In my previous article, I highlighted the big picture benefits of operating a maturing startup business more like a publicly-traded corporation. This article provides the financial rationale and a detailed roadmap any company can follow to transition from a more entrepreneurial style of management into a more standardized, data-driven operation — without losing the disruptive spark behind what created our success.
When I joined FreeConferenceCall.com almost four years ago, the 13-year-old company was wildly successful but was facing three key issues common to entrepreneur-led companies that grow organically but inevitably reach a point where a lack of operational structure begins to impact long-term growth:
1. The company was run on a purely cash basis, making it difficult to determine an accurate financial position or effectively forecast receivables and payables.
2. The company structure included more than a dozen separate LLCs operating outside the scope of the parent company.
3. The finance staff had grown with the company and reached the limits of their ability to move the company forward.
Step One: Historical Audit And Conversion To Accrual-Based Accounting
Our first step in updating operations was converting all the books to an accrual system and conducting a historical audit of the last three years of company performance. That process took just over a year and included:
• Hiring a full-time consultant with industry expertise to manage the process and ensure we had the bandwidth to stay focused on running the business
• Engaging a well-known, national accounting firm with the expertise and credibility necessary to “certify” the audit results.
• Creating a new role for a director of finance with telecom industry experience and letting go of several long-serving employees who lacked the skills necessary to evolve with the company
The goal of the audit process was to create a baseline set of numbers we could use to create our first annual budget and profit and loss statement. As a telecom provider, that required the creation of a historical database of every minute of network use by rate, location and carrier for a global business that has carried more than two billion calls and is used in more than 195 countries. With that baseline complete, we added marketing and sales performance data as well as customer acquisition rates, new product investment models and employee hiring and staffing information.
Step Two: Standardize Forecasting And Measurement Across The Organization
Once the historical data collection process was complete the next step was looking forward through organization-wide forecasting. Although the finance team was accustomed to using forecasting tools, most of the company leadership had managed their departments by instinct and hands-on experience. To get to a single company-wide forecast, the finance team had to first socialize the results of the audit then teach product development, sales and operations management how to forecast. Once forecasts were complete, each department created goals and began consistently measuring performance against a consistent data set — in this case, the audit.
Step Three: Launch of External Reporting
With three years of externally audited results in place, the company was now able to provide the data required to be included in key industry analyst reports. Since that first report, we have moved up further as price pressure and new technology platforms put immense pressure on some of our competition.
Making business decisions based on a single source of audited data has improved our business in countless ways. Beyond the softer metrics of increased credibility, brand awareness and ease of hiring, we also learned some lessons in three key departments that enabled us lower costs while continuing to provide the same level of service.
1. Customer Service: Our network usage information reviewed against call center trends allowed us to revamp our staffing models while maintaining the same exceptional level of customer service. We now have a staffing model based on seasonal trends, which has reducing personnel costs by 25%, enabling us to invest in automation software that reduced customer wait times and further increased overall customer satisfaction metrics.
2. Sales and marketing: Our new data helped us determine our average revenue per customer leading to a completely new approach to customer acquisition. Knowing exactly how much we could spend to secure new customers, we stopped investing in complex enterprise pitches, decreased the size of the sales team and refocused our activities on online and viral marketing. The changes meant we no longer needed a long-lead sales staff and empowered our online marketing team with exact metrics for our search and pay-per-click programs.
Over time, we have continued to drive costs out of the system while consistently growing our customer base.
3. Product development: In this case, our new information confirmed what we knew to be true: Our customers want a streamlined, secure and reliable service at a great price. While many of our competitors invest countless dollars developing “bells and whistles,” we have continued to focus on security and stood by our commitment from day one that we would never sell customer information. In today’s age of data breaches and increasing federal regulation, this investment continues to support our customer’s peace of mind and drive our robust enterprise customer sign-ups, making it money well spent.
Although getting through the process outlined here took us the better part of two years, it has paid off immeasurably in operational efficiencies and company-wide accountability to a single set of metrics. The process also revealed some areas for improvement in our leadership and reporting structure. Stay tuned for my next article reviewing tips for building the leadership team necessary for long-term success.
Chief Financial Officer at FreeConferenceCall.com, leading our Financial operations, Sales, Customer Care, Legal and HR operations.
Sourced from Forbes