Latest Case Studies

Transforming, Increasing Value and Selling an Enterprise Software Business Successfully

A family-owned, enterprise software business, with double-digit revenues

CMC provided this family owned, enterprise software business with business realignment, cost restructuring and sales growth experience. Working directly with the founders and company board in setting a growth path for the company. The transformed business was then sold successfully at an enterprise value over 3 x more than originally valued prior to CMC Business Advisers engagement.

The Challenge

The client is a leading provider of specialised enterprise software for the telecom industry. While the management team had managed to penetrate the market controlled by larger software manufacturers, they were unable to scale the business cost-effectively. The business was stagnating at 4% revenue growth with a market growing at almost 10%. The Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) levels were almost a third of industry averages. A deeper investigation, by CMC, of the company’s strategy and direction revealed the following core problems:

1. The sales team was taking a very product feature centric approach to selling. Almost no one in the organisation understood the concept of value selling
2. In addition, there were inadequate sales professionals to provide effective customer and market coverage, resulting in lost sales and insufficient touch with the customers. Over 50% of revenue was coming from a single customer increasing risk due to customer concertation
3. Product management function was unable to effectively plan the roadmap and deliver regular version updates to their customers
4. Insufficient partners with the right skills and training to deploy the software making customer adoption difficult and expensive
5. Operating expenses were rising faster than revenues
6. Sales were growing much slower than market and competitors

The Solution

CMC Business Advisers worked with the founder and the company board and through a strategic audit of the company identified the core problems described above. Through a series of detailed functional workshops and conversations with the company founder the following steps were agreed for implementation:

1. Appointing an experienced Sales VP who brought in a value-selling approach
2. Series of sales training workshops conducted by specialists brought in by CMC
3. Hiring of 50% additional sales personnel and reallocation of territories amongst sales reps for better account management and customer coverage
4. Tying sales incentives to targets and performance
5. Introducing offshore and nearshore development resources to right-size product development costs
6. Establish a product roadmap planning and version release process based on high priority customer requirements and market demand
7. CMC Partner and client founder, board and senior team members to set up a monthly business review

The Outcomes

CMC Business Advisers guided the founder in systematically executing the above action plans. Specialist resources, such as sales trainers or experienced head hunters were brought in as required to recruit new talent who then drove many of the agreed actions. The following was achieved:

1. Revenues increased at an annual rate of 15%, double the historical run rate
2. Dependence on the single large customer was brought down from 50% of total revenues to less than 25%
3. Operating margins increased from an unhealthy 6% to a respectable 18%
4. Two major new product versions were successfully released adding to the follow-on potential of cross-selling new services

Successful Business Sale

As these changes were rolled out and the company began demonstrating solid growth and vitality the client received informal interests from prospective trade buyers. CMC Business Advisers worked with the founder and board to understand what the shareholders intended to do as a result of market interest in acquiring the firm. CMC Business Advisers advised an investigation process for determining the feasibility of selling the company. We worked with the client in establishing shareholder objectives, an expected value for the company and then formally proceeded to engage with buyers.

CMC Business Advisers acted as the project manager in the company sale process. The firm was ultimately sold to a competitor who was looking to increase market share. The transaction delivered value 3x more than the market was willing to offer prior to the business transformation engagement with CMC Business Advisers.

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