See how one company’s rapid expansion led to unexpected margin challenges – and how working with our team helped it find the right solutions.
Company
Challenge
Support
Using a two-phased approach, the Crowe pricing and margin optimization team conducted a rapid assessment that identified numerous gaps and reporting challenges regarding financial performance. We reviewed a variety of data, conducted field interviews with key stakeholders, and created a detailed schedule before implementing our recommendations.
Solution
Through our assessment, our team identified four transformational actions that could help the company improve margin and forecasting:
- Create a centralized repository with automated reporting and notifications
- Standardize timing calculations for higher forecasting accuracy
- Integrate financial reporting for real-time margin gap notification and price action opportunities
- Develop an accountability process to improve negotiated price realization on a weekly basis
Challenge details
The company’s rapid expansion through private equity investments combined multiple market-based businesses with different approaches and cultures, which resulted in a lack of visibility across the business. During that time, the cost of materials rose rapidly, with no effective way to pass those price increases through to help manage margin erosion. As a result, the company experienced a significant increase in labor and material costs. This delayed reaction quickly eroded the combined company’s margins.
One of the acquired companies was already working with a Crowe team when it noticed this erosion in margin, and it called in our pricing and margin optimization team to help determine the cause and help plan for next steps.
Our team identified the following data-tracking gaps:
- Pricing data was neither centralized nor readily available to team members.
- Senior leaders were responsible for tasks that should not have been performed at their levels.
- Limited details and delayed reporting led to a variety of challenges.
- Lack of standardized processes led to miscommunication and unreliable data.
- Minimal visibility of sales numbers led to gaps in compensation, recognition, and other challenges.
Solution snapshot
The Crowe pricing and margin optimization team developed and implemented Microsoft™-based tools to help track the entire price action life cycle: target-setting, negotiation, acceptance, contract, and validation. One of these tools, a price increase tracker report, was developed with the Microsoft Power BI™ solution to significantly reduce the time needed to gather and consolidate data and publish reports related to pricing and financials.
Through key stakeholder interviews, our team also designed a pricing strategy to identify opportunities among different customer and pricing segmentations, internal controls, and external factors to capture and sustain improved margins. These margin enhancement strategies were deployed and captured through bid negotiations, change order management, work-in-progress reviews, and contract pricing sign-off.
The results
Working with the Crowe team, the company was able to:
- Improve job cost margins
- Improve sales and margin forecasts
- Realize pricing and margin increases across high-volume commodities
Additionally, the policies, process, and tools Crowe developed with the company allowed the company to:
- Standardize a collaborative, shared list with detailed pricing elements
- Collect pricing elements at each stage of process: target, proposal, and accepted
- Report data collection on an hourly basis
- Standardize exports for financial planning and analysis to model in conjunction with pipeline and backlog
- Standardize and automate the exceptions approval process
- Achieve visibility into pricing acceptance
- Improve communication flow from sourcing to sales
- Enable margin reporting
Takeaways
- Using a One Crowe approach, our team was able to provide the client with new insights and visibility into issues.
- These insights and improved visibility allowed the client to develop and execute a new business strategy.
- Our team was on-site to work with the client throughout this process.
- Our team helped the client improve profitability.
- We trained account executives and operational and support people on the process so they could do it themselves.
- Our team helped the client realize more than $100 million of increased price-related revenue and more than $50 million in price coverage.
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