Service Leadership
Total Profit Solutions for IT Companies™
Service Leadership Index™
- Q/Q Revenue Change - BIC Profitability SPs: Q1-09 16.1% Q2-09 168.3% Q3-09 -75.7% Q4-09 6.3%
- Q/Q Revenue Change - Median Profitability SPs: Q1-09 -38.4% Q2-09 15.4% Q3-09 32.3% Q4-09-22.9%
- Q/Q Revenue Change - Bottom 1/4 Profitability SPs: Q1-09 1.9% Q2-09 16.5% Q3-09 -42.5% Q4-09 20.7%
- Product GM% - BIC Profitability SPs: Q1-09 23.4% Q2-09 24.3% Q3-09 25.1% Q4-09 23.5%
- Product GM% - Median Profitability SPs: Q1-09 17.2% Q2-09 23.8% Q3-09 18.6% Q4-09 19.3%
- Product GM% - Bottom 1/4 Profitability SPs: Q1-09 25.1% Q2-09 27.9% Q3-09 15.5% Q4-09 10.8%
- Services GM% - BIC Profitability SPs: Q1-09 53.6% Q2-09 50.5% Q3-09 54.9% Q4-09 53.5%
- Services GM% - Median Profitability SPs: Q1-09 47.5% Q2-09 31.9% Q3-09 46.3% Q4-09 44.9%
- Services GM% - Bottom 1/4 Profitability SPs: Q1-09 41.6% Q2-09 38.7% Q3-09 44.1% Q4-09 36%
- SG&A% - BIC Profitability SPs: Q1-09 29.1% Q2-09 38.1% Q3-09 26.4% Q4-09 29.8%
- SG&A% - Median Profitability SPs: Q1-09 35.3% Q2-09 35% Q3-09 29.9% Q4-09 32.1%
- SG&A% - Bottom 1/4 Profitability SPs: Q1-09 42.8% Q2-09 35.7% Q3-09 39% Q4-09 46.3%
- EBITDA% - BIC Profitability SPs: Q1-09 17.7% Q2-09 13.6% Q3-09 21.9% Q4-09 16.5%
- EBITDA% - Median Profitability SPs: Q1-09 4.0% Q2-09 -1.8% Q3-09 6.9% Q4-09 4.2%
- EBITDA% - Bottom 1/4 Profitability SPs: Q1-09 -9.7% Q2-09 -14% Q3-09 -2.6% Q4-09 -16.6%
- Q/Q Headcount Change - BIC Profitability SPs: Q1-09 15% Q2-09 164.2% Q3-09 -71.4% Q4-09 0.9%
- Q/Q Headcount Change - Median Profitability SPs: Q1-09 -32.5% Q2-09 57% Q3-09 -41.9% Q4-09 -23.5%
- Q/Q Headcount Change - Bottom 1/4 Profitability SPs: Q1-09 12.2% Q2-09 62.3% Q3-09 -48.6% Q4-09 7.6%
Quarterly Solution Provider Performance
S-L Business Model Explorer™
The purpose of the Service Leadership Index™ Business Model Explorer™ is to allow you to quickly see the profitability and stock valuation results of growing your business in ways that you choose. As you plan for 2009 and beyond, you can use this tool to immediately see the cash flow and current market M&A value of the alternatives you are considering. To sample the tool prior to purchase, click on the graphic below and adjust the various Control Panel settings to see just how useful this tool can be.
The Business Model Explorer™ is useful for:
- Business planning
- Executive discussions
- Management training
- Staff training
What the Business Model Explorer™ Means
Your choices about how you run your Solution Provider business have a direct impact on the growth, profitability and stock value of your company.
By setting the Business Model Explorer™ to your current business model, and then setting your five year goals, you can see how different levels of business performance (as reported by the Service Leadership Index™ of over 1,500 Solution Providers) result in different levels of cash flow and stock value.
Based on these results, you can adjust your business plan to determine what business model and financial performance scenarios you will need to attain your five-year financial cash flow and stock value goals.
How the Business Model Explorer™ Works
The Business Model Explorer™ allows you to set the major variables associated with different Solution Provider business models, according to your specific situation and plans.
Then, you choose the financial operating ratios to apply, as produced by the:
- Best-in-Class Solution Providers, or
- Median Performance Solution Provider, or
- Bottom Quartile Solution Providers of...
...The more than 1,500 Solution Providers measured by the Service Leadership Index™.
What is the Service Leadership Index™?
The Service Leadership Index™ is the Solution Provider industry's only non-vendor-funded, non-media-funded benchmark of operating and financial performance. This means you get critical business intelligence that is unbiased by the needs of other audiences.
The Service Leadership Index™ is also the only Solution Provider industry benchmark of stock valuations, based on Service Leadership's mergers and acquisitions practice.
Thus, the Service Leadership Index™ is the only benchmark resource that directly ties your operational and strategic business planning to your cash flow and your stock value, the two paramount concerns of shareholders and C-level executives.
For more information on how to gain all the benefits of the Service Leadership Index™, click here.
How to Use the Business Model Explorer™
The Business Model Explorer™ screen is divided into three areas, as shown in the screen shot below:
The left hand rectangle is the Control panel, where you make all your inputs.
The three graphs in the upper right area show your results in terms of revenue, operating income (cash flow) and headcount for the first and fifth years of your planning period.
The yearly table at the bottom shows the total revenue, operating income (cash flow) as a percent of revenue, and the approximate valuation of the company based on ranges reported by the Service Leadership Index™ as of fourth quarter 2007.
Each of these is described in detail below.
Control Panel
The left-hand rectangle is the Control Panel. In this area, you choose the settings which tell the Business Model Explorer™ about your current business model and strategic plans.
The settings within the Control Panel are explained below.
Business Performance Level - This setting allows you to choose from three financial performance levels for your company:
- Best-in-Class Solution Providers, that is, those in the top quartile (25%) of Solution Providers in the Service Leadership Index™.
- Median Performance Solution Providers, that is, the level of financial performance compared to which 50% of the Solution Providers will perform better, and 50% will perform worse.
- Bottom quartile Solution Providers, that is, the bottom 25% of Solution Providers in terms of financial performance.
When you choose a Business Performance Level, the Business Model Explorer™ looks at the business model you have chosen (that is, the mix of product and services revenue in the "Business Model Change" area of the Control Panel) and applies the appropriate benchmark metrics from the Service Leadership Index™.
These metrics are specific to the business model you set. For example, the best-in-class profitability of a 20% services business model is different than the best-in-class profitability of an 80% services business model. To see how much different, simply adjust the setting in the "Business Model Change" area of the Control Panel, and watch the results in the table at the bottom of the screen.
The metrics provided by the Service Leadership Index™ which are used in the Business Model Explorer™ are:
- Top quartile, median and bottom quartile performance for Solution Providers with a 100% product resale (no services) business model, for Solution Providers with a 100% services (no product resale) business model, and for Solution Providers with product/service hybrid business models along a continuum between these two extremes.
- Top quartile, median and bottom quartile sales performance for Sales Representatives in Solution Providers with these various business models.
- Top quartile, median and bottom quartile billable realization performance for Service Professionals in Solution Providers with these various business models.
These are all as reported by the Service Leadership Index™.
Based on the Business Performance Level you choose, the Business Model Explorer™ picks the appropriate ratios for your assumptions and applies them to show you the five year results.
Year 1 Revenue - Generally, you set this to the current total revenue of your company, or whatever other starting point you prefer to use. When you change it, the revenue indicated in the "Year 1"
Year/Year Revenue Growth - This setting allows you to indicate the speed with which you plan to grow the company over a five year period, starting with the Year 1 setting you made immediately above.
Business Model Change - This control allows you to set the business model for the first and fifth years of your planning period. The business model is determined by the percent of your total revenue that will be made up of product resale revenue and services revenue. You can set either of these to anything between 0% services revenue to 100% services revenue to indicate the direction and degree of change you expect in the business model.
Performance Graphs
In the upper right area of the screen, there are three performance graphs. Each shows the first and fifth year results of the business plan you have indicated in the Control Panel.
The left hand graph, Revenue Streams, shows the amount of product and services revenue in the first and fifth years of your business plan. The height of each column shows the total revenue in that year.
The middle graph, Operating Income, shows the amount of operating income generated by product resale and services portions of your business model in the first and fifth years of your business plan. The height of each column shows the total operating income in that year.
The right hand graph, Staffing Levels, shows the number of sales and service people on staff, using the job performance ratios appropriate to the Business Performance Level you have chosen in the Control Panel. For example, to attain a given revenue level by year five, you will need to add sales people faster if you choose the Median Performance Level than if you choose the Best-in-Class performance level, since sales people in Median performing companies generate less revenue per sales person.
The mix of sales people to service people also gives you some idea of the type of "people" culture you will need to develop.
Results Table
At the bottom of the screen, you will see the results table, showing the operating results and value of the business each year for the five years of your plan.
The business valuations are based on the Service Leadership Index™ for Solution Provider company market valuations as of Q4 2007 and are, of course, not guaranteed. Valuations in this model are based on current market conditions and related to cash flow and business model (revenue mix). However, your actual valuation will likely also be influenced by your balance sheet, customer base, intellectual property, management strategy and capability, the buyer's strategy and other factors. Please contact us for more information on M&A services.