Maximize the Value of Your Acquisition
Your Acquisition Work Does End When You Complete the Purchase
There are two ways to grow your answering service. One is by sales and marketing, and the other is through acquisitions. Both have their advantages and disadvantages. When it comes to acquisitions, many answering service owners love chasing the deal. They enjoy negotiations, structuring the offer, and closing the transaction. With the project done, they then move on to the next acquisition.
But in doing so, they miss the most important part. They fail to invest their time and effort into optimizing the service they just bought. As a result, they don’t receive the full value of their purchase. Even though they’ve negotiated a smart deal, failing to follow through after the paperwork is signed is worse than a bad deal that leaves money on the table.
Instead of rushing off to make another acquisition, the wise choice is to work to maximize the value of what they just bought. This is where the hard work starts, and where the big payoff begins. Though chasing deals may be more interesting, maximizing the value of the acquisition after the sale is where the real money comes in.
For her first acquisition Jo Forsyth, owner and founder of Primar Answering Service, chose to buy a small local competitor. The former owner stayed on to help with the transition. He trained agents on the new accounts, soothed clients’ anxiety, and took a lead role in handling customer service issues. He did this for one year, managing to retain most of the clients.
Based on this initial success, Jo felt confident in pursuing a second acquisition. This was a larger answering service on the other side of the state. She reasoned that with one acquisition completed, her next one would go even more smoothly. After all, she and her team were now “experienced” in making acquisitions.
In addition to being larger, the second acquisition target was also more profitable. This meant Jo needed to pay more per client—almost 50 percent more—to close the deal. Yet the revenue generated from these new accounts would cover her monthly payments, along with a small cushion.
Transitioning the Acquisition
However, the owner of this answering service wasn’t interested in helping with the transition. He had pushed himself into burnout and needed to be done with the whole thing. As a result, he wanted his money and then to walk away so he could slide into retirement.
This didn’t concern Jo, who felt confident her own team could manage the transition. Financing the deal through her bank, she completed negotiations quickly, signed the paperwork, and paid the owner in full. Some of the staff at the acquired answering service had expressed interest in staying on to help with the transition, but none of them did. Within days they had all scattered to pursue other things.
Still Jo wasn’t concerned. Programming the new accounts into her answering service system went smoothly, but when they cut over, the problems started. Operating from incorrect information, they made mistakes in serving these new clients. Many mistakes. The cancellations started. When they did their first billing, Jo saw it wouldn’t generate enough revenue to cover her loan payment.
She panicked. She needed to stop the cancellations and find more revenue from these clients. In doing so, she couldn’t afford a misstep. She had to do this right and had to do it fast. She brought in a call center consulting firm that specialized in maximizing the value of acquisitions. They set about with a multi-part plan.
After a quick review of the situation, talking with staff, and meeting a few key accounts, the consulting firm begin implementing their plan to stabilize the tenuous acquisition and optimize it to produce maximum value. They handled some of this with their own staff. In other cases they directed Jo’s staff on what to do.
Verify Account Programming: Even though the acquired answering service was computerized, with all the account information entered into their computer, most of the instructions were old or even wrong. The operators at this answering service kept the key information to service their clients in their heads. And when those employees left, that information went with them. Therefore, to properly serve these new clients, each one needed to receive treatment like a new account.
Since Jo’s staff couldn’t review and update all clients at once, they prioritize them. First, they looked at the ones with the most customer service issues. Next, they addressed high-volume accounts. These had the potential to produce the highest profits (even though many of them weren’t as profitable as they could be—yet). Third, they looked at the high-profit clients to make sure they kept these folks happy. Then they handled the remaining accounts.
This intensive effort took several weeks to complete. But because they strategized which accounts to work on first, Jo’s answering service staff felt the results immediately.
Additional Operator Training: While the account programming for these new clients was undergoing its fine tuning, the operators received a bit of additional training so that they could better serve these new accounts. For example, some of the basic terminology used by Jo’s answering service meant something different to the clients at the acquired answering service. Once the consultants discovered this, a quick round of advanced operator training took place to address this and other related issues. This quickly cleared up a lot of miscommunication and misunderstandings.
The operators felt relieved to have this additional information, and the new clients finally realized someone was hearing them and taking their issues seriously—all because of clearer communication.
Focused Customer Service: Simultaneous to these two initiatives, a third one was to institute a dedicated customer service rep to focus on these acquired accounts. Though she didn’t need to do all the work—it was too much for one person to handle—she was the primary customer service interface for these new clients.
Since Jo didn’t have a person on her staff who could take on this additional workload, the consultant provided this customer service person. She continued in this role until things stabilized. Then she began an organized handoff to Jo’s regular customer service team.
Rate Adjustments: These first three steps stopped the cancellations. However, it did nothing to increase the revenue of these new accounts to the level that Jo had used in her financial analysis. Though the bleeding had stopped, the patient was still ill.
As with many acquisitions, this one had its share of underperforming clients. This meant that for some of accounts, their monthly invoices barely covered the work required to serve them. And for other accounts, Jo lost money. That’s when she realized that just because a client is high-volume and generates a lot of revenue, doesn’t mean they’re profitable.
About one third of these new accounts were profitable, and another third were unprofitable. The remaining one third hovered around the breakeven point. That meant that two thirds of these clients needed to have their rates increased, sometimes by quite a bit.
To address this, the acquisition specialists embarked on a plan of strategic rate increases to make every client profitable. They did this over a series of several months, working closely with clients to explain the rate change rationale and help ensure that they remained a client. Though not every account that received a rate increase stuck around, most did. And the new revenue more than made up for the few who defected.
And since they were in a rate-analysis mode, the consultants also took a quick look at Jo’s existing accounts, identifying 12 percent of them that were underperforming and in need of rate adjustments. They applied their same careful strategy to these accounts, instituted the rate increases, and didn’t lose one of these clients.
Selling Additional Services: Jo’s answering service is a top-notch operation, with the latest technology. This meant they had advanced capabilities that the acquired answering service clients only dreamed of. As a result, Jo could offer new, money-generating services to their new accounts. This also made a nice revenue bump from these clients. This made up for most of the losses from the accounts who had initially canceled their service.
New Sales and Marketing Initiatives: The acquired answering service was well known in their city. Now that things were stable with the acquisition, Jo could begin a sales and marketing push in that area. Again, the acquisition consulting team took the lead on this. They used proven marketing techniques to generate sales inquiries and close more sales. This was in addition to what Jo’s sales team was doing in their local market and strategic verticals across the country.
In round numbers, Jo’s second acquisition took a 20 percent hit the first month due to cancellations. However, the account verification, operator training, and focused customer service kept further defections from occurring. Then the rate adjustments eventually increased billing a net 30 percent, and selling additional services brought in 15 percent more. And this doesn’t include the new sales the consultant brought in for Jo’s business.
Although the acquisition transition started poorly, the call center optimization specialists quickly stabilized it and turned things around. A year later, revenue from these acquired accounts is bringing in much more money than Jo had originally projected. Now she’s ready to do another acquisition. This time she’ll avoid her prior mistakes and have her consulting team involved from day one. It’s sure to be her best acquisition yet.
Regardless of where you’re at in an acquisition—negotiation phase, the transition aspect, or post acquisition integration—make sure you get your full value from it. Call Center Sales Pro can help you realize your acquisition’s financial goals and then some. Get in touch with them today, and make for a better tomorrow.