THE ALTA GROUP HELPS LESSOR REACH PROFITABILITY TARGETS
After a key strategic acquisition, a publicly traded equipment leasing company realized it had to do something to help its newly acquired division turn the corner in its continual struggle to reach profitability targets.The firm hired The Alta Group to identify the root causes of the performance shortfall. Alta was charged with using a variety of metrics to benchmark the division against its competitors, as well as conduct an operational review. Using the results of these exercises, Alta was asked to then provide strategic recommendations to improve the organization’s efficiency and address the profitability issue.
In less than four weeks, Alta interviewed all of the key executives in the division and completed a thorough evaluation of its structure and workflow. There were obvious areas to cut costs, including the transition to a single technology platform to serve both operations, which already was underway. In addition to reviewing staffing levels, the consultancy looked closely at combining back-office activities to further streamline expenses, but ultimately decided not to do so because of language and cultural differences.
Alta concluded that the major problem with the firm’s profitability revolved around its pricing structure rather than expenses. With a very high client retention rate, it was clear either the division did an exemplary job or it was not securing an adequate spread on its money – essentially under-pricing its leases. Alta discovered the client’s sales teams enjoyed the freedom to drop the prices on transactions by as much as 50 basis points to win business! Customers obviously took advantage of the generous terms at the expense of the firm’s profitability. What’s more, Alta discovered the competition’s sales teams secured more than double the sales of its client and offered higher lease rates. How did they accomplish this and what did Alta’s customer have to do to join them?
When meeting with the client, Alta said the competition simply exhibited much greater operational discipline. The consultancy provided a number of implementable ideas for the client to improve its sales and pricing processes. The chairman of the leasing company was very pleased with the recommendations. It was not easy, but he enacted the proposed changes and the international division is on much more solid ground financially than ever before, with profits on a nice upward trend.
