Function: Finance
Fiber Optics Company Building Out Executive Team for New Division
Service Area: Human Capital: Recruiters
Client Type: Portfolio Company
Service Provider Type: Telecommunications-Focused Recruitment Firm
Industry: Telecommunications: Wireless Internet, Fiber Optics
Need
Recruiters in Telecommunications Industry
The CFO of a telecommunications company that specializes in wireless internet needed help building out its executive team for a new division of its business.
Challenge
Specialized executive search firm needed
Looking to better serve its customers, the CFO sought an executive search firm that specialized in telecom and fiber. They saw a big growth opportunity in their market and wanted to move fast to build out its leadership team.
How BluWave Helped
The Business Builders’ Network
After a scoping call with our research and operations team, we presented multiple executive search firms that were experienced serving fiber optics companies.
Result
Specialized firm engaged to build out executive team
One of our most-used service providers was selected to kick off the process of building out the executive team. They signed on for a three-month engagement to help the telecommunications company hit the ground running with its new telecom ambitions.
Q1 2023 BluWave Insights: HR, Tech Take Center Stage
Every quarter our team analyzes the projects we work on with our 500+ PE firm clients to get a bird’s eye view of the market. We recently compiled our Q1 2023 findings into our BluWave Insights Report. You can request your copy and our client coverage team will be in touch.
Key findings from Q1 ’23 include:
- Value creation activity is at an all-time high, matching Q1 2022.
- Human capital remains PE’s primary area of focus at 45% of all Q1 activity, also matching an all-time high.
- Technology remains a priority at 11% of all Q1 PE activity.
Learn more about the insights we gleaned from Q1:
We can support your value creation needs, human capital needs, technology needs, sales & marketing needs and more.
Manufacturing Equipment Financing: Machine Loans, Leases
Machinery Finance: Process
From a high-level point of view, there are four steps to the machine tool financing process.
1. Apply
You apply for financing from an institution. Whether you’re seeking a few thousand dollars, or millions upon millions, this is the first step.
2. Get Approved
After the financial institution reviews your application, hopefully you’re approved to receive the funds. Some banks allow for pre-approval, which speeds the process.
3. Review and Sign Finance Agreement
After you have the financial institution’s go-ahead for your manufacturing financing, they’ll send you terms to review. If both sides agree, you can sign the papers and move to the crucial last step.
4. Funds Disbursed
Once the ink is dry, the bank should finalize the transaction by giving you the money. Now it’s time to purchase that new equipment to finance your business.
That’s a simplified summary. The actual process is a bit more complicated.
The Business Builders’ Network has expert third-party resources who can advise you in this crucial MFR process. Whether you’re in glass, construction, textile and apparel, chemicals, electronics, steel, refrigeration, pharmaceuticals or one of many other industrial businesses, we already know an exact-fit service provider to help you through this process, and grow your business.
Before we connect with expert help from the invite-only network, here’s a more detailed look at manufacturing equipment financing, whether you’re looking to loan or lease.
Equipment Loans: Manufacturing Industry
Whether you need a a single piece of equipment, or you want to rapidly expand your fast-growing fleet, machine tool financing can speed up that process.
Less complicated pieces of equipment may only cost a few thousand dollars, and these may be a good candidate for an SBA loan.
But if your ask meets a minimum threshold – usually around $250,000–500,000 – firms are likely to require you to share tax returns and/or audited financial statements.
Depending on a number of factors, a financial institution may be willing to lend you tens of millions of dollars to make your purchases.
READ MORE: Why Hire an Interim CFO?
Terms Length
Typical loan terms could range from 24-84 months. (That is, 2–7 years.) This will depend on how much money you need, how long you need to pay it back and how willing the bank is to work with you.
Rates
You may be able to find interest rates under 4 percent for machine tool financing, but it’s likely to increase from there.
CNC Finance Rate Factors
- The current federal rate
- The borrower’s credit score
- The type of machine being financed
- The risks to the loan
- The company’s borrowing history
- The borrower’s credit history
Application to Funding Timeline
Some firms allow you to apply online, even getting pre-approval. In that case, your loan could be approved the same day, if not within 48 hours.
Larger, more complicated machinery finance options may not be so straightforward. The approval process could depend on both sides’ availability, as well as all the CNC finance rate factors mentioned above.
What Credit Score is Needed to Finance Heavy Equipment?
This will depend on the lender. Some require a credit score around 500, while others are more stringent, asking for 650 or higher.
Which type of finance should be used to purchase new machines & equipment?
SBA Loans
An SBA loan is a loan backed by the Small Business Administration. The SBA sets guidelines for loans made by its partnering lenders, community development organizations and micro-lending institutions. These loans are often used by small businesses to start or expand their operations.
READ MORE: Industrial Pricing: Strategies for Manufacturing Businesses
Financial Institution Loans
If you’re not a small business, you may seek a more traditional CNC finance option. Namely, a loan that is made by a bank or other financial institution. This type of loan can be used by a manufacturing business to purchase new machines and equipment.
Machine Types
- Metalworking machines: Used for cutting, shaping, and forming metal, metalworking machines include lathes, mills, and presses.
- Plastics processing machines: Melting, molding, and shaping plastics are possible with plastics processing machines such as injection molding machines, blow molding machines, and extrusion machines.
- Woodworking machines: Sawing, planing, and sanding are all achievable with woodworking machines like saws, planers, and sanders.
- Textile machines: Fabrics can be spun, woven, and knit with textile machines, including spinning jennies, looms, and knitting machines.
- Food processing machines: Mixing, grinding, and baking food are all tasks performed by food processing machines such as mixers, grinders, and ovens.
- Chemical processing machines: Mixing, heating, and cooling chemicals are possible with chemical processing machines including reactors, distillation columns, and evaporators.
- Power generation equipment: Generators, turbines, and solar panels are examples of power generation equipment used to produce electricity.
- Machine tools: Lathes, mills, and drills are among the types of machine tools used to manufacture other machines.
- Conveyors: Manufacturing facilities use conveyors to move materials around the facility.
- Warehousing equipment: Forklifts, pallet jacks, and conveyors are examples of warehousing equipment used to store and move materials within a warehouse.
- Packaging equipment: For packaging products for shipping, equipment such as shrink wrap machines, tape guns, and labelers are used.
- Testing equipment: To test the quality of products, tensile strength testers, hardness testers, and vibration testers are some examples of testing equipment used.
- Laboratory equipment: Microscopes, centrifuges, and ovens are some examples of laboratory equipment used to conduct scientific experiments.
- Vertical centers: Parts that are vertical in orientation can be machined with vertical centers.
- Horizontal centers: Horizontal centers are used to machine parts that are horizontal in orientation.
- 5-axis centers: Machining parts that require 5-axis machining can be accomplished with 5-axis centers.
- Lathes: Cylindrical parts can be turned using lathes.
- Excavators: Excavators are machines used for excavating soil and other materials.
- CNC Swiss turning: Small diameter materials can be turned using this type of CNC machining.
- Bobcat: Bobcats are small, all-terrain vehicles used for a variety of tasks, including construction, landscaping, and snow removal.
- Horizontal boring mills: Boring holes in horizontal surfaces is possible with horizontal boring mills.
- Metrology (CMM): The dimensions of parts can be measured using metrology (CMM) equipment.
- Multi-axis turn/milling: Multiple axes can be used to turn and mill parts using this type of CNC machining.
- CNC milling machines: Parts can be milled using CNC milling machines.
- Tractors: Tractors are used for a variety of tasks, including agriculture, construction, and landscaping.
- CNC turning centers: Turning parts can be accomplished using CNC turning centers.
- CNC grinding machines: Parts can be ground using CNC grinding machines.
- CNC routers: CNC routers are used to cut and shape parts.
- Welding: Metal pieces can be joined together by melting and fusing the metal through the process of welding.
- Forklifts: Heavy objects can be lifted and moved using forklifts.
- Racking: A system of shelves and supports used for storing goods is called racking.
- Packaging: The process of enclosing goods in a protective covering for storage or shipping.
Machine Manufacturer Brands
Here are a few of the companies that make this type of manufacturing equipment.
Manufacturing Equipment Leasing
If you prefer CNC leasing to manufacturing financing, you’ll have access to the same great equipment without having to purchase.
READ MORE: Market Analysis: Growth Strategy for Businesses, PE Firms
There are businesses that lease new as well as used equipment.
Types of Leases
There are two main types of manufacturing equipment leasing: operating leases and finance leases.
- The most common type of manufacturing equipment leasing is called an operating lease. This type of lease allows the company leasing the equipment to make monthly payments to the leasing company in exchange for the use of the equipment. At the end of the lease term, the lessee does not own the equipment, but they may have the option to purchase it for an agreed-upon price.
- Finance leases differ from operating leases in that the lessee must purchase the equipment at the end of the lease term, which allows the lessee to accumulate equity in the equipment while leasing it.
Advantages
- With leasing, you don’t own the equipment. This can be a good thing if you’re not sure how long you’ll need the equipment or if you don’t want to be responsible for its maintenance. Leasing companies typically offer maintenance and repair services, which can save you time and money.
- Leasing can be more affordable than borrowing money. This is because leasing companies typically factor in the depreciation of the equipment when they calculate your monthly payments.
- Leasing can be easier to qualify for than a loan. This is because leasing companies don’t require you to have a good credit score
- Tax deductible: The payments on a manufacturing equipment lease may be tax deductible, depending on the type of equipment and the terms of the lease. This can save you money on your taxes.
- Smaller monthly payments: Leasing can often result in smaller monthly payments than purchasing equipment outright. This can free up cash flow for other business expenses.
- Buy-out option: Many leasing agreements include a buy-out option, which allows you to purchase the equipment at the end of the lease term for a pre-agreed-upon price. This can be a good option if you decide that you want to keep the equipment after the lease term is up.
- Variety of equipment options: Leasing companies offer a wide variety of equipment options to choose from. This means that you can find the equipment that you need for your business, regardless of your budget.
READ MORE: What is Commercial Due Diligence?
Whether you’re a private equity company working on value creation in your portfolio company, or you’re at a private or public company that’s ready to expand, our research and operations team is here to help.
The third parties in the Business Builders’ Network know whether you need to loan or lease, as well as all the best institutions to help you with the process.
They’ll also work with you to maximize value creation as you take this important step to grow your business. If you’re ready to take the next step, contact us to get connected to exact-fit service providers in less than one business day.
Industrial Pricing: Strategies for Manufacturing Businesses
Manufacturing pricing strategies are top of mind for businesses in this transitionary economy. Industrial pricing has becoming more competitive than ever as margins shrink and supply chain problems persist.
“BluWave is seeing an increased number of resources allocated to competitive pricing analysis from our private equity clients and their portfolio companies,” BluWave co-head of operations Keenan Kolinsky says. “Specifically in the manufacturing and industrial spaces, companies are running into much higher costs for production materials, which is putting a dent in their margins.”
READ MORE: Strategic Sourcing and Procurement: Commercial Due Diligence
When private companies, public companies, and private equity firms and their portfolio companies contact BluWave for help with industrial pricing, it’s because they’re presented with two difficult options.
1. Increase the Price of Manufactured Goods
This may increase margins, but it also means passing costs along to customers.
They end up paying more for the same products, some of which arrive later due to supply chain and sourcing challenges.
2. Keep Prices the Same
In this scenario, customers continue paying the same price for products. The problem? Margins get thinner and thinner as material and production costs continue to rise due to inflation and demand.
There is, however, a best-case scenario that takes both of these choices under consideration when it comes to industrial pricing.
READ MORE: How To Raise Prices Strategically with Sales Team Buy-In
Manufacturing Pricing Strategies
The expertly vetted service providers in the Business Builders’ Network know industrial pricing strategies for companies like yours inside and out.
“Specialized pricing resources allow companies to stay up to date with their pricing models so they keep margins healthy while maintaining strong relationships with their key customers,” Kolinsky says.
Here are some of the strategies they might employ for your business or portco when you work together.
Understand Your Costs
This includes both your variable costs (those that change with production) and your fixed costs (those that do not).
Variable costs are costs that change depending on the quantity of goods or services produced. For example, the cost of raw materials, labor and packaging are all variable costs.
Fixed costs are costs that do not change regardless of the quantity of goods or services produced. For example, the cost of rent, insurance and equipment are all fixed costs.
Understand Your Target Market
Conduct thorough research to understand your customers’ needs, preferences and willingness to pay.
This can be done through surveys, interviews and focus groups. It is important to understand what your customers are looking for in a product or service, and how much they are willing to pay for it.
Create Value-Based Pricing
Focus on the value your product or service brings to customers rather than just the cost of production.
This means understanding the benefits that your product or service offers to customers and pricing accordingly. For example, if your product or service saves customers time or money, you can price it higher than a competitor’s product or service that does not offer the same benefits.
Conduct Competitive Analysis
Research your competitors’ pricing strategies to ensure your prices are competitive in the market.
This includes looking at the prices of similar products or services offered by other companies. It is important to be aware of your competitors’ pricing strategies so that you can price your product or service competitively.
Consider Pricing Tiers
Offer different pricing tiers with varying features or levels of service to cater to different customer segments.
This allows you to reach a wider range of customers and maximize your profits. For example, you could offer a basic tier with limited features and a higher tier with more features at a higher price.
READ MORE: How To Analyze Sales Data
Test and Iterate
Continuously test and adjust your pricing strategy based on customer feedback, market trends and business goals.
This is an important part of pricing strategy because the market is constantly changing. By testing and iterating, you can ensure that your pricing strategy is always up-to-date and effective.
Align Pricing with Customer Value
Understand the value your customers perceive in your product or service and price accordingly.
This means understanding what your customers are willing to pay for the benefits that your product or service offers. For example, if your product or service is unique or offers a significant benefit to customers, you can price it higher than a competitor’s product or service that does not offer the same benefits.
Segment Your Customers
Tailor your pricing strategy to different customer segments based on their needs, behaviors, and willingness to pay.
This allows you to reach a wider range of customers and maximize your profits. For example, you could offer a discount to customers who purchase in bulk or who sign up for a subscription.
Data analytics tools – especially AI-driven ones – can make this a much more efficient and accurate process.
LISTEN TO THE PODCAST:
SVB Bank Crisis: How Private Equity Will Reframe Crisis into Opportunity
Communicate Value Effectively
Clearly communicate the unique value propositions of your product or service to customers through marketing and sales efforts.
This means highlighting the benefits of your product or service and explaining why it is worth the price. For example, you could create marketing materials that focus on the features and benefits of your product or service, or you could offer free trials or demos to let customers experience the value of your product or service for themselves.
Implement Pricing Discipline
Ensure consistent pricing practices across all channels and avoid unnecessary discounts or price concessions.
This means setting clear pricing policies and procedures and ensuring that all employees are aware of them. It is also important to avoid giving away discounts or price concessions unless it is absolutely necessary.
Regularly Review and Update Pricing
Regularly review and update your pricing strategy to align with market changes, customer feedback and business objectives.
This is an important part of pricing strategy because the market is constantly changing. By regularly reviewing and updating your pricing strategy, you can ensure that it is always up-to-date and effective.
You can get connected with a data-driven pricing resource in less than a single business day.
Set up a scoping call with our research and operations team, and they’ll introduce you to a short list of best-fit service providers to help you capture margins and continue to drive volume.
HR, Tech Take Center Stage in Q1: Private Equity Industry Update
Fast-Growing Company Needs Help Managing Transactions
Service Area: System Selection & Implementation
Client Type: Portfolio Company
Service Provider Type: Supply Chain Technology Firm
Industry: Waste Management
Need
System Selection & Implementation in Waste Management
A rapidly expanding outsourced waste management company had outgrown its accounts payable automation tool. With a modest-sized IT team, they needed expert help with greater depth and engineering to better handle their growth requirements.
Challenge
Tech service provider to ingrate their CRM with their AP tool
With an IT team of less than 10 people, the VP of Tech asked BluWave for help finding a service provider that could better integrate their CRM with their AP tool. As business continued to boom, they weren’t able to keep up with the transactions and needed guidance on not only getting the most out of the tools in place, but finding something more powerful for the future.
How BluWave Helped
The Business Builders’ Network
The very next day, we connected them with four experienced service providers that have done excellent work for other independent and portfolio companies, respectively. They landed on their top choice – a proven system architecture firm that understands their industry – and we continued to support the company by monitoring the service provider until the project was finished, and beyond.
Result
Connected with a best-in-class IT firm
The IT firm helped the portco reorganize its systems internally, better equipping them to select and implement a new AP automation tool. They were able to better integrate with their ERP and manage ever-increasing transactions more efficiently.
The work product we have seen is very good, both for documentation and quality of expected outputs.
They stayed involved from the discovery phase on through implementation.
The changes all look very good and were completed faster than expected. Additional input on changes were well received and follow up has occurred quickly.
-Vice President of Technology at the Company
Automating Accounts Payable: Benefits of the Best Software
What is AP Automation Software?
Accounts payable (AP) automation software is a multifunctional tool that assists businesses in optimizing and automating their accounts payable operations. This can involve activities such as processing invoices, matching purchase orders, and reconciling payments. AP automation software has the potential to reduce risk, increase precision, and save time and money for businesses.
AP automation software typically comes equipped with the following functionalities:
- Invoice processing: The software can automatically acquire invoices from vendors, extract critical data, and direct them for approval.
- PO matching: The software can match invoices with purchase orders to verify accuracy and ensure that the appropriate products or services were received.
- Payment reconciliation: The software can cross-check payments against invoices to confirm timely payment and accurate payment amounts.
AP automation software is an advantageous tool for businesses of all sizes. By employing this software, businesses can enhance their accounts payable processes, reduce risks, save time and money, and improve accuracy.
Benefits and Features
AP automation can provide a number of benefits for businesses, including increased efficiency, reduced costs, and improved accuracy.
Save Time
AP automation software can streamline accounts payable procedures such as invoice processing, PO matching, and payment reconciliation, freeing up time for other tasks like negotiating vendor discounts.
Save Money
By minimizing expenses and removing the need for manual data entry and processing, AP automation software can help businesses save money.
Improve Accuracy
With AP automation software, businesses can ensure prompt invoice payments and accurate vendor payments, thanks to decreased likelihood of human errors.
Reduce Risk
AP automation software generates an easily traceable record of all transactions, which helps to safeguard businesses from fraud and financial losses.
CASE STUDY: Accounting Specialist in a Hurry for a PortCo
Choosing an AP Automation Tool
Choosing the right AP automation software for your business depends on your specific needs. Experienced third parties who have helped businesses implement these exact systems are an excellent resource.
Some factors to consider include:
- The size of your business: The size of your business will affect the type of AP automation software you need. Larger businesses may need a more sophisticated solution, while smaller businesses may be able to get away with a simpler solution.
- The volume of invoices you process: The volume of invoices you process will also affect the type of AP automation software you need. If you process a large number of invoices, you will need a solution that can handle the volume.
- Your budget: AP automation software can range in price from a few hundred dollars to tens of thousands of dollars. It is important to set a budget before you start shopping for a solution.
- Integrations: Some AP automation software solutions offer integrations with other business systems, such as ERP systems and accounting software. If you have other business systems in place, you will want to make sure that the AP automation solution you choose can integrate with them.
If you’re not sure how to make this evaluation, it might be a good time to bring in an experienced third party.
READ MORE: Tech Stacks of Companies: How To Choose
Best Accounts Payable Software
While there isn’t one “best” software solution, here are some of the more popular ones:
- NetSuite: NetSuite is a cloud-based ERP solution that includes a number of features for AP automation.
- DocuPeak: Docupeak is a web-based AP automation solution that offers a number of features, including invoice processing, PO matching, and payment reconciliation.: DocuPeak is a web-based AP automation solution that offers a number of features, including invoice processing, PO matching, and payment reconciliation.
- Tipalti: Tipalti is a cloud-based AP automation solution that offers a number of features, including invoice processing, PO matching, and payment reconciliation.
A BluWave-grade expert from our expertly vetted network can help you choose among these and other top providers, saving your time and money.
READ MORE: Outsourced Bookkeeping Services: Third-Party Accounting Help
Matching your specific organization’s needs to the right accounts payable automation software can be time-consuming. The risks of choosing the wrong providers for such an important task are too high to leave to chance.
The Business Builders’ Network is full of proven third parties who have helped countless PE firms, portfolio companies and private and public businesses choose the right partner for this exact situation.
Our research and operations team knows the exact-fit, industry-tailored service provider for your specific situation before you even contact us.
Set up a scoping call today, and you’ll be introduced to of the best options on the market within a single business day.
How To Extract Data from ERP Systems
What is ERP (Enterprise Resource Planning)?
Enterprise Resource Planning (ERP) software streamlines business processes by coordinating data flow across an organization. It provides a single source of truth and optimizes operations.
They are used to manage everyday business activities such as finance functions, compliance, risk management, retail, supply chain and HR.
How To Extract Data from ERP Systems
Integrate API Endpoints
One way to extract data from ERP systems is by connecting your database to an API management platform.
From there, you can define and test your API endpoints with an external tool.
Lastly, you will integrate the API endpoints in order to get the data from the ERP system.
Use Extract, Transform and Load (ETL) Tools
Another way is by connecting your ETL tool to your ERP system’s database.
Once connected, you must tell the program what information you want to pull out before converting it into a format other systems can use.
Then you can put all that converted data into a database.
READ MORE: What are the Different Data Warehouse Types?
Get Help with ERP Systems
As you might have gathered from the overview above, managing Enterprise Resource Planning data is no easy task.
That’s why so many PE firms seek help for their portcos in this area. Private and public companies often seek outside support, too.
Here are the primary hurdles we hear about on scoping calls where a client needs help extracting data from their ERP:
- Lack of internal expertise: This is a common challenge when extracting data from enterprise resource planning (ERP) systems. Outsourcing to a third-party service provider offers access to domain experts with the knowledge and skills to efficiently extract data.
- Time constraints: Outsourcing offers a faster turnaround and allows companies to focus on core business functions rather than data extraction, which can be a time-consuming process.
- Complexity: Extracting data can be complex, especially if the data is spread across different modules or systems. Experienced service providers who specialize in data extraction can provide a more efficient solution and ensure that the information is accurate and reliable.
- Cost: Investing in the necessary hardware and software to extract data from an ERP system can be expensive. By outsourcing the project, companies only pay for the services they need.
- Need for specialized tools: Companies may not have access to the necessary specialized tools and software. These same tools will be part of a third-party service provider’s day-to-day toolkit.
- Data accuracy concerns: Extracting data from an ERP system requires a high level of accuracy to ensure that the data is reliable and can be used for reporting or analysis. If you leave this to chance, you may end up making important decisions based on faulty data.
- Need for customized data extraction: Companies may require customized data extraction from their ERP system, which may not be possible with existing in-house resources. Outsourcing to a third-party provider can provide customized solutions that meet the specific needs of the company.
- Compliance and regulatory requirements: The data extraction may be subject to specific regulations or industry standards. Companies may not have the in-house expertise to ensure that the process meets these standards, and can benefit from the provider’s knowledge of industry-specific regulations and standards. This helps minimize the risk of regulatory violations, legal penalties and reputation damage.
- Scalability: As a company grows, the amount of data generated by an ERP system may increase, and the data extraction process can become more unwieldy. There may become a point when companies don’t have the resources to handle the volume of data generated by their ERP system. Third-party providers can offer scalable solutions that can handle larger data volumes and provide ongoing support as the company grows.
If you’re ready to extract data from your ERP system, we’re here to connect you with a niche-specific, expertly vetted service provider.
We know the resource you need for your specific situation before we ever jump on a scoping call, and we’ll introduce you to two or three best-fit solutions in less than one business day.
Contact us now to meet BluWave-grade solutions to your biggest technology challenges.
Pricing Consultants: Hire an Expert
What Do Pricing Consultants Do?
Pricing consultants help businesses maximize profits based on researching trends, competitors, customer behavior and more. The goal is to maintain high demand and revenue generation without sacrificing quality, loyalty or perception.
Setting the right price for a product or service is a key factor in maximizing profit margin. It can unlock substantial additional revenue when done correctly.
In fact, demand for pricing strategy resources continues to increase in this high-inflation economy. It’s often among the most-sought resources in the BluWave network.
If you want to hire a pricing expert, here’s what you should look for during your evaluation.
READ MORE: How To Raise Prices Strategically with Sales Team Buy-In
Set Price
How consultants set prices depends on many factors, such as the type of product or service, market conditions, customer segments and business goals. That’s why it’s so important to hire someone who will take the time to intimately understand your organization and its competitors.
By choosing the “right price,” these consultants help maximize a business’s ROI by protecting profit margins while maximizing revenue and demand.
Pricing consultants may use a number of different high-level strategies: cost-plus pricing; value-based pricing; dynamic pricing; promotional pricing; penetration pricing; skimming pricing.
Pricing, however, is not a one-time exercise. They must be constantly assessed and adjusted based on performance. Consultants work closely with their clients to understand their objectives and constraints and develop a pricing strategy that supports them.
They help businesses choose the “right price” that aligns with the overall business strategy, marketing plan and sales goals to achieve maximum ROI.
Pricing Market Research
When choosing a pricing consultant, finding someone who thoroughly researches the market before making recommendations is essential. Pricing consultants use various methods such as surveys, interviews, focus groups, experiments, data analysis, and more to gain customer and market insights. This establishes a solid foundation for an effective strategy.
In addition to customer and market insights, pricing consultants also consider production, distribution and other operational costs to develop a strategy that ensures profitability.
Pricing consultants also analyze competitors’ strategies to identify opportunities and potential threats. This analysis includes not only their product or service prices, but also their promotions, discounts and other tactics.
To measure price sensitivity, consultants may use techniques such as conjoint analysis or price elasticity testing. This helps them determine how price changes may affect customer demand. They also use digital tools such as web analytics, social listening and sentiment analysis to gain insights into customer behavior and preferences.
All this market research can help validate a new product or service, identify customer value drivers, measure price sensitivity, segment customers by willingness to pay, benchmark competitors’ prices and more.
Target Pricing Strategy
After conducting market research and analyzing customer insights, pricing consultants typically use a combination of quantitative and qualitative analysis to create a pricing strategy that meets their clients’ goals. This includes:
- Segmenting customers: Based on their willingness to pay, customer segments are created to help determine the optimal pricing strategy. This involves identifying the different types of customers, their preferences and their willingness to pay for a particular product or service.
- Identifying value drivers: Consultants work with their clients to identify the key value drivers for their products or services. This involves understanding what features or benefits are most important to customers and how they affect their willingness to pay.
- Developing pricing structures: After identifying customer segments and value drivers, consultants develop pricing structures that align with their clients’ business goals. This may involve creating different pricing tiers or packages that offer different levels of benefits or features.
- Conducting sensitivity analysis: For an optimal pricing strategy, consultants conduct sensitivity analysis to understand how changes in pricing may affect demand and revenue.
- Developing measurement tools: Pricing consultants also develop measurement tools to monitor the performance of the pricing strategy over time. This includes setting up metrics and analytics to track sales, revenue, profit margins and customer satisfaction.
By using a combination of market research, quantitative analysis, and pricing strategies, pricing consultants help businesses maximize ROI and growth.
READ MORE: Industrial Pricing: Strategies for Manufacturing Businesses
Customer Analysis
To better understand customer behavior and preferences, pricing consultants use a range of techniques to gather insights:
- Key decision factors: One of the first steps in understanding a customer base is defining what motivates them. This involves identifying the main drivers of customer behavior, such as price, quality, brand reputation or convenience.
Research techniques such as surveys, focus groups and data analysis can all be used to understand what influences purchasing decisions. - Willingness to pay: This concept helps businesses determine the optimal price point for their products or services.
Essentially, willingness to pay is a measure of how much customers are willing to spend on a particular product or service based on factors such as perceived value, quality and market competition. - Preferences: Customer needs vary from market to market. For example, pricing consultants may work to reduce churn for a SaaS organization by understanding customers’ needs, what they value and how they make choices. Success is measured by an increase in adoption and revenue.
- Offer options: Offering choices with good-better-best options and bundles that meet varying needs, use cases and budgets can reveal a lot about a customer. KPIs here include customer adoption and employing Give-Gets to protect price/value alignment.
- Perception of discounts: It’s also important to understand how customers perceive discounts and how they influence purchasing decisions. This information is also used to inform pricing strategies that maximize revenue while maintaining loyalty.
A pricing expert will know when and how to use each of these tactics to develop the deepest understanding of the customer base for your particular industry.
READ MORE: Hire an Interim CFO
Some businesses never realize the potential of their products or services because they’re not charging the right price.
By blindly setting prices without conducting proper diligence, you’re leaving money on the table. Depending on the size of your business, this could mean millions of dollars.
Fortunately, there’s a roster of expertly vetted price consultants ready for you to hire from within the BluWave Business Builders’ Network.
We have thoroughly evaluated each and every pricing resource that’s been invited into our network so that you can move forward with confidence. These niche-specific resources have invaluable experience helping companies like yours optimize prices.
Whether you’re a PE firm working with a portco, or a private or public company that wants to accelerate revenue growth, we already have the right service provider for you.
Contact our research and operations team to get connected with two or three best-fit options in less than one business day.
In the Know: Optimizing the Finance Function
By evaluating the technology, processes, and people within the finance function of their portcos, private equity firms can make informed decisions that can lead to improved financial performance and increased profitability.
Here are a few ways they’re already doing so:
- Technology: After an acquisition, portfolio companies incur debt that they need to measure against for the duration of the hold period. To effectively measure financial goals like these, companies need a robust, PE-grade reporting package
- Processes: Private equity firms often look for ways to streamline processes, improve accuracy and increase efficiency by bringing in service providers like interim CFOs or finance operations groups
- People: Firms want to ensure that the right talent is in place to effectively manage the unique demands of a PE-backed finance function. Assessing finance talent often includes bringing in search firms to fill skill gaps, or bringing in leadership coaches and training providers
If you or your portcos have a finance need, or any other third-party need, contact our research and operations team to set up a scoping call.
In the Know: How to Action BI & Analytics Experts
As part of an ongoing series, we’re sharing real-time trending topics we are hearing from our 500+ PE firm clients. In our most recent installment, Jeremy Yoder, a BluWave Strategic Account Executive, shares how to action BI & Analytics experts, detailing the different use cases firms and other proactive companies have for bringing in data & analytics experts. Learn more by watching the video below.
Get connected to a BI & Analytics Expert.
Video transcript:
In our increasingly digital world, business intelligence and analytics is a growing input factor for companies to measure their level of growth and for private equity firms to evaluate the success of their portcos. PE firms come to BluWave with needs for data and analytics specialists who can help drive effectiveness and efficiency within their portfolio companies. Here are just a few of the most common use cases we see for why a firm brings in data and analytics specialists.
Number one, developing more measurable metrics at the portco level. The first step to making data-driven decisions is having the right metrics and reporting measures in place. Many companies are lacking this when their first PE sponsor comes into the picture, so our clients equip their new portcos with specialists who can help companies build a solid metrics and reporting foundation. This gives the PE firm visibility into how their portcos are tracking against those set goals.
Number two, data diligence. For companies with large sets of data on products and customers like companies in the B2C sector, there is often hidden value hiding within these datasets if they aren’t being analyzed. When companies aren’t actioning the data available to them, leading PE firms bring in specialists to uncover what stones are being left unturned and help glean risks and actionable opportunities from the data that already exists.
Number three, cleaning and assessing data. The most forward-thinking PE firms are using specialists to clean and assess their portcos data so that they can improve the precision of their evaluations and more deeply inform the health of their organizations. We have a deep bench of business intelligence and analytics providers at the ready for a variety of niche needs. To get connected to the PE-grade,exact-fit provider you need, contact us at info@bluwave.net.