TMNG Global Creates A New Business Plan For A Communication Service Provider

Challenge

A leading CLEC was in financial difficulty as its current business model was proving to be a severe drain on capital. It was projected that, at this rate, the client would run out of money in less than a year. The client needed to restructure its debt and obtain additional capital from their investors. However, the industry was experiencing a severe downturn and access to investment capital was challenging. The only way to obtain the financing necessary was to develop a new business plan that would allow the company to achieve success in the changing environment.

The company needed a fresh take on its business model and a workable plan - one that might require a departure from current ways of thinking. The client realized that it would require help in executing this new approach and sought TMNG Global’s expertise to help them achieve their financial goals.

TMNG Global Solution

TMNG Global was engaged to work closely with the company’s management team to modify the current business model and plan to reduce the current burn rate, while increasing revenue and reducing costs, given a targeted maximum cash infusion. It was anticipated that the immediate outcome would result in the company achieving a positive EBITDA. We discovered that the original corporate vision was valid, but it needed to be modified in the short term to account for changes in market conditions.

While cash was available, it made sense to expand the network, since facility-based services provide better margins and are necessary for a business to scale. However, the network expansion outpaced revenue goals and so the costs far exceeded income. The answer was to develop a suite of resale products, meaning the client needed to resell the products of other carriers. In doing so, portions of the leased facility network, which were clearly underutilized, could be removed and the customers switched to a resale product. In this fashion, revenue was retained while costs were reduced, allowing a negative margin to be converted into a positive margin, albeit a small one. Additionally, the resale products were incorporated into a “smart build” process. That is, when venturing into a new geographic market, resale products were offered. Once a volume threshold was reached, the network would be expanded to incorporate the new area. Costs of the expansion would be recouped almost immediately, and the large margins representative of facility-based services were realized.

Other initiatives undertaken included: initiating staff reductions, increasing revenue per employee, and transforming sales and marketing processes to bring earnings generation per representative to industry standards.

Benefits to the Client

Through our efforts, the engagement was successful. At the end of the project, the results were clear: the burn rate was reduced, and the plan was on target.

The client was clearly committed to the existing mode of operation and had resisted some of the basic precepts incorporated in the new plan. However, the strategy was presented to the investors and approved. TMNG was asked to assist in the execution of the plan, and a team member served as interim COO. His role was to manage the force reduction, and drive the organizational restructuring, development of new sales processes, network redesign, and operational planning.