KPMG Financial Services Consulting - Defining a Market Strategy

To be more successful, businesses should manage more strategically. There is at least one business that took its own advice and did just that, with outstanding results. This brief article discusses the early steps in that business's strategic management process, and provides a good example of how strategic management can dramatically improve a business's performance.

During the years from 1993 to 2001, KPMG's financial services consulting practice (FSC) in the United States grew at an unprecedented rate. Revenue for the practice grew during that period at a compound annual growth rate of just over 40%. Outside the US, this high rate of growth began a couple of years later than in the US, but once started the results were similar. From a starting point of less than $100 million in 1993, in 2001, after several years of significant growth, global revenue for FSC exceeded $1.2 billion.

There were many factors that contributed to this extraordinary growth. The purpose of this article is to discuss one of them, the market strategy that was defined for the practice. A strong case can be made that market strategy was the most important factor in the success of the practice, but regardless, it did at least represent the first step in moving the practice forward.

Market Strategy
The market strategy that was selected for FSC was "business management". That market strategy proved to be an excellent choice for FSC, for a couple of major reasons:

• The "business management" strategy clearly differentiated FSC from competitors. At the time, firms in the market that were consulting to financial services organizations could be categorized into three major types. There were systems integration and managed services firms that approached the market with their functional skills and large pools of resources. There were general strategy firms that approached the market with their consulting process and corporate level reputations. There were also dozens of niche firms that approached the market with their knowledge and experience in a limited array of services. No firms in the market offered services where depth of business knowledge was a requirement. FSC chose that path, and quickly became differentiated in the marketplace.

• The "business management" strategy built on FSC's core strengths. Traditionally, FSC hired consultants with at least three years of industry experience. This hands-on business experience became a good starting point for developing even more depth of business knowledge and understanding of best practices across an industry.

Natural Client
The natural clients for FSC's "business management" strategy were the heads of the internal lines of business at the large financial services organizations. These were people who usually had Executive Vice President titles, or sometimes Vice Chairman titles, and who had full profit and loss responsibility for retail, corporate, capital markets, and other major businesses. Other firms were focused on the heads of technology, the Board of Directors, or at lower levels across the organization. Other firms did not identify strongly with the executives who had day-to-day responsibility for the P&L, and who were also the chief visionaries for their businesses in the market.
FSC's market strategy appealed to line of business heads, and they controlled significant consulting budgets. The market strategy demanded in depth knowledge of the business. Functional knowledge was also important, but only within the context of the business knowledge. Most of the time, the issues faced by line of business heads could not be segmented into functional components. It was necessary to blend various functional skills, such as strategy, risk, finance, operations, and technology, into project teams, all with deep business knowledge.

Buying Factors
The line of business heads, who were FSC's natural clients, had two buying factors that could not be compromised when selecting consulting firms:

• There could be no learning of the business on the job. FSC not only embraced this buying factor, but tried to take it a step further. The goal was to assign professionals to projects that knew the business better than client personnel ever could. Therefore, best practices in the industry were introduced to clients in the normal course of consulting projects.
• Consulting expenditures had to have bottom line payback. Once understood, this buying factor became a benefit to FSC. The heads of business lines were much more inclined to spend money on consulting projects when there was a quantified known payback. FSC had the knowledge and confidence to make commitments when necessary on paybacks.

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FSC enjoyed unprecedented growth during the 1990's. One of the major factors contributing to that growth was FSC's market strategy of "business management". The market strategy appealed to the internal heads of lines of business, who became FSC's natural clients. These natural clients had requirements for selecting consulting firms that demanded deep business knowledge and payback on consulting expenditures. The market strategy proved to be effective for FSC.

Taking the first step along the strategic management pathway required a tremendous amount of information gathering, analysis, insights, and hard work, but in the end, the results were worth the effort. FSC would not have been as successful during that period without, first, thinking strategically.

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How Does a Construction Staffing Company Make Money?

A construction staffing company operates the same way as any employment agency does, except it works specifically with workers and companies in the construction industry. These agencies recruit key construction personnel -- executives or managers -- and deliver temporary skilled and unskilled labor or temporary-to-permanent employees based on the contract with the company that hires them. Multiple profit streams exist for construction staffing companies that offer all or some of these services.

Recruiting Efforts

Construction staffing agencies often make money from both construction firms and potential employees. Upfront flat-fee retainers are paid by the construction firm before it has hired someone from the agency's pool of recruits. After an agency's recruit has been hired, it charges the company a percentage -- up to 50 percent -- of the position's first-year salary. Some agencies might also charge a flat fee to the person looking for work in addition to the fees charged to the hiring company, unless it advertises that the fees for the position are paid by the employer.

Temporary Employees

When a construction company falls behind schedule or loses valuable workers, it might turn to a staffing agency to provide temporary employees. These can be skilled or unskilled workers, depending on the needs of the construction company. The staffing agency makes money by charging an additional cost on top of the temporary employee's salary. For instance, an unskilled laborer might make $10 an hour, but the staffing agency could charge $15 per hour or more for providing her.

Temp-to-Perm Employees

Many construction companies look to a construction staffing agency to screen potential employees for hire. In the temp-to-perm scenario, the construction company agrees to try out the candidate for up to 90 days. The staffing agency adds a percentage of the person's hourly wage -- up to 50 percent or more depending on its internal fee structure and contract. After the trial period, the construction company makes a decision to keep the temp-to-perm employee or let him go. Some construction staffing agencies might charge an additional "hiring" fee on top of the hourly percentage after the 90-day period.

Profits and Fee Structures

Construction staffing agencies typically have profit margins that range from 25 to 50 percent, usually on the higher end when they offer multiple employment services. Some construction companies contract with a staffing agency on a yearly basis to receive lower hourly fees. In these situations, the staffing agencies make their money on the monthly retainer and the sheer number of employees they provide to the construction company.

Checkout here for how to start an employment agency.

What About A Business To Business Franchise?

A business to business company differs from others in such that while the others cater to consumers, b2b caters to businesses in a particular area. The options and choices available upon thinking of going into this kind of business is not just profitable but diverse. Here you can offer blue collar services such as networking or marketing or white collar services like printing and janitorial services. In any case, a b2b or business to business company serves for the benefit of the other businesses in the area by providing them venues for outsourcing some of the work cheaply and effectively. This translates into a lower overhead for them as well as less problems in the logistics, acquisition and maintenance of people and equipments.

A b2b company also differs from other businesses because they are open for only certain hours of the day. Usually the hours that a b2b company is open depends on the hours of the businesses they serve.

This means that b2b companies usually have shorter hours than regular businesses. B2b companies also tend to cost less in monthly expenses such as the utility bills, personnel wages and equipment maintenance. This is because b2b centers runs of just a few personnel, requires less office space as well as less equipments. This means that you have a much lower monthly overhead and thus lower risk. Add this to the minimal start up cost of this type of business and you will see why it has become so popular as a form of business today.

Some b2b options may even be run from the comfort of your own home. Examples of these are internet based services such as transcription services and web hosting services. This results in a lot higher profits margins because of the negligible cost of maintaining a home office and high demand for services like these.

So if you are thinking of going into b2b, read about the different kinds of b2b businesses that you can start. Of course it is generally suggested that you go into a business where you are interested in, can market convincingly and with ease, and fits into your kind of lifestyle. Franchise opportunities are also available in this kind of business so you will definitely find it easier to start, maintain and grow to a successful business. In b2b the success of businesses you serve means a lot to the success of your own business.

So look up possible b2b businesses you might be interested in and choose the one that is perfect for you.

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Franchise Opportunities - 5 Advantages of Operating a Franchise Business

Looking to start your own business? If you want to own your own company, but are not sure where to start or how, you may want to consider purchasing a franchise. Franchises are great, because they offer many advantages to the franchisee, allowing them to operate their own business and gain profits, while providing a format to help direct your business.

If you are thinking that operating a franchise will be a ready-to-use business, you are mistaken. Although franchise ownership is not a buy-and-fly operation, many franchisees do find that starting and operating a franchised outlet fit their personal tastes much better than trying to start a company from scratch.

Here are some great examples of the most common advantages of operating a franchised business:

1. Instant Recognition: The main benefit of purchasing a franchised business is that it allows you to use your parent company's already-established name to attract a pre-existing customer base. A franchise is basically a license to use an existing company's name, trademarks, products, services, and other resources in return for agreeing to use that company's existing business formats and provide a percentage of your franchise's income and earnings. An established company means established products and services, which appeal to an established market, already waiting to buy your product!

2. Working Operations and Procedures: When you purchase a business format franchise, you gain the privilege of not only being able to sell the parent company's products or services, but also the right to use their established industry practices. These practices may include training programs, marketing strategies, trade secrets, accounting systems, etc. This cuts down drastically any problems you will encounter in trying to establish these systems on your own.

3. Lower Start-Up Costs: Normally, the initial fee of purchasing a franchise is substantially lower than the cost of setting up an enterprise from the ground up. Combine this with the pre-established operations formats that will be provided for you, mentioned above, and you have saved yourself quite a bit of money and energy.

4. Ongoing Support: While the initial advantages of operating a franchise have been illustrated, one of the most important aspects of having a franchisee is the fact that the parent company will provide you with ongoing support throughout your venture. You will never have to worry about being on your own.

5. Financial Clarification: In addition, most of the financial aspects of running a company will be much more straightforward. The franchisor will be able to provide you with details of both start-up costs and operational costs, taking much of the guess work out of running a business.

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Starting a Franchise Business

Research is essential before starting your franchise business. Your research should include knowledge about the market conditions, competition, the requirement and worth of the services or products that you are planning on selling, expenses, etc.

Knowledge of the demand of the products and services is as essential as knowledge about the competitors you will face. You need to know how you can divert clients to your franchise, how much your competitors charge for the services they provide, and if you can provide your clients something better, and cheaper.

To start your own business, you need big capital. You will need a lot of money to advertise your business. Starting a franchise business, on the other hand, requires lesser initial investment on your part. Franchisors will also help train you. They are also willing to support you financially in marketing your business.

Advertising is an integral part of running any business. You need to have an effective marketing strategy, and you need to account for the expenditures that you incur. Marketing through yellow pages, handbills, doorstep advertising, etc., for a regular business should not cost you more than $1500 every month. It can cost more, or less, but you need to know if you can afford that sum while your business is still in the initial startup phase. This cost can be less through a franchising opportunity.

You also need to make a profitable business plan before starting a franchise business. This will not only assist you in running the business in coming years, but will also prove to be a valuable teacher when you are in need of immediate answers.

Taking up a business course in a college is a good idea if you are not very well versed with the ways of the business world. Many colleges and private institutions offer short courses that can boost your management and business skills considerably. If you have a job, keep it until you are sure that your business will thrive. Remember, franchising is the best kept secret of the 21st Century!

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What is Franchising?

This article will tackle the definition of franchising.

Franchising is a practice where a corporation allows an other entity to use the company's already successful business model. The franchisor (the company that provides the business solution) and the franchisee (the entity that uses it) enter into a contract to use and capitalize on the company's successful business model and/or it's existing brand awareness (most often called Goodwill) for a faster return of capital.

In return, franchisees pay two payments in general. First is a one time payment, called the franchise fee, and the other is royalty fee, which is a recurring expense, for the continuous usage of the business model, advertising and training costs. Royalty is usually 3-10% of gross income.
That's pretty much what franchising is.

One common misconception about franchising is the statement, "I am buying a franchise.". You are not buying, you are capitalizing onto the business model. What you will own are the physical assests that are needed to act upon the franchise, like the building and equipment.

For a business to work as a franchisor, it must have a good track record of profitability and the business system it employs is easily duplicable. Otherwise, that business is not suitable for franchising.

What's so great about franchising?

For the franchisor, the business can grow and gain more branches while lessening the traditional risk and liability of doing so. It is also a great way to gain more brand recognition and reputation.
For the franchisee, they are investing in an already proven business model and recognized brand. In fact, a franchising business is 90% proven to be successful. With a success rate like that, who can go wrong?

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What is the Cost of Franchising Your Business?

So you're thinking about franchising your business and wondering how much it costs. There isn't necessarily a right answer for this question, but let's walk through a few different scenarios. First off, let's remember why you are looking into franchising your business. I would imagine it is because you have a good business that is profitable and would allow for a franchisee to make a decent return on their investment. You may also be considering franchising your business because you are unable to expand through your own cash flow, get a loan through a bank, or find investors that have an interest in your company. Isn't funny when you look back and you actually thought at some point that you would actually find an investor? Who were we kidding! You may also be franchising because you don't have the right staff in place for more company locations or need to expand rapidly.

So all of this has led us to the point of franchising a business and now you are wondering what it costs to franchise. Let's take a look at the initial costs. Initially you are going to need to have a franchise company developed. So you are going to need a franchise business plan, franchise legal documentation, franchise operations manual, franchise marketing plans, franchise brochure, and franchise training. There are a number of ways to complete these items such as doing it all on your own, hiring a franchise consultant, or finding some way to piecemeal the project together. Don't be fooled by your local attorney telling you that they specialize in franchise law or convince yourself that now all of a sudden you are a master in franchising. It is a highly specialized field and you are far better served connecting with a franchise consultant to help you through this process.

Okay, okay, so what does it cost to franchise already? Generally speaking franchise costs can range from $50,000 upwards to over $250,000 and usually are not much more than your cost to open up another company owned location. Although the initial cost might seem a bit overwhelming, you have to remember that you are building a mold to sell franchises from. After the mold is built you will be able to sell as many franchises as the market can bear. Remember too that you most likely will be asking your franchisee to spend the same amount or more in order to buy your franchise.

Overall, there are many variables that can contribute to your cost to franchise a business such as if you intend to expand internationally, nationally, or regionally. Other factors include your marketing budget, what kind of outsourced franchise service providers you work with, what you already have in place, and other types of operating expenses. I hope this helps to answer your question about what the cost is to franchise a business.

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