Growing companies are finding out-of-house analysis and services that used to be available only to big businesses.
Big companies thrive on high-powered number crunching. Now you can too
Early this year, the managing partner of a 12-person human-relations consulting firm realized that the business -- despite healthy sales -- had a cash-flow problem. Even worse, no one in the company could locate the source of the problem. The solution: an analysis by a sophisticated computer model. The findings: the company's new commissions program was producing a loss of $5,000 a month.
Large companies have long had access to computer programs capable of fine-tuning every aspect of their operations, from cash flow to personnel to inventory management. Growing companies also have software to help with those functions, but buying or developing the sort of sophisticated software models needed to thoroughly analyze a business has been beyond their reach. Now those companies have a new option: consultants who specialize in applying high-powered pc-based business analysis tools to smaller businesses.
One such company is BusinessMatters Inc., a consulting and business-services firm based in Washington, D.C., that offers clients the benefits of high-tech business analysis without heavy overhead. Founded in 1992 by Jackie Braitman, who initially ran the company as a typical management consulting firm, BusinessMatters is now a complete outsourcing service that provides its clients with management information and advice based on the output of a state-of-the-art proprietary database Braitman designed with her brother.
The human-relations firm that was losing $5,000 a month because of its commissions structure seemed to have a healthy bottom line. And creating incentives for employees to bring in new business seemed to be a logical action. It took Braitman's computer analysis, which scrutinizes the same information that an operating manager would look at, to figure out the glitch: the company was paying commissions too soon -- and they were too high.
Braitman admits that if she had simply been asked about the commissions program, she would have said it was a good idea. But her powerful tools, which, in effect, give small companies both an accounting department and a computer department, allowed her to see beyond the bottom line.
The first client to use Braitman's new service, in 1993, was Statistics Collaborative Inc., a $500,000 Washington, D.C., consulting firm for biomedical research studies. Owner Janet Wittes had hired her son to run the office, but he was leaving the company. Worried about finding a top-notch manager -- and about the hefty salary a top-notch manager would command -- Wittes decided to turn everything over to Braitman.
Wittes and her son had worked hard to build a database, but Wittes says their system was "pretty primitive." Since hiring Braitman, Wittes has stopped using computers to run the office. BusinessMatters takes care of everything -- from paying electric bills to collecting accounts receivable.
And then there are the reports. Each month, Braitman presents Wittes with a 50- to 100-page breakdown of every aspect of Statistics Collaborative's operations. Using $40,000 worth of computer hardware and her proprietary software, Braitman generates a series of ratios that track everything from the productivity of each employee to the profitability of each job. Braitman goes over every report with Wittes and makes suggestions. But even the numbers alone can be revealing.
"One monthly report," recalls Wittes, "made clear that I had to fire someone." That report showed that a programmer Wittes had recently hired had a relatively low productivity number. At first Wittes attributed this to the fact that the programmer was new. After a couple of months, however, nothing had changed. Confronting the programmer led nowhere, and finally Wittes let him go. "He was completely unproductive," she says. "The numbers alone told me that."
Braitman's analyses also revealed that jobs headed by a particular project manager always lost money. Further probing indicated that the project manager was neglecting critical duties -- for example, she wasn't rebudgeting when she incurred unexpected expenses. This time, sharing the information with the employee led to a complete turnaround: the project manager's jobs began to show consistent profits.
For her consulting and full outsourcing services, Braitman charges clients $1,200 to $4,000 a month, depending on the number of employees in a company, the complexity of a company's payroll system, and so on. Statistics Collaborative pays about $1,600 a month. For many clients the full outsourcing alone -- what Braitman calls "hassle relief" -- justifies the price.
While none of Braitman's 25 clients have more than 40 employees, Braitman says she's equipped to handle companies with as many as 150 people. Her client list keeps growing. In fact she's now developing a new version of her proprietary software to meet clients' demands for increasing levels of customization.
"Astounded by how little support small companies have had," Braitman believes that her clients greatly value the service she provides. "I'm more than a consultant for them," she says. "I become an insider."
Gina Slater Parker, CEO of $1-million Hill Slater Inc., also appreciates the value of outsourcing and management-information services for small businesses. Last year, she hired the Mastermind Group Inc., a bookkeeping and accounting consulting service in Huntington, N.Y., to do full outsourcing for her 17-employee company, an engineering- and architectural-support firm based in Great Neck, N.Y.
"I wasn't getting the service I needed from my accountant," she says. "No managerial reports -- nothing." Since she started Hill Slater in 1984, Parker had gone through several accountants and bookkeepers. But when she met Crisler Quick, founder of the Mastermind Group, at a small-business meeting in the fall of 1994, she immediately recognized an opportunity to help her business. And she was right: Hill Slater's revenues have climbed 30% over the past year, a fact Parker attributes to Quick's services.
Although Quick uses off-the-shelf software and contracts payrolls out to Automatic Data Processing Inc., in Roseland, N.J., she offers her clients full outsourcing and in-depth managerial reports similar to those that Braitman offers. For example, at one point when profits were down, Quick analyzed all of Parker's jobs and found the source of the problem. Parker had abandoned her usual billing method for a profit-sharing arrangement with a particular contractor. A long winter with 17 snowstorms had caused so many delays in construction that the project had made very little money. And the contractor had gotten what little there was; Parker had received nothing. Quick pointed out the importance of billing on employees' time and fees, not on hopes of future profits.
"Hiring the Mastermind Group is better than hiring your own CPA," says Parker, who claims she now has a whole team of experts for less than the cost of an in-house office manager. "I'm never shuffling around looking for things." And like other clients of services like BusinessMatters and the Mastermind Group, Parker also values what Quick has "forced" her to do: organize, account for every action, streamline operations.
Even if most growing companies decide they can get by without outsourcing or consulting services, at least those services are becoming an option for them. That's one less advantage for large companies.