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Bouncing Back After Losing a Big Client

A Chicago-based tech outsourcing firm retools marketing and pricing for a turnaround.
February 22, 2011
URL: http://www.entrepreneur.com/article/218163

Small Business Comebacks

Editor's note: Small-Business Comebacks is a new series about resilient entrepreneurs and their strategies for rebounding from the recession.

In 2008, Matthew Kaseeska's technology outsourcing firm was coasting. Business was the best it had been since before 9/11, and Net Works Consulting Resources Inc. was posting annual revenue of about $1.3 million with 15 employees.

But almost overnight, the tables turned.

In late December that year, the Chicago-based company's largest client, which accounted for 20% of total revenue, changed leadership and took its business elsewhere. Kaseeska suddenly found himself in a fierce fight for his company. "Someone flipped the switch at the end of '08, and '09 was just one battle after another," he says.

A Low Point
While reeling from the client loss, Kaseeska also took a hit in his personal finances. With three kids at home, including one headed to college, his monthly house payments shot up 40% as a result of the mortgage adjusting. He couldn't even refinance because of the mortgage crisis. So, with his business and home seemingly at risk, Kaseeska started to make big decisions, desperately trying to stay afloat.

Instead of cutting employee salaries, he cut his own pay by 20%. He also laid off three employees, but hired a new sales manager in an attempt to bring in new business. It wasn't enough. By July of 2009, a month after the changes, the company posted a record net monthly loss of $80,000, proving the new hire wasn't the magic bullet he had hoped for. Kaseeska burned through $200,000 in reserves to pay employees and cover overhead expenses. Business was barely trickling in. Something had to change, and fast.

The Turnaround
That summer, Kaseeska enrolled in Entrepreneur Organization's Entrepreneurial Masters Program, in conjunction with Massachusetts Institute of Technology. The four-day program, which chooses 65 entrepreneurs from around the world to participate at a cost of $3,500, was instrumental in getting him to think about his business from a new perspective. While sitting in on a lecture taught by entrepreneurship guru Verne Harnish, Kaseeska had an "aha" moment: He realized he hadn't thought at all about how his customers' needs had changed with the economic downturn.

"I realized there was a huge need out there for companies to save money," says Kaseeska, 44, who grew up in a family of entrepreneurs.

Your Reality Check
When Kaseeska was in crisis mode, he had to answer some tough questions. Consider how they may also apply to your business:

• What will happen to your company if you lose your biggest client?

• Has your customers' environment changed? How can you modify your product or service to better meet their needs?

• Is there "dead wood" in your company? Who isn't contributing to the bottom-line in a meaningful way? How can you get someone more effective to do the job?

Kaseeska launched his company when he was 30, but developed a fascination for information technology much earlier, while spending his eighth-grade summer tinkering with his uncle's Radio Shack TRS-80 computer. He went on to earn a dual bachelor's degree in Business and Management Information Systems. But even with his years of business experience, Kaseeska found that looking to his network of colleagues inspired him to think in new ways about the downturn.

With their help, he recognized the need to take a different approach with clients. What that meant was an overhaul of his company's fee structure and a retooling of marketing efforts. Kaseeska changed the company's pricing schedule from one that charged for services by the hour to more of a "value meal" approach, now offering clients unlimited monthly services for a fixed price.

"People in an uncertain economy want certainty," he says, and by paying a flat fee, customers didn't have to worry about being charged more when they needed extra help.

Kaseeska also placed a renewed focus on what his firm does best: help companies outsource their IT departments. In tough economic times, this was especially attractive to businesses looking to improve efficiency. For example, by eliminating the in-house IT department at a credit-card processing company, a new client last year, the company cut costs by 40%. And by offering that "value meal" option, Kaseeska got clients to sign long-term contracts.

What's more, Kaseeska realized that the crummy economy left a dearth of unemployed talent, so he now had a better shot at attracting the best and brightest to his small firm. He began working with Hireology, which helps companies make hiring decisions, and brought on three new employees. By the end of 2010, Net Works Consulting Resources was back in the black with $1.4 million in annual revenues. Kaseeska even plans to hire two or three more employees this year.

"My biggest take-away is to always reinvent yourself--always stay fresh," he says. "Pay attention to what the consumers or customers are asking for. Once you listen to that, you get it."

Lessons Learned
It wasn't until Kaseeska took a step back and looked at how clients' needs had changed that he was able to make the right decisions for his company. By recognizing the business opportunities of a down market -- such as helping clients cut costs and seizing opportunities to hire great talent -- he was able to turn the company around.