Mike Duffy, who running a company called Yard Guyz, based in Sackville,NB, is facing a serious problem. His company is operating in an competitive environment because his competitors have deeper pockets of more established companies to support their operations and never worry about getting paid quickly. Therefore, when he was reconsidering the fledging landscaping and snow-removal business, he found that his cash-flow was in an adverse position. As a result, he recognized he should have put more money in his reserve account.
In order to reduce overhead costs and to provide a more competitive and affordable price, Mr. Duffy had decided to mostly use his own money to finance equipment purchases rather than rely on bank debt. However, we all know that this strategy seemed only good on paper, but in reality it made it hard to secure bank financing to cover his working capital needs. Consequently, the reality force Mr. Duffy to come up with an idea to solve this problem.
Firstly, Mr. Duffy decide to lower overhead costs by giving customers discounts for early payments. This strategy can basically relieve the pressure of the adverse situation. Also, it can help his company to take advantage of lower overhead costs than his competitors.
Secondly, the next strategy is to actively build his customer base. Therefore, he plan to take on smaller jobs that other companies will pass on, and that pay faster. This will not only make his client base be stable but also do increase clientele. In addition, the faster pay can help his company’s financing.
Finally, he start to pay more attention on his sales training. Through the improvement of service, client will be attracted by the quality service which can increase the revenue and his client base.
As a result, this solution help Mr. Duffy to get his new venture in the black in the first year of operation. Also, he added to his fleet of vehicles with bank financing and hired two people to help with the increased work load.
As far as I am concerned, I have a recommendation for Mr. Duffy. According to the first strategy, he started out by giving customers discounts for early payments, taking advantage of lower overhead costs than his competitors. Actually, this will not good for him to build his client base and attract customer because no one is willing to pay before they get the discount.
