The Challenge
A company with a ยฃ50 million turnover faced challenges in maintaining optimal EBITDA performance due to high operational costs amounting to approximately ยฃ43 million.
Despite increasing revenues, the company’s EBITDA performance was underwhelming. The CFO, supported by investors, recognised the need to rigorously address the bloated cost structure of ยฃ43 million to improve profitability.
The primary challenges included high personnel costs, an inefficient organisational structure with excessive layers of management, and misaligned expenditures with corporate strategic goals.
How did CEG help?
The strategy involved implementing a zero-based budgeting approach, which required evaluating every expense from scratch to ensure it aligned with strategic needs rather than historical spending patterns.
This approach was complemented by a workforce optimisation plan, which included relocating roles to lower-cost offshore locations and a reduction in some areas of the workforce to improve utilisation metrics.
Additionally, expenditure on marketing and operations was critically analysed and realigned with strategic expansion goals, allocating a higher proportion of the spending to growth markets in Southeast Asia.
Where are they now?
The restructuring and strategic realignment led to several significant changes, including a workforce reduction of 9% in full-time equivalents (FTEs), which enhanced operational efficiency. One underutilised office was closed and another was relocated to a more cost-effective location.
These changes resulted in significant cost savings, with an annual reduction of approximately ยฃ5 million, equating to 12% of total costs. Furthermore, the management span ratios were improved to best practice levels, facilitating better oversight and faster decision-making.
