Dial-a-Nerd: Staying on Top While the Market Changed

Dial-a-Nerd: Staying on Top While the Market Changed

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Founder Colin Thornton is quick to point out that the brand’s growth is largely because of the management team’s willingness and ability to keep relearning the basics and adapting to change.

“If we didn’t evaluate who we were and what we do on a regular basis, particularly with market changes in our industry, we wouldn’t still be going,” he says candidly. It’s this ability for self-reflection and above all, change, that marks Dial-a-Nerd’s propensity for success – and continued growth.

One of the biggest lessons we have learnt over the years is to never become complacent. Business is about constantly reviewing what you are doing and how you’re doing it, from your business model and the products or services you offer, to what staff and management structures you have in place.

When we launched in 1998, extending our footprint was the most important thing to me. I wanted a branch in every main (and not so main) centre in South Africa. Our model was based on doing onsite work, and so the more satellite offices we had, the wider our reach.

I concentrated on opening offices and getting technicians within those areas and didn’t even question this logic. We needed to be everywhere to grow our brand.

In hindsight, this was definitely the right strategy at the time. We managed to grow a national brand, and we had technicians across the country. And then the market changed. New technology enabled us to do most of our work remotely.

 

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Suddenly, we didn’t need to be onsite, and we certainly didn’t need offices in far flung places. Maintaining those offices is expensive, and so are travel expenses. It’s far more cost-effective and efficient to work remotely, particularly since in many cases we were sorting out problems remotely anyway, and the offices were just sitting there costing us money.

It sounds so obvious, but if you don’t pay attention to the numbers, you can often miss the obvious.

If I could go back, it would be to have realised this earlier and begin our consolidation sooner than we did. You can’t close offices overnight, and so we are still carrying some unnecessary costs. On the other hand, if we hadn’t realised this at all, we wouldn’t still be going. We’ve gone from 14 to ten offices in the last year, and are aiming for eight.

From budget solution to premium service

The technology changes that affected how we operated also changed our market. For many years the average client needed to see us every three to six months, and our market was 80% consumer and 20% corporate. Over the past year and a half though, technology has improved to such a degree that home-based tech doesn’t need fixing.

Again, this sounds obvious – we all know tech has improved substantially over the past few years – but when your whole business is based on helping non-tech savvy people fix their hardware or instal and troubleshoot software, it’s problematic when the problems go away.

A large part of our business also focused on training, and again, as people have become far more comfortable with technology, this market has also shrunk. We could have stuck to our guns and tried to approach more people, expanded our marketing and sales efforts or simply accepted a shrinking business, but that’s no way to run a sustainable business.

We needed to change our business model instead. There’s no sense in holding on to something that’s no longer working.

Our solution was the corporate market. The consumer market for training and after-sales support might be shrinking, but the corporate market is growing. More and more businesses are using tech – particularly smaller companies that could not previously afford to.

The difficulty for us was understanding the difference between the two markets.

Consumers want to pay less, but they are happy to wait a few days for assistance. The corporate market will pay more, but demands immediate service. Their own businesses are based on their tech – everything needs to be running smoothly, at all times.

We have adjusted our offering accordingly. It’s meant a number of shifts. First, the students we employed for consumer work are not suited to the corporate market. In many cases students have grown with us, and years later are ideal for this market, but it has changed our hiring practices.

We need technicians who are comfortable working in a corporate environment, work well in high-stress, high-pressure situations, and intimately understand bigger and more complex corporate systems.

Our entire model has shifted to 80% corporate and 20% consumer. As a result, we need far more technicians as well. Our corporate clients can’t wait for assistance. We need to be addressing their problem within four to six hours at the most, which means we need a surplus of technicians who are actually sitting around, waiting for a call.

To be able to afford this model and offer this level of service, we need to charge a premium price to take into account the fact that we have capacity that is not being used. Interestingly, this has not been a problem. We originally started out as a budget solution.

Today, we offer a premium service, and as long as we are able to deliver on our client service agreements, it’s a premium price our clients are happy to pay for the value we are adding to their businesses.

Our strategy over the past year has been to grow the business side as quickly as the consumer side shrinks. It’s been a challenge, but because we keep re-evaluating the way we operate, we’ve been able to streamline a lot of our processes along the way, which has alleviated cost pressures during the transition.

Know your profit generators

The trick with both pricing and watching the bottom line is understanding where you make your money. It sounds like a cliché, but in my opinion it’s the single most important part of running – and growing – a business.

Hardware and software have become so commoditised that you need to make your margins on service offerings. Since our model was already based on charging premium prices for excellent service, this could have been the end of it, with an assumption we were making a tidy profit.

Instead, each year we do an extensive overview of where we are making money, and where we’re spending it. We take nothing for granted.

Through the exercise we could clearly see how much the 14 branches were costing us, but also how our system gave a false impression of how well some of the branches were actually doing.

A branch manager would report a profit of R100 000 for example, but not take into account that head office administrative and accounting support cost R300 000. Without balancing the books, you end up with essentially false margins, and branch managers who don’t have a strong picture of how their deliverables are impacting the business as a whole.

Similarly, we needed to determine what was making us money, and these are not necessarily the jobs that offer the biggest margins. Let’s take network cabling as an example. On paper this offers a 60% margin, which is great. What you don’t factor in are the hours of upfront consulting and management hours. These are indirect costs, but they add up.

Compare this to a job that only has a 20% margin, but no additional costs for time and manpower. At the end of the day you end up with a higher profit, even though the margins are lower.

What we learn each year from this exercise is that you can’t assume you know where your money comes from, and that the highest paying contracts aren’t always the biggest profit jobs. As a business owner, I regularly sit down and question how well I know and understand the inner workings of my own business, and I make sure I’m as informed as I can be.

Keep a constant watch

The most important job description that I have though is managing people. Someone from every branch reports directly to me, and although our branch managers are empowered to make their own decisions and manage their own teams, I get regular updates on what’s happening in each branch so that I have a strong handle on where the business is.

It’s my job to motivate my managers, support them, train them and help them solve issues. When we receive a complaint, it’s not about assigning blame. It’s about asking what went wrong, determining the best way to resolve the issue, and then putting systems in place to ensure the same mistake never happens again.

Everyone is involved in the process, and we all learn from it, across the branches.

Customer service is our entire business. If we relax, this starts slipping, so I keep a constant watch on how we are delivering on our mandate and receive monthly reports on client interactions. I am also very conscious of the fact that I need to lead by example.

If a client wants to speak directly to me, I make sure I’m available. One of the things that has always driven me nuts is companies whose MDs are inaccessible. You have a problem and you’re passed from manager to manager and never feel like your issue is being addressed or taken seriously.

This isn’t the business we want to be. Our differentiator is service, and I can’t insist on that with our employees if I’m not willing to follow suit with my own time.

Achieving sustainable growth

  • Never become complacent

If you assume you’re making a profit or your pricing is spot on, chances are you’re missing something. We regularly take a long, hard look at what actually makes us money, and we’ve realised that higher margins don’t necessarily relate to higher profits – sometimes it’s even the other way around.

  • Focus on your market

What previously worked might not work today. Stay on top of market trends and relate them to your business model. If we had stuck to our consumer model because that was the way we had always worked, we wouldn’t be around today.

  • Find your differentiator

It sounds clichéd, but when you are offering a non-commoditised service, the value you offer your clients determines your price point. Understand what value you bring to your clients’ lives or business.

The higher the value, the more you can charge – and no, value is not the quality of your service or product, but what you bring to the client. In our case, we give our clients the gift of minimum down time. They don’t care how great our technicians are, as long as they don’t feel the pain of tech that doesn’t work.

Nadine Todd
Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.
  • Great article on a real entrepreneur with his head set squarely on his shoulders!

    I met Colin back in 1998 when he had just started Dial-a-Nerd, and he was a service provider (him personally at the time) to my business, Red Pepper Books, which had also just started up.

    I always admired his professionalism and expertise, and it’s wonderful to read about how he has grown and he lessons he has learned along the way. These are all lessons that many entrepreneurs face but don’t always address.

    May Dial-a-Nerd continue to grow from strength to strength under the leadership of this great leader!