4 social customer service lessons from the ‘Beast from the...
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At the time of investment by the Advantage Growth Fund the company had two customers and 4 employees. The company was struggling to find a vertical market in which to specialise, so Midven introduced a consultant to advise on the most appropriate target market. Initially the software was sold at a loss making price point to this target market, but the company quickly obtained reference sites and more market knowledge, enabling it to start the process of increasing prices.
As well as attending Board meetings, Midven was a member of the marketing team that met monthly to review strategy and pricing. At Midven’s suggestion the Company implemented a contract ‘extension’ strategy rather than waiting for a renewal at contract expiration date, which significantly increased the average contracted term at exit.
In 2009 following a review of market penetration in key areas, an awareness of the potential impact on the business of a forthcoming general election (as the customer base was 100% public sector) and a strong understanding of the management mind set and dynamic, Midven introduced corporate finance advisors to prepare the business for sale. This introduction was welcomed by management who subsequently disclosed that they had wanted to exit but weren’t sure how to raise the issue.
The business was sold in May 2010 to AIM-listed Allocate Software for a headline price of £9m, with £5m of cash up-front. The performance of the business post sale has suffered significantly due to public sector spending cuts highlighting the importance of having the experience to know when to exit.
In 2008 the company had been ranked 33rd nationally (2nd in the Midlands) in Deloitte’s review of fastest growing technology businesses in the UK. At the time of exit the Company employed 48 people and had 121 customers.