Business Impact
Unlocking Significant Value within Non-core Business Activities
Cost savings are a force multiplier
Fast-growing companies, especially from merger and acquisition, face a variety of challenges including the need to scale and realize synergies quickly while simultaneously managing the complexities of organizational restructuring. This can exacerbate inefficiencies within non-core business activities. By focusing cost management initiatives in these overlooked areas, companies can uncover significant hidden costs to enhance long-term profitability.
The Challenge
As companies scale or integrate post-merger, they inevitably encounter growing pains. Non-core activities are those seemingly unrelated to boarding, processing, or payment technology and, while not directly tied to the company’s competitive advantage, still play a crucial role in overall efficiency. As they do not seem to give the company its competitive edge, they may receive less attention and fewer resources. Over time, these inefficiencies compound. As a result, these non-core areas suffer from underinvestment in three key areas show below.
The Solution
At a leading merchant acquirer, our founder deployed a comprehensive strategy, aligning merchant data with historical merger strategies, financials, and other information sources. This approach revealed inefficiencies within multiple areas, amounting to approximately $1.72M in recurring costs.
The Business Impact
The financial impact of these cost management initiatives is compelling. In this case $1.72M in recurring costs translated to an equivalent of about $31.2M in sales. This is because cost savings are a force multiplier known as the profit leverage effect. This company had an operating margin of 5.5% meaning that the organization would need to generate $31.2M in sales to realize the same $1.72M in operating profit. The profit leverage effect significantly amplifies the financial impact of cost management initiatives.
The Takeaway
Targeting inefficiencies in non-core business activities isn’t just about trimming costs—it’s about unlocking hidden value. By identifying and eliminating these inefficiencies, companies can achieve significant cost savings that directly boost the bottom line.
For this company, these efforts were equivalent to generating over $31.2M in annual revenue, highlighting the impact of operational efficiency. When managed with a comprehensive approach, companies can unlock significant cost savings, driving long-term profitability.
*ARR equivalent is based on individual company operating margins
Please send me an email, or feel free to call me directly on any business-related matters .
Jennifer Johnson, Founder and Principal
(c) 562-322-6272
(e) Jennifer@MoretonBayAdvisory.com
The Challenge
As companies scale or integrate post-merger, they inevitably encounter growing pains. Non-core activities are those seemingly unrelated to boarding, processing, or payment technology and, while not directly tied to the company’s competitive advantage, still play a crucial role in overall efficiency. As they do not seem to give the company its competitive edge, they may receive less attention and fewer resources. Over time, these inefficiencies compound. As a result, these non-core areas suffer from underinvestment in three key areas show below.
- Less Strategic Focus: These activities aren’t central to the company’s goals, leading to a lack of management oversight.
- Lower Investment: Companies may prioritize investments in core activities, leaving non-core areas lagging in technology, training, and process improvements.
- Lack of Expertise: The best talent are drawn to the core functions, leaving non-core areas with less experienced personnel, which only amplifies inefficiencies.
The Solution
At a leading merchant acquirer, our founder deployed a comprehensive strategy, aligning merchant data with historical merger strategies, financials, and other information sources. This approach revealed inefficiencies within multiple areas, amounting to approximately $1.72M in recurring costs.
The Business Impact
The financial impact of these cost management initiatives is compelling. In this case $1.72M in recurring costs translated to an equivalent of about $31.2M in sales. This is because cost savings are a force multiplier known as the profit leverage effect. This company had an operating margin of 5.5% meaning that the organization would need to generate $31.2M in sales to realize the same $1.72M in operating profit. The profit leverage effect significantly amplifies the financial impact of cost management initiatives.
The Takeaway
Targeting inefficiencies in non-core business activities isn’t just about trimming costs—it’s about unlocking hidden value. By identifying and eliminating these inefficiencies, companies can achieve significant cost savings that directly boost the bottom line.
For this company, these efforts were equivalent to generating over $31.2M in annual revenue, highlighting the impact of operational efficiency. When managed with a comprehensive approach, companies can unlock significant cost savings, driving long-term profitability.
*ARR equivalent is based on individual company operating margins
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Please send me an email, or feel free to call me directly on any business-related matters .
Jennifer Johnson, Founder and Principal
(c) 562-322-6272
(e) Jennifer@MoretonBayAdvisory.com
The information is for general information purposes only. Moreton Bay Advisory assumes no responsibility for errors or omissions in the contents of the Service, Business Impact, or other.