Case Analysis of Billcutterz.

com
1. Assess Barry Gross, the founder and President of Billcutterz.com. How has Gross
performed as the President of the company as it progressed from new venture into its
current growth phase?
Barry Gross possesses unique knowledge and expertise that enables him to lead Billcutterz.com.
His 30-year experience in the telephone marketing industry is the main competitive advantage
Billcutterz.com has over its competitors. Mr. Gross is a leader with a strong vision of the value
his company’s service can provide to the majority of US citizens over 18 years old. Nevertheless,
Mr. Gross may have made a strategic miscalculation by marketing the services of Billcutterz.com
on multiple media platforms within a short period of time. The exponential growth in demand for
the company’s services after the media exposure put a strain on its ability to efficiently serve its
expanded customer base. Mr. Gross acknowledged that the increased demand prevented him
from focusing on business development as he spent most of his time training the growing
number of new employees.

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As the President of Billcutterz.com, Mr. Gross was not able to help his company make a smooth

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transition into a growth stage. Its payroll expenses skyrocketed, and contact wait times increased

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to several days following the spike in demand. However, the President quickly recognized the

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challenges of exponential growth and demonstrated his ability to react and adapt quickly. He
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planned to increase the company’s efficiency by establishing a referral-based approach to
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customer acquisition and entering into prenegotiated savings agreements with major service
providers.
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2. Regarding Billcutterz.com’s current operations, what are its strengths and weaknesses?
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What resources, capabilities and core competencies greatly benefit the company? In what
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areas is the company potentially weak or require managerial attention? What is your
overall conclusion regarding Billcutterz.com’s current operations?
The main strength and a core competency of Billcutterz.com’s current operations is the
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efficiency of its Savings Experts, led and trained by the President Mr. Gross. Mr. Gross’s
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techniques allow them to minimize negotiation time and maximize savings for their customers.
Billcutterz.com’s customer value proposition is another advantage of its current operations. The
proposition is straightforward and easy to understand, which attracts the company’s broad target
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market of “nearly every US citizen over the age of 18.” The increased efficiency of
Billcutterz.com’s current operations is also due to the low-cost office space provided by the
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Costal Bend Business Innovation Center. A major weakness of the company’s operations lies in
high variable costs that consist mainly of payroll. As the number of new customers drastically
increased in 2014, the company had to hire and train several new employees per month, driving
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the operating costs up. Additionally, Billcutterz.com has been unable to create a consistent
stream of new customers each month. Mr. Gross is trying to address this issue by either creating
an alliance with an outside company yielding 1,000 new customers monthly or by acquiring new
customers through referrals of existing customers.

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 Regardless of the operational advantages that allowed the company to succeed prior to the spike
in demand, the current state of its operations is in distress. Not only do the payroll costs comprise
83% of total revenues in 2014, but the company is also at risk of outgrowing and losing its
affordable office space at Coastal Bend Business Innovation Center. Strategic adjustments are
necessary for Billcutterz.com to return its operations to the prior efficient levels.
3. Conduct an analysis of Billcutterz.com’s financial statements. Where is the company
strong and/or growing? Where is the company weak? What is your overall assessment of
the current financial condition of Billcutterz.com?
Calculating key financial ratios of
Billcutterz.com for 2013 and the
January-May period of 2014 and
then comparing the values allowed
me to assess the current financial
condition of the company. As

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pictured in Table 1, current ratio and
working capital were strong aspects

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of the company’s financial
statements during the first five

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indicated the company’s ability to
pay its short-term obligations in a
timely manner. The revenues in the
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first five months of 2014 were growing at a faster rate compared to the previous year. They
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exceeded the revenues for the entire year of 2013 by 2.85%. Additionally, the balance sheet as of
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May 31st, 2014 demonstrated that Billcutterz.com had more cash and fewer accounts receivable
compared to the balance sheet at the end of 2013. The changes in the two accounts’ balances
indicated the company’s ability to effectively collect its receivables and turn them into cash,
which was another strength of the company. Table 1 demonstrates that the weakest aspect of
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Billcutterz.com’s current financial position is its low profitability. Operating and net profit
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margins, net return on total assets, and return on equity drastically decreased from 2013 to 2014.
Operating expenses were approximately 97.8% of total revenues in 2014. The company’s
profitability deteriorated after it gained a large number of new customers, which is a sign that its
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current operations are not suitable for the increased volume of work. Total current assets and
shareholders’ equity of Billcutterz.com decreased in 2014, while its total liabilities grew. As a
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result, the company was leveraged more heavily in 2014 than in 2013. If the amount of leverage
utilized by Billcutterz.com continues to grow over time, it may lead to a greater risk of
bankruptcy and poor balance sheet strength.
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Billcutterz.com’s overall financial condition is satisfactory. The company’s current profit margins
are negligible and operating expenses are high, but it is common for startups to experience low
profits and even losses during their first years on the market. Billcutterz.com is currently able to
effectively convert accounts receivable into cash and repay its short-term liabilities. As the

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 company adapts to the increased demand for its services, it will lower its operating costs and
further grow its revenues and profits.

4. Briefly summarize the operational and strategic issues faced by Billcutterz.com, and
consider the options that Barry Gross has to address these issues. What are your
recommendations regarding the course of action that Billcutterz.com and Barry Gross
should take to address these key strategic and operational issues?

The two major issues faced by Billcutterz.com are the high variable costs of doing business and
the inability to generate a consistent and predictable stream of new customers. The issues are
interrelated. The company’s ability to predict the monthly number of new customers will enable
it to manage its payroll expenses more efficiently. I believe these key issues can be addressed
with three options. The first two were developed by Barry Gross, and the third is my own
concept:

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1. Entering in prenegotiated savings agreements with major service providers.

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Prenegotiated savings agreements will be mutually beneficial to both parties. High-volume

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providers will lower the churn rate of their customers and will save the valuable time of their

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employees by agreeing to hundreds or thousands of identical discounts. Billcutterz.com will

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decrease the negotiation time and the number of Savings Experts it needs to hire and train,
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minimizing the variable costs of its operations.
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2. Incentivizing existing customers to make referrals.
Consistent referrals from existing customers have a high chance of creating a predictable stream
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of new customers every month. The company can encourage referrals from its existing customers
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by providing them and the new enrollees with a 10% discount fee for one to three months after
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the new customers’ enrollment.

3. Attracting more organizations and businesses by lowering their fees or offering
them promotional rates.
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The case study stated that organizations and businesses tend to have more savings due to larger
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and more variable expenses, which equates to more revenue per customer for Billcutterz.com.
Hence, the company will need to attract fewer businesses than individual customers to generate
the same amount of revenue. The company may choose to charge new business clients 40% of
their savings instead of 50% for the first one to three months after enrollment as part of the
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promotion.
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