Language the CFO Understands
1 Nov, 2004
By: Roy FergusonQ: We''re building a business plan for our 500-seat call center. Are there any financial models or templates that are available to help us provide some structure to our plan? — Curious in California
A: Absolutely. Financial templates are a great start to better understanding your contact center and quantifying planned changes. Also, talking to your chief financial officer (CFO) in the language he/she understands (numbers and money) can only help your cause. Show management how your plan will positively affect their bottom line, and you’ll get their attention.
There are various basic templates to choose from. Each will provide you with the structure you’re looking for to craft a financial model that is unique to your customer contact center. Just by going through the process of building this model, you will have a better financial understanding of your center.
To figure out the best template to use for your particular organization, ask yourself some simple questions to help you understand the function(s) of your center. These might include: What services does my contact center perform? Am I in a direct support, or a sales support role? Is my primary charter customer service/support?
These questions will help you to explore your functional charter. Once you’ve answered them, you’ll be well on your way to picking the best financial template—one that allows you to enable and measure your success. Your choices include:
• Customer Service Model
• Direct Sales Model
• Sales Augmentation Model
• Operational Cost Savings Model
• Strategic Asset Model
Remember, financial models are unique to each business. Because there is a broad range of contact center types—and applicable templates, I am going to walk you through the Customer Service Model to demonstrate how a template can improve your financial understanding of your contact center. Making sure you understand the information will be key to building a plan your CFO is going to understand and, hopefully, approve.
The cost of a dissatisfied customer is difficult to assess, but its presence and effect on your company can be huge. A well-executed call center management plan can help improve your customer’s experience with your contact center and their opinion of your company, as well as increase the likelihood they will return—the real “home run.” Let’s begin.
Step 1: Clarify your goals
These might include increasing customer satisfaction/customer retention, decreasing the number of customers who aren’t making as many purchases because of poor service, decreasing the number of negative word-of-mouth referrals, increasing the number of positive word-of-mouth referrals and decreasing operational costs.
Step 2: Economic analysis
Let’s turn to your numbers. Based on one year, let’s assume you have 1,005,000 total customers and 2,713,500 total customer contacts per year. The value of each customer contact is $46.73, the average contacts (per customer, per year) is 2.7 and your total dollar value for your customer contacts is $126,801,855.
Step 3: Think statistics
For the purpose of this example, let’s say your contact center is currently experiencing 7 percent of customers who will not return (lost customers) and a 10 percent reduction in value (created from remaining customers reducing their purchases). This translates into 70,350 lost customers (at an $8,876,130 loss) and an $11,792,573 loss from remaining customers (through reduced purchases). The total loss amounts to $20,668,703.
Step 4: What’s the plan?
Looking at your statistics, what do you hope to achieve through your new plan? Let’s assume that you are aiming for a 50 percent improvement, across a variety of call center statistics, via better management and/or improved automation.
Your target rates will then become 3.5 percent for lost customers and 5 percent for reduction in value. This translates into 35,175 lost customers (at a $4,438,065 loss) and a $6,118,190 loss from remaining customers. The total loss now amounts to $10,556,254—a $10,112,449 improvement—just the punch your plan needs!
Hopefully, this gives you some idea of how financial templates can be used to better understand your center and to quantify proposed changes in your CFO’s language.
I’d also suggest that you meet with your CFO to discuss the financial criteria by which your business unit is measured and funded. Your CFO will help you understand the numbers that define Capital Investment and Operating Expense, as well as what Return on Investment (ROI) is expected.
