John Linton
..........and 'Residential' is just an ongoing 'hat full of problems' - comparatively.
As I've undoubtedly mentioned over the past year or so, Exetel began a process of attempting to balance our revenues by building a new business sales operation to put far more emphasis on growing our business customer base. Our logic was pretty simple in that even selling data services at something like 80% less than Telstra and the other dinosaurs charged (and some 30% to 40% less than the smaller data communications providers) we could provide better and just as reliable services to the customer and make far more money than the equivalent revenue from residential customers generated - and still remain 'true' to our corporate objectives of offering equivalent or better services at far less cost than any other provider in the Australian marketplaces. As it becomes increasingly difficult to provide the lowest cost services in the residential marketplaces it becomes more important to look at other marketplaces where Exetel can have a positive impact.
We have been providing business SHDSL services since April 2004 and still have three out of our first five business customers some 6 years later and an overall 'churn rate' of less than 1% per annum of business services so we had a very solid network/technical support base to build the growth program on. While we also still have three out of our first five ADSL customers our ADSL churn rate is far higher than our business churn rate though exactly the same network capacities and capabilities are provided to residential users as are provided to business users. The obvious difference is that a business user has a dedicated line that is not subject to the vagaries of the Telstra exchange comings and goings and a business user is, in almost all cases not 'fiddling about' with their router/modem set ups and declaiming that any subsequent problems caused by that are somehow their providers.
March marked the first 12 months of our beginning this program and we reached the first mile stone of new business revenue exceeding new ADSL revenue generated in a month for the first time and monthly business revenue reaching 15% of ADSL revenue for the first time. Obviously there is a long way to go before we reach the 50/50 levels we are aiming at but much of the really difficult work in building the sales methodologies and infrastructures has been done over the past year and, if all continues to go well (and that can never be certain) the pace of growth will continue to increase as we now acquire new sales people at a faster rate. This remains the most important of all our initiatives as, even at the lowest prices in the marketplace, business sales generate net profits of 30% compared to ADSL services that barely break even - in a good month they generate around 2% profit after all expenses.
Exetel is still meeting its ADSL net growth targets each month but we expect that will continue to become more difficult as 2010 progresses. Our plan to replace any shortfall of ADSL growth at a 2% profit with a similar and now greater revenue growth at 30% profit remains a key stone in our plans to keep Exetel both growing and growing more profitably than in the past - because of the necessity to deal with a stagnating ADSL market place and ever fiercer competitive activities. The enormous up side of such a 'strategy' is referenced in the title of this musing - business customers are far easier to satisfy and keep satisfied and tend to never leave you providing you constantly reduce their costs as we are able to obtain better rates for the components of the services....which we have been able, and willing, to do over the past six years.
The key issue now, is can we continue to recruit as effectively as we have in the past and will our methodologies and processes that have been so successful to date continue to work as well as the numbers of people quadruple over the next 18 months or so? I don't know the answer to that question but I have always believed that if you recruit very high quality people and pay them better than any competitor and create a 'vibrant' working environment then you will succeed in meeting whatever realistic sales targets you set.
So far so good.