Business Analysis & Recommendations Subsidium Inc.

Ashwin Kumar Michael Hoke Steve Villa Yasmine Tarek

Team 4

EMBA Class of 2015

Final Capstone

Table of Contents

Executive Summary .......................................................................................................................1 Problem Statement.........................................................................................................................2

Current State of Subsidium ..........................................................................................................3

Financials .....................................................................................................................................3

Sales, Business Development & Prospecting Processes ..............................................................4

Organizational Hierarchy .............................................................................................................5

Operations & Workflow Cycle ....................................................................................................5

Industry .........................................................................................................................................7

Analysis ...........................................................................................................................................7

Current State of the IT Consulting Industry .................................................................................7

Competitor Analysis .....................................................................................................................8

Strengths, Weaknesses, Opportunities & Threats ......................................................................10

Recommended Business Development Personnel, Structure & Process ...................................11

Recommended Business Development Function .......................................................................15

Funding the Business Development Team .................................................................................16

Conclusion & Justification of Business Recommendation .......................................................17

Additional Recommendations .....................................................................................................20

Leadership ..................................................................................................................................21

Business & Corporate Strategy ..................................................................................................21

Company Mission & Vision .......................................................................................................22

Physical Location & Office Appearance ....................................................................................22

Final Thoughts .............................................................................................................................23

Appendices ....................................................................................................................................24

Appendix 1 – Balance Sheet ......................................................................................................24

Appendix 2 – Income Statement ................................................................................................25

Appendix 3 – Organizational Chart............................................................................................26

Appendix 4 – Growth Projections ..............................................................................................27

Appendix 5 – Present Value Analysis ........................................................................................28

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Executive Summary

Subsidium Inc. was founded in 2001 as a technology services company specializing in

staff augmentation. Through that area of expertise, the company provides engineering, systems

integration, technical and programmatic services to both the Government and Commercial

Markets with the majority of their revenues coming from government related contracts.

Subsidium was formed as a spin-off of Modis Inc. Modis was founded as The McKinley Group

Inc. before they were purchased by Accustaff and renamed to Modis in the late 90s. In 2001,

shortly after the September 11th attacks, Subsidium found itself positioned to take advantage of

the wave of government contracts being generated as a result of increased needs around security

and defense. At that time, the demand for government-related IT services was at an all-time high.

Subsidium, like many other small IT services companies, found that it immediately had access to

a number of valuable contracts which allowed the company to generate revenue and a net profit

right out of the gate. This economic environment served as both a blessing and a curse. While it

provided Subsidium with immediate and easy access to a few large and valuable contracts, it also

masked the need for a more formal business development process, structure and business

development leader. These business development deficits would ultimately lead to a near

shutdown only ten years later.

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Problem Statement

Subsidium’s revenues and net income peaked in 2007. At that point, Subsidium’s

performance began a slow but steady decline to 2013 where the company’s revenues bottomed

out. This decline in performance all coincides with the loss of a few large contracts and a lack of

new business generation to replace those contracts. Without any intervention, Subsidium was

destined to shut down in the coming year.

With this dire reality looming, our client tasked us with following directives:

1. What is the current state of the company?

2. What went wrong?

3. How do we turn things around to become profitable again?

To answer these questions, we analyzed a number of areas that included but were not limited

to, expenses, revenues, business strategy, leadership, office location and even office condition &

setup. Given the short period of time our client was given to prevent Subsidium from shutting

down, we had to focus on the one area we believed would have the greatest and most immediate

impact on the performance and health of the company. While some expenses had to be cut

immediately to keep the company at break-even and while there are certainly concerns with the

overall business strategy and even company leadership, we feel that the absolute greatest

deficiency at Subsidium is the lack of a strategic and purposeful new business development

model and the absence of a business development leader responsible for creating and managing

that process.

Business development is a very broad topic and one that may seem obvious in terms of a

company’s performance issues but this is often an area that many small companies overlook and

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fail to properly develop. Small IT services companies in particular, are often founded on the

basis of technical expertise and existing relationships, as was the case with Subsidium. When

you combine these two aspects with the very warm government-related business environment

that existed after 911, it is clear the vast majority of Subsidium’s business was originated very

organically and with little or no formalized business development strategy. Once the post 911

wave of government contracts slowed down, those companies who had relied on organic growth

began to decline and in many cases, closed their doors for good. Subsidium was part of this

group.

Current State of Subsidium

Financials:

Subsidium is an entirely internally funded private company i.e. its stockholders and

owners have provided all of the equity needed to start and sustain the firm up until this point.

Subsidium utilizes accrual basis of accounting, where revenues are reported on the income

statement when they are earned. Likewise, expenses are matched with the corresponding

revenues and are reported when the expense occurs, not when the cash is paid out. As a result of

this methodology, Subsidium has been able to produce an income statement that is very accurate

and better measures the profitability of the firm during a particular period of time.

As can be seen from Subsidium’s income statement (Appendix 2), the company’s

performance peaked during 2007. Since then, the economic downturn has taken its toll on the

company’s operations. Total revenue has been steadily declining since topping out in 2007. This

is mainly because of several government program cutbacks and reductions in contract funding

and budgets. Management has been able to control COGS (Cost of Goods Sold) at 67% of total

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revenue and expenses at 32% of total revenue which has helped Subsidium whether continued

financial headwinds.

Sales, Business development & Prospecting Processes:

Subsidium primarily functions as a sub-contractor for a handful of prime vendors. Its

current prime vendor Vectrus (spun off from Exelis in 2014) engages Subsidium in professional

services ranging from systems integration, data networking, and security solutions to software

training. They have also successfully served as subcontractor under the Seaport-e contract.

Because of its lack of experience as a prime vendor, Subsidium has had to rely on bigger

players for business prospects, despite its noteworthy credentials. In addition, the company has

never had in place, a strategic and purposeful business development process, or a seasoned

business development leader with a proven track record of success. While they do have someone

with “Business Development Manager” in their title, this person’s prospecting activities have

been limited to browsing for RFPs on the Federal Business Opportunities website

(www.fbo.gov), and have resulted in very little proposal actively and very little new revenue

generation. In fact, over the last four years, the company won six bids resulted in zero new

revenues.

Current prospecting activity over the last few years is as follows and is based on best estimates

of current Subsidium management:

Average Total Proposals Per Year: 6

Average Project Size: $1MM

Closing Rate: 30%

New Business Revenue: $0.00

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Organizational Hierarchy:

Subsidium is a small business entity where each staff member plays a vital role in

running the firm. Below are the current organizational roles and responsibilities. The official

organizational chart is shown in appendix 3.

CEO: The new CEO (Pat Philbin) took over this position in 2014 after acquiring a 51% stake in

the company. With this transition, Subsidium will now be able to leverage its SDVOB (service

disabled veteran owned business) status. This position requires mapping and chartering the

firm’s future course with pivotal partnerships and deciding which sector to focus on.

COO: Gary Wayland is the 49% owner and former CEO. Mr. Wayland now focuses on daily

operations of the firm and ensures that all projects are on track.

Accountant: Pam Bud is responsible for tracking all sources of income, expenses and

maintaining the general ledger. She also serves as the office administrator.

Business Development Manager: Pat Fontaine in his role as BDM, scouts for opportunities on

the Federal Business website and discusses opportunities with senior management before

proceeding. He also prospects for opportunities with Vectrus to see if there are needs that

Subsidium can service.

Recruiter: John McKenzie serves as Subsidium’s recruiter. Once vacancies are identified at the

prime vendor and communicated to Subsidium, Mr. McKenzie fills these positions with suitable

candidates.

Operations and Workflow Cycle:

Subsidium has not yet been a prime on any government contract. Subsidium’s workflow

starts with an RFP (Request for Proposal), or a Teaming Agreement and Non-Disclosure

Agreement (NDA) from another company. Mr. Philbin, Mr. Wayland and Mr. Fontaine are in

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charge of making the final decision to either proceed with submitting a proposal or not. Once

they reach an agreement on moving forward with a proposal, both Gary and Patrick start working

on the proposal. Mr. Philbin is also involved at this initial stage where he provides input on the

proposal’s details. Mr. Fontaine’s main role is in developing the main body of the proposal and

in the provisioning of any required qualifications, certifications or representations. Gary is

responsible for setting the final pricing along with input from accounting while Mr. Philbin is In

charge of signing off on final proposals.

Once Subsidium wins a contract, Mr. McKenzie then takes the necessary recruiting

actions required to fill the positions requested in the contract. After interviewing and screening

potential candidates and once the appropriate personnel selections have been made, accounting

develops and sends out offer letters and begins the onboarding process with the new contract

employees. Patrick then runs the necessary background checks to ensure that all contract

clearance requirements are in compliance with the client’s needs. From that point forward, Mr.

Fontaine acts as project manager and liaison between the contract employees and client. Lastly,

Mrs. Bud in accounting sets up the billing process as indicated in the contract and coordinates

with the rest of the team, which includes the requested Monthly Status Reports (MSR’s).

Reporting system

Accounting provides Monthly Status Reports to each client which illustrate the current

and cumulative hours billed, amount budgeted, amount funded, amount used, percentage of

funded contract used, and amount left to be funded. In addition, the MSR includes a staffing

summary showing information on security clearance status, CaC card status and that all

mandatory training that has been completed. Both the project manager and Gary get copies of

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the MSR each month, through which they identify and correct any problems identified on the

report.

Industry:

As a whole, Subsidium is a part of the IT consulting industry which is discussed in detail

in our analysis section below. In the past, Subsidium has bid for only one contract as a prime

vendor, but lost due to pricing. In the extremely competitive government contracting industry,

price is usually one of the main differentiating factors.

Analysis

Current State of the IT Consulting Industry:

The IT consulting industry is poised for growth over the next few years and into the

foreseeable future. According to the May 2015 IBIS World Industry Performance report,

revenues in the IT consulting industry are projected to grow at an average annualized rate of

2.8% over the next five years.

While federal and state governments represent almost one quarter of the demand for industry

services, demand for IT consulting services typically correlates very positively with corporate

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profits across all industries in the United States, as well as expected investments into computers

and software.

Based on this industry outlook, we feel that there is a strong and growing demand for the

services that Subsidium provides. Despite the fact that there are signs that government related

spending is slowing, we feel that the overall projected industry trend moving forward is strong

enough to mitigate any volatility in microeconomic government spending fluctuations. This

industry growth projection is in direct contrast to Subsidium’s current declining revenue

trajectory which indicates a current inability to capture existing market share and substantiates

our claim that a lack of business development and business development leadership is at the

heart of their poor performance.

Competitor Analysis:

In order to provide some context to the types of companies that exist within the IT

consulting industry, and to provide our client with recommended competitor references, we

chose to analyze three companies in the IT consulting industry that have a strong focus on IT

related services for government contractors: Java Productions Inc., Patricio Enterprises Inc., and

Accenture. Java Productions is similar in size to Subsidium and also operates in a HUB zone

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(Historically Underutilized Business). Patricio Enterprises is a much larger company than

Subsidium and recently beat them on a prime contract for the Marine Corps. They represent what

Subsidium could become with a renewed focus on business development and an overhauled

corporate strategy. Lastly, Accenture serves as an example of the largest and most profitable type

of IT management consulting company that exists today. Although Subsidium doesn’t strive to

become as big and far reaching as Accenture, there is still a lot to be learned in terms of

corporate structure, branding and strategies on winning prime contracts. Here are details on each

of these competitors.

Java Productions, Inc. (JPI) (Blacksburg, VA)

Employees: 40

Revenue: $2,500,000 to $5,000,000 (estimated)

NAICS code: 541511 (Custom Computer Programing Services)

Patricio Enterprises, Inc. (Stafford, VA)

Employees: 370

Revenue: $18,600,000

NAICS code: 541611 (Administrative Management and General Management Consulting

Services)

Accenture Federal Services (Arlington, VA)

Employees: 1,200

Revenue: $58,300,000

SIC code: 8742 (Management Consulting Services)

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Strengths, Weaknesses, Opportunities & Threats:

Current Strengths:

Subsidium currently has access to several unique contract vehicles to include SDVOB,

HUBZone and DCAA. This gives them a distinct competitive advantage over several other small

IT services companies serving the federal market. They currently have an active portfolio with a

mix of both government and commercial clients. They have done well over the past several years

in maintaining a staff of highly skilled engineers and have proven their proficiency in program

execution.

Current Weaknesses:

While Subsidium has been very proficient at executing on existing contracts, they have

done a very poor job in finding and winning new contracts. Related to that, they have done a

poor job in deriving revenue from about six awarded subcontracts over the last four years. Much

of this has been the result of major business development deficiencies that include no strategic

business development plan or strategy, and a lack of appropriate business development

leadership. Lastly, Subsidium exists in a very isolated spot in Font Royal VA, in a very old and

outdated office, with no presence close to DC as an appropriate meeting spot for potential

clients.

Current Opportunities:

Subsidium has access to a quota of limited, set-aside government contracts through their

SDVOB, HUBZone and DCAA status. For a long time now, they have had an excellent

relationship with their current prime vendor. This relationship should continue to bear fruit into

the future. Lastly, while government spending is in question, with continued political unrest in

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the Middle-East, Far-East, and other parts of the world, the type of personnel that Subsidium

provides will continue to be in demand. As stated in our industry analysis, the IT Services

industry as a whole is poised for continued growth as well.

Current Threats:

Being that Subsidium primarily serves the federal market, and despite the fact that the IT

Services industry looks very promising over the next few years, they still have to be very

conscientious about possible fiscal austerity on the part of the government. In addition, they exist

in an industry with very few barriers to entry that in many cases is highly commoditized with

companies offering little in the way of product or service differentiation. This creates a highly

competitive environment.

Recommended Business Development Personnel, Structure & Process:

In order to formulate the optimal structure and process for business development at

Subsidium, we sought the expert opinion of Dr. John Hillen, Executive in Residence at George

Mason University. Dr. Hillen is a highly accomplished CEO in the government contracting space

and a former high ranking U.S. government official. He has created and run several successful IT

contracting companies and served on the boards of over half a dozen federal contracting firms. In

addition, we also consulted with Jerry Wykoff, the new Vice President for Business

Development at Crisis One, a second company owned and operated by Subsidium’s new CEO,

Mr. Philbin. Based on this collective industry knowledge, we recommend the following

structure, process and compensation plan.

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Recommended Personnel:

Based on feedback from Dr. Hillen and Mr. Wykoff, we feel that initially Subsidium will

only need to hire a seasoned business development professional. This person will handle all

responsibilities, to include proposal writing for the rest of 2015 and through 2016. We then

recommend that the company hire a proposal writer at the beginning of 2017 to assist the new

VP of Business Development. By adding the proposal writer at that time, we feel that the new

VP of Business Development will have had plenty of time to organize his or her strategy and will

be ready to fully utilize this new level of support. We also believe that the new proposal writer

will help to ensure our projected increase and annual proposal submission capacity. We

recommend the following personal structure and compensation:

- 1 Business Development Professional

o VP level executive

o 12-15 years of experience

o 200K-250K total compensation (175K salary plus bonus)

- 1 Proposal Writer

o 3-5 years of experience

o 60K total compensation

o In 2018 & 2019, 10K per year in additional sales support

Bonus Structure:

Any business development professional with 12-15 years of experience will have all of

the tools and knowledge to be successful. That being said, it is critical that Subsidium create a

bonus incentive structure that will ensure a maximum level of productivity. Per the guidance of

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Dr. Hillen, we recommend an annual sales bonus program whereby the new VP of Business

Development is paid a one-time, annual bonus based on his or her successful completion of that

year’s booked sales goal.

Sales Process and Pipeline:

To ensure that the new business development team achieves desired new revenue

numbers, Subsidium needs to focus on three critical sales metrics - total annual proposals,

average proposal size and closing ratio. On average, most small IT services companies win about

30% of the contracts they bid on for new customers. Subsidium needs to execute on a sales

pipeline with these assumptions accounted for.

Average Proposal Size:

With its existing capabilities, Subsidium is capable of servicing projects up to 10MM in

size. Most contracts on average will bill over three years. Based on information gained from our

consultation with Jerry Wykoff, Subsidium is fully capable of immediately winning and

servicing contracts between 1MM and 5MM dollars in size. He also believes they can ramp up to

deals in the 10MM dollar range within the first five years. To be conservative with growth

projections however, we recommend that Subsidium plan for contracts that average a minimum

of 1MM dollars in size for the next five years (although we believe they will exceed that

minimum average). Assuming there is no backlog, and assuming all projects average a three year

bill cycle, Subsidium will need to achieve and maintain a 1.2 book to bill ratio to ensure growth.

Average Annual Proposal Generation:

Based on our consultation with Mr. Wykoff, a business development professional with

12-15 years of experience should be able to find and submit on average one to two proposals per

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month, or somewhere between twelve and twenty four per year. This number should be even

greater with a proposal writer, which we have factored into our analysis. Again, to make a

conservative projection, we recommend that Subsidium plan on a slow ramp up in terms of

expected proposal generation starting off with only 4 total proposals with the remainder of 2015

and ramping up to 20 by 2019.

Closing Ratio:

While Subsidium may not have full control over their closing ratio, both Dr. Hillen and

Mr. Wykoff confirmed that 30% is a safe bet in terms of expected closing ratios in the IT

services industry and more specifically, government IT consulting. Although this does appear to

be the industry standard, we feel that Subsidium’s lack of business development expertise

negatively affects their ability to achieve a 30% closing ratio. For that reason, we recommend

that the company initially plan on a much more conservative closing ratio, which they should

gradually increase over time, just like the other two metrics. We recommend that Subsidium plan

on a 15% closing ratio in 2015, an 18% closing ratio in 2016 and only 20% in years 2017-2019.

While we have all the confidence in the world that the right business development professional

will be able to outpace these closing rates, we think it makes the most sense in terms of planning

to use more conservative assumptions.

To best illustrate how this plan will affect projected new revenues moving forward,

please refer to the following two tables.

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Recommended Business Development Function:

While the most pressing and short-term issue at Subsidium relates directly to hiring an

experienced business development professional and eventually a proposal writer, they also need

to focus on a long-term strategy that would include raising capital and hiring additional staff in

order to scale the business. The idea being that the company would transition from a startup

structure where the co-founders do most of the hands-on work, to a scalable company where the

co-founders can focus on strategic planning and management can delegate business development

and operations tasks1. This methodology would allow Subsidium to lay the foundation for a

1 Schaefer, N.V., S.L. Katz, and S. Neily, 2002, Innovation Clusters Research and Development. Baseline Report. Fredericton: University of New Brunswick, Faculty of Administration. Report prepared for the Atlantic Canada Opportunities Agency and the National Research Council.

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business development process that would align the company’s core capabilities with

opportunities in a growing IT services market.

Subsidium’s plan should focus on one year of potential business development outcomes

at a time. This would include determining which contracts to pursue, when to execute those

contracts and which resources to allocate. This would in turn allow Subsidium to operationalize

its business plan, bring a greater focus and purpose to its efforts and achieve desired revenue

targets2. The new Vice President of Business Development should be highly engaged in the pre-

contract and contract stages, and not as involved in the post-contract stage where implementation

and delivery of services occurs.

The Vice President of Business Development needs to be more than a title. In addition to

focusing 100% on identifying potential contracts, this person needs to be responsible for

preparing a business plan, creating project plans and contributing to the company’s operational

readiness. In addition, this person should be expected to explore all opportunities, extend

business from existing customers, develop relationships with potential customers, increase and

maintain key partnerships and drive ongoing new business development.

Funding the New Business Development Team:

As illustrated above, even with the most conservative of assumptions, we believe that the

final fiscal year revenue totals will have a dramatic impact on the overall financial health of the

company. That being said, in looking at Subsidium’s current balance sheet, there does not appear

2 Large, D. and T. Conrod, 2003, ‘Vertical Solutions Marketing: Ensuring a Successful Transition,’ Ivey Business

Journal 67 (5), May–June.

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to be any available cash to invest into a new business development professional. To remedy this

situation, we recommend the following.

1. Release the current business development manager

a. This would free up 80K in salary expense

b. The move would be justified based on the historical lack of performance and

ability to generate enough new business to keep the company afloat.

2. The remaining $95K that would be required to cover the new business development

person’s salary would have to come from a personal investment by the current CEO

or from some other investor. Based on our conservative revenue projections, we feel

that this investment will be more than justified.

Conclusion & Justification of Business Recommendation

While Subsidium has had its fair share of challenges over the last few years, we feel very

strongly that the company has a big upside and possesses the ability to leverage its operational

expertise to service a substantial number of government contracts, both as a sub and as a prime.

The company needs to address several areas to include leadership and both corporate and

business strategy, but in the short-term, the company needs to address its current business

development deficiencies in order to keep from shutting its doors. We are confident that if the

business development deficiencies are properly addressed, the company will again become

profitable and the remaining challenges will be manageable over time.

Over the past several years, Subsidium has done a poor job at both finding and proposing

on new contracts and in winning new contracts. In several instances, they have even been unable

to generate any revenue at all from awarded contracts. In this industry, there is no way around

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the simple prospecting math that determines either success or failure. To be successful and to

grow in the IT services industry, especially when serving the federal market, a company needs to

maintain a steady and predictable process for generating new opportunities and closing a

requisite number of those opportunities. To achieve success in this area, Subsidium needs to hire

an experienced business development professional who will be expected to not only bring in

immediate revenue, but create and execute on an overall business development plan for the

company and maintain full responsibility for new business revenue moving forward.

In order to bring someone aboard who possesses the required background and skill set,

Subsidium will need to make an initial investment in the form of a new salary. Based on

recommendations from our industry expert Dr. Hillen, we feel that a salary of 175K with an

incentive plan to potentially earn 250K per year will be enough to attract the right person to take

on this new role. Based on additional expert advice given to us by Dr. Hillen and Gerry Wyckoff,

as it pertains to expected business development activities for a 12-15 year business development

veteran in the federal market, and based on the types and size of contracts that Subsidium is

capable of servicing, our projections indicate that this initial investment will be more than

justified, even using the most conservative of assumptions. We also feel that our conservative

and expected growth projections will be more than enough to fund additional staff in the next

few years, to first include a proposal writer in 2017.

Based on our projections, which use the same conservative prospecting assumptions from

our recommended business development strategy, as well as the most conservative deal-size and

closing ratio projections provided to us by industry experts Dr. Hillen and Gerry Wyckoff, we

feel very confident that net income will remain level through 2015, climb to 147K in 2016, 343K

in 2017, 589K in 2018 and then 852K in 2019. These assumptions maintain the company COGS

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average of 67% of revenues and account for the increase in fixed expenses that will result from

the salaries and related costs of both the new VP of Business Development and the new proposal

writer (to be hired in 2017). These projections are illustrated in appendix 4, with a present value

analysis substantiating this same conclusion included in Appendix 5.

While this growth might seem a bit aggressive on paper, to some degree it mirrors the

company’s downturn in revenues starting in 2007. Additionally, being that we’re infusing

Subsidium for the first time in company history, with a high powered and experienced business

development professional that will be expected to create and execute an effective new business

development strategy, we would expect new business growth to be substantially higher than in

years past. That being said, the new VP of Business Development and the eventual proposal

writer have a limited capacity for new business generation. We expect that capacity to top out in

year 2019, or 2020. At that point, Subsidium’s new business development should level off,

unless the decision is made to invest in additional business development resources such as a sales

team and additional sales support. From that point forward, if properly planned and executed, we

expect to see typical industry growth not exceeding 5%.

Reflecting on our original directive from our client, we came up with the following

individual conclusions:

1. What is the current state of the company?

a. While Subsidium is dealing with a number of challenges and has been barely

earning a profit over the past few years, they still remain very operationally

effective, have a trusted brand in the market and are only a few new contracts

away from turning the corner. They also have access to both HUB Zone and

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SDVDA contract opportunities, which gives them a competitive advantage over

several other companies.

2. What went wrong?

a. From the very beginning, Subsidium had a flawed business development process

in place and no business development leader to create and take responsibility for a

strategic growth plan. This was masked by the early success of the company,

which was mainly attributed to a very warm government market after the events

of 911. When that market cooled, Subsidium was not able to produce enough new

business to replace contracts that were falling off, and thus the company began a

downward slide starting in 2007.

3. How do we turn things around to become profitable again?

a. As with any business, there is no silver bullet but in order to save Subsidium from

imminent failure, they have to make some immediate and significant changes to

their business development process. This will be best achieved by investing in a

business development professional with the necessary experience and skills, and

ensuring that this person executes on the expected industry standards for new

business prospecting and deal closing ratios.

Additional Recommendations

Throughout our analysis for Subsidium, we found several areas that need improvement.

While business development was the most pressing issue, we also wanted to bring attention the

following items, so that they can be properly dealt with at the right time. Many of these areas

relate to and overlap with business development, but they all should be individually analyzed in

order to come up with realistic strategies for improvement.

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Leadership:

Prior to our client’s involvement with Subsidium, the previous CEO at some point took

on a very hands-off approach to managing the company and became disengaged. Why this

occurred, no one really knows, but it clearly had a negative impact on the company’s

performance. A company like Subsidium needs to have an engaged and passionate leader. They

are a smaller company, and they cannot afford to simply rely on status quo, ongoing operations

to sustain the business. They need someone to provide a vision and mission and help augment

strategy as the market changes over the years. We feel that the company needs both executive

leadership at the CEO level and business development leadership in the form of a VP of Business

Development. With our client now involved as the new CEO, we feel that the executive

leadership deficiency has been officially solved, but Subsidium still needs a full time business

development leader.

Business & Corporate Strategy:

With no true business development leader in place, it is no surprise that Subsidium has

lacked a clear business strategy. They currently have access to some unique contract

opportunities in the Federal sector and possibly some access to opportunities in a recently

growing private sector. They also currently have exposure to a few existing contracts that

actually cost the company money (mainly Bahrain). A decision has to be made to exit these types

of contracts as soon as possible. To maximize all of this potential, Subsidium will need a clear

plan moving forward. We feel very confident that this current issue will eventually subside once

the right business development leader is hired.

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Company Mission and Vision:

After our first meeting with Subsidium, it became apparent that the company had no

specified mission or vision. There was nothing about the company that defined or promoted any

kind of corporate culture or purpose beyond simply making a profit and avoiding a shutdown.

All companies, from every industry, large and small, need to have some kind identity. There has

to be something about the company that elicits a sense of passion and purpose. With our client

now taking on the primary leadership role at the company, this should be something that is easy

to fix, at least in terms of officially establishing an official mission statement and defining for the

current employees, what the vision and culture will look like going forward.

Physical Location and Office Appearance:

Given Subsidium’s HUB Zone status, it is clear why they have offices in both Front Royal and

Luray. That being said, their current main office is simply unacceptable in terms of appearance

and setup and cannot serve as the primary location for meeting with potential clients. Office

appearance is critical for both employee morale and client engagement. Subsidium’s current

office space is very outdated, visually unappealing and disorganized. At a minimum, the Front

Royal office needs to be updated and setup in a way that promotes a healthy and enjoyable

working environment. It also needs to be brought up to a level worthy of hosting potential

clients. Additionally, they need to have meeting space available closer to DC, for clients that

simply cannot make the drive all the way to Front Royal. We believe this can be achieved by

using shared space at the main office of our client’s second company, Crisis One in Reston.

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Final Thoughts

Based on all of our research, we feel very strongly that Subsidium is worth investing in

and worth saving. The current upside is enormous and readily accessible. Once the business

development deficiencies are dealt with as we have recommended above, we strongly believe

that the company will return to profitability and eventually exceed the company’s greatest

performance levels in a relatively short period of time. We foresee a very bright future for

Subsidium and believe that it has the potential to become a major player in the IT service

industry in the DC area and beyond. Our analysis and projections all support this vision.

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Appendix 1

Balance Sheet

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Appendix 2

Income Statement

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Appendix 3

Organizational Chart

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Appendix 4

Growth Projections

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Appendix 5

Present Value Analysis