Portfolio diagnostic and asset realisation

Situation

A childcare operator was underperforming across a large network of centres. Several improvement attempts had already been made and had not worked. The problems were spread unevenly across the network, resources to fix them were limited, and the executive team could not agree which centres deserved investment, which needed operational help and which did not belong in the business at all.

Judgements about individual centres were being made from experience and local reputation rather than from data.

Constraint

The relevant information was scattered and of different types. Financial performance sat in one system. Staffing, qualifications and turnover sat in another. The external factors that actually decide whether a centre works, such as local demographics, birth rates and nearby competition, sat outside the business entirely.

There was also a time constraint. COVID arrived during the work and took roughly 30% out of revenue, which made the decisions urgent and moved the ground under the analysis at the same time.

What was built

A methodology for assessing every centre on the same basis, then a diagnostic tool that applied it. Each centre was scored across financial performance, people measures and external market factors, combined into a view of both current performance and strategic fit.

The output ranked the whole network and, more usefully, explained why each centre sat where it did. A weak centre in a strong catchment was an investment case. A weak centre in a declining catchment with a competitor next door was a disposal case. The distinction had not previously been visible.

Who it was built with

The finance team supplied and validated centre level financials. The people function provided workforce data and helped interpret what the staffing measures meant in practice. Operations leaders tested the rankings against what they knew on the ground, which corrected the model in several places. The executive team used the output to agree the disposal list.

Outcome

More than 20 centres that did not fit the strategy were identified and sold, a process Shaun went on to manage. The proceeds and the operational improvements sustained profitability despite the fall in revenue, and released cash the business could put behind growth instead of into holding up weak centres.

What this looks like for you

If you run many centres, branches or contracts, the argument about which ones to keep is usually an argument about data nobody has assembled. Score them all on the same basis and the list mostly writes itself. See strategic finance.