Question

Status of Global Training Associates 2019

Global Training Associates’ revenues have fluctuated over the past few years. Historically, Global Training Associates carried out more than 3,700 seminars. Each location dispatched approximately 25 seminars per week over a 50-week training year (fiscal year). Base price for any seminar (net of materials) is $4500. Base price covers a three-day seminar (including trainer travel time). Base price covers training for five trainees net of materials with an additional $500 for each additional trainee. In 2010, the average seminar serviced 15 trainees.

Global Training Associates has an excellent reputation as a provider of training for human resources, Salesforce and Microsoft Dynamics, SAP, QuickBooks and PeopleSoft. Barber knows that the core of 225contracttrainers,whoconductslightlyoversixtypercentoftheclassesofferedeachyear,are thekey to Global Training Associates’ success. The core trainers average 15 three-day sessions per year.

Contract trainers are nationally recognized experts in their fields. Most trainers once worked for large corporations (e.g., Oracle, AT&T and Microsoft) and some trainers hold advanced degrees.

In 2019, Global Training Associates ran 3,200 sessions with an average billing of $12,000 per session for a gross revenue of $38.4 million. The declining revenue in 2019 has prompted Global Training Associates to change pricing.

Barber explained the Global Training Associates had cancellations between 2018 and 2019 and conceded that several long-time clients had cancelled training because of delays. One client indicated that his trainer was unprepared. “The guy used a white board for the first two days of training. We paid for professional training. I had several trainees complain that they could not follow the material and had to take copious notes by hand.”

Barber elaborated that in the situation the trainer arrived at his hotel on Monday expecting that the training materials would be there. Because of delays in processing at one of the offices, the training materials could not be shipped until late the previous Friday. The training materials arrived Wednesday afternoon—two days into the training. Barber further explained that three of the staff in the office involved were ill due to a flu outbreak —causing a backup in processing. So, the materials were shipped out ASAP to the hotel rather than the training site—a restaurant chain.

Not only did Global Training Associates lose the restaurant chain as a client--the trainer involved, who was one of the core, went to another training company. “That fellow took about $500,000 annual revenue with him,” Barber conceded.

Calculate the following:

1. Calculate the total revenue loss in 2019 from the historical revenue (using historical number of seminars and total number of seminars in 2019).
2. Calculate the potential loss of revenue if: 10% of the core trainers quit and take their portion of the training seminars with them to a competitor.

Answer 1

Computation of Revenue Loss (Based on historical Data
No of seminars per historical data	3700
Base price for 5 trainees	4500
Addl revenue per trainee over 5 trainees	500
Trainees per seminar	15
Revenue per seminar	$             9,500.00
Total Revenue per year	$ 35,150,000.00
No of seminars in 2019	3200
Revenue per seminar	$             9,500.00
Total revenue based on historical pricing	$ 30,400,000.00
Revenue loss in 2019 (a-b)	$ (4,750,000.00)
(resulted in price increase)

No of trainers	225
% contribution to seminar	60%
Total revenue of 2019	$        38,400,000
Revenue generated per trainer	$              170,667
No of trainers after 10% exit	202
Shortfall in trainers	23
Potential revenue loss	$          3,925,333