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TEACHING NOTE
CASE 2
Billcutterz.com
Overview
Billcutterz.com was a bill negotiation company that attempted to lower rates for customers on their monthly
bills for such services as electricity and utilities, Internet, phone, waste management, and cable or satellite
television. No fee was charged for BillCutterz.com’s services unless savings were negotiated on behalf of
its customer. Once savings were obtained and the customer had received revised bills from providers, BillCutterz.
com would receive one-half of the savings for the first year.
On January 21, 2014, Billcutterz.com founder and president, Barry Gross, gathered with friends to celebrate his
birthday and watch his interview with Dianne Sawyer on ABC World News Tonight that profiled how his four-
year-old bill negotiation company was saving its customers hundreds or thousands of dollars each year on their
monthly bills. Within days of the ABC World News Tonight segment, Gross also appeared live on Fox Business
News to discuss his company’s approach to saving money for its customers on their monthly bills. The exposure
from the two news segments brought in more than 30,000 new enrollees by February 2014. At the end of its
first quarter in 2014, BillCutterz.com was adding 20 to 30 new enrollments every day and had seen its revenues
increase by more than 400 percent over the same period in 2013.
There were a number of issues facing the company after the spike in enrollments. The most critical was the
backlog of new customers that had signed up for Billcutterz.com. The company did not have the manpower
to handle the dramatic increase in customers, which forced Gross to spend the majority of his time on new
employee training. In addition, the rapid addition of new employees was creating a cash crunch as the company
worked through customers’ bills and waited on payment for its services. As a result of exponential growth, the
company’s business model and strategy have been called into question.
Suggestions for Using the Case
This case was written as a leadoff case and was carefully crafted by the case author to require students to draw
upon most all of the concepts discussed in Chapters 1 and 2 to sufficiently prepare for a class discussion of the
case. The case involves issues relating to business model development and the evolution of strategy; as with
Mystic Monk Coffee, the need for an action plan is obvious—these are the very things one looks for in a good
leadoff case. And the nature of the case virtually guarantees the stimulating kind of class discussion one needs to
get the course off on the right foot.
We think Billcutterz.com is an excellent leadoff case for the course (other good choices are Mystic Monk Coffee
and Robin Hood—which also require that students draw upon the material covered in Chapters 1 and 2). The
very close connection between the case and the material in Chapters 1 and 2 make this an especially good leadoff
case. You may want to consider covering Chapter 1 in your first day’s lecture, Chapter 2 on your second day’s
lecture, and then assigning Billcutterz.com for class discussion on Day 3.
*This teaching note reflects the thinking and analysis of Professor Randall D. Harris, Texas A&M University – Corpus Christi. We
are most grateful for his insight, analysis and contributions to how the case can be taught successfully.
: Business Model,
Strategy, and The Challenges of
Exponential Growth*
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265
We recommend opening the case discussion with a brief discussion of Barry Gross and his role as the founder
and President of Billcutterz.com. A more detailed discussion that focuses on the strategic and operational issues
facing the company is next, accompanied by an analysis of the company’s financial statements. Finally, the
instructor can assist the class in outlining the options that are available to Barry Gross, and to deliberate the
recommended course of action for this colorful entrepreneur. We suggest use of a teaching plan that focuses
on Billcutterz.com strategy, its business model, and strategic issues resulting from the company’s exponential
growth.
Video for Use with the Billcutterz.com Case. There is an accompanying 3:10 minute video available at
YouTube that you might want to show the class (or have students watch on their own). The ABC World News with
Diane Sawyer video interview with Barry Gross is located at https://www.youtube.com/watch?v=_qY0f_H3qgs.
The assignment questions and teaching outline presented in upcoming sections of this TN reflect our thinking
about how to conduct the class discussion of the Mystic Monk Coffee case.
It is really very difficult to have an insightful and constructive class discussion of the Billcutterz.com case unless
students have not only read the case but also conscientiously worked their way through a set of well- conceived
study questions before they come to class. In our classes, we expect students to bring their notes to the study
questions to use/refer to in responding to the questions that we pose. Students often find having a set of study
questions is useful in helping them prepare oral team presentations and written case assignments—in addition to
whatever directive questions you supply for these assignments.
To facilitate your use of study questions and making them available to students, we have posted a file of the
Assignment Questions contained in this teaching note for the Billcutterz.com case on the instructor resources
section of the Connect Library.
You may also find it beneficial to have your class read the Guide to Case Analysis that immediately follows Case
31 in the text. Students will find the content of this Guide particularly helpful if this is their first experience with
cases and they are unsure about the mechanics of how to prepare a case for class discussion, oral presentation,
or written analysis.
Auto-Graded Connect Case Exercise. The 20th Edition includes a fully auto-graded Connect case exercise
for 17 cases included in the text. The auto-graded exercises closely follow the assignment questions and analysis
included in the teaching note for the case. The auto-graded exercise for the Billcutterz.com case requires that
students answer a series of multiple choice questions related to Assignment Questions 1-4. Question 5 is left as
an open ended question that allows students to fully discuss recommendations concerning improvements to the
company’s coffee operations, changes in its long-term direction, objectives, strategy, or approach to strategy
execution.
Students should be expected to spend about 30-45 minutes to complete the exercise, assuming they have done
a conscientious job of reading the case and absorbing the information it contains. All of the questions are
automatically graded, and the grades are automatically recorded in your Connect grade book, which makes it
easy for you to evaluate each class member’s ability to apply many of the concepts discussed in Chapters 1 and 2.
The length of the case makes it ideal for an in-class written case or a final exam case. Our suggested written
assignment questions are as follows:
As a prospective intern for Billcutterz.com, Mr. Barry Gross has asked that you evaluate the company’s
business model, strategy, and internal situation. In addition, he has asked that you recommend an action plan
that addresses the company’s backlog of customers. Your 4-5 page report should include as assessment of
the company’s business model, competitive strategy, resources and capabilities, and financial situation. The
report should also provide an action plan to allow the company to successfully capitalize on its rapid growth,
strengthen its competitive advantage, and improve financial performance.
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While participating in an internship with Billcutterz.com, Mr. Barry Gross has noted your skills of analysis and
growing business acumen. He has asked that you prepare a report that evaluates Billcutterz.com’s business model,
strategy and operations. Your report should also make recommendations for contending with the company’s
exponential growth and improving its overall financial performance. Please provide whatever exhibits related to
your analysis that are necessary to present a persuasive argument for your recommended course of action.
Assignment Questions
1. Assess Barry Gross, the founder and President of Billcutterz.com? How has Gross performed as the President
of the company as it progressed from new venture into its current growth phase?
2. Regarding Billcutter.com’s current operations, what are its strengths and weaknesses? What resources,
capabilities and core competencies greatly benefit the company? In what areas is the company potentially
weak or require managerial attention? What is your overall conclusion regarding Billcutterz.com’s current
operations?
3. Conduct an analysis of Billcutterz.com’s financial statements. Where is the company strong and/or growing?
Where is the company weak? What is your opinion regarding why the company may be weak in this area?
What is your overall assessment of the current financial condition of Billcutterz.com?
4. What is Billcutterz.com’s stage in the new venture life cycle? Why? What, as a result, is the greatest challenge
for Billcutterz.com as a result? What potential steps will Billcutterz.com need to take in order to address this
challenge?
5. Briefly summarize the operational and strategic issues faced by Billcutterz.com, and consider the options
that Barry Gross has to address these issues. What are your recommendations regarding the course of action
that Billcutterz.com and Barry Gross should take to address these key strategic and operational issues?
Teaching Outline and Analysis
1. Assess Barry Gross, the founder and President of Billcutterz.com? How has Gross
performed as the President of the company as it progressed from new venture into its
current growth phase?
Clearly, Barry Gross is a charismatic entrepreneur. From the opening tableau of his birthday party to the ABC
World News Tonight interview, the impression students can draw from the case is that Gross characterizes the
Students should also be quick to point to the financial success of Billcutterz.com. As of year-end 2013,
Billcutterz.com had reported a net income of $57,585 on sales of $89,612. This was an impressive rate of
The question posed by the case, however, regards whether Gross has the ability to take the company from
startup into its current growth phase. New customers, for example, may have outstripped the ability of
the company to adequately service each account. The company may also have reached the limits of its
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2. Regarding Billcutterz.com’s current operations, what are its strengths and weaknesses?
What resources, capabilities and core competencies greatly benefit the company? In
what areas is the company potentially weak or require managerial attention? What is
your overall conclusion regarding Billcutterz.com’s current operations?
Billcutterz.com exhibits a number of strengths in their current operations. Barry Gross and his bill cutting
model was clearly a core competence of the company. Further, his ability to train and develop new
employees in his bill cutting method was also a core competence. Positive publicity and the resulting spike
in new customers suggested a strong revenue potential for the business going forward, and the company’s
With regard to weaknesses, the recent spike in new customers posed a significant challenge to the company.
The company’s Savings Experts had yet to successfully work through the backlog of new employees, and
this effort was complicated by the large surge in customers in a short period of time. New customer flow, in
other words, was erratic. Gross discusses gaining referrals from existing clients as a marketing strategy to
Commensurate with the spike in enrollments, staffing also posed a challenge. Gross was also heavily
involved with employee training, limiting his ability to (a) train more Savings Experts than he alone could
handle, and (b) constraining his time to develop new customers and negotiating large discount packages
from major service providers. The other issue related to this staffing problem was the difficulty of matching
While a tremendous strength for the company, students should be able to point out that Gross may pose a
challenge going forward. Currently, decision making, operations management and training all reside with
While not discussed at length, the case mentions that Billcutterz.com tracked customer communication
through a proprietary software system. Care needed to be taken to ensure that this custom system was
To summarize, Billcutterz.com demonstrated a number of resources, capabilities and core competencies that
3. Conduct an analysis of Billcutterz.com’s financial statements. Where is the company
strong and/or growing? Where is the company weak? What is your opinion regarding
why the company may be weak in this area? What is your overall assessment of the
current financial condition of Billcutterz.com?
An analysis of Billcutterz.com’s financial statements is presented in Exhibit IM-A, below. Annual financial
data for the company is available for 2013, and information for January-May 2014 is also presented in
the case. Table 1 presents some simple annualized projections for 2014, based on the current rate of sales
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Revenues for the first five months of 2014 have already outstripped revenues for all of 2013. Sales through
May 2014 were $92,170, compared to $89,612 for all of 2013. On a forecasted annualized basis, this would
put 2014 sales at 146.85% of the 2013 sales pace. This is a very robust growth rate and, as reported in the
Wages for the company grew from $16,429 in 2013 to $76,496 as of May 2014. This represented a
1017.48% rate of wage growth for the company, on an annualized basis. The case discusses the addition of
new employees, and these new hires represented approximately $60,000 in new wage expenditure. Despite
The other difficulty posed by the rapid growth in wages for the company was the mismatch between sales
growth and wage growth. While sales were growing at approximately 146% on an annualized basis, salaries
were growing at a blistering 1017% annualized rate. It is difficult to argue that Billcutterz.com had overstaffed
All other expenditures on the income statement were growing rapidly, but appeared to be in line with the
company’s growth rate. Net income through May 2014 was roughly at breakeven, and net income on an
The current ratio for the company had dropped sharply from 2013 to May 2014, but did not appear to be an
area of concern. Accounts receivable dropped from $24,621 to $4,337 as of May 2014. Students should be
Debt to asset and debt to equity ratios for the company have shown a modest increase, with total debt for
the company rising to $22,124. Debt levels were not currently a cause for concern, and did not appear to
Retained earnings for the company dropped $16,248 from year-end 2013 to May 2014, and suggested that
the company had likely taken a charge in 2014. Students, particularly accounting majors, should be able
to connect this drop in retained earnings with the sudden drop in accounts receivable. Assuming that the
In summary, sales growth for the company had been rapid, and was accompanied by a large spike in company
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TABLE 1. Billcutterz.com Financial Analysis, Annual 2013,
Jan–May 2014 and Annualized 2014
Jan. – May
2014
Annualized
2014 2013
% Change
2013–2014
Revenues $92,170 $221,208 $89,612 146.85%
Wages $76,496 $183,590 $16,429 1017.48%
Computer and Internet $656 $1,574 $685 129.78%
Merchant Processing Fees $2,686 $6,446 $1,117 477.08%
Office Supplies $5,037 $12,089 $4,209 187.22%
Rent $4,066 $9,758 $7,188 35.75%
Telephone $1,164 $2,794 $1,830 52.68%
Other Expenses $2,028 $4,867 $568 756.87%
4. What is your assessment of Billcutterz.com’s business model? Does the company
have a compelling customer value proposition? What is your assessment of its profit
formula?
Students are likely to show strong enthusiasm for the company’s customer value proposition since Billcutterz.
com’s bill negotiation service is easy to understand and universally appealing. The company’s fee structure
of 50 percent of negotiated savings provides no risk to its customers if savings are not achieved. In addition,
Students will be less enthusiastic about the company’s profit formula. Students who have made calculations
similar to those in the financial analysis illustrated in Assignment Question 3 will note that the company’s
delayed billing and collection practice had created a liquidity problem for the company that could jeopardize
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5. Briefly summarize the operational and strategic issues faced by Billcutterz.com, and
consider the options that Barry Gross has to address these issues. What are your
recommendations regarding the course of action that Billcutterz.com and Barry Gross
should take to address these key strategic and operational issues?
Billcutterz.com had a number of strategic and operational issues with which to contend. The company had
progressed rapidly, and was now struggling with the results of the successful launch of this entrepreneurial
In many ways, the issue for Billcutterz.com revolved around a question of vision: Where did Barry Gross
envision this company in two years’ time? What changes needed to be made to the company in order to take
Strategic Issues
Vision – What was Gross’ vision for the company in the next two years? Did Gross envision growing
Growth – How to manage the large spike in new customer enrollments and grow into a maturing company.
President – Was Barry Gross able to evolve from an entrepreneur into an executive? Further, was he able
Business Model –There was some indication from the balance sheet that the current business model may
need examination, especially because of the company’s current cash flow predicament. While the company’s
Operational Issues
Management – Who would manage the day to day operations of the company and begin to systematize the
training of new Savings Experts?
Proprietary Software System – Was the company software system scalable?
Students should be able to formulate this list of strategic and operational issues for the company, and develop
recommendations that encompass workable solutions for these issues. In particular, students should be able
to articulate a set of recommendations that takes Billcutterz.com from a start-up venture into a small business
Specific recommendations likely to be made by students include:
nDevelop employment opportunities for student workers to become Savings Experts to speed the bill
nEvaluate partnership opportunities with telemarketing firms with idle capacity to negotiate bill
reductions.
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nThe company’s customer value proposition is appealing, but the company’s profit formula is burdened
by labor expense related to Savings Experts’ compensation. Students may recommend that the company
nStudents may also recommend a new compensation plan that provides Savings Experts with incentives
Epilogue
As of early 2015, Billcutterz.com continued to struggle with the backlog of new customers. However, Barry
Gross was in negotiations with a telemarketing firm with idle large phone banks that could assist the company
in negotiating customer bills. An agreement with the company would require that Gross provide training to the
telemarketing firm to develop bill negotiation capabilities in its workforce.