135. Profit is not everything

Hi Erik,

Recently, we said goodbye to a service line that will give us around four million euro in sales this year with a profit margin of around 8% (outperforming the temporary staffing benchmark of 3-5%). Next year, if we continued, sales might even rise significantly with perhaps a higher profit.Therefore, it hurts us all to finish with it and the only reason we are doing this is that we will probably be hurt even more if we continue with it. And in this case, there will be no gain from the pain. Ending a profitable business line is something I’ve never done in my life, as far as I can remember. It is against almost everything I stand for. And now that I think of it, I cannot actually believe I’m writing this. Am I crazy? Why end something that makes money and has growth potential? No entrepreneur with common sense would consider this. Right?

However, this service line makes losses in different areas than the financial area. And most importantly it creates a disproportionate burden on the executive team. Highly valued team members have left us and some want to leave if they have to work with it any longer. In addition, the whole process has become so complex concerning the applicable legislation and regulations that it cannot be performed flawlessly and automation in the short term is not possible. The entire process is extremely unstable due to the frequent legislative changes and it is almost impossible to remain fully informed so that the entire process can run without errors. Because of this, we can’t get the process operating without the constant involvement of the top management team.

Despite the monetary gain, we experienced a huge loss related to our team members and so we decided to stop this service line. It took us three days of heated and sometimes emotional discussions. Here and there a tear was shed. For some even sleepless nights and stomach cramps. But now that we have made the decision, everyone is relieved. Both proponents and opponents.

We have also decided that we want to replace it with service lines which are easier to implement, more fulfilling for the team, with a higher margin and much higher added value for customers. A service line that will score positively on the KPIs (Key Performance Indicators) of a healthy business model: available project management, financial feasibility, limited risk, automated, stable processes, transparency, profitability, easy legal compliance, job satisfaction, guarantees, independence of individual team members/management and good market prospects.

And oddly enough, believe it or not, we think in the next three months we will have new services in place which meet all the above mentioned KPIs. One good idea after another presents itself. So it seems if you want something badly enough and focus on it, you can achieve it. Firm decisions bring firm results. And ultimately, we think we will make even more profit in this way (in cash).

Sincerely,

Gerard