Dear Gerard,

I am also an experienced expert in this field. In 2005, our revenues came entirely from brokerage and were transaction-driven. This is a volatile and exciting source of income, because it is impossible to predict. If no transactions are undertaken, we go home empty-handed with zero income. We got into trouble, because suddenly revenue stalled in some departments. This was partly due to the famous 80/20 rule that 80% of income stemmed from 20% of the customer base. And this very important group of our customers suddenly changed jobs or functions, so they were no longer customers for our institutional brokerage. We were also overweight in labour costs due to the excessive number of people in the back office, for who there was very little work due to computerization. We retained them, as we were a kind of family business. But in the end with the continued importation of eTrading, we had to take the decision to dismiss colleagues for economic reasons. (more…)

Dear Erik,

Someone I know went bankrupt. And that’s a shame, because I think it could have been avoided. I nearly went bankrupt five times myself and each time I could only blame myself for ending up in those situations. After the last time (the 2009 crisis), I firmly resolved that this will never happen to me again. Fortunately, we were able to turn it around each time together with all the partners and colleagues. But this person wasn’t able to. (more…)

Dear Gerard,

I also recognize the phenomenon you describe. Often the most energy is spent on one department, one product or one person where the participants do anything but bring added value. You recognize the added value from an activity of the company, but one way or another it requires more energy in keeping it running than other business units combined. And indeed carried by the emotions of all involved in the activity, the solution to stop the activity is often not seen. An outsider would probably make the decision to quit in an instant. It is far more difficult for an insider to go through with it. Therefore, it is even more praiseworthy that you have severed the knot and have freed up your mind for new ideas. (more…)

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. (more…)

Hi Erik,

Luck is what you need if you buy a lottery ticket. Because the probability of making a profit is clear: you will only lose money. And if the operating income of your company depends on luck, you better stop today. I have never seen a business plan with a luck factor prognosis. Erik, I think luck is the last thing you want to build the foundations of a good business on. (more…)

Dear Gerard,

A farmer had orchards full of apple trees. The neighbor said this was good and he was lucky to have such a means of production, but that he had put all his eggs in one basket. The farmer shrugged. The apples then got a fungal infection and the entire crop failed. The neighbor told the farmer ‘I warned you’ and the farmer shrugged. The next year the farmer tried potatoes. The neighbor said sarcastically ‘At least you will have plenty to eat’ and the farmer shrugged. The population then switched en masse to pasta and rice, and the farmer was left with his entire crop unsold. (more…)