"Everything was going fine — or so I thought"

Marco runs a precision machining company with 20 employees and 4M in revenue. For 15 years he made every decision on instinct: pricing, investments, hiring. The business was growing, clients were there, the bank account looked fine.

Then, at year-end, the accountant presented the financial statements. Profit had dropped 40% compared to the previous year, despite revenue growing 12%.

The question: how is it possible to sell more and earn less?

The discovery: revenue hides the problems

Marco's situation isn't unique. It's described in the article Your revenue is growing but profit isn't?: when a company grows without monitoring margins, costs grow faster than revenue.

In Marco's case, three factors had combined:

Uncontrolled discounts — to win larger jobs, Marco had granted 10-15% discounts without verifying the impact on margins. Some jobs were below break-even
A client that was losing money — the company's largest client, generating 25% of revenue, had such aggressive terms that it produced a negative contribution margin — exactly the situation described in I discovered my best client was losing me money
Hidden costs — two hires made during the year had increased fixed costs more than Marco realized

The change: from numbers to decisions

Marco decided to address the problem systematically. Not with a €100,000 software package or a 6-month project, but with three concrete actions.

Action 1: understand real costs

The first step was calculating the true cost of each product. Not just raw materials and direct hours, but all indirect costs: energy, depreciation, logistics, scrap.

The result was a surprise: out of 12 product families, 3 had a gross margin below 10% — far less than Marco estimated mentally.

Action 2: build a weekly dashboard

Marco started checking 5 numbers every week:

Weekly revenue
Average margin on completed jobs
Cash balance
Receivables overdue by more than 30 days
Effective production hours vs. attendance hours

No complex system was needed: a spreadsheet linked to the management system, updated every Monday morning. The 3 essential reports gave Marco visibility he'd never had before.

Action 3: renegotiate the problematic client

With numbers in hand, Marco entered negotiations with his largest client. He presented an updated price list with prices guaranteeing a minimum 20% margin. The client accepted a 7% increase. Not enough to reach 20%, but sufficient to move from a negative margin to 12%.

Revenue from that client dropped 5%. The company's overall profit rose 15%.

The results after 12 months

Metric	Before	After 12 months
Revenue	€4,000,000	€3,850,000 (-4%)
Contribution margin	28%	35%
Operating profit	€120,000	€280,000 (+133%)
Time for pricing decisions	2-3 hours (gut feeling)	30 min (data-driven)
Loss-making jobs	~15%	< 3%

Revenue decreased slightly — because Marco stopped accepting loss-making jobs. Profit more than doubled.

What Marco learned

1. Gut feeling isn't enough

Instinct works when the company is small and the numbers are few. When revenue exceeds 2-3M, complexity requires data. Not to replace experience, but to support it.

2. A perfect system isn't necessary

Marco didn't implement an ERP costing hundreds of thousands. He started with a structured spreadsheet, a weekly dashboard, and the discipline of checking the numbers every Monday. Management control isn't about software — it's about habit.

3. Numbers change conversations

Before, client negotiations were based on perceptions: "this price is fair", "the market pays this much." With data, conversations become objective: "this job costs X, the minimum margin is Y, the price must be Z."

4. The first step is the hardest

The biggest resistance wasn't technical — it was psychological. Admitting the company had a problem, that gut feeling wasn't enough anymore, that a different approach was needed. Once that step was taken, everything else was surprisingly straightforward.

Where to start

Marco's story isn't unique. Thousands of SMEs face the same journey every year. The concrete steps are:

Calculate real margins — by product, by client, by job
Build a minimal dashboard — 5 numbers, updated every week
Use data to decide — pricing, discounts, investments, hiring

The complete management control guide for SMEs describes the path in detail.

Want to stop running on gut feeling? Get in touch for a no-commitment conversation, or learn about our strategic consulting.