Struggling with cash flow, I forced myself to take on a 50 million yen job. Almost no gross profit remained.

On a 50 million yen project that took four months to complete, almost no gross profit remained.

In the world of custom furniture and interior design, this is close to a "disaster".

But the real problem wasn't the numbers.

Last time, I wrote that I would "tell everything." So, I think I'll start with the most painful part.

The surface story

From last winter to spring, there was a project that took four months. The scale was about 50 million yen.

Because it was a long-term project, I had them pay half the amount upfront as a deposit.

However, the rough estimate that served as the basis for that half-payment, in hindsight, had already been accepted while being subjected to significant price pressure. I thought I had looked it over, but in the end, I failed to notice.

Normally, you should firmly pin down costs at the procurement stage. Every time an additional change comes up, you should confirm with the client, "This change will cost this much. Is it okay to proceed?" and provide a price. You must not simply keep accepting changes coming down from design when the specifications are already set.

That basic practice wasn't functioning as an organization. Various things were, little by little, not meshing well.

When the fiscal year-end approached and I reviewed the project ledger again, I let out a sigh looking at the gross profit column for that project. No matter how many times I checked, the numbers didn't change.

"You took it cheap, didn't you?" No, half of that is correct.

I will write honestly. I had circumstances where I wanted to take that project in the short term.

It was cash flow.

I have a long-standing relationship with that client, a relationship where they can even sense our financial situation. If I consulted them, they would pay half upfront. So, I had a plan that a lump sum of money would come in quickly.

Of course I wanted the sales, but more than that, I needed temporary cash.

That's why I gave instructions to the person in charge: "Accept it at the client's desired price first."

I had a well-founded confidence that even at that price, I could properly retain a gross profit.

But.

That confidence was, after all, only my own.

Accepting at the same price and leaving the same gross profit. That was a feat that existed only in my own head, and it hadn't been conveyed to my subordinates. No, it was far beyond their reach.

Without realizing that, I just told them, "Take it."

That was probably the worst part.

Even so, the person in charge is not to blame.

The person who handled the project is probably thinking this.

"I did my best in my own way. The gross profit decreased, but I managed to leave this much, so isn't that fine?"

I cannot blame that person.

Because we only had a system where, whether or not gross profit was left, the person's treatment didn't change at all.

Results were not accompanied by responsibility.

People are creatures that move based on a balance of utility. If so, it is actually natural to think, "It's fine if this much is left."

I was the one who had made it a company where it was natural to think that way.

To tell the truth, when I received the report, the person I was first angry at wasn't him. It was myself.

The core is education and systems.

This incident is not just a story about the failure of one project.

The mechanism to bridge the gap between what I could do and what my subordinates couldn't, which is to say, education. The mechanism to link results to treatment, which is to say,

systems.

After 20 years, I still hadn't created either of those.

Honestly, at first, I thought, 'If I had been doing it myself, this wouldn't have happened.' That is probably true. But the moment you say that, you've already lost.

As long as you build a company on tricks that only you can perform, that company will never grow taller than you are.

You probably know this, too.

If you are also a business owner, I think you understand.

'If I do it myself, it's faster and more reliable.'

That's true. But if you hold onto everything yourself, the company will always be limited by your own physical stamina. If you rely on yourself, it will collapse, and it won't grow beyond your own stature. Yet, delegating to others is scary. This inescapable dilemma is the most painful part.

So, I am changing the 'system'.

To be honest, this hasn't happened just once. It has happened several times.

If you say I was turning a blind eye, I think that's true. I should have taken action sooner.

People act based on a balance of utility. If the rules remain ambiguous, they get lost on where to focus their efforts.

If that's the case, what I need to do is clear.

Create a system where, even without being particularly conscious of it, people naturally move toward 'retaining gross profit,' and that properly becomes their own joy and take-home pay.

I believe this is the true job of a business owner.

Set goals and make promises. Assess the results and measure the variance from the goals. If they achieve them, their compensation changes. If they don't reach them, it doesn't go up.

I have finally built such a system. I will announce it within the company next month.

Right now, I am laying my company bare with the help of AI.

Right now, I am breaking down my company's numbers, down to the very last yen. I am looking at which project, under which expense category, my gross profit melted away into.

My partner in this is AI. (This "live report" will be for another time.)

Work that would take a single person days to complete is finished in a few hours through dialogue.
And the reality I didn't want to see is also clearly laid out before my eyes.

From individual skill to organization

For 20 years, I have operated almost entirely on individual skill.

But the scars from that job taught me clearly.
From now on, I will win as an organization.

I am not chasing gross profit for the sake of money.
It is to ensure that in the near future, I can build a company that can properly reward the members I work with.

I have a clear image of how it will work out.
I don't know how long it will take yet.

But the era of carrying it all on my own is over.

DW

*Next episode preview: The story of how I laid my company's numbers bare with AI*