Three consecutive years of top-line growth, and a founder who could not explain why the bank balance kept getting tighter. Headcount had grown with revenue. Two new service lines had been added because clients asked for them. Nobody had ever gone back to check whether either one made money.
Reporting was organized by client, not by service line, so profitability was invisible at exactly the level where the decisions were being made. Two of the five service lines ran at a loss and were cross-subsidized by the original core offering. The delivery team was 40% allocated to the least profitable work. Cash pressure was not a collections problem, as the founder assumed. It was a mix problem.
We rebuilt the reporting so margin was legible by line and by delivery team, then ranked the five lines by contribution rather than by revenue. One line was repriced. One was retired outright, with a handoff plan for the four clients it served. Delivery capacity moved to the two lines that had been quietly carrying the firm.
Gross margin improvement in year one
Service lines, deliberately
From Audit to stabilized margin
Eleven months after the Audit, revenue was down slightly and profit was up substantially. The founder can now answer the profitability question in a sentence, which is the outcome that actually compounds.
Every Audit starts from the same place and ends somewhere different. That is rather the point of doing one.
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