Case
"The startup only earns enough to cover salaries"
How in 4.5 months of working with a small enterprise we increased its profit by 115%
About the client
The company has been importing goods to the Russian Federation for 2 years. Its role is intermediary, to bring the buyer and the supplier and organize the whole process from the purchase to the delivery of the goods.

The company consists of 5 people: 2 co-founders (one in the Russian Federation, the other in South-East Asia), a sales manager in the Russian Federation, a sales manager in South-East Asia and one assistant.
PSY Element:
What is your request?
CLIENT:
We have been importing for 2 years and we have practically no profit, there is enough money only for salaries. We attribute this to the fact that we have a lot of problematic transactions, because of which we lose money. We want to figure out why this is happening and why we are not growing.
PSY Element:
Why did you decide to contact organizational consultants?
Client:
We don't understand what our problem is. We have everything for good earnings - large customers, a cool team, high quality goods. Our competitors, who started at the same time as us, do not have such connections and such large customers, but grow and earn well. The reason is clearly in us, but we don't see it.
I offered a 2-stage project
1
CHECK-UP
At this stage, I will find the reasons that prevent the company from making money. I will also develop an action plan for changes
2
Implementation of changes
At this stage, I will implement the plan and work on the reasons that I will find in the Check-up stage

My notes on the results of the negotiations

During the negotiations, I noticed several interesting points:
  1. Communication was built in such a way that it was not clear who my client was - one founder or both
  2. One of the founders disagreed with the other founder on many issues (necessity of sessions, number of people in the team, choice of supplier, etc.)
  3. There were difficulties with signing the contract. At first, the client offered not to sign it at all, but after my initiative he did not agree on the clauses in the contract for a very long time. Because of this, the deadlines were greatly delayed and there was tension in our communication.

As consultant, I pay attention to all this and reflect on how this can be related to the client's request.
1 stage
"Check-up"
So, after signing the contract, me and my colleagues started checkup or diagnostics, which includes in-depth interviews with all team members. Our task at these interviews is to get the broadest possible view of the problem. And also observe our own feelings and behavior during this work. This is an important part of the analysis, as the team of consultants begins to "play" the same dynamics as the client's while working with the client
Preparation for the interview
Before the interview, we prepare a list of questions. These questions are based on a psychoanalytic approach, which allows us to learn the "hidden layers" of the company - how the business task is described, what fears it causes, how employees protect themselves from these experiences, etc. These "hidden layers" help us see how the company functions as a system and what hinders it.
List of questions for the interview
In-depth interviews with founders
Our notes on interviews with other team members
Team metaphors
An important part of the interview is to hear not only rational explanations of the participants, but also their fantasies. This helps us see the hidden dynamics in the organisation, which no one talks about directly. We asked the following question: "What associations do you have with your team?". These are the metaphors we heard:
Circus
"Everything is fine outside, but inside there is a circus with horses"
Hurricane
"A strong element that breaks everything in its path"
Three headed dragon
"Three heads and each one has no idea what the other two are doing."
Rafflesia
"This is the biggest flower in the world that smells like rotten meat"

Our notes on the results of the interviews

  • There is a hidden conflict between the founders
  • All team members are engaged in sales, but no one is responsible for the transaction process
  • A lot of large transactions are executed without the participation of our client - directly with the supplier, the client's % is not documented in any way
  • The team feels the avoidance of responsibility
  • The team does not communicate in the general chat, everyone has parallel chats with each other
  • It turned out that the sales manager in the Russian Federation has a share in business and considers himself one of the co-owners of the business
  • a sales manager in South-East Asia feels unnecessary in the team, a freelancer without a license

Thanks to metaphors, we uncover the key facts around which our hypothesis is formed
  • 1
    Circus and hurricane
    There is chaos in the team that interferes with work
  • 2
    Three headed dragon
    There are problems with leadership, it's not clear who's in charge
  • 3
    Rafflesia Flower
    There is a conflict between how a startup sells itself to customers and what service it ultimately provides
But that's not all!
Analysis of internal dynamics of consultants
What we hear in the interview is only part of the information we receive from interaction with the client. We also analyze our interaction in the process of work and our dynamics within the team of consultants.

Here we remember the difficulties in concluding a contract with us (there is a fear of responsibility). That when interacting with the client, it is not clear who is the leader in the team (leadership issue).

During the 1st stage of diagnostics, it took us 5 hours to analyze our internal dynamics
We look at what happened to us, the consultants, while working with the client. We pay attention to what is unusual for us
  • The question of leadership
    At first, we could not agree among ourselves who is responsible for this project, who will conduct key interviews - no one wanted to take the lead
  • Risk for relationships
    During the work, a misunderstanding arose between us; one of us felt that this work was putting our relationship at risk
Based on the analysis of all information, we formulated a HYPOTHESIS to address the client's request:

"The company isn’t reaching profitability because deals with clients are being made in an insecure way. Informal, undocumented agreements with clients create significant risks. This makes leadership within the team feel unstable, as responsibility is diffused across all team members. This results in role confusion within the team, with no one held accountable for structuring the deal process. Consequently, there are issues with product delivery to clients, and it fosters mutual distrust and unspoken conflicts within the team"
Based on this hypothesis, we prepared an analytical report for the client, in which we detailed each parameter of the hypothesis in a question-and-answer format:

  • Why do we believe client deals are being handled unsafely?
  • How do personal agreements with clients trigger conflicts within the deal?
  • Why is there no clear leader in the team?
  • Why is everyone on the team selling, but no one is responsible for managing order processing and shipment?
  • Why are they working with unreliable suppliers?
  • Why are there hidden conflicts within the team, and why are they not being addressed?

Additionally, we developed a step-by-step plan to resolve this situation


Next stage
Meeting the client
We presented our report and action plan

This was a very challenging meeting, as the two founders joined forces against the consultants and began to reject the proposed hypothesis. During the meeting, we aimed for the founders to recognize the unspoken grievances they held against each other. We asked provocative questions, but this only heightened their resistance. The meeting concluded with the founders expressing a desire to reflect on what we had discussed.


A month later, we received an audio from one of the founders:

"The main takeaway from the session wasn’t so much a concrete answer, but rather the question that resonated with us deeply: Why are we doing all this? This question left us hanging, and we struggled to find a clear answer. It stirred up notable resistance between us as partners, likely due to the fact that it was our first time working in this type of format, which may have led to an initial response that didn’t fully align with the process. Since then, we haven’t discussed it further; instead, we’ve pushed it to the back of our minds."

It was a turning point in the project

The founders admitted that they have a hidden conflict that they cannot resolve on their own and need help. We have started the next stage of work - "Changes".
2 stage
"Changes"
At this stage, we are focusing on what we discovered during the "Check-Up" stage and implementing the plan for changes
Pair sessions with founders
Within 2 months we met and discussed all the pain points
Conflict resolution
t took five sessions for the founders to confess their mutual grievances to each other. During these sessions, they discussed all the pressing issues: leadership, equity, and responsibility.
Development of a common vision
After they "let off steam" in their relationships, they were able to discuss strategic matters—where they were heading, what goals they wanted to achieve, and how they would differentiate themselves from competitors, among other things. This took another three sessions.
Important decisions
Throughout the process of working in pairs, the founders had to make a number of important decisions, including clarifying the role and involvement of the third participant (the sales manager in Russia). They also decided to hire an outsourced lawyer to handle documentation for client transactions.
Team sessions for the whole team
We also held 10 team sessions
(within 2.5 months), on which:
The founders announced the new decisions they made
Finalized the goals and vision taking into account the expectations of the team

Developed a clear structure with roles, fixed responsibility for each process in working with the client

Discovered that now the "narrow neck" in their process is an unreliable supplier, found a replacement for him
Results
For 4.5 months of hard work, the team was able to make +115% to the profit!
This was achieved due to the following solutions:
  • Check-up
    Qualitative diagnostics and identification of key complexities, which targeted all further work
  • Registration of transactions
    Properly executed transactions ceased to be risky and did not provoke conflicts and monetary refunds from the team

  • Defining the leader
    Safe deals reduced the degree of tension and allowed one of the founders to take the lead

  • Assignment of roles in the team
    Fixed roles and responsibilities in the team allowed to clearly carry out the deal from start to finish
  • New supplier
    The new supplier did not break the deadlines, as competent, rigid contracts on the format of work were concluded with him
  • Team sessions
    Sessions allowed to openly discuss all the difficulties and quickly move on to finding solutions
As a bonus, the team received:
  • Resolution of the founders' conflict
    The founders discussed all mutual claims and started communication at a new, more productive level
  • Independent team
    The team has learned to initiate and facilitate complex conversations itself
Why wouldn't other business tools help here?
The nature of startups or new enterprises is such that 90% of a business's success depends on the founders, as much is tied to their personalities. In this case, the key issue was the hidden conflict between the founders.
Until this is resolved, all other actions will be meaningless.
Yes, there were many questions regarding business processes, suppliers, and team roles in this case. However, these issues are secondary and should be addressed only after the founders resolve their conflict and agree on a shared vision for the company.