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16 Dezember 2020

erento: from loss-making business to profitable market leader while building a great company culture in the process

Step One: restructuring the business

Background:

In 2017, erento was at a turning point. The company could not achieve their ambitious growth strategy of fully transforming from a listing to a commission-based marketplace and closed the year with declining revenues and a 7-figure loss. The company’s management decided that a strategy shift was inevitable and started drafting a comprehensive restructuring plan.  

Executing the restructuring plan:

This plan was based on four cornerstones:

  • Strategic shift from growth to complexity reduction & focus on profitability Communication plan
  • Execution plan (cut employees from 40 to 20) with the biggest cuts in software development
  • Legal/contract preparations

The management’s plan was truly ambitious: they planned to save over € 1 million in costs, increase revenues and set the company up for future growth.

However, one big question remained: Can erento even function with half the team?

The execution plan was equally ambitious: it was time to share the new strategy with the team, inform all affected employees to be let go and at the same time keep the remaining team motivated.

The management gathered the whole company and transparently shared with them in detail what they were going to do and why this was needed. Right after this meeting, each department head had a meeting with all their employees that had to be let go and handed them the cancellation. At the same time, they told the affected employees that they had 2-3 job interviews ready for them and sent them home for the day.
Immediately afterwards, the management had another team meeting with all employees that were staying. They explained the reasons for the company restructuring again and gave them the outlook why the new strategy shift was going to make erento successful and profitable. Further, 1-on-1 meetings with each remaining employee were introduced to support them through the transition phase.

This way, the management managed to uphold morale in the remaining team and successfully planted the first crucial seeds in building a new transparent company culture.

For phasing out all employees which had to be let go, they were given the option to stay until the end of their notice period or leave the company immediately – whichever they preferred.
The company management also supported all employees that decided to stay with their application processes, gave them good recommendation letters and flexibility for their new job interviews.

Naturally, in the first month after announcing the restructuring plan, the mood in the company was down. However, the core team who stayed understood the process and reasons behind and appreciated the management’s transparent and open way of managing this tough process.
In the second month, the mood in the company was already significantly better. But let’s be frank: with such tough measures, it takes time for employees to fully go back to “the new normal”. Erento needed 6-8 months to complete the full transition with handover.

Focus on stabilising the company:

After the restructuring plan was put into motion, the management’s first task was to stabilise the company. With their new scaled down team, all tools and processes were rebuilt and transparent knowledge sharing was introduced.

The company focused on its core products: they introduced price increases for their “listing” product and fixed functionalities of the “top position” product. Further, they implemented much more testing and verification before developing new features and stopped all smaller side projects which were not generating significant revenues.

Cost cutting:

In order to achieve their ambitious goal of saving € 1 million in costs, the company mainly saved in personnel expenses, tools and licences.

Total team size was decreased from 40 to 20 employees, which resulted in significant cost savings. Further, the company got rid of every single cost which was not contributing to EBITDA. Each employee was empowered to maintain cost discipline.

Main learnings from the restructuring:

  • Prepare up front as much as you can, later you won’t have much time
  • Good communication plan is key
  • Plan enough time for knowledge transfer
  • Rebuild processes to fit the new company size
  • Cut all the cost which are not directly contributing to EBITDA
  • Focus on things that really matter
  • Work on your company culture & focus on motivating employees throughout the process

 

Step 2: building a great company culture

In addition to restructuring & stabilising the company financially, the management knew that it had to tackle the company culture next.
As expected, the mood was icy right after the restructuring.

How to fix this:

Communication was key for improving the company culture. The management introduced regular strategy meetings where all employees could join. Additionally, 1-on-1 meetings with each employee contributed to better understanding their new ideas and take on their feedback. Each month, the company now holds company breakfasts for the whole team with anonymous questionnaires to openly discuss rumours and company performance.

Erento also started sharing all strategy documents and financial performance openly with all employees to keep track of the status of the company turnaround.

Encouragement, perspective and clear focus allowed employees to develop and increase their performance significantly. Caring for the employees’ private lives and giving them flexibility also contributed to building a great team spirit.

The management succeeded in giving employees a clear picture of a successful future after the restructuring. There were countless new development opportunities within the team: new positions for existing employees, increased responsibilities and new learning experiences for expanding their domain knowledge.

Another important puzzle piece in building this new company culture was a shift to giving full trust to employees. Productivity was prioritised over face time in the office. Each employee took full responsibility and ownership of their tasks. This way a team spirit of “we are all in this together” was created.

Employee benefits:

The company introduced a 4-day work week for all employees during the summer as well as a 2-week company-wide remote working time in Tenerife. Home office is encouraged, employees get discounts at Urban Sports Club and the company BBQs on the erento terrace are legendary.

However, the management told the employees that all these benefits are valid for a test period only and it is the employees’ responsibility to make it work. In case there would be a drop in performance or any other issues, management would have cancelled it.

Read more on erento’s 4-day work week here.

Results

  • Since the restructuring, employee turnover has gone to almost 0
  • Product output much higher than before
  • Higher sales
  • Highly motivated and happy team
  • Differentiated USP – not only salary

In 2018 after the restructuring, the company recorded an increase in revenues and positive EBITDA again. In 2019, the company increased revenues even more and was able to generate a comfortable >20% profit margin.

Step 3: Acquisition of rentsoft together with Russmedia Equity Partners

After Erento and the rental ERP software Rentsoft crossed paths at the end of 2016,  it became immediately apparent that a cooperation on the sales side would be highly beneficial for both parties. Rentsoft is helping rental companies to manage their daily operations with a digital and cloud based solution. Wasting no time, Erento started selling contracts for Rentsoft with a joint revenue share.

After one year of successful sales cooperation, both parties wanted to tie their efforts even further together. As a result, Erento invested into Rentsoft, becoming a 20% owner of the company in early 2018. After another year had passed and the business kept growing at a flourishing rate, Erento initiated the second investment round, becoming now a 50,1% majority owner, with both Rentsoft founders still being highly operationally involved.

Since 2019 both companies are now working in that setup, whilst strategically expanding Rentsoft’s features and customer base. Rentsoft is particularly strong in vehicles, incl. motorhomes, construction, events, and customized enterprise solutions, which cater for all specific needs in renting and exhibits.

Step 4: Acquisition of campanda together with RMEP

Read more on this acquisition here. 

In May 2020, erento acquired campanda.de, one of the world’s largest marketplaces for motorhome bookings. More than 250,000 customers have already rented a camper van through the platform.
Motorhomes are an important part of the erento marketplace and Campanda is a perfect addition to the erento portfolio.

After the successful acquisition of the all-in-one rental software Rentsoft, this is the second successful acquisition of the team led by Luka Dremelj & Robert Rutkowski within two years.

The acquisition of Campanda is a great example of RMEP’s’ comprehensive corporate toolbox and how we are able to support the growth of our portfolio. Our dedicated investment team supported the erento management team in all phases throughout the transaction from sourcing, to financing and closing in order to help erento consolidate their industry.

ERENTO MANAGING DIRECTORS ROBERT RUTKOWSKI AND LUKA DREMELJ AFTER THE SIGNING OF THE CAMPANDA DEAL

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