Since the start of Hercules Trophy in 1999, we have given it a chance to grow slowly but steadily, with a solid foundation as a result. The IT platform that had been built from the beginning, appeared to be crucial for the start of Herculean in 2012.
The biggest investment was the start-up of offices in New York and Dubai on their own. Simultaneously, a management buy-out of Hercules Trophy Belgium was financed to get full control of the domestic market and conduct R&D there for the rest of the world.
In 2013, these investments had a negative result, but much faster than expected they led to a positive result as from 2014. So these were good investments.
Herculean has always been profitable, except for one investment year. However, the profit is not high enough to carry the investments in international growth as well.
The financial plan, drawn up by the management, challenged by the Advisory Council and approved by the Management Board is proposed below. Many risks we dealt with in the past have disappeared from this plan, causing acceleration of profitability.
Herculean has various turnover flows and margins of own offices and licensees. In Herculean’s own offices — BE, NY, AE — the complete turnover and margin are recognised in the result. Licensees (Poland, Lithuania, etc.) pay an annual fee and a multi-stage commission on the total turnover that passes via the webshop. The licensees, therefore, carry the risk for them but receive a higher upside in return.
The gross margin in terms of percentage decreases in the plan, since there will be more licensees and because the share of Hercules Projects and Hercules Academy — where the margins are lower too — will increase proportionately.
- Hercules Trophy: low turnover per customer, but the margins increase with the volume
- Hercules Projects: higher turnover per customer, more one-offs, lower margins
- Hercules Academy: average turnover per customer, framework contracts, lower margins
Since we switched over from direct sales to content marketing and sales automation, these costs have also decreased sharply as a percentage of turnover. With a smaller team and strong partners like VOKA we can now handle a much higher turnover.
The direct costs can be predicted accurately due to stable licence contracts and many years’ experience in organising the Hercules Trophies. Meanwhile, travelling expenses have also become much lower, due to the IT platform.
The investments and depreciations show that we focus on digitisation. Every feature developed on the platform that is offered to the licensees, causes a multiplication effect. No capital was provided to start new high-risk own offices on new continents.
Thanks to further digitisation, the overheads remain stable and decrease as a percentage of the business. Herculean does not have anybody in employment and does not have any expensive offices.