The Pressure Equation: Why I Said No to ₹48 Lakhs a Month Contract

In physics, pressure is force divided by area. In business, bad deals create pressure that breaks your company when the financial force gets too large for your operational surface area to handle.

In 2021, after the first COVID lock-down lifted, I sat across from my largest customer. We had two contracts generating ₹64 lakhs monthly. The bigger one, worth ₹48 lakhs, was up for renewal. I proposed increasing our service fee from 5% to 6% and reducing our payment terms from 30 days to 15.

The lock-down had stretched my cash flow thin. Revenue doesn't guarantee survival; profit and cash flow do.

My father had signed the original ₹48 lakh contract in 2017. The terms weren't great, but they came with a second security services contract worth ₹16 lakhs with better economics. The customer served a government agency across Punjab.

Delayed payments during COVID forced me to evaluate every contract. I needed to understand what each was actually generating.

The ₹48 lakh contract represented 20% of our monthly revenue but was barely breaking even. When renewal came up, the math was clear: we needed better terms.

I presented my case to the customer's HR and finance head in Chandigarh. The extra reporting requirements they added made the deal economics even worse.

Ten days later, my phone rang. The finance head said, "HQ wants to reduce expenses. They need you to drop the service fee to 3% and accept 60-day payment terms."

I opened my spreadsheet. With our current 5% fee and the actual 45-day payment cycle, we were already cash-flow negative.

Here's what the pressure looked like in practice.

• Monthly service fee: ₹2.4 lakhs.
• Direct overheads: ₹1 lakh.
• Interest on working capital: ₹75,000.
• TDS on the transaction: ₹96,000.
• Net profit: ₹65,000.
• Net Cash Flow: negative ₹31,000.
• Working capital locked up: ₹72 lakhs.
• Annual ROI: maximum 10%.

The force in this equation was the deal's financial demands. The area was our limited operational bandwidth. The client wanted to increase the force while shrinking the area.

At 3% with 60-day terms, we'd start losing money on every transaction. The financial force had increased while our surface area further reduced due to longer payment terms

Longer payment cycles meant more interest costs. More working capital locked up meant less money for other clients. The pressure kept building.

During the lockdown, I adopted a simple benchmark: aim for 15% minimum return. Fixed deposits pay 8% with zero risk and zero pressure.

My actual target is Nifty returns plus 3-5%. If I can get 12-15% in an index fund with zero effort, why take on operational risk and compliance liability for less?

I called the HR head with a final offer. "We can do 3%, but only if you pay on receipt of invoice and we drop the extra reports." This was my attempt to increase our area by reducing complexity.

He paused. "We can't do that. But we can keep the current 5% if you accept 60-day terms." Same force, smaller area.

"We'll pass," I told him. "The new terms aren't viable."

When I hung up, I felt relief, not fear. I'd walked away from ₹5.76 crores in annual revenue—20% of our business. They hired another vendor who also provided security services.

Six months later, my security field officer called with news. The new vendor had been caught underpaying EPF and ESIC contributions. They'd skipped statutory bonuses too.

When a government audit found the discrepancies, they negotiated an under-the-table settlement to avoid further liability. They'd taken a bad deal, then cut compliance corners to survive.

This is what happens when pressure becomes unbearable. The financial force, concentrated on a small operational area, forces ethical compromise. I'd rather increase my surface area than play that game.

That ₹6 crore decision taught me to evaluate every contract across four dimensions.

• Financial ROI must clear 15%.
• Operational drag can't kill team morale.
• Hidden costs such as relationship taxes matter.
• Ethical boundaries aren't worth the risk.

This is how you manage pressure. You either reduce the force or increase the area.

Look at your largest client right now. Run the real math on payment cycles, working capital locked up, and true ROI after all costs.

If that ROI is below 15%, you'd be better off investing in a Nifty Index Fund. You're subsidizing someone else's cost-cutting while your operational area shrinks to zero.

A deal that loses money isn't a deal. It's a slow bleed disguised as business.

Walking away from bad revenue is the most profitable decision you'll ever make.