Question: I want to hire, but I get push-back because of cost. We do have a lot of outstanding bills to pay. We can”™t hire until our debts are paid, but we should hire where we”™re weak so we can get to the next level. Can we get enough of a return if we look at hiring as an investment?
Thoughts of the day: Today”™s businesses are highly dependent on people. Know which areas will get you a payoff and where to make do until there”™s more profit to work with. Think about reorganizing the company”™s financials to free up funds. Make sure you have a realistic plan to work with.
The majority of companies today are service companies rather than manufacturing companies. That means that hiring people can be directly tied to expansion. If you take on more work, you need more people to do the work. If you don”™t hire ahead of need, you end up with untrained people making mistakes and costing the company profits. Mass hiring isn”™t going to solve the problem. Some departments may need help. Some can wait.
Collections help won”™t be needed until you”™re well into your busy season. Try to eliminate some of the collections demands by asking sales and project managers to complete paperwork accurately along the way. Eliminate the need for collections later on. Ask someone to send out invoices to clients as soon as work is completed and call to confirm receipt and payment date.
Are you getting enough sales? Would another salesperson help generate more sales more quickly? What”™s the ramp-up time from hiring to generating new business? Focus on quick-payoff hiring in sales, where you can cut the lead time by adding someone with existing contacts and by focusing on sales with short lead times. Do you need to invest in marketing to support lead generation? That can be farmed out, usually for less.
Pay attention to your operations staff. Can they handle the present workload efficiently? What about when things pick up? Increase productivity by investing in training when things are slow. Look for opportunities to automate with low-cost systems.
Buy your company time to recover by looking at repositioning your existing debt. Is your credit line big enough? Consider terming out the credit line into longer-term loans, giving the company more time to pay it down.
Long term, build up savings and consider investing in a building to house the business. Real estate can be a great asset, especially for a service-based company. Banks will be more willing to work with you if there are assets they can touch.
Paying off debt can be tricky. It can also be tricky trying to increase sales and generate enough profit to pay the bills. Keep in mind that as sales increase, cash flow usually dries up. You spend money to pay for the work that has to be done before you get around to collecting payments from clients.
Know how much work your company can afford to take on, and try to cap the amount of work you agree to do in your busiest months. More strain on the system will most likely result in less profit. Give customers incentives to work with you in quiet periods, and look for additional business activities that are in demand in your weakest months.
Make sure promises to hand out raises and bonuses are linked to growth in profits. As the job market tightens, people are going to be looking around, and you don”™t want to lose good people. But you also can”™t make the problem worse by spending money you don”™t have.
The solution about getting through lean times comes from bits and pieces. No silver bullets. Having a plan and being able to see if that plan is working will help. Try using a budget to pay out how you think things will go. If you don”™t like what the budget is saying, fix it now before you get into the headaches for real.
Looking for a good book? Try “Budgeting: Setting up a Budget and Making It Work” by Leonard Campbell.
Andi Gray is president of Strategy Leaders Inc., strategyleaders.com, a business-consulting firm that specializes in helping entrepreneurial firms grow. She can be reached by phone at 877-238-3535. Do you have a question for Andi? Send it via email to AskAndi@strategyleaders. Visit AskAndi.com for an entire library of Ask Andi articles.
