I don”™t know what to do in the slow months. Trying to hang on to when we”™re slow has left us stretched for cash going into the next busy cycle every year. But it”™s getting harder to find good new people and I don”™t want to lose people after we”™ve worked so hard to train them. I also don”™t want to get caught short with too few people to handle our next busy period.
Thoughts of the Day: Businesses with cycles have to have a full-year game plan. Be realistic about what you can and cannot afford to do. Figure out why it”™s so hard to make enough profit and then work on that root cause.
Peaks and valleys of income can be really hard for a variety of reasons. Employees cost money even when they”™re not working full tilt. Businesses look most profitable at the end of a busy season, when they”™re about to become least profitable because of a down season. Overhead costs don”™t go away just because the volume of work drops off. Escalating vendor costs chew up profits when sharper negotiation would have headed those costs off. Few businesses have enough in reserves, nor do they have a plan to build more. Some owners take too much out of the business at the end of a busy season and get caught short. Last of all, most business owners don”™t understand how much profit they really do, or don”™t, earn.
You do have options. Flex hours, job sharing, telecommuting, sabbaticals, time off for education and extended vacations can all be tools in your arsenal. So can looking to share employees with other companies that have cycles opposite yours. And of course unemployment insurance is meant to soften the blow for employees who have to deal with seasonal work opportunities.
Know how much you can afford in excess payroll during the slow months. Build a plan to keep people busy with cross-training, skill building and vacations. Ask people if they want to take off extra time, on their dime ””you may be surprised to find that extra time off is valuable ”” especially to millennials.
Manage the total workload. Schedule service and other routine work for slow times. When busy, resist the temptation to go to overtime, which burns up cash. Put busy time profit into reserves to make payroll when it”™s slow.
Make sure employees understand and are supportive of your strategy. Make it clear they can”™t have it both ways; lots of overtime or excess spending during busy periods eliminates the possibility of full pay during slow times. If cuts are necessary, ask employees to choose: let go of some people, or share the pain by reducing everyone”™s hours enough.
Do reviews of job profitability and overall employee performance at the end of a busy season. Match reviews up with work downturn and make tough, but necessary, decisions on whom to cut.
Set a goal for payroll-to-invoices ratio. As work winds down, have a plan for who goes and who stays. Resist the temptation to wait too long; every week you overspend on payroll eats away at reserves.
If you do furlough people you”™d want to bring back when it gets busy, make sure to get their slow season contact information. Start recruiting for the busy season when things are really quiet. Don”™t wait. Stagger employee returns, a few each week, until you”™re back at peak workforce.
Make sure you”™re actually charging enough for the work you do. It costs money to flex a workforce up and down. If the business winds up unprofitable at the end of each season, ask your employees to help you figure it out. Focus on fixing the root causes, so you don”™t have to keep dealing with the craziness of the ups and downs. After all, your job as owner is to be realistic and manage the business for the long term.
Looking for a good book? Try “Strategic Workforce Planning: Guidance & Back-up Plans” by Tracy Smith.
Andi Gray is president of Strategy Leaders Inc., strategyleaders.com, a business consulting firm specializing in helping entrepreneurial firms grow. She can be reached by phone at 877-238-3535. Do you have a question for Andi? Please send it to her, via e-mail at AskAndi@StrategyLeaders.com or by mail to Andi Gray, Strategy Leaders Inc., 5 Crossways, Chappaqua, N.Y. 10514. Visit www.AskAndi.com for an entire library of Ask Andi articles.
