Is Your Business Growing?
One of the things we found when we took our business from just the two of us to running a small team was initially there seemed to be more work to do and less cash. It’s a common thread we have found in our many chats with other business owners. We differentiate now in simple terms, between a growing business and one that is just getting bigger. The growing business is seeing better and more plentiful cash flow, higher profits and more time for the founders to develop new services and products. The business which is getting bigger is just increasing spend and employing more people. The business that is just getting bigger needs very close scrutiny.
Common issues which cause businesses to fail
Taking on employees too early and for too many hours
Not understanding the cash flow dynamics of your business – those gaps when there are bills and no cash to pay them
Founders still involved in delivering the work
Employees low cost but very inexperienced so sucking up time of the directors/founders
What can we do?
Before you bring on staff work out exactly what you need them to do and the hours you will need them for. Chances are you will need them for a lot less time than you imagine you will. Consider long and hard before bringing on any staff if you can outsouce some tasks to virtual help which will get your plate clear without the costs and supervision a staff member will need. Remember a staff member coming on will eat into your management time too, they also will not be productive for all the hours you pay them to be present in your business. In short they won’t, no matter how great they are, how lovely they are as people, ever be as invested in your business as you are. Why should they be? No one will ever love your business like you do – prepare for this and avoid the heartache and pain paying someone 40 hours a week and getting only 25 hours worked at your pace brings.
Check out your numbers, most businesses are not charging enough to run their businesses at the profit they need to service premises, loans and staff wages. Work out what is essential and what can be left out of the business. Expansion should not come at the health of you or your existing businesses, stay small rather than go broke. Increasing your fixed costs can see very attractive when servicing larger contracts but consider this, if those contract terms change, are not renewed or falter in some way, what will happen to your new fixed costs, will they shrink or will you have to run out and find another larger contract to replace the one lost? What time will that take and what is your exposure financially in the interim? All of these questions and more need to be answered before jumping in.
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