If you are reading this you are most likely a business owner- if you aren’t then I hope you learn a few of the challenges business owners face.
As a business owner, you have the privilege, the joy, the challenge and associated rewards of being your own boss and building an empire. You’re aiming to build the levels of income and returns you dreamt of, and to achieve the goals that got you out of the rat race of employment in the first place….Is this really the case, or just a far off dream?
From my experiences and interactions with many businesses it is an unfortunate reality that many should be more realistically called ‘employment agencies’, as this is the true function- employing a team of staff.Too many businesses today have impressive turnover, employ a great team of people, but in reality are not leveraged or costed to be operating in a profitable level and the owners make limited income, if any.
When you think of businesses doing it tough, the mental image is often the small mum and dad store on the corner. In many cases the reality is different. I am referring to those iconic and long standing businesses that we all know and love so well, and often make the incorrect assumption that they owners are in fact ‘loaded’.
So if you are in business, ask yourself whether you are in fact building the foundation for a long-standing future, or are you simply keeping a bunch of great people employed? If you are, some changes need to be made!
4 Warning Signs for your business
Sign 1- Your staff earn more than you!
If you review your wages summary and see that the number one wage earner each year in the business is Joe Blow (and you are not Joe Blow!), then something is clearly wrong. A common myth around the Canberra market especially, is that you have to pay excessively high wage rates to get staff (skilled or unskilled) due to the public service pay rates. What people don’t take into consideration, is that the public service isn’t a simple walk in job, so the over the top rates aren’t necessarily applicable.
Sign 2- You haven’t been paid in order to make payroll, pay the bills or the rent!
Many business owners have the approach that all other bills become the priority before themselves and as a result, in tight or tough weeks or months, may not pay themselves at all.You have the most critical role in the business, that of maintaining its operation and trade, so it is imperative that you are paid for your time and efforts.
Sign 3 – Your staff enjoys holidays but you don’t.
Cant recall the last time you had a holiday, let alone a weekend or a day off? I am sure your staff take their 4 weeks each year, plus use up all their sick leave and any other entitlement they may have while you bust your butt to cover while they sit on the beach drinking cocktails! If you are a business owner who hasn’t or feels can’t take time off then there is an issue.
Sign 4 – Your turn over good money, but make none1
This is more the result of some of the issues mentioned above, plus potentially some more detailed business performance matters, but if there is a healthy turnover, no wage for you, and very little if any profit at the end of the month then ‘Houston we have a problem!’.
If you find yourself nodding in agreement with many of these points, that’s all good, but what can you do about it? I’m glad you asked, here are a few tips or suggestions.
1. Have someone review your business
By obtaining an independent or outsider’s viewpoint on the business, often a new perspective can be gained. Whether this be a coach, consultant, accountant or a business colleague, someone else can provide you with the possible ‘obvious’ issue, which you may have become ‘business blind’ to and provide some simple options as a solution.
2. Speak to your bank about an over-draft or review your current needs
If your business is simply experiencing challenges based on cash flow and timing issues of invoice paying, then extending or obtaining an overdraft may assist. A constant and truthful relationship with your bank should be fostered as they can then work with you to identify solutions for your business needs as it goes through the various phases of growth. There are also some financing options out there to assist with cash flow management (not lending) where invoices are bought from you and the bulk amount is paid to you immediately vs waiting for the due date if the challenges are simply cash-flow related.
3. Review your people process, performance and rates
Are you your worst enemy here by failing to establish any process? Many businesses have staff on no contracts, no performance targets, no work conditions defined, rates may or may not be legally compliant etc. and the nett result is more oftne than not the worng people are working in the business and the R.O.I or productivity is inefficient. Make tough calls if you need to to fix this dilema. Do you need to re structure the business and the roles, which may require redundancies, change of roles or managing under-performing staff. Establishing basic people systems and performance processes will assist in longer-term sustainability of wages.
4. Track and measure costs and set targets
Do this not only for wages and rates, but all aspects of your business, as the adage ‘what gets measured gets done’ works and by focusing on this the results will continue to improve.
This certainly is not an extensive list of what can be done to help, as in most cases the fundamental cause of these dilemma come from poor process round recruitment and people management which leads to staffing become a burden on the business instead of an asset, and maybe some degree of fear from the owner as well. Small business is vastly different to the corporate world. We care for our staff as friends, and seem to have a different level of loyalty or protectionism over them, which can and does lead to this mindset and reality that we pay everyone else first, and ourselves last!
I am sure it wasn’t what you had in mind when you went into business!
Image Source- FreeDigitalPhotos.net by Grant Cochrane