The cost of the election

Many millions of dollars were spent on the recent election by congressional and presidential candidates, but the real cost of the election may yet to be seen.  Almost immediately after the results were in some business owners were announcing lay-offs and reduced hours for their employees.  One mine owner announced over 150 employees would lose their jobs, and it is reported that 54 people have already been notified that they were being laid off due to the concerns of the President's view of the coal industry.  The CEO of Papa John reported this week that most franchise owners would reduce the hours of their employees as a result of Obamacare.  Only those working 30 or more hours a week are required to be covered by employer provided insurance.  The corporation that owns Olive Garden and Red Lobster restaurants announced similar reduced hours for their employees, and the owner of Applebee's is reported to have said their restaurants to cease hiring new employees.  Large corporations such as these make the headlines, but one has to believe that many small business owners are having similar thoughts.  Of course, the public is outraged and boycotts of these businesses are already being considered.

American people have become somewhat schizophrenic in recent years.  We love millionaires who play sports and will buy clothing with their names plastered all over them.  We love millionaires who star in movies and on television.  We love millionaires who sing.  We love millionaires who go to Washington and pass laws they don't understand that impact the entire nation.  But, we hate the millionaires who provide us with jobs.  These are the greedy ones that must be destroyed so "the playing field will be level for all people."  I simply don't understand this line of thinking.  Not once in my entire life has a poor person ever gave me a job that provided for my family.  I've never even had a person on the same economic level as me give me a job.  Crush the ability of a business to make a profit and the unemployment rate will go up even higher than it is already. 

Businesses, both large and small, must make a profit to survive and be able to provide jobs that benefit everyone.  The small business I owned went enough years without making a profit that it finally had to be closed putting all my employees out of a job.  For anyone in Congress and anyone else who never studied Economics 101, a business cannot survive if it is not allowed to make a profit!  Of course, we can complain that the salaries of those who operate such companies are out of control, but the ones who make that complaint have probably never owned a business.  Founders, owners, and CEOs of these businesses are the ones taking the risk.  Employees may lose their jobs when a business goes under, but the owner of a small business is often at risk of losing his or her home, life savings, and retirement accounts.  Why take that risk to earn the same salary you could earn working for someone else without any risk?

Only people who have owned a business can understand how mandated health care will affect the company's ability to earn a profit.  Others like some in Congress who said they would read the bill after it was passed don't have a clue how it will affect small businesses.  After all, this is the same kind of thinking that convinced Congress they knew how much water it took to flush a toilet!  They got that wrong, and many business owners believe they got this wrong as well.

People will argue that businesses will just pass on the cost of the insurance to their customers, but here is where that American schizophrenia kicks in again.  The public loves Papa John's $10.00 pizza.  What happens when the costs of that pizza goes up to reflect the real cost of mandated health care coverage?  People will be outraged at the "greed" of the company.  They will stop buying the pizza resulting in stores closing and more employees out of work.  Take that across the board and include more than just restaurants.  Begin to think of supermarkets, department stores, service providers, wholesalers, and other companies all facing the same challenge of trying to earn a profit with increased government interference.  How many costs can be passed on to the American consumer before the entire economy collapses?

Health care insurance is expensive, and we should not expect to see it become less expensive just because it is mandated for everyone to have it.  I've yet to see any government mandated program result in lower costs.  Small business owners are going to have to be very careful that their health care costs do not jeopardize their ability to remain profitable.

The need for health care reform is real.  Too many people have been without health care and have suffered as a result.  Could there have been a better solution than Obamacare?  We'll probably never know now since President Obama's re-election ensures that it will move forward.  My fear is that in the next five to ten years that the changes under Obamacare are enacted we will find that this election cost America much  more than just the money spent by the candidates.

Staffing a start-up

Image: FreeDigitalPhotos.net

 

A common mistake some entrepreneurs make when they start a new company is spending money on things they don't need.  I recently heard a caller to a radio program explain that one of the reasons he was having financial problems was he had bought a new pick-up truck for the carpenter business he was starting.  He had made virtually no money in this new enterprise, and he spent $30,000 for a new pick-up truck.  The radio host told him that was a huge mistake, and the business owner responded that he had to have a truck to do his construction business.  The radio host agreed that he needed a truck, but he didn't need a $30,000 truck he had to finance before he ever got his business off the ground.

New businesses make the same mistake when they purchase or rent office space or equipment.  They overspend on these items before they have any cash coming in thinking they have to have all the latest technologies and a prestigious office.  Actually, unless you are a retail store you may never need to meet a client in your office.  When I think of many of the service people with whom I do business I realize I've never been in their office or even know where that office is located.  You can work out of your garage or your basement when you start out.  For only a few dollars a month you can get a post office box for your business mail and add a second business line that comes into your home which will transfer your calls to your cell phone.  Most people will assume you are working in your office when they call. 

Another unnecessary expense some start-ups encounter involves their staff.  It is doubtful that most new start-ups need to hire a full-time person when the business first begins.  Many entrepreneurs do not realize all the expenses such a hire creates.  This person will need supplies, equipment, and training.  There will be additional taxes due with such a person now on the payroll that will eat into those early sales.  There are better options that hiring a full-time person right off the bat.

1. Get a virtual assistant.  There are now numerous companies providing virtual assistants who will handle the administrative tasks you need to avoid so you can be more productive with your time.  These will cost your new business much less than hiring someone, and if they don't work out you simply end your agreement.  You don't have to worry about unemployment compensation or any of the other issues that goes along with terminating an employee.  There is one thing to make sure of before you get a virtual assistant.  Have a detailed list of what you need this person to do and ensure that is clearly communicated before signing any type of agreement.
2. Get a part-time person.  Maybe you have enough administrative work for someone to do for 10-20 hours a week and you're not comfortable with a virtual assistant.  A part-time person might be the best option for you.  I know a person who did some work for a local professional in her home during the evenings on a part time basis.  The work was such that it could be done at her convenience which made it appealing to her.  
3. Hire a temp.  The benefit of having a temporary employee is you only have to worry about paying a salary to the temp's agency.  They handle all the taxes for the person.  You write out one check each week for the person's services, and you don't have to worry about it after that.  A second benefit is that you can hire the person for a particular project, and when that is completed his or her employment with you is completed as well.
4. Use interns.  If you are located near a college or university there may be some students willing to do intern work for the experience and so they can add it to their resumes.   Interns usually need a lot of supervision but they also bring a lot of energy to the position.  In some cases, you may find a great future team member at little or no financial cost to you.

Starting a new business requires a lot of time, and it may be appealing to hire someone to help.  I agree that it does take a lot of time, but chances are you still have more time than money.  You can't afford to pay someone to answer the phone for you.  Answer your own phone.  Order your own supplies.  Open and close your business yourself.  If your idea for a business is a good one the day will soon come when you will need to add team members.  At that point begin to add part time people or follow the suggestions listed above.  If that is successful it won't be long before you will be adding people, but at that point you should be able financially to do add people who will contribute even more to your business' bottom line.

You need a great team

Image: FreeDigitalPhotos.net

I believe it was John Maxwell I first heard say that if your dream is too small for a team your dream is too small.  Many small businesses began as a one-person show, but eventually the owner of a one-person business will learn that he or she is still an employee...and the boss.  Soon after that recognition comes another awakening - unless you can expand the business to include more people it will never be what you first envisioned it would be.  It will never provide you and your family with the life you wanted when you became a business owner.  It is the failure to develop a team that causes many small business owners to eventually give up and return to the workforce.  It makes no sense to deal with all the headaches that go with owning your own business if you are the only employee and are not making any more money, or often even less, than you were when you were working for someone else.

But, just adding people isn't enough.  You have to be adding the right people.  Dave Anderson, in his excellent book Up Your Business!: 7 Steps to Fix, Build, or Stretch Your Organization, writes, "You can read books on strategy and attend courses on corporate vision but the fact is that without getting the right people on your team, nothing else you do will matter.  Your vision is worthless, strategy impotent, and values corrupt without the right people to execute them."  Later in the book he adds, "A great dream with the wrong team is a nightmare because bold goals pursued by mediocre people still result in mediocre results."  He spends the remainder of his book addressing good hiring procedures, the importance of ongoing training, setting high expectations for the team, and how to survive success by overcoming common temptations that successful companies face.

Adding team members is expensive.  If the owner does it right it takes an enormous amount of time.  The best people do not work for entry level salaries and benefits.  There is the cost of training new people in your culture and in whatever business you may be in.  It is very expensive to hire new people, but the cost escalates much higher when you hire the wrong people.  You have all the expenses the good people have plus you have the additional costs of lost business, a damaged reputation, and your own elevated stress levels while you try to contain the damage they cause.  Unless you begin to feel that you are taking too long to hire a new team member you probably have not taken enough time to do it right.

If you want your business to continue to grow you must be constantly developing team leaders.  You cannot wait until you need a new leader to begin searching for one.  The best companies always have people in the leadership pipeline at various stages of leadership development so when the need arises they can go to that pipeline and immediately bring someone in that is prepared to provide the leadership needed.  Without that pipeline a small business owner will often find that he or she is being held hostage by incompetent, mediocre people that the owner doesn't want to keep but can't afford to lose either.

One of the mistakes I made as a small business owner was not hiring quality people when I had the opportunity.  It seemed like those people always presented themselves during our slow times, and by the time we needed them they had already found positions with other companies.  If I had it to do over again I would hire them and create a position if I needed to so that I could keep them.  I really believe they would have easily paid for themselves and would have put us in a much stronger position for long-term growth.

If you want to read a very helpful book on the importance of having a quality team working for you I encourage you to read Anderson's book.  It is one of the best on the topic I've read.