Let’s Work Together

Can You Afford Not To?

Jun 22nd, 2012

Blayr Barnard – So many times, I hear my clients say, “I need a secretary (or line worker or sales person, etc) so badly, but I just can’t afford them.” My reaction is usually to tell them that we should go through their financials and see if they have the financial ability to hire. Recently though, I have run into many owners that my reaction is, “Can you afford not to?”

I highly suggest looking at all of your options, decided whether you can afford an additional staff member and determining if one is necessary, but in some cases, that hire could be key to your business.

For example: I had a client that was looking at using Sales Reps. The owner did not want to pay the “exorbitant” amount of commission she had been quoted from various potential channels. She felt it would cut into her profit too significantly and would erode her firm base of customers. When I delved deeper into the company information, I found that they were currently breaking even at 60% of purchase price, but that volume was far too low to make any significant gains on market share. At that point, my response to the client was a resounding, “Can you afford not to?”

In this situation, the client needed to increase their sales significantly in order to get any real market share and turn a profit for the company. Since they were breaking even at 60% of the price of the product, that still left 10% for the owner and 30% for commissions. Yes, this is a bit simplified so that I can explain it easily, but in essence, this was the situation.

This is not the only case I have run into where hiring right now instead of waiting made sense. In another client situation I ran into, it was an office manager position that was being weighed. Many businesses can run effectively with lower administrative support, but in this case, the situation needed addressing… and quickly. I asked the client to tell me about his sales process and found that he was both answering the calls, bidding the jobs and trying to manage the back office staff. When I heard him answer a call with exasperation from stress and leave someone on hold for 6 minutes, my response was a resounding, “Can you afford not to?”

While I am an advocate of strategic thinking and strategic hiring, in these two cases the owner was almost the enemy of growth for the business. In one, the company was only going to grow as far as one person could handle. In the other situation, the customer service was suffering because the owner was taking on too much work.

If you are in this situation, take a moment to do a quick analysis of the positions you are considering. Here are a few tips I would consider:

  • If it is a commission position:
    • What is your breakeven point?
    • What is the commission position percentage based on?
    • Consider a 3 month trial phase before making a final decision.
  • If it is an administrative position:
    • Do a one week time study. Keep track of tasks you do all week long and how much time it takes you.
    • Then divide these tasks up into the categories you would like to hire someone to complete.
    • See how many hours this would take and estimate a wage amount to see if you can afford the position.
    • If so, consider hiring someone on a temporary basis or through a talent agency.

Sometimes it makes sense to hire an additional staff member instead of waiting for all of the financial pieces to fall into place. Don’t grow haphazardly, think strategically, but always ask the question, “Can I afford not to?”

Blayr Barnard is the Regional Director for the Southeast Indiana Small Business Development Center, an organization with the mission of having a positive and measurable impact on the formation, growth, and sustainability of Indiana’s small businesses by providing entrepreneurs expert guidance and a comprehensive network of resources. Blayr can be reached at bbarnard@isbdc.org.

*Photo via iStockphoto.com