“To open a shop is easy, to keep it open is an art.” — Chinese Proverb
On Tuesday we discussed the appropriate mindset for any owner — to act as though you’re operating a start-up, regardless of the stage of your business.
With much of the focus on outlasting the one-year mark, we have to discuss what to do even if and especially when the income just isn’t being generated. Though this may seem like a dire outlook — it’s not meant to be. It’s just a reality for which all professionals need to prepare. Its not harsh or desperate, it is.
There are some steps you can take when operating costs outweigh the revenues, and the most obvious one is to let some people go. How you determine that is up to you. It can be done indiscriminately or by who the newest hires were.
When I’ve had to cut some employees loose, I typically analyzed who cost my firm the most time and ultimately, money.
There’s three types of business units with corresponding workers and important functions:
- Profit centers. These are your sales executives, business development associates and client engagement staff. These are the revenue generators. Their numbers don’t lie.
- Expense centers. Here, you don’t make money. You have John or Jane handle the bookkeeping, for example, so that you are freed up to make money, attract clients or upgrade your systems.
- Investment centers. Something of a hybrid of the first two, the idea behind the investment center is that you’ll train an employee whose output will somehow justify the cost. Whether it’s a social media and web expert who can design an attractive site or a technical writer who can explain your business to the uninitiated, these people should be able to make money on the back end.
If your employee(s) isn’t performing in the designated center and it’s not worth it to move them to another one, then it’s time to let him/her go. No one likes to do it but in business you need to persevere constantly. This leanness is part of being in the start-up state of mind and it will help you succeed.
Your comments are making their way to the posts, so always feel free to leave more or contact Brinen & Associates to discuss how you can keep your business fiscally fit.
I’m also including one final shout-out to Michael Kessler for having me as a guest on Business Profits in the Real World, which provides some of the finest business advice on the airwaves.