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When to Stop Outsourcing and Hire Instead

In my last post I shared the pros and cons of outsourcing. But how do you know when to stop outsourcing and hire instead? Small business owners who are on the path to success know that they can’t do everything by themselves. Hiring employees could mean the difference between stagnation and growth. The three reasons why you should consider hiring an employee instead of outsourcing are below.stop outsourcing

Priority

When you outsource your work to a contractor or freelancer, you end up competing against other clients for their time. Something that you need done right away could end up taking weeks if the contractor has other projects ahead of yours.

On the other hand, employees are committed to your company for the time that you’re paying them. You manage their priorities as it relates to their work assignments. Your highest priority work will be done in the order that you see fit.

Quality

Small business owners generally compete on quality more than they compete on price. Therefore, outsourcing to a contractor can be risky. Contractors don’t have a stake in your business and are often looking to complete the job as quickly and efficiently as possible. They may also provide lower quality workmanship if they believe that you’re not going to extend the contract term.

As you consider hiring employees, it’s important to understand the tasks that they’ll be responsible for. Assess their ability to complete the tasks in an efficient way and maintain the level of quality that your customers are used to.

Security

Outsourcing sometimes puts your company at risk, especially if you need to provide classified or sensitive items to the contractor as part of the project. Although it’s easy to forget, information is still stored somewhere in the brain and you don’t want the contractor to recall your sensitive information when they’re working for your competitor.

Stop Outsourcing

You should have enough work to keep your employees busy for the hours you’re your paying them. Otherwise, they’ll become complacent and may end up using work time to run personal errands, come in late or leave early.

Giving employees meaningful work that keeps them busy is not only rewarding for you, but it provides the sense of contribution to the success of your business. It gives them a chance to celebrate the wins and at the same time feel confident in their own abilities to accomplish great things.

When to Hire Employees in Your Small Business

You’ve worked real hard to improve your business, run it efficiently and have finally reached your capacity. Growing your business requires more than your efforts and making a decision to hire employees is often the right route to go. Before you put an ad on Craigslist, you need to articulate the job role, crunch the numbers and have a plan in place.hire employees

Articulate the Job Role Before You Hire Employees

Assess your current situation before you make a decision to hire. What areas of your business can you hand off to another person?

Generally, the first role that business owners fill is administrative. It’s good practice to have someone that can act as a hub for requests, office tasks and communications. This role is more than answering the phones and scheduling. Someone in this position could be given the responsibility to do light accounting, simple marketing pieces, advertisements, payroll and coordination. Administrators and personal assistants are usually multi-talented and can free you up to work on your business.

Whether you employ an administrator or not, it’s critical that you have clear job descriptions to get the most out of your staff. Set the expectation that the role will grow over time. Communicate that you expect your employees to take ownership of issues and resolve them, even if it’s not specifically in their job description. When you see positive ownership spirit, reward it accordingly.

Crunching the Numbers

After you’ve identified the role, you’ll need to determine what the market will bear for the tasks and where you’ll find the money in your budget. You can find general salary estimates from sites like Salary.com and Bureau of Labor. Remember that you’ll need to consider the minimum wage, payroll tax, required benefits and worker’s compensation in your analysis.

After you have an idea of salary requirements, you’ll need to estimate return on investment. With all of the time you gain back, how many more clients will you bring into your business? How many more units can you sell? Try to estimate how much extra business would be generated by getting the help you need. Then, write down your goal and make sure to revisit it later down the line.

Employee Types

You don’t have to hire a full-time employee immediately. Especially, if you’re having a hard time finding the budget allocation. Consider hiring someone part-time and then migrating to full-time as you see the return on investment. Outsourcing, freelancing and temporary hires are great alternatives as well.

In either case, you’ll need to invest time in the hiring process and then train the employee to proficiency. You’ll also have additional paperwork and records to keep track of, so be sure you’re prepared.

Ultimately, you may need to ask yourself if there are other ways to gain efficiencies, like using software to automate certain tasks or simply getting more organized. If you choose to hire employees, make sure you hire the right person with the right skills, experience, and education for the right job.

Are you making plans to hire? I can help you plan and make the most out of your time and money if you contact me today.

Learning is the Key to Growing Your Small Business

Technology rapidly changes at a moments notice and it’s more important than ever to be on top of your game and open to new ideas. Business owners must have skills beyond their core competencies if they want to stay competitive. Learning is the key to growing your small business.learning

Gaining new skills

Gaining new skills helps you better understand your processes, projects and employees. This understanding gives you insight in to how your business is running and allows you to make improvements that drive efficiencies, maximizes resources and helps your employees advance in their careers. Access to education is readily available in different formats that suit your learning style and time constraints.

Learning Environments

Learning environments exist online, locally and abroad. Some are free and others can be cost prohibitive. I’ve discovered that the best lessons come from experience, listening and observation. Some of the resources that I recommend are listed below.

  • Online courses—You can learn just about anything online. From free college courses at Coursera.org and MIT Open Courseware to paid training from sites such as Lynda.com or from top colleges around the globe.
  • Books—The greatest leaders read, and nothing beats a good book. These days you can get them for free or cheap from your local bookstore or sites like Amazon, Barnes and Noble or trade for them at Paperback Swap.
  • Mentors and advisors—Learn from others who have walked this path before you. Some professional organizations have formal mentoring programs or can partner you up with another member. But if the professional organization of your choice doesn’t have a mentoring program, you can rely on Small Business Development Centers to help get you the resources you need.

Listen and Observe

Be attentive to body language and word choices when listening to employees, peers and stakeholders. There are often clues to what’s really being said between the words and if you take a moment to simply observe you’ll discover insights into bottlenecks and reap the rewards of being just a little bit smarter.

As Dave Ramsey says, “Your team will never grow beyond you”. The question to ask yourself is, are you growing?

Document Your Systems to Save Time and Money

If you find that you constantly have to call employee meetings to remind everyone how business should be conducted within your company, you may have a bigger problem than you think. document systemsSure, there are some employees who will find it impossible to get with the program, but if confusion reigns throughout, you’ll have to ask yourself just how well, if at all, your systems have been documented. After all, how can you expect your employees to have a clear idea of expectations if there isn’t anything to reference? Here are 5 easy steps that will help you clearly document your systems and save you both time and money over the long haul.

Document Your Systems

  1. Identify your systems – This step is the most important because it lays the foundation for the remaining steps. Start by identifying the key systems within each of your business units or departments. You can ask employees to help you since they’re most likely familiar with the systems and can provide insight into redundant functionality.
  2. Map them out – Once all the elements have been identified, you need to create a diagram that shows their relationship to key functions in your business. Typically you’ll have systems that manage your lead generation, development, conversion, fulfillment and relationship management. After you map out what you have, you’ll want to map out the systems that you’ll need for the future. This step requires a little bit of forward thinking as it’s important to include elements that you know are coming as your business expands.
  3. Prioritize – There is a pretty good chance that you are going to have a rather substantial list of systems to organize, and that all begins by figuring out which are the most crucial to the success of your business. When possible, try to identify where you have systems that have similar functionality so that you can reduce a redundant system. Eliminating a system is a decision that shouldn’t be made lightly, as you may find that certain systems are dependent on others. Prioritizing means knowing which are the most important systems and which should be considered for elimination.
  4. Assign accountability – If you have multiple systems, you’ll want to assign accountability to others so that you don’t get caught up managing systems instead of your business. Chances are that the employees you chose to help identify required systems are the ones that you trust the most. Delegate some of the system curation, implementation and management responsibilities to them.
  5. Document processes – The final step is to document all of the systems in a way that everyone can see and follow. Every employee should have access to the documentation so that they can familiarize themselves with the process and steps required.

Once you’ve documented all of your business systems and have removed redundancies, you’ll need to train employees and provide reference information. This way they’ll know exactly what is required of them without having to ask or be reminded.

If you’d like some help with your system audit, let me know. I can help you set up systems that will increase efficiency and save you time and money. Contact me today.

Move Your Accounting From Excel to an Automated Software Solution

Small businesses that do their own accounting usually start out using Microsoft Excel or paper forms, but they quickly find out that neither does an adequate job. excelThere can be no denying that Excel is widely used and performs a number of tasks admirably, but a poorly executed spreadsheet can have a ripple effect that hurts the business year over year. One prime example of this came in 2012, when JP Morgan had an Excel spreadsheet error that ended up costing them billions. While that is an extreme case, it’s not an isolated incident.

Accounting in Excel is Hard

There are a number of potential problems that can arise when you substitute professional accounting software with Excel. The most common mistake is underestimating how difficult it is to actually use. You’ll need to have at least one person who is proficient in Excel and able to create macros and pivot tables in addition to report configuration and data entry. Re-configuring reports after you start data entry can be a nightmare, so be sure to have a plan before you get started.

Keeping track of all your transactions in Excel can be a nightmare, as it simply doesn’t have the power to spot mistakes such as duplicate or missed entries. Spreadsheets can also be easily altered, which in turn can lead to fraud and trouble with the IRS.

Automation is Key

Accounting software that automates many manual entries is a better option for your small business. It removes data entry errors, reduces the opportunity for a disgruntled employee to commit fraud and generally has an easy to follow interface. Use it virtually by finding a cloud-based solution and you’ll have 24/7 access to your financial data without needing to worry about backing it up every 5 minutes.

With accounting software you can be sure that the data you are looking at is accurate, especially since it can be integrated with other small business software and linked directly to your bank accounts. The reports that you need can be accessed with the click of a mouse, while all the information included in the software is automatically kept up to date. This can be especially useful when it’s time to prepare your taxes.

Excel is what small businesses have been relying on for years and change doesn’t come that easy. What you have to ask yourself is whether you’re willing to accept the financial risks that come with using it. Be proactive and bring your business into the present by using cloud-based accounting software. Call me today so I can help you find the best solution.

How to Determine Salary Structures as a Subcontractor

Subcontractors as well as other small businesses must keep a close eye on expenses and salary structure. Determining what wages to pay your employees within a total compensation plan requires knowledge of skills, prevailing wages, project expenses and profitability.Subcontractor

Know Key Skills

You probably already know the skills that you need for each of the jobs that are included in your list of services. Take the time to document the job description, including the title, tasks required, skills, abilities and work environment. Use the Department of Labor’s job resource tool O*NET to help you discover the tasks, technology, knowledge, skills, abilities, work activities, work context, education, work styles, work values, and wage trends. When you take the time to list these out, you create clarity with your job applicant as well as your hiring staff.

Pay Competitive Wages

O*Net has a link to Careeronestop, which can provide a range of hourly or annual wages specific to your state or zip code. Inexperienced employees can often be brought in at the low range if your total compensation, which includes paid time off, health and retirement programs are competitive. More experienced employees can command a higher wage, but are often worth it because they are more efficient and able to train your newer employees.

It’s important to note that there are minimum wages that you must pay your employees, even if the project you are working on is project based. On October 13, 2013 the Industrial Commission of Arizonan signed a resolution resulting from ARS 23-364 that raised the minimum wage. The hourly rate increased to $7.90 per hour effective January 1, 2014. You must pay at least this wage even if that means that you don’t make a profit on your project-based contract.

Subcontractor Profitability

Generally, contractors pay subcontractors by the job so that employment lines aren’t blurred, which could cause a reclassification of the subcontractor to employee status. Smart contractors ensure that the subcontractor has behavioral and financial control of their business as well as contracts that describe the nature of their relationship.

Because pay is often tied to the job, you must be competitive in your bid while still remaining profitable. Knowing what you pay your employees is just one component of the entire bid, but often times the highest expense. Don’t underbid just to get the job unless you can sustain your business with your current cash flow and have reasonable expectations of future higher paying contracts.

Subcontractors that create fair compensation structures will attract, retain and maintain performing employees. Compensation structures include salary, incentives and benefits. Determining the right mix for your small business requires research, planning and continuous improvement. It’s one piece of the financial health of your business. Contact me today if you’d like to discuss how I can help you implement systems and processes that improve your profitability.

Loan Requirements for Small Businesses

If you’re looking for a loan for your small business, consider yourself normal.small business loan In fact, 80% of small businesses need some sort of financing. While larger banks have cut funding over the last few years, local banks seem to be loosening the purse strings a little bit more. Since 2007, small-business loan volume at smaller, more local banks grew by $17 billion.

Loan Requirements

Every small business loan program is different and may have different requirements. However, it’s likely that you’ll submit similar information to your loan officers. Getting organized will save you time in the long run. Before you start the application process consider gathering the following information in one place:

  • Personal Information: You’ll probably be asked to provide a history of personal information, such as residential addresses, names, criminal record, educational background, employment history, tax returns, bank statements, social media activity and credit reports. Remember to review your credit reports for inaccuracies as they can significantly impact whether or not the bank approves your loan. Signed personal financial statements may be required if you have more than a 20% stake in your business.
  • Business Plan: All small business loan programs require a documented business plan with financial statements, including profit and loss, cash flow and a balance sheet.
  • Business Financials: Be prepared to submit bank statements, tax returns, and a credit report for your business. As with your personal credit report, it’s important to review your business credit report for inaccuracies. You may also be required to provide projected financial statements as part of your business plan or as individual documents.
  • Collateral: If your business requires a higher-risk loan, you’ll need to provide collateral to secure the loan. Your collateral document will include the value and cost of personal or business property used to secure the loan.
  • Legal Documents: In addition to the items above, you may have to submit multiple legal documents, such as business licenses, registrations, Articles of Incorporation, third-party contracts, franchise and lease agreements.

If you’re just starting out, it’s likely that you’ll have a tough time securing a small business loan. Don’t give up. Start with a small business credit card and build up your financial reputation. You can read my latest article on small business credit card requirements to get started. In my next post, I’ll list some alternative and more creative ways of funding. Until then, let me help you get your business financially sound and on the right path. Contact me today.

Small Business Credit Card Requirements

Co-mingling business with personal funds jeopardizes the corporate veil and puts you at risk to be personally liable for your company’s debts. If you’re guilty of mixing funds, you’re not alone because 65% of small businesses have credit cards and only 50% of those bear the corporation’s name.Small Business Credit Card Requirements

As a small business owner, you need to keep your personal and business funds separate at all times. A small business credit card can help you pay for daily expenses, such as office supplies, gas and networking functions. Additionally, it helps you track expenses, control employee spending, provide quick access to cash and can also come with perks like purchase protection, travel assistance, cash back and rewards.

Small Business Credit Card Requirements

Typically, you’ll need to meet certain requirements before you’re granted a credit card from a major bank. Here’s a list to get you started.

Authority

Typically the owner or authorized officer needs to apply for the business credit card. If your personal credit isn’t stellar then you may need to get a secured credit card, which means you’ll need a security deposit. You should never ask your employees to open an account for the business in their name. It makes them responsible for the business debt and the company responsible to them. That’s not good business.

Numbers

You’ll need your Employer Identification number (EIN) and social security numbers for all authorized users and signers. You may not have a EIN if you’re a sole proprietor. Instead, the bank will use your social security number.

If you’re a sole proprietor the bank will consider you and your business as the same entity. Therefore, you are personally liable for the business debts and for paying taxes on your business income. The bank will pull your credit score, assess your income and use your personal information to make a decision on whether or not to grant the credit card.

Business Details

The business gross sales and net profit for the last fiscal year will also be required. Bring proof of legal entity and address even if the address is your home. This may be in the form of utility bills, bank statements and checking accounts. You may even need to describe the business type and your specific title and function in the company.

Once you’ve satisfied these requirements, you’re ready to go. Remember to be truthful when applying for credit and always spend responsibly.

How to Be in the 20% of Businesses that Succeed

No one starts a business with the express purposes of failing, yet an alarming number of business owners will eventually end up closing their doors permanently. In fact 80% of start-ups will close within the first 18 months. It makes you wonder what the businesses that succeed do differently from those that fail. While the location of your business and what you offer can play a major role, there are 9 other elements that you should consider.

Nine Ways to Succeed

success

  1. Know your core values and beliefs – Starting a business that you don’t really believe in is a major problem. Some people make the mistake of starting a business based on a current product or market trend, only to find that they don’t really believe in what they are pushing. It is hard to be passionate about something you don’t really care for. If you’re passionate about your business, then take some time to develop and know your core values and beliefs.
  2. Understand your business purpose – Why did you choose to start this business? If you can’t answer that question, you are in trouble. Everything in life has a purpose, and you need to know what that means for your business in order to succeed.
  3. Define your target customer – Poor market research can doom a business before it even gets off the ground. If you don’t take time to know your target market, failure will be sure to follow.
  4. Define where you want your business to be in 3-5 years – A business plan is absolutely essential before you start a business, but it’s also important to continue to plan for the future. Having a clear goal to focus on will help you make more informed decisions.
  5. Determine how you’ll get there – Would you ever hop in your car and head to a specific destination without first having a road map to follow? Of course not. If you want to get from Point A to Point B without becoming lost, you need to know how to navigate that road. Create a plan to achieve your goals.
  6. Prioritize the big things you must do – Being a business owner means wearing many hats and juggling all kinds of tasks. It’s tough to do, but it gets a whole lot easier if you prioritize by level of importance.
  7. Assemble a team and/or outsource – If you do all of the juggling on your own, you will eventually drop something. Stick to what you do best in the business and get qualified help to do the rest.
  8. Develop a marketing plan – This goes hand in hand with finding your target audience. Once you know who they are, you need to find them, let them know who you are and where they can find you.
  9. Remember why you started your business and live your life – If you can follow the steps outlined above, you will be well on your way to success. At that point you can start to leave trusted individuals in control of more and more aspects of the business. It will still be yours, but you will have reached the point where you can step away a little and start to enjoy the fruits of your labor.

I can help you build comprehensive processes and a solid team that will breathe life back into your business. Contact me when you’re ready to get started.

What’s Your BHAG? Good to Great: A DLB Consulting Book Study

We’ve been studying what makes a company go from good to great over the last seven weeks. Links to the previous posts on these topics are below for your review. Now it’s time to think about how your company can be built to last by setting your BHAG: Big Hairy Audacious Goal.bhag

Good to Great Attributes

Here are the seven things that make a good to great company:

  1. Level 5 Leadership: Leaders with a paradoxical blend of humility and professional will.
  2. First Who…Then What: The principle of hiring the right people before setting the vision and strategy.
  3. Confront the Brutal Facts: The belief that through the difficult times you will prevail in the end so long as you have the discipline to confront reality.
  4. The Hedgehog Concept: The intersection of three circles comprising of what you can be the best in the world at, what you are deeply passionate about, and what makes enough money.
  5. A Culture of Discipline: A culture that combines disciplined people, thought, and action with an ethic of entrepreneurship.
  6. Technology Accelerators: The careful section and pioneering of technology to accelerate growth rather than to ignite a transformation.
  7. The Flywheel and the Doom Loop: The process of pursuing success in one direction, turn upon turn, building momentum until a point of breakthrough, and beyond.

Developing Your BHAG

This framework is essential to building a great company, but goal setting is key. To develop your BHAG you must consider your Hedgehog. Your BHAG will intersect what you can be the best in the world at, what you are deeply passionate about, and what makes enough money. Stay within those three circles, but be willing to change the specific manifestation of what’s inside them.

Enduring great companies preserve their core ideology. Their purpose and core values stand the test of time. However, in order for progress to be made, it must be stimulated by change. Changes that occur in cultural and operating practices and changes that occur in goals and strategies. Create BHAGs that are consistent with the Good to Great framework and you’ll be on your way toward greatness.

What’s your BHAG?