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8 ways to know if you can afford to hire your next employee - Part 1

Can't afford to hire your next employee?

It’s an age-old dilemma for small business owners: You need help to grow your business, but you can’t afford to hire anyone.

This common situation is a catch-22 that has driven many an entrepreneur into early burnout, if not an early grave.

There is an answer to the merry-go-round of “I need more help but I can’t afford to hire anyone.”

You can get off this ride!

We've broken these 8 ways into 2 parts.

  1. Do these 5 things before you put that seek ad up!
  2. Crunch these 3 numbers before you sign that employment agreement!  (coming next week)

 


Do these 5 things before you put that seek ad up!

I’m not anti-employment. It can be the most rewarding part of entrepreneurship.  But in a modern world, employment is in my opinion a last resort.

Here are some options to consider before hastily employing someone (in order of priority).

  1. Elimination
  2. Systemisation
  3. Automation
  4. Delegation
  5. Utilisation

 


 

 

Doing something unimportant well, doesn’t make it important.

Tim Ferriss.

Elimination

You’ll be amazed how much wasted resources (time, energy and money) go into tasks that simply don’t add value.

I worked as an external consultant for 500+ of the top Accounting firms around Australia.  Accounting firms are typically ‘old school’, and when I’d ask ‘why are you doing things that way?’ it would often be met with a “because we’ve always done it that way!”

Not a valid excuse, sorry.  

It’s that type of thinking that will keep your business in the dark ages, while your competitors have innovated ahead of you - taking your profits & your clients!

Think of this systems review as the scraping off of barnacles on the bottom of a ship that slow forward motion.

Ask Yourself:  Will this task either make a client happy or make our business more efficient?  If not, stop doing it.

 


 

Most Entrepreneurs are merely technicians with an entrepreneurial seizure.  Most entrepreneurs fail because you are working IN your business not ON your business.

Michael E Gerber

Systemisation

I recently had a coffee with Michael Gerber when we both spoke at the same Business Conference in Hawaii.

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Michael is very well known for championing the need for SYSTEMS in a business in order to free up the owner's time.

In fact he would argue, a business IS a system.

I was taught that SYSTEM stands for Save Yourself Time Energy and Money.  

Most businesses don’t have the systems, which in turn CHAINS a business owner to the business.

But won’t a new employee free the owner up to create more systems?

Maybe.  From the sheer number of system-less businesses we’ve seen, it’s seems most get caught up in the busyness of running a business and never get around to prioritising the things they know deep down should be done - like building systems.

Having systems in place will help get a prospective team member up and running sooner, meaning you get your Return On Investment (or ROI) quicker and ultimately freedom you from the business.

Ask Yourself:  Do I have a system in place to run every key aspect of my business so that if I were to be absent for 3 months, it would be business as usual?

Once you have the system, ask the Elimination question above [does this task / process either make a client happy or the business more efficient?  If not, delete], then ask...

 


 

Intellectuals solve problems, Geniuses prevent them!

 Albert Einstein.

Automation

Ask Yourself:  Could this be done by a ‘robot’?

Now you’ve trimmed the tasks that add little to no value, we’re now looking at the wonderful ecosystem of cloud apps and integrated technologies that promises to make our life easier.

For example -

"Xero has really cut my accounting time by 80%. It gives me goosebumps thinking about all that extra time I have."  Bridget Labus

 

So often I hear stories of business owners staying up until midnight as they “do their books”, or retailers sitting in their store on a Sunday doing their books on their laptop as customer come in and out of the shop.

But that’s no longer necessary with simple, cloud based technologies like Xero which intelligently automate a lot of the repetitive tasks that keep us Entrepreneurs working late.

 

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Do what you do best and delegate the rest 

Chris Ducker

 

Delegation

There are 3 different types of Delegation - Outsourcing, Offshoring and Junior Staff

Number 3 has worked best for me in the past but I’m interested to see what’s working for you.

  • Outsourcing

Outsourcing is finding another australian company that specialises in a certain activity, to do the job for you.

Marketing is a great example of an activity that could be outsourced to a local agency.  Not only will you leave the experts to do what they do best, but usually the continuation of a contract is dependant on success and an agency will be be able to scale up as your business grows.

  • Offshoring

Outsourcing is often mixed up with Offshoring, which is getting tasks done by remote teams in other countries like India & Philippines.

The major benefit of Offshoring is the low hourly rates.

For example, I just found an Architect on Upwork and found one in Ukraine, with 15 years experience for $8 per hour.  Compare that to a Seek ad for a Sydney based Architect with similar experience for $130,000 per year.

Offshoring is a complex strategy.  The businesses who I see are KILLING IT with offshoring, first sought professional assistance from an Offshoring expert.  

Before going all in with Offshoring, why not dip your toe in the water?  I’d recommend looking for what low value, repetitive tasks could that easily be offshored.

For example, when we conduct an interview for our page Entrepreneurs of Brisbane, we send the recorded audio file offshore to be transcribed for $1 per minute of audio.  A 15 min interview costs $15 and is returned in 24 hours with 98% accuracy.

That’s a practical time saver for the editor to focus on organising great events for Entrepreneurs.

  • Junior Staff

Which brings me to my final point in the delegation series.

Utilising Junior staff to complete low value, repetitive tasks that currently take senior staff away from the high value work they are qualified and excited to give, could be your alternative to employing another experienced superstar or sending stuff offshore.


Often the most underutilised team member in a business is the owner himself!

Mike Michalowicz

 

Utilisation

I include this because I’ve been guilty of thinking that moving from working IN the business to working ON the business was as easy as ‘flicking a switch’.

I’ll tell you my personal story about under-utilisation - 

When going into business, we often fantasize about the freedom it will bring us.  I looked at the lifestyle of an Entrepreneur I admire, who drives amazing cars (you know the type that when they drive past you think - ‘seriously, is he a drug dealer??’), wears incredible clothes (always bespoke and tailor made, never off the rack) and was seemingly on a Business Class international flight every time I looked on Facebook!

I ignorantly just saw the team of 5 he always had in the office and assumed my ideal lifestyle was just a couple of hire’s away.

I employed aggressively and holidayed even more aggressively!  I thought working on company vision was a full time job.

It’s not.  

Our profitability quickly went through the roof when I left the ego at the door and got my hands dirty again on the activities I’m best at.

So if you like me, need to be temporarily woken from your entrepreneurial daydream, take this as your alarm clock!

Freedom from your business is the dream, but there’s a few steps that come first.  Systemisation is the most important of them.

 


 

Let’s bring it all together now...

Let’s summarise our steps to date with the example of a busy restaurant with overworked head chef.

It’s first reaction might be to find another Head Chef to increase capacity.

But Head Chef’s are expensive, hard to find and usually high maintenance (with their years of experience comes an insistence on doing things their way)

Here are some alternatives to consider -

    • [Elimination] Reduce the number of dishes by deleting the 2 least ordered dishes.  This simplifies the back of house operations and eases the load on existing staff.
    • [Systemisation] Adjusting the kitchen layout to make the flow of food preparation more streamlined.
    • [Automation] Investment in a technology like a Thermomix, which does the same job that otherwise would have taken 3 x junior chefs 3 hours each.
    • [Delegation - Outsourcing] Securing a supply deal with Pasta specialist ‘Angelos’ for a weekly order of 20 kg of fresh fettuccine, instead of making it  in house. Saving 2 x Sous Chefs 10 hours per week.
    • [Delegation - Offshoring]  Sending minor website updates offshore to a wordpress specialist for $5 / hour saving the owner's wife spending 4 hours per month announcing a menu change.
    • [Delegation - Junior Staff]  Collaborating with the local TAFE or engaging more junior staff who are eager to gain experience.  Utilising lesser experienced staff gives you more choice (there are more apprentices than chefs!), at a lower per hour rate, while opening doors for juniors and providing a pipeline of experienced staff in the future.  
    • [Utilization] - Taking a step back and seeing the whole operation in action can help you find ways to better utilise existing resources.  But don't step back too early as the answer to an employment shortfall might be looking you in the mirror!