Incidents of cybercrime have been problematic for a long time, but since the onset of the pandemic, we’ve seen these incidents increase not only in frequency but in elaboration, too. Unfortunately, phishers and hackers have become more adept at successfully targeting small and midsize businesses with their efforts.
Previously, we’ve addressed how you can improve the security of your online accounts. However, if your organization’s reputation depends on maintaining the security and privacy of customer records, then this insurance is a must. In today’s climate, it’s no longer a matter of “if” but “when” your private business information could be breached, and to what extent. However, with the right precautions in place, you could reduce–and possibly even eliminate–such risk.
Finding the Right Insurance
The best place to start is your current insurance agent or a general insurance broker that you trust. Cybercrime policies are separate policies that cover specific acts, and you will need to read the policy carefully to determine exactly what you are protected from. You should also distinguish between personal and business policies; you may want both.
In a business policy, some of the items you’ll want to consider protection against include:
- Data breach
- Ransomware attack
- Spoofing and identity theft
- Wire fraud
- Civil fines
- Costs of notification, reputation repair, forensics and data restoration, credit monitoring, and other potential damages
A good policy will cover some or all of these costs:
- Business interruption costs
- Data breach costs
- Extortion costs
- Crisis management and public relations costs
- Data recovery costs
- Computer replacement costs
- The cost of reputational harm
Like any other insurance, you will need to complete an application to obtain a quote. Some of the standard questions you’ll be required to answer include:
- Type of products and services sold in the business
- Type of electronic data stored on your computer systems
- Whether laptops are password-protected
- Whether you have written network security and privacy policies in place
- Whether you have physical security procedures in place
- Whether you have the most current software and processes to keep it upgraded
- Whether you have backups
- Whether you monitor unauthorized attempts to access systems
- Whether you are in compliance with PCI DSS (Payment Card Industry Data Security Standard), HIPAA (Health Insurance Portability & Accountability Act), and GLBA (Gramm-Leach-Bliley Act)
- Whether you have a written document retention and destruction plan in place
- Whether you have encryption enabled
- Whether third parties are involved in data handling
- Whether you have a process to check copyrights of materials you use
- Whether you have a risk management education program for employees
- Your current insurance policies
- Whether you’ve had a breach in recent years
- Whether you’ve had any lawsuits or claims in this area
- Whether you use a firewall
- Whether you use anti-virus protection
- Whether you have an employee/third party off-boarding process that terminates access to computers and data
As you can see, the application process itself is an excellent way to “cross your Ts and dot your Is” when it comes to putting safeguards in place for your business. And, of course, your premium will likely be less expensive when you have these precautions and systems in place. It goes without saying that your premium will be less expensive if you get insurance before you are attacked so that you have a clean application.
A key aspect of owning a business is managing enterprise risk effectively. A cybercrime policy will go a long way toward protecting your hard-earned investment and offer you peace of mind, knowing that your business is protected.
There’s more to being financially resilient than simply saving enough money for a rainy day. One aspect of being financially responsible is maintaining good financial records – and making sure the people who will need access to your records, like family members or key business partners, know where to find them if something happens to you. Here are some ideas for your consideration.
Systems and lists
You’re probably managing your accounting through a digital platform like QuickBooks, but what about other tools that supplement your needs? Do you have a chart of your accounting tech stack and ecosystem? What about Excel worksheets that supplement your use of QuickBooks? Is it clear where these can all be accessed? Do your loved ones know how to find these items if something happens to you?
Now that so many things are digitized, it’s not as easy for others to access the intel required to run your business in your absence. Digitization is a critical advancement in business management, but it does make things a bit trickier for your representatives to step in. For example, your financial records might be in a dozen different places on your computer or the cloud. Being organized and planning for a smooth financial future for your loved ones means making a list of instructions on how to access all of your financially-related digital assets. Keep in mind, this information is highly sensitive and should not be shared until it’s absolutely necessary.
Your list might include:
- Contact information for your accountant, who will likely have access to your cloud-based accounting software.
- A list of banks you do business with.
- A list of credit cards that need to be paid monthly.
- List of government-related accounts, such as social security and IRS.gov.
- List of regular monthly bills, such as utility, credit cards, and rent, plus their associated email accounts.
- Details of regular monthly income received.
- Where to find financial files on your computer or cloud, such as tax returns, bank statements, and real estate closing documents.
A password management system like LastPass can help you share sensitive and critical data securely and even at a moment’s notice. We can’t stress enough how important it is to keep this information private and secure, and under no circumstance do we recommend sharing this information before it’s necessary.
If your computer crashes, will you be able to recover your financial files? Taking periodic backups will prevent a loss of records. In the IT world, there’s a common saying that “two is one and one is none.” This means that if you only have one backup file and it fails, you’re left with nothing. Having two backup systems ensures that the data is still preserved even in the event of one failure.
What to keep in case of an audit
You hope it will never happen, but if it does, are you prepared for an audit with the IRS or a state agency? Do you know what records to keep and for how many years?
Having good documentation, sharing financial knowledge and goals with the right people, and making a backup plan will boost your financial confidence. You will be more prepared than most households when it comes to financial safety.
How financially resilient do you feel? Take into consideration the above ideas to help you stay one step ahead.
The past few years have seen significant kinks in the supply chain due to several reasons: inconsistent buyer behavior, source material scarcity, government shutdowns, and worker shortages, to name a few. What can a business owner do to protect their businesses from shortages that result in revenue loss? Let’s take a look at a few ideas.
Source New Suppliers
Being dependent upon only one supplier for a critical item is risky. Increase your options by finding new suppliers to use as backups or alternates whenever you can. While it’s admirable to buy local, it’s not always possible. Expanding your network will provide you with a lot more flexibility, even if you have to pay a bit extra at times.
Understand Your Timeline
How accurate is your prediction of lead time? Are you providing enough time for ordering and delivery before you need the part in-house? Timelines have changed a lot in the last year. Spend some time reviewing and recalculating lead time if you need to.
Get skilled at forecasting so that you can anticipate and prevent inventory shortages before they occur. We can help you set up spreadsheets and generate dashboard reports so you’ll have better information for decision-making in this area of your business.
The more dependent your business is on a particular supplier, the more you want to develop that relationship. Adding that personal touch might not help you get your orders faster, but when troubleshooting is needed, you’ll enjoy the extra help that a personal relationship can provide.
Increase Communication and Collaboration
Increase communication with your suppliers so they can manage their own timelines and supply chains. Provide them with accurate forecasts and let them know how they can better meet your present and future needs. Remember, it’s within their best interests to serve you as best they can, too.
Audit Inventory Records Frequently
If your inventory balances are only adjusted once a year, inaccurate inventory numbers will likely cause problems. Instead, find ways to take inventory more often or, at the very least, increase the accuracy of inventory balances. The savings will be worth it; you’ll have fewer unexpected out-of-stock or back-order situations that could cost not only a loss in sales but customer loyalty.
Proactively Manage Shipping
There may be times when paying rush charges on shipping is justified. Actively managing shipping and in-transit items will help you keep a handle on this. When possible, line up alternate shipping methods in the event that one method becomes unreliable. Alternate shipping methods are especially advised with overseas shipments where more can go wrong.
Create a Supply Chain Task Force
If supply chain issues are critical in your business and have cost you profits in the past, it might be time to create a dedicated team to manage and prevent crises. Consider putting together a group of employees who can be responsible for strengthening your supply chain.
Try these ideas to smooth out supply chain woes in your business.
Most large businesses have developed mission, vision, and values statements to help guide them and inform stakeholders about the company’s strategic direction. Going through this strategic exercise is a wonderful idea for even the smallest business as well.
A company’s mission statement lists its core purpose and desired impact for employees, customers, owners, and other stakeholders. A vision statement defines what the company wants to be. A values statement describes what the company stands for.
It’s a perfect activity for business owners to answer and remember why they built the business in the first place. It also serves to correct and re-align the trajectory of the business.
Start by asking what impact you want your business to have on the outside world. Here are some mission statement examples that are frequently quoted:
- Harley-Davidson: More than building machines, we stand for the timeless pursuit of adventure. Freedom for the soul.
- Disney: The mission of The Walt Disney Company is to entertain, inform and inspire people around the globe through the power of unparalleled storytelling, reflecting the iconic brands, creative minds and innovative technologies that make ours the world’s premier entertainment company.
- Nike: Nike exists to bring inspiration and innovation to every athlete* in the world. Our purpose is to move the world forward through the power of sport – breaking barriers and building community to change the game for all. *If you have a body, you are an athlete.
Notice how each one is short and simple to understand. They focus more on the big-picture benefits they bring to customers and less on how they will get there.
To write your own mission statement, ask yourself what your business’s purpose is and how you will impact your customers’ lives with your products and services.
A vision statement is big, bold, and futuristic. What do you want your company to be?
Here are a few examples:
- Harley-Davidson: Building our legend and leading our industry through innovation, evolution, and emotion
- Deloitte: We aspire to be the Standard of Excellence, the first choice of the most sought-after clients and talent.
- Amazon: Amazon strives to be Earth’s most customer-centric company, Earth’s best employer, and Earth’s safest place to work.
What do you want your company to become? That’s your vision statement.
Values statements are typically a set of adjectives or statements that answer what the company stands for. They can be in the form of leadership principles, core values, or a similar format. These days, they often include values on environmental, social, climate, global, human rights, diversity and inclusion, sustainability, and many other current issues. They can take the form of additional strategic statements on each one of these issues.
Sample values statements can be found in the company’s annual report as well as the About or Company section of their website.
Here are some examples:
- Harley-Davidson Principles:
- Communication – Communicate with purpose, structure, facts and inspiration
- Agility – Accelerate, innovate and thrive in a rapidly changing environment
- Impact – Focus on impact, not process, and be outcome driven
- Simplicity – Pursue the simplest path to achieve each outcome
- Speed – Don’t let perfection get in the way of process and pace
- Culture – Be fair, honest, positive and creative. Strive to win and have fun.
- Courage -Take risks and go against the norm
- Judgment -Think strategically and make informed decisions
- Focus – Focus on a short list of meaningful opportunities that build desirability
- Lean – Maximize impact with limited resources
- Coca-Cola Behaviors We Focus on:
- Merck Values:
- Patients first
- Respect for people
- Ethics and integrity
- Innovation and scientific excellence
Your mission, vision, and values statements will help you communicate the qualities of your business. It can help in hiring to see if a candidate’s individual values align with the core corporate values, and with customer acquisition when prospects see what your company is about. It can also help you remember your roots and why you work so hard every day.
We’d love to hear from you when you write up your mission, vision, and values statements.
When growing a business, it’s essential to consider every available opportunity to increase automation. Doing so frees up valuable time and, as a result, can increase profitability. One key area to increase profitability is accounts receivable. Collecting money from customers is a key function in any business, and the more automated this process is, the better. When collecting payments online, options are becoming increasingly available. Here are a few examples of what these methods might look like.
You might initially assume that your website is the perfect place to collect payments from customers, but there’s one reason this might not always be the case: security. A typical website is not as secure as it needs to be to collect credit card information from customers. Almost always, you’ll need an additional application to obtain that security. Many web-building platforms allow you to connect to these apps seamlessly, but you can also implement a workaround if necessary. For example, you can direct customers to your website for payment and provide a link to a secure site (a shopping cart with a payment gateway) via a hyperlinked button. In both cases, you’re utilizing the necessary security protocols to protect you and your customers.
A Payment App
A payment system needs to handle three functions:
- A shopping cart feature, in which an item is priced and can be added to a basket
- A checkout page, where billing information and credit card information can be collected
- A behind-the-scenes settlement function, where the money is taken from the customer, held in a merchant account, and then sent to your business
You need shopping cart software to handle the function in the first step. Standard retail solutions include Shopify, WooCommerce, and Magento, to name a few. But these won’t, by themselves, get you paid; they simply process the transaction in a secure environment.
The second step requires a payment gateway application. The most common stand-alone gateway is Authorize.net, and you would typically connect this to your shopping cart.
Your merchant account handles the third step, and sometimes, a separate processor is involved, too. From your merchant account, which is connected to your gateway, you typically get a reconciliation of the daily settlements that hit your bank account. You would also handle customer complaints and disputes with them.
Luckily, credit card companies like Stripe and Square have combined the second and third steps into their platforms in recent years. These platforms act as the gateway, the processor, and the merchant account for a streamlined process. Some vendors go a step further and combine all three functions into one vendor. PayPal is the quintessential example. Additionally, by using WooCommerce and WooCommerce Payments together, you can accomplish the goal of achieving an all-in-one solution.
Getting Paid in Service Businesses
A shopping cart is standard for online retail businesses, but what about service-based businesses? Service businesses that charge in advance can use a shopping cart just like retail.
If a service business bills its customers after the fact, the payment setup is connected to invoice distribution instead of a shopping cart. In this case, you would need to determine which solutions work with your specific billing system and if you’ll need an add-on application to extend your billing system’s capabilities. For example, QuickBooks users can sign up for QuickBooks payments which links your invoice to the customer payment to the bank deposit.
When the invoice is sent to the customer, it will include a payment link the customer can use to pay. These service business payment solutions are fairly industry-specific; for example, you might have noticed that medical offices often use different solutions than beauty care businesses.
When selecting a payment system for your business, you might think that credit card fees are the most important factor to consider. While that’s important, there are some additional considerations to keep in mind:
- Strive to understand exactly what each apps’ capabilities are.
- Applying for a merchant account is just like applying for a loan. In the past decade, this process has become highly streamlined.
- Make sure the system allows you to pull the reports you need, like settlement details, refunds (full and partial) and void processing, failed payments and retries, and dispute resolution.
- Establish processes to handle all of the items mentioned above.
- Make sure the app you’re choosing can handle the type of billing you need it to, including cart items, recurring payments, after-the-fact invoicing, sales tax, and shipping parameters.
- Find out how long it takes for payments to move from collection to bank deposit; this can range from 1-6 days, depending on the provider.
- Watch for a high failure rate on customer transactions. If this is the case, it could be that the gateway and merchant account are rejecting perfectly good business because the merchant account’s acceptance rules are stringent. This can happen with merchant accounts tied directly to banks, and the best thing to do is avoid them and look for a different option.
- Expect any new provider to hold the first few days of transactions for longer than usual. This is a temporary safety measure and should clear up quickly without action required on your part.
Adding an online payment system is a smart business decision and can save accounting time once you choose the best payment system for your specific needs.
While there are hundreds of accounting reports that can help you gain better insight into the financial health of your business, one of the most popular – but also most underutilized – is the variance report. A variance report helps you compare your actual performance with a past or expected performance. It makes crystal clear how far you’re straying from where you want to be and can therefore make it easier to course-correct earlier.
Variance to Prior Periods
A standard variance report that almost anyone can generate compares current period results to prior period results. For example, you can generate an income statement with six columns:
- Current month activity, such as March 1 to March 31, 2022
- The same period of the prior year, such as March 1 to March 31, 2021
- The variance between both months (column A minus column B)
- Year-to-date activity, such as January 1 to March 31, 2022
- Prior-year-to-date activity, such as January 1 to March 31, 2021
- Year-to-date difference or variance (column D minus column E)
The variance allows you to see, at a glance, whether your sales or expenses have increased compared to last year. Seeing monthly variances is especially important if the business experiences seasonal fluctuations.
You can take your reporting one step further to explain the variances in an accounting process called account analysis. Take a look at the components of each number to see what caused the variance. Then, record your explanation in a notes section of your variance report.
You may not want to spend management time on the minor variances. To avoid this, a good financial dashboard, or simply an Excel spreadsheet, can help you color-code the balances that are more than 10 percent (or any percent you feel is material) off track.
Variance to Plan or Budget
You can also develop a variance report that compares current period results to the revenue and profit plan. Here, you would generate an income statement with these six columns:
- Current month actual activity, such as March 1 to March 31, 2022
- Revenue/Expense plan for the same period above
- Month difference or variance or (over)/under (B minus A)
- Year-to-date actual activity, such as January 1 to March 31, 2022
- Year-to-date revenue/expense plan, such as January 1 to March 31, 2021
- Year-to-date difference or variance or (over)/under (E minus D)
Do the same thing above, color-coding and explaining the variances using account analysis. How did your plan details differ from what actually happened? If it’s better, can you do more? If it’s worse, how can you get back on track? Performing a timely variance analysis helps you find either a) available opportunities to exploit for profit, or b) ways to get back on track faster so you don’t lose as much.
Of course, with revenue/expense plan versus actual variance reports, you do have to create the the plan first! If you’re not already receiving variance reports, would like help creating a revenue/expense and profit plan, or would simply like to set up a session to better understand variances, please feel free to reach out any time.
Is your business having trouble attracting and retaining team members amidst the Great Resignation? It’s not the only one. So far during the pandemic, the U.S. alone has seen over 33 million resignations take place. Anthony Klotz, the organizational psychologist and professor at Texas A&M University who coined the phrase “Great Resignation,” remarked that for workers, “It’s not just about getting another job, or leaving the workforce, it’s about taking control of your work and personal life, and making a big decision – resigning – to accomplish that. This is a moment of empowerment for workers, one that will continue well into .”
A convergence of issues has created one of the greatest talent shortages in our lifetimes. With Baby Boomers retiring in large numbers, pandemic- and opioid-related deaths, low wages, limited or nonexistent access to child care, tighter immigration policies, and professionals reevaluating their life choices and priorities, it’s no wonder so many businesses are having trouble finding workers.
The good news is that small business owners can still implement strategies to retain and attract a strong team. Below, we outline four creative suggestions to consider:
1. Allow your employees the space to be human
American workers are demanding more from their employers, and leading businesses are listening and delivering. Beyond the usual benefit package of 401K, health insurance, vacation, and PTO, you may want to add on one or more meaningful perks like the five we’ve outlined below, which can improve work-life balance:
- Flex hours – consider keeping “core hours” that your team should be online or in the office for, but give them the flexibility to work at a time when they’re most productive, or have the greatest availability of time, outside of that window.
- Work-from-home days – A hybrid work model is no longer the exception; more and more, it’s becoming the norm. Many people enjoy working from home, citing reasons like fewer distractions, greater comfort, and the ability to schedule home appointments without having to use precious PTO.
- Pet insurance – According to the ASPCA, pets cost their owners $700 to $1,100 on average each year. Pet insurance can be a great way to add value to employee compansiation packages while also demonstrating that you care about the things that are precious to your employees.
- Extra PTO – There’s a radical new movement happening in the workplace: unlimited vacation time. With this policy in place, your business is bound to stand out amongst competitors for top talent.
- Child care – any way to make child care easier on caregivers is a plus. Childcare providers like KinderCare can help you establish an employer-sponsored child care policy. Watch your employees’ shoulders relax in real time when they hear about this one.
2. Make “fun” a vital part of your workplace
It’s a known fact that employees will stay in a role, even if they’re not thrilled about the work, so long as they feel supported by their managers and teammates. As the leader, it’s your job to set the tone at the top and establish a spirit of camaraderie. Consider bringing in breakfast once a week, scheduling a creative team-building exercise like an escape room, learn a new (non-work-related) skill together, or celebrating birthdays, workplace anniversaries, and employee wins.
Other perks to think about are holiday gifts, bonuses, free dry cleaning, free car washes, and employee discounts. An unexpected moment that surprises and delights can go a long way.
3. Embrace technology
Employees will always benefit from a better tool for the job, and your bottom line will, too. Ask around to see where employees think processes could gain more efficiency or use a more robust software. They likely have a better handle on what will improve their workplace experience, so check in with your team once or twice a year to make sure they have the infrastructure they need.
4. Apply marketing techniques to hiring
Instead of posting a simple job ad, consider creating a marketing campaign to attract ideal employees. Make sure your social media is up to date and mirrors the culture of your organization. Create a job interview process that’s interesting and enthusiastic. You’re definitely competing for talent, so find ways to connect with your candidates and make them feel welcome and excited.
While the talent shortage isn’t going away just yet, there are still strategies you can implement to keep the talent you have and secure additional talent. More than ever, people are looking for two things: work that feels meaningful and companies that see them as human beings–not just workers.
Most entrepreneurs would agree that owning a business is an incredible privilege, and they would likely never want to go back to working for someone else. However, we all have our days! Sometimes, those rough days can turn into weeks.
With 17 million new entrepreneurs predicted to enter the small business economy in 2022, we thought now would be a great time to ensure you’ve got the tools to weather the days that challenge your entrepreneurial passion. Here are our tips to rekindle that spark.
If you read customer reviews with one eye closed, it’s time to reframe your perspective. Whether positive or constructive, customer feedback is an asset you want to harvest as much as possible. Since it’s easy to fall victim to impostor syndrome as an entrepreneur, positive feedback can help you gain perspective from a credible source about your performance.
No review is a negative review; any feedback left by a customer will help you succeed moving forward. Constructive reviews can help you pivot to success and provide better customer service in the future. Even a nasty review serves a purpose: you now know that this personality is not your target client, and you can shift your marketing and sales efforts in a more positive direction.
One of the best ways to garner customer reviews is via a Net Promoter Score survey, or NPS. The super-short survey was invented by Fred Reichheld, a partner at Bain & Company, during his search for the best one-question indicator of customer lifetime value. Customers are asked, on a scale of 0 to 10, how likely they are to recommend your services to another individual. Depending on their results, they fall into one of three categories: promoter (if they score 9 or above), passive (if they score 7 to 8), or detractor (if they score a 6 or lower). The feedback they leave in their follow-up question, “What is the primary reason for your score?” will tell you where your strengths and opportunities for improvement are.
Your overall NPS is calculated as follows: NPS = (% of Promoters) – (% of Detractors). Wondering where you fall among competitors? The average score across all industries is +32, and you can find more information about your specific industry here. If your customers aren’t leaving reviews online, it’s time to ask for them, and a Net Promoter Score survey is a great place to start. Follow up with your Promoters and ask them to leave a review on Google or Yelp.
Make sure to allocate enough time for personal care. No one can work 24/7 and survive without burning out. Self-care can look like a yoga class or an indulgent spa day, but it’s what we do week to week and day to day that matters most. Surprisingly radical steps toward self-care can include:
- Working toward a daily lunch break that’s at least 30 minutes long.
- Turning off email notifications after hours.
- Outsourcing household chores during a busy week
Make self-care a regular habit, and you’ll be better balanced when you go to work.
If you’ve been skirting by the last few years on incremental or unchallenging goals, it might be time to give yourself a BHAG – that is, a Big Hairy Audacious Goal – as outlined in the book Built to Last. A BHAG is an ambitious, long-term goal that can help propel your entire company past the hamster wheel toward a mission for a better future.
If you feel your employees could use some rejuvenation, too, schedule an empowering goal-setting retreat for the entire company to help team members feel heard, valued, and motivated.
As an entrepreneur, you’ll never stop learning. New skills are required every time you reach a new level in your business. Changes in technology, science, and government compliance trickle down to small businesses, requiring changes to your business processes constantly.
Take a new class or read a book to learn something that will improve your business. If you’re short on time or low on capital to invest in expensive education courses, try starting with Coursera for go-at-your-own pace education or downloading a business book like Built to Last or The Four Disciplines of Execution on Audible.com. You’ll be full of ideas that you can implement to make your business better.
We all have tasks that we love to do and those we would love not to do. If you’re spending too much time on the tasks that don’t fulfill or inspire you, it’s time for a change! If you have a team, delegate the things you don’t love – and find employees that really love to do them. Not in a position to bring on more personnel? Augmented Intelligence can add automation to any process, from converting prospects to customers, completing daily bookkeeping tasks, and more.
Is there a project that you’d love to pursue but has been on the back burner forever? Making it a priority may just be the reset button you need. Oftentimes, urgent but less important tasks take priority over things that are also important but less urgent. Carving out time each week to progress an important “back burner” project can be a great way to commit to your priorities and suppress the tyranny of the urgent.
Last but not least, while it might sound terrifying and counterproductive, it may be time to take a good old-fashioned vacation. Especially after two years of working remotely, you might benefit from some time looking at four different walls.
If the idea of taking a step away from your business for a few days sounds scary, consider starting with something small, like a weekend getaway. Alternatively, for longer trips, you could allow yourself 1-2 hours each day to progress the things in your business that keep nagging at the back of your mind.
Remember, the only way to find out what works for you and nourishes your entrepreneurial spirit is to experiment! Try to implement any of the tips above before you reach burnout, especially if you’ve been working hard and it’s been grinding you down lately. You deserve time to relax, refresh, and rejuvenate your passion for your business.
The Four Ds for Efficiency
Time is our most precious personal resource; once it’s spent, we can never recover it. As busy entrepreneurs, we seem to have less time than anyone else, so it just makes sense to look for ways to use our time wisely. We’d like to introduce you to a technique called the Four D’s that has worked for many.
The Four D’s
When you think about it, there are only four types of actions you can take against any one task:
- Do it.
- Delegate it.
- Delay it.
- Delete it.
As you approach each task on your to-do list, ask yourself which one of the four D’s is best.
The first option is simply to do the task yourself. Get it done, checked off, and out of the way. This is often the best option if it’s urgent, important, or you are the only one with the experience and training to do it.
While this might sound counterintuitive at first, simply doing a task might not be the best option. Let’s look at the other three options before we decide.
If your to-do list is full of simple, routine actions, then delegating is a strong choice. Delegating is also great for tasks that are beyond your expertise and would require too much learning to accomplish sufficiently. If you don’t have time to do everything yourself, then getting help is a smart alternative to doing it yourself.
Getting help doesn’t mean you have to hire a full- or part-time employee. You can get help in a multitude of other ways:
- Engage a company to do a task. From walking your dog to managing Google Ad campaigns to handling your bookkeeping and taxes, there are service-based companies that can take over a task permanently or on a short-term basis to alleviate some of your workload.
- Automation is a form of delegation. Can software do what you are doing?
- Find help on platforms like Fiverr.com or UpWork. Whether it’s a five-minute or a five-day task, you can find a freelancer to help with your project.
If you can write instructions about how to perform the task, you can delegate it. And if you’re worried about losing control or quality, simply add milestones where you check the person’s work. Initially, it might not be faster, but in the long term, it will pay off.
If a task is not urgent or important, delaying it might be the right option. But the problem with this strategy is that it requires you to handle the task at least twice: once when reviewing it and deciding whether to do it, and again when you finally decide to do it. If you repeatedly decide to delay it, you’ve taken up precious time and mental energy that could be better spent.
So, when exactly is the best time to delay a task? Consider delaying when any of the following apply:
- It’s not urgent and you have other urgent items to attend to.
- It’s less important than other items you must attend to.
- It’s less profitable than other items you must attend to.
- The task is best accomplished in batches. As an example, rather than answer each email as it comes in, think about blocking out a couple times a day where you check and clear your email. You can apply this time-batching concept to just about everything to gain efficiency: posting on social media (write and schedule a month’s worth in advance), returning phone calls, attending meetings (book them all on one day and keep other days clear), and running errands (delay until you have three to four errands, then do them all in one run.
Be careful of delaying a task over and over again. Something else may be going on with your mindset:
- The task may be uncomfortable for you (find someone that loves to do what you don’t and delegate), or
- The way to get started is ambiguous (schedule some training or find someone experienced to shorten your learning curve).
Some tasks should never be added to your to-do-list in the first place. When there is no return on investment for a task, perhaps the best choice is to delete it.
Take a look at some of the things you do out of habit. Does it still make sense to do that task, or is it simply done because it was always done that way?
14 Solutions for Controlling Labor Costs
While the cost of labor is a significant expense for many business models, for those that are service-based, labor cost is the largest expense incurred in business operations. Controlling labor costs so that they stay in line with what’s best for the organization is an important management function. We outline a few ways you can control (or reduce) labor costs in your business.
- Encourage employee retention.
If a well-trained employee leaves, their institutional knowledge of your business leaves with them. The process of replacing them results in a temporary hit to productivity across the board: you must spend hours recruiting, hiring, and then onboarding a new employee, and they’re likely to need training and experience to get up to speed. Some turnover can actually be good, but if it’s too high (which is the case for many in the era of the Great Resignation), it can result in increased labor costs.
- Automate tasks.
Save labor by automating any tasks that have the capacity to be automated. While a few automations could require extensive capital outlays, many systems can be implemented that are not costly and have an immediate return on investment. Your QuickBooks file is a great place to start. Integrations of native software and feeding of transactions are just two examples.
- Streamline processes.
Are you operating your business most efficiently? Or are employees still performing tasks that are outdated, nearly irrelevant, or unnecessarily redundant?
A great place to start when searching for inefficiencies in your company is the interface between departments. Is your sales team duplicating some marketing team efforts? Is customer service answering the same question repeatedly without communicating to operations how it should be permanently fixed? Enhancing communications among employees throughout the company can increase visibility and cut down on labor costs.
- Train employees.
There’s only one way to ensure employees are doing what they should be, and that’s to spend time training them. Many of the technologies you likely use have created training modules and certifications that employees can partake in for free. If your team frequently uses systems and other tools, consider enrolling them in training courses.
- Provide the right tools for the job.
Do employees have the tools they need to execute deliverables effectively? Keep an open dialogue going about what is and isn’t working in the context of internal processes and technologies. Many times, employees will continue performing a task inefficiently because they either don’t realize a bug in the software can be fixed, they don’t have time to stop and troubleshoot a program, or don’t realize there’s a more efficient way to complete the job. Opening communication around the subject can lead to innovation and improved morale.
- Cross-train employees.
If an employee is out sick, does a customer’s job remain stagnant until your employee returns to work? Check to see if your employees can easily pick up another’s work in the case one employee is out. If they can’t, create an opportunity for cross training once they return. A recorded training session (with a screenshare when necessary) is a great way to train team members, and saving the recording to the customer’s file means that in the future, anyone who needs to can step in and complete the job with relative ease.
- Optimize employee schedules.
In many industries such as restaurant and retail, employee scheduling can be the difference between profit and loss. Software can help you determine how many employees you need and at what time. Ensuring employees know when to come in and what to focus on when they do will go a long way toward productivity. In some cases, a shorter workweek is a possibility that can drive lower labor costs, as is leveraging employees’ individual “magic hours,” or the times of day they’re personally most productive.
Outsourcing may be cheaper than using employees on certain tasks, especially those requiring specialized knowledge or skills. Outsourcing can also help you determine how long a task will take, which allows you to plan better in the event you decide to take the activity in house once again.
- Review compensation.
Compare your company’s current salaries to the going market rate for salaries in your industry. Are your salaries in line? Adjust accordingly for future hires.
You can also consider different pay structures, such as commission-based, to better match performance to labor costs. It’s also important to consider compensation in the context of employee retention; while bonuses paid out in lieu of annual raises could allow you better management of accumulated pay raises for long-term employees, your team may value receiving a raise over a bonus.
- Review benefits.
Benefit packages are a great way to encourage employee retention, but they can become costly. If reducing costs in this area is a necessity, consider reviewing time off policies, shopping for new health insurance rates annually, or reevaluating employer’s percentage share of 401(k) plan contributions.
- Review overtime pay.
There are two sides to overtime. On the one hand, some overtime pay can help you avoid the cost of hiring a headcount you either don’t need permanently or don’t need full-time. On the other, if overtime pay is so high that you’ve considered adding additional personnel, then your overtime pay is too high. We can help you evaluate when it’s time to hire.
- Provide remote work options.
Studies show remote workers are more productive. Plus, overhead expenses such as rent, furniture, and utilities will plummet, saving expenses overall.
- Hire smart in the first place.
The saying is “hire slow, fire fast.” Finding the right worker for your business is an art form. Interview, test, check background and references, and put employees on a 90-day trial basis to be sure you have the best workers.
- Understand the accounting side of labor costs.
If you pay an employee $15 per hour, understand that your labor cost is far more than $15. Not included in that $15 is:
- Employer’s share of payroll taxes (Social Security and Medicare)
- Vacation and time off
- Paid holidays
- Workers compensation insurance
- Unemployment insurance (federal and state)
- Health care
- 401(k) matches
- Company-sponsored events, like holiday parties, team building experiences, educational conferences, or planning retreats
There are also infrastructure-related costs associated with retaining an employee, such as:
- Computer equipment and software subscriptions
- Rent, utilities, furniture, parking spaces, building repair
- Employer-paid meals, snacks, and coffee
- Meeting time and expenses
If you’d like us to help you calculate your labor costs per employee hour, please reach out.
Employees make your business possible, but to maintain a business profit, labor costs must be frequently reviewed. Follow the suggestions above to keep your team productive and your labor costs in shape.