Look Inward

January 30th, 2012

Over the weekend a Focus Group I facilitate met in Naples, FL to once again take an in-depth look at the financial, marketing and operational sides of their businesses. Many of these seven franchisees rank among the sales leaders in their system, yet they value the importance of getting together each quarter to share, challenge and learn from one another.

Among the key metrics tracked and reviewed are Percentage of Salaries compared to Sales and Sales per Employee. One member has lagged in these categories for a while, so the group recommended it’s time to address the situation by either changing the makeup of the workforce, reducing headcount or increasing sales to make the ratios fall into line.

Not surprisingly, there was pushback to this suggestion, with the franchisee saying things like: “In our market we wouldn’t get a single resume if we advertised for anything less than what we currently pay,” “We couldn’t get out the door this much sales without the skills these folks bring” and “If we were to reduce salaries even slightly, there would be an uprising.”

Of course, the other owners and me countered with: “How will you know until you try?” “Might it be possible bringing in new energy in a few positions might give you more capacity?” and “So you’re happy with your employees maintaining their income while yours continues to fall as health insurance and other expenses rise?”

Owning your own business means you take all the risks. You cover mistakes out of your profit. You pay yourself last. Every franchisee or small business owner I know previously worked for someone else at some point during their career, so they’ve seen both sides. It may seem cold-hearted to make tough decisions about your employees, yet it’s part of the responsibility that comes with being the boss. As one of my first clients told me nine years ago, “The only place a business will run itself is into the ground.”

When the numbers don’t add up and cash flow is tight, you have to make the difficult call to protect the organization. Otherwise, one day you may wake up and be out of business.

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