Episode #75 - Build a Bigger Boat
I was asked what I thought about the decision of a small online company to bring on five full time employees after reaching only a couple hundred thousand dollars in annual revenue. At first my head exploded but the truth is that the question is complicated.
On the show today I talk about the ways you can look at this question and how you should be thinking about hiring for your company. The truth is that the answer to the question comes down to mindset and situation. The decision to hire or use contractors really comes down to you. Do you know your numbers? What work are they doing? How are you going to use them? These and many more questions get addressed in this week’s episode.
Featured on this show:
- Reynolds OBM
- Get Your Agency Together
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Welcome to the Get Your Act Together podcast. I'm your host, Kelly Reynolds, ob strategist and agency coach at the Reynolds OBM agency. This podcast is all about building well run and profitable businesses so that we can create the lives we dream of.
Hello, everyone, and welcome to episode 75. So this morning, I had a really interesting conversation. And I thought you might think it's interesting too. So I wanted to share this. And I'm going to present this scenario kind of in a case study, word problem thing that you might get in school. And then I want to work through it. Okay. So this is a scenario. There is a business owner, she has grown her agency very quickly, and is making a bunch of revenue. Yay, right. That's awesome. multiple, multiple, six figures, okay. This person has been given the advice that all of the people on our team should be employees. And she now has a team of five employees on staff. Problem is, that is a lot of money. So she's having a hard time paying that payroll, keeping the lights on, it's a big chunk of the like, of the revenue is going right back out to payroll. And the question that was presented to me was, should she get rid of some of these employees? And how would she go about doing that? So I want to kind of dissect this a little bit. So my first thought is that this is a fantastic reminder that you need to know your numbers. I have been lacking in my duties to remind you that you need to know your numbers lately, I feel like I haven't really been pushing that. But here is a prime example of why we need to know our numbers. I've been hearing a lot of people say this, and it makes me cringe every time I hear it. I just got word from my accountant that this is what I made for the year now that I went to him in January. And the problem is that you have no recourse now, like you can't change a thing, because it's over. If you are looking at your numbers all throughout the year, at the very least quarterly, I would rather you have a monthly. I know them maybe daily because I'm a little bit of a nerd. But knowing those numbers means that you can adapt and change as the year goes through. Sometimes we don't know how much we're spending, and all the profits from your business are going right back out. Sometimes you don't know how much you make in a month, which to me is insanity. Because I know exactly how much I make all the time I have goal tracking sheets, I know what's going on in my business, I need to know what kind of revenue I'm gonna make. And if I'm short, I need to go find some revenue, right? So knowing those numbers is so important, because you need to know how much you can afford. We need to know if you can afford to pay an employee because it's not a one time expense. It's not like paying for a lawyer to drop a contract. It's a thing, you get invoiced, and you pay it. An employee is ongoing. It's overhead. And it's not like you can just drop employees and fire them for any reason at all. Most states have a lot of laws around what you're allowed to do. So it's not so easy. So these are decisions, you need to go into knowing what's going on in your art in your business and knowing your numbers. My second thought is, I'm not going to get on a soapbox about this, I'm going to because I could go on about this forever. But there has been a ton of advice I have been seeing lately that you need to only hire employees because contractors don't care about your business. And the only way to be successful and to be cool. And to be a big deal is to hire only employees. And this drives me crazy because I hate blanket statements like this, because all of our businesses are so different. And it's just that I just hate it. I hate that kind of blanket bucketing of well, you if you were making this much money, then you need an employee, like well, why? Who are you hiring? What do you need? What are they going to do for you? Can you afford it? None of those questions are asked. And it really bothers me when people do that. There are lots of people who are hiring employees that have absolutely no idea what they're hiring for, or what they're doing or what they need. And then they hire someone because they need to be cool for the, you know, the list of things that they're supposed to do. And then they have an employee that they can't afford, or that doesn't actually do the thing that they need them to do. So many small businesses, don't need a whole marketing department or even a marketing person. They need a social media manager contractor that can come in and make some graphics and go you know, little things like that they need to hire out a thing. And that's it. So, when people are giving you advice that you must do things in your business, please, please think about it first, does it make sense for me, because they are not going to pay your bills if the advice is bad? Okay, focus here. So, I really want you to look at the situation instead of following advice blindly. Okay? Three, getting rid of people is one way to look at this. It can be costly, it could be a lot of paperwork. Getting rid of people, like I said, in certain states is really kind of hard. You can't just fire people, you have to present documentation that they have done a bad job, or like, it's a different ballgame. And you need to know the legalities there. You also have to realize that if you get rid of these people, and you realize you need them back, it's going to cost a lot of money to rehire people. Hiring is expensive, not just in, I paid this much money to a placement firm. But it's time, it's effort, it's training, it's expensive. Turnover is expensive. So you need to make sure that if you really want to get rid of people, you really want to get rid of people. I want to offer this to you, the first knee jerk reaction to say, Oh, I've got to get rid of some people, I've got to get rid of these expenses off my books, a lot of times comes from a total mindset of scarcity, and lack and fear. The first thing we want to do is go Oh, god, oh, God, I've got to get these expenses off my books. And like, it's just panic. But I want you to ask yourself instead, if you could afford that team, if you could afford these five people? Would you want them? Are they the right people? Are these jobs the right roles for your company? So if you looked at it, and you, if you have no org chart, just draw a basic one out just to get an idea? What are the roles in your company? And for a lot of us, our name goes in a lot of those roles. But what are the roles in your company? Who's doing what, then, are these people that are in these jobs? Now? The right people for these jobs? Maybe you did a fantastic job of hiring these five people, and they're exactly what you need. But now you're just scared because of the money. But what if you could afford them? Would you keep them all? That's the first thing to question. Are these the right roles? Are these the right people? And if the answer to both of those questions is yes, then why would you get rid of them? Because you're scared. Because it's scary, because you like feeding your children? What I want to offer you is this, instead of making a smaller boat with less people, what if you build a bigger boat. And the way to do that is to make more money. If these are the right people in the right roles, that is not your problem. Your problem is you need to make more money to afford them. Because if you should fire them and get rid of them, you will stagnate your growth if they were the right people in the right roles. So the problem isn't your team, your problem isn't HR, your problem is probably marketing and delivery, you are looking at the wrong part of your business because of fear, and lack. So instead, let's go make some money, making more money. It's not a terrible thing. It's why we're in this business. And some people get very wound up about oh, well, a lot of money, it's bad for you, or it means you're evil or all that. No. Money is not evil, money is just money. And if you're a crap person, you're gonna be a crap person with lots of money, or no money. If you're a good person, you can be a good person with no money or a good person with lots of money. And what would this world be? If a whole bunch of good people had a whole bunch of money? What fantastic things could we do with it? Right? How many puppies could we feed or children can we feed? Or clothe or send to school or whatever it is? All the good things that money does. So I'm just throwing that out there because a lot of times we want to suck back and go, oh god, I've got to make myself smaller. Instead of Nope. I need to go make some more money. I need to get bigger. We want to grow but we're scared. So what do we do next? Well, we look at all the things we're selling. We need to shift that mindset from cutting to growing. So let's look at offers. What are you offering? Is it profitable? How much money do you make? How much is each offer? How much money does it cost to do that service? Are you making any money on it? Is the market you're focusing on? Can they pay you? Do they want your product? Do they want your product at that price point? How are you delivering this? Are there ways to deliver it that are more profitable? Is there a way that you can have an aspect of this that is easier to deliver, easier to repeat over and over again, without so much labor cost? Or, you know, touching on all the things by the team, so that the team can focus on other things and grow? What else can you look at offering? How can you fix the delivery? What is your marketing? Right? These are the things we should be looking at? What kind of marketing do you need to be doing? Are you visible? Are you not talking about this enough? All of those things. Those things are scary to a lot of us, especially for people like me, who are operations people who like doing the things we like getting the things organized. But that's the part of talking, talking to people about your thing. That's the scary thing. So instead, we suck back, we think, Oh, I've got to fire a bunch of people. Forget it, instead of doing the scary thing, which is getting out there, figuring out what you're offering, making the marketing happen, and making more money. That is the mindset shift that is going to move you forward, especially since what if you fire those people, and then you grow? Now you're going to be behind because you don't have the team behind you. If these are the right, people think of this as an investment, you are set, and you are ready to grow. Right, they're here, they're ready to go, we are ready to work and grow. I don't even have to hire anyone, I've got the people, we got the Dream Team. It's fantastic. Now we're gonna go sell this stuff. And now we're going to make a bunch of money, leverage them and think of them as an investment for the growth you want. I hope this little walkthrough through the way my brain works on a scenario is helpful for you today. And I hope that it kind of shows you that there are lots of different ways to look at it. And a lot of times our fear, and our like that scarcity mindset of oh god, oh god, there's not enough money. It gets in our way of seeing what the business needs. So if you are in this place where you're freaking out a little bit, as we all do, I forget all the time. I'm a freak out. Or if you are in this place, try to step back and say, Okay, what does the business need? Even if it's scary for me? Do I really need to be smaller? Or do I need to grow? I would love to hear what you think of this. And if this is your take on the word problem. So if you have some other ideas on what you should be doing here, or what this person should be doing, I would love to hear from him. So send me a message or come and I'm going to be posting this in the Get Your Agency Together Facebook group and I would love to have this discussion about what you guys think this person should do. So I will talk to you guys next week.
Thank you so much for joining me this week. If you have an agency or want to create one, come join my Facebook community. Get your agency together, where we talk all the things growing and scaling your agency for show notes and more info and all the things head over to Reynolds obm.com Follow me on Instagram and Facebook at Reynolds OBM. And finally, if you enjoy this podcast, I would love for you to give us a review on iTunes.
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