When it comes to small to medium businesses, it's tempting to follow the crowd. Here's the trend: panicked owners and managers see profits falling and race to reduce the workforce without considering the long-term effects. Here's a common sense approach to how to increase business profit without also having to "clean house."
Business consultants who work with small to medium business owners to improve profitability say there's always a tendency to reduce payroll first. After all, employees are a significant expense to any business - salaries, benefits, payroll taxes, retirement packages - all those expenses add up to a big chunk of a small business owner's financial burden.
On the other hand, the productivity gained by maintaining a well-trained workforce, even in difficult financial times, can't be overstated. When machines, desks or computers sit idle, productivity will eventually flatten and it could be nearly impossible to recover your momentum.
If, instead of immediately reducing payroll at the first sign of financial trouble, you examined every aspect of your business from the viewpoint of productivity, you might see another path to staying afloat. Today's innovative business productivity improvement systems allow owners and managers to dig into the details of their businesses from every angle and set benchmarks for measuring each indicator's impact on productivity.
Using these cutting edge business improvement tools, they're often able to see that a slight increase in the rates they charge, for example, or a restructuring of vendor contracts might have more impact on the bottom line than immediately laying off employees. You may also see opportunities for shifting those employees within departments without significant retraining to avoid losing them completely.
The question for you, as the owner of a small to medium business, is this: "Can you afford to let valuable, well-trained talent go in pursuit of a better bottom line?" The follow up question is, of course, "How long will it take you to replace and retrain those employees once the market improves?"
Industry sectors around the globe are feeling the effect of widespread "talent loss", the shrinking of innovation, experience and wisdom that keeps an industry growing. Extended periods of unemployment motivate those seasoned employees to move to other sectors, creating a flood of newly trained employees when the industry recovers.
This phenomenon isn't limited to large corporations; service industries, for example, are often populated with small to medium businesses. When those smaller firms are hit with an industry-wide slowdown, the talented professionals working in that sector are forced to migrate to other professions unless business owners find innovative ways to control the bottom line.
There may come a time when industry factors force you to let go of experienced personnel. Not every market decline can be overcome by increasing your rates or extending the delivery schedule of raw materials. But by taking advantage of today's business profit increase systems to examine every benchmark of your business, you may be able to keep the wolves at bay long enough to hold onto valuable talent and keep your company in the black, as well.
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Chris Robertson is a published author of Majon
International. All Rights Reserved. Copyright 2010 (Wed Jul 29 2009)
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