Day of Decision (in your business)

Today’s coverage of the election is commonly called “Decision ‘08.”  For some, an easy decision, for others a tough decision.  I am certain there are enough blogs out there dedicating something political to the fray today, so I will not add.

 I will however draw a parallel to business.  There is a reason we have term limits and elections.  First, nothing lasts forever.  Second, It is necessary to continue to challenge (and sometimes revisit) previous decisions.  Elections force us to do that with our government’s leadership.  Unfortunately, nothing forces it in quite the same way in a small business.

I speak with hundreds of small business owners each month and some, I am afraid to say are simply on “auto-pilot.”  VERY FEW change the way in which they market, sell, hire, operate, do their books, compensate staff, compensate themselves, or even answer the phone.  I am not advocating change for the sake of change,  (please don’t read into that too much) but it IS necessary to take a look at all areas of one’s business regularly - sometimes a hard look.

Here is an example that is common and based on the conversations I’ve been having with Partners out there seems to be all too familiar in this market/economy, etc…  The scenario is when to cut back on expenses.  In particular, when is it the right time to let an employee go?  This is such an emotionally charged topic, that concepts of fairness, guilt, regret, responsibility and fear all get in the way of making a business decision. 

I was talking with a business owner that had hired staff too quickly.  (hired staff and then began selling)  When business didn’t grow as quickly as anticipated to support the new expense of the additional staff, a decision had to be made.  The options, as the business owner saw them were

1) just sell more, it will take care of itself

2) fire the last person hired (that’s fair right?) [note: this was owner’s least desirable option]

3) cut back on other expenses, such as benefits for all staff

4) dramatically reduce the owner’s compensation (for the time being)

The owner was looking at emotional reasons and NOT looking at his business.  He was not analyzing the P&L, sales pipeline, balance sheet, and cash flow analysis - but he should have been.  In this case, he was considering lowering his pay by 50% to $4,000/mo and cut benefits such as mileage reimbursement and some other healthcare and fringe benefits to all employees.  His total savings would equate to approximately $6,500/mo.  Alternatively, as I saw it his other option was to let go one of his high paid (slightly overpaid) techs.  This single change would save approximately $8,000/mo when everything from payroll, taxes, benefits, mileage, etc was factored in.

Which is more emotionally taxing for the business owner?

Which is more emotionally taxing for the remainder of the staff?

And finally, the most important question (and really the only one that matters) is:

Which course of action is best for the health of the business both long and short term? 

Here is my point. 

When making dramatic decisions in your business, always do two things:  First, Pretend you are not the owner/operator but rather an investor looking out for the long term value of the business.  Second, be certain to look at major decisions from multiple angles and not be clouded by emotion.

Good luck and happy hunting!

P.S.  If you find yourself at this decision point and want an objective opinion from one’s who’s been there, reach out to me, I will be glad to listen and offer my opinion and help however I can.

Let Ambition Be Your Mission!

~ Matt Makowicz

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