S7 E21-24 Be sure your business will make money before you launch. Planning ahead leads to success with Jeremy Gray

Jeremy Gray – Practical Solutions to Difficult Problems
IBGR. Network. The World of Business at Your Fingertips

Be sure your business will make money before you launch. Planning ahead leads to success.
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Episode 21 Start up hiring is different. Here is why you need a hiring plan.
Recruiting talent is no different than any other challenge a start-up faces. It’s all about selling.” – Vivek Wadhwa

1. Staff expenses are likely to a major cost to your P&L. In labor intensive industries they can be as high as 70% of your total costs. The term labor intensive conjures up a vision of old-fashioned manual labor but in the service sector most of your costs will be labor. A business such as SaaS will be labor intensive, 
   
2. Often, they are less but they will be significant so they will be an important component of your cash flow forecast so you need to plan what positions you will hire, when you expect to hire them and at what cost.
   
3. Costs go beyond salaries, you may incur payroll taxes, statutory benefits and industry standard benefits. Also, you need to assess holiday pay, sick pay and possibly overtime. These can add 30% to the salary number.
   
4. You may need to supply tools such as computers, screens, workspace etc. 
   
5. A start up is different because often you are hiring your executive team first. Unlike an established business that hires to replace gaps or to expand.
   
   1. Assess your skills and identify gaps that must be filled before launch. Be honest – you cannot do it all yourself.
      
   2. Industry knowledge should be acquired if needed.
      
   3. Assess when the skills will be needed and factor in hiring time.
      
6. Hire talent but manage the costs.
   
   1. Start ups are hard work. You need folks who are willing to pitch in and do whatever is necessary to get the business off the grounds
      
   2. Beware of corporate types who have been used to having a support network.
      
   3. Pay for the talent you need but get creative in packages. Base plus incentive. 
      
   4. Consider people embarking on a second career
      
   5. Sell your business to candidates. Tell them of your business plan, vision, values, and culture. Show your enthusiasm for your business. 
      
7. Work backwards to establish your executive payroll and when costs will be incurred.
   
8. Identify essential workers – production staff, programmers, waiters. This will vary by the type of business
   
9. Research costs for your market and availability.
   
   1. These roles often have market rate
      
   2. As a start up the future is uncertain – you may have to pay a premium to encourage staff to join you. Especially if skills are in high demand.
      
   3. Incentive plans may be appropriate
      
10.  Your hiring plan should reflect your planned organizational structure.
    
    1. Does it fit?
       
11.  Quantify your employee costs and timing. Essential part of your cash flow. 
    

Tags: How to start a business, Achieve start up success, Hiring, Organizational structure, employee costs, The successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems

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Episode 22 
Employee turnover costs you money. – Retention is the key
“We cannot stop employees leaving unless we have a plan to them stay”.

1. Hiring replacement employees is expensive. 
   
   1. Recruitment costs
      
   2. Lost productivity
      
   3. Reduced institutional knowledge 
      
   4. Stress on remaining employees
      
   5. Onboarding and training costs
      
   6. Loss of morale
      
2. It’s expensive Built In reports the average costs to replace an employee in the US are:
   
   1. $1,500 for hourly employees
      
   2. 100 to 150% of an employee’s salary for technical positions
      
   3. Up to 213% of an employee’s salary for C-suite positions
      
3. Why do employees leave? Robert Half cite the following reasons:
   
   1. Inadequate salary and benefits
      
   2. Feeling overworked and/or unsupported
      
   3. Limited opportunities for career advancement
      
   4. A need for better work-life balance
      
   5. Lack of recognition
      
   6. Boredom
      
   7. Unhappiness with management
      
   8. Concerns about the company’s direction or financial health
      
   9. Dissatisfaction with the company culture
      
   10. The desire to make a change
       
4. This can be summed up – employees leave when they do not feel valued.
   
5. Retention starts with recruitment:
   
   1. The interview stage is as much about them liking you as it is about you liking them. It’s also about sharing realistic expectations of what the role entails and having a mutual understanding of what both parties bring to the table.
      
   2. Consider the future: The candidate might be a perfect fit now but what about in two or five years’ time? You’re looking for loyalty and longevity to reduce the likelihood of the right person leaving sooner than you’d like.
      
   3. And ultimately, whether the individual fits your company culture and will work well with the rest of the team. Are they familiar with startup culture? After all, a startup is a very different beast to a large corp.
      
   4. The best person for the job on paper isn’t always the right person for the job. What one person may lack in experience, they make up for in aptitude and attitude.
      
6. Instill a positive Company culture:
   
   1. Retention is about cultivating an environment where people can do their best work,” Nick Francis, CEO of Help Scout.
      
   2. A startup with great company culture will not only attract new talent but also help to retain talent. Fundamentally, positive company culture should:
      
      1. Align teams behind a clear mission
         
      2. Drive the business forward
         
      3. Set expectations for behavior, communication, and collaboration
         
   3. Promote work/life balance and positive wellbeing
      
   4. Acknowledge everyone’s contribution to the bigger picture
      
7. Invest in training and development:
   
   1. As time passes and the new hire’s contribution increases, be sure to schedule regular catchups to see how they’re feeling, if they’re meeting objectives or if they need further support or training. 
      
   2. Regular one-to-ones are also an opportunity to ask the employee for honest feedback regarding onboarding, training as well as general processes and workflows. 
      
   3. Being a startup is that core processes can be improved as the company grows. You can set the culture for your company
      
8. Financial rewards:
   
   1. As a start up you may not be able to match larger companies
      
   2. Employees can recognize potential income – stock options, incentive programs based on success, profit sharing.
      

Tags: How to start a business; Achieve start up success, Employee recruitment, Employee Retention, Training, Company Culture, Cost Management, The successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems

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“Cut smart, Cut with a plan, and Cut with help”
Jason Goldberg - Fab
Episode 23 – Your startup has hit the rocks – How to reduce staff cost while minimizing disruption.

1. If the viability of your start up is in question its time to take action.
   
   1. Do not wait, the earlier the treatment the easier the cure
      
   2. Staff costs are a major cost and there is a temptation to cut drastically. Cut Fast Cut Deep is often quoted,
      
2. Reflecting on the failure of his start up Fab’s Jason Goldberg regretted imposing massive layoffs in Europe and reducing the US team from four hundred to eighty five employees. He criticizes himself for being too quick to focus on slashing costs and narrowing scope versus taking a step back and devising a plan that could preserve value for the shareholders. 
   
3. Communicate openly with your staff about the situation
   
   1. Often concerns that if you tell employees that the business needs corrective action that they will leave
      
   2. More likely to leave if you take action without explaining why.
      
   3. Give them a voice. If you have hired right and focused on retention, they may be willing to accept changes in their employment
      
4. Overtime: A good place to start is to look at overtime. Overtime can quickly become institutionalized. Employees can quickly get used to their overtime pay and become to rely on it. So, they slow down on the job so they can put another couple of hours on the clock before they leave. Or rather then finishing some work on a Friday they come in over the weekend to get the job done.
   
   1. Determine the main cause of overtime hours in your workplace and think about how you can reduce it. It could be as simple as optimizing staff schedules or reevaluating an outdated process.
      
   2. Alternatively, if the overtime is both necessary and temporary, consider waiting it out instead of hiring a new full-time employee. Sometimes overtime costs are temporary based on deadlines or quirks of the workflow but hiring a new staff member is a longer — and more costly — commitment.
      
5. Improve Workflows Bottlenecks, disorganization, and lack of structure cause inefficiency that can waste time and money. Simply reviewing your business’s processes and workflows could save you a significant amount of money and foster more productive and effective employees.
   
6. Eliminate unnecessary work. 
   
   1. Its likely that some work is being done that does not deliver a lot of value. 
      
   2. Free up employees to do more productive added value work.
      
7. Outsource low value added but essential routine work
   
   1. Particularly useful in you are in high wage economy
      
   2. Many free lancers are available at a low cost to do this type of work
      
   3. Be ready to go through a number of candidates before you find a reliable quality worker
      
8. Offer flexible hours, remote working, shorter working weeks
   
   1. Employees may be willing to trade a better work/life balance for a lower salary
      
   2. The improved engagement can lead to same work being done in less time.
      
9. Restructuring fixed salaries sounds more ominous than it really is. Instead of simply reducing your employees’ salaries, which will cause disengagement, demotivation, and even turnover, consider offering performance bonuses and commissions instead.
   
   1. This ensures staff members are only paid additional amounts when your company is profitable.
      
   2. For example, let’s say you have a salesperson who has a base salary as well as a 5% commission on the sales they make. Ask them if they’re willing to take a lower base salary in exchange for a higher commission, like 10%. That way, you’re paying them more when they bring money into the company, instead of all the time.
      
   3. Alternatively, introduce performance bonuses to other full-time employees in lieu of salary increases or in exchange for a lower salary. Set goals for them to meet that are based on the profitability of their role or department, whether it’s reducing costs or increasing sales, and reward them based on whether they meet their goals.
      
   4. This way, you’re rewarding staff for a job well done when the company is doing well.
      
10.  If you must cut, Who?
    
    1. To my mind there is no hard and fast rule for this decision. Certainly, what used to be basic guideline of last in first out is no way to do this. Nor should the cost of an individual be a guiding criterion. Terminate your poorest performing employees and retain your most talented employees. Focus on the person not the role. If you are cutting back your marketing efforts and within your marketing team you have a talented employee who has skills that can be used elsewhere, redeploy them to a role where the can continue to contribute.
       

Tags: How to start a business; Achieve start up success, Lower staffing costs, Alternative to staff cuts, outsourcing, The successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems


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Episode 24 – On thin ice? Ten signs that your start up maybe beginning to fail.
Based on a Forbes Inc article by Geoge Deeb published May 2021

1. Lost Focus on Primary Goal
   
   1. For some startups, their focus can divert to unimportant factors than the primary goal at hand. A successful startup learns to prioritize its efforts and stay religiously focused on that end goal.
      
2. Poor or Slow Execution
   
   1. There are startups that begin with innovative concepts but cannot execute them properly. This can be due to a number of reasons—lack of relevant resources, lack of motivation or poor working habits
      
3. Lack of Customer Engagement
   
   1. A lack of customer engagement is something many early-stage startups face. There are a many possible scenarios in which customers might lose interest in a product or service. Maybe the startup didn't properly research the market to ensure meaningful demand?
      
4. Poor Teamwork
   
   1. Sometimes, perfectly capable and promising startups begin descending into failure because of differences among team members or lack of effective teamwork.
      
5. High Employee Turnover Rate
   
   1. If the employee turnover rate is high and recurring, it could be an indicator of a failing startup. There could be a number of reasons why the turnover rate is high. For one, a startup’s culture plays a strong role.
      
6. Lack of Adaptability
   
   1. Any startup that says it is immune to changes in the market is setting itself up for failure. External market forces ultimately dictate how your startup will fare against changing trends and competitors in the industry.
      
7. No New Product Development
   
   1. For a startup to stay relevant, it needs to constantly be reinventing itself. Your product development efforts are never done, you should always be striving to improve from version 1 to version 2 to version 3 over time.
      
8. Unaware of Finances
   
   1. Every good startup should always be aware of its financial situation. But you would be surprised how many entrepreneurs have no clue about their finances, and hence cannot easily predict they are about ready to slam into a brick wall.
      
9. Creative Block or Stubbornness
   
   1. Oftentimes, a startup’s team gets hung up on a particular perspective or approach to an issue. When things are not going well, it is important to push the team to change their perspective and try something new and creative to solve the problem.
      
10. Boredom
    
    1. The team getting bored with what they are working on can surely be a startup killer. Early in the startup’s life, the team is motivated, as the venture is exciting to work on, and the team enjoys working towards the success of a startup. Hence, everyone works with dedication and puts in long hours. But the reality is, after the euphoria wears off, it is easy for the team to get bored with their work.
       

Tags: How to start a business; Achieve start up success, Signs of startup failure, Business on thin ice, Watch for these signs, The successful entrepreneur; business common mistakes; small business startup; avoid these common mistakes of business; mistakes in business; IBGR.network; Jeremy Gray; Practical Solutions to Difficult Problems

Link to Forbes Article
https://www.forbes.com/sites/georgedeeb/2021/05/03/top-10-warning-signs-your-startup-will-fail/?sh=65175ebb3549