Do you ever feel confused about whether or not you should be adding someone to your team? So many business owners hire incorrectly, which is tragic because it doesn’t have to be a struggle. You can predict the outcomes of any decision and make better decisions, more profitable, great choices in your business, with the help of your budget!
You can hire the perfect person at the exact right time, and make ALL of your business decisions better, using your financial projections spreadsheet (your budget). We will use this example to show you how the process really works.
1. Create financial projections for your business for each fiscal year (we have a great budget template here).
2. For each projection/decision-making situation, make a COPY of your original projections (budget spreadsheet) and name it accordingly.
For example, “Budget 2022 w/ new Sales Person.”
3. Add ALL of the revenue that this new person will bring in or all of the revenue they will allow YOU (or someone else) to bring in because they are taking hours of non-needle-moving activities OFF of your plate (or the other person’s plate).
4. Add ALL the expenses that you will have to pay for the new person: base pay, commission, labour burden, benefits, WCB, etc.
In this example, you would make sure you consider revenue going up each month as the person is trained, and expenses going up as their bonuses go up with sales!
5. Make sure your formulas are working properly to calculate your total income, total cost of goods sold (COGS), gross profit, total fixed expenses, AND net profit.
Net profit is the number you want to see go UP from making the correct and most informed decision. *It may not go up in the first month or so but it MUST go up and continue to go up long term, because of the new decision you make.
6. If net profit doesn’t go up significantly over the year, once you’ve added all of the new revenue and expenses in the proper categories, ask yourself if you are missing something.
Adding a new team member should ALWAYS make you more net profit if it’s done correctly.
For example, ask yourself if you have been using your calendar/time tracking method to show how many hours each team member is spending on each task. Perhaps you don’t need another person; maybe you just need better time tracking and Key Performance Indicators (KPIs), which would give you higher efficiency and productivity.
Did you undershoot the projected revenue number? Be optimistic but realistic.
Did you include too much added expense, when this person will actually cost less?
If your numbers are your most accurate guesstimate, and your net profit in your projected budget goes DOWN from hiring a new person, examine your current team’s roles and goals, KPI meetings & procedures, time tracking, and most importantly LEADERSHIP to figure out how to increase your productivity and net profit withOUT hiring this new person!
It’s no secret most employees are on average 13% productive. Yes. 13%. So make sure to look there before adding another person. And make SURE everyone has clear roles and goals; this helps tremendously with staff motivation and productivity.
A lot of people moan and groan about budgets and financial projections (I used to be one of those people), until they realize that these spreadsheets not only help us make the best decisions, they can drastically increase our gross and net profit! You can predict the outcomes of any decision and make profitable, great choices in your business, with the help of your budget
Combining exceptional marketing and sales, stellar leadership, and financial mastery is the BEST way to achieve all of your goals and make the best decisions for yourself and your team. This is exactly what we teach our clients. If you need help making your business better, click the button below and let us help you. Business should be fun, profitable, systemized, sustainable, and FREEING. <3
Remember, Business can be Better™ and it should be!