Solution #1: Hiring Smart
The importance of winning the talent war is driving entrepreneurs to explore a variety of ways to identify, recruit, develop and retain quality employees. The best approach is to ask your existing employees for referrals to people they think would fit in at your company, according to Robin Kreitner, director of human resources at Safilo USA, a luxury eyewear company in Parsippany, New Jersey. But don't just ask-offer them money. Kreitner says Safilo pays referring employees $500 after new hires have been there six months and another $500 after a year. Gift certificates to popular retailers are another motivator. Safilo is a large firm, but you can adjust the amount of referral incentives for your company's size and budget.
Some entrepreneurs are looking to their local educational systems to try to build a reservoir of appropriately trained and motivated employees. Lorraine Kay, CEO of Kay Construction in Mount Laurel, New Jersey, works with local colleges to improve the image of the construction industry and fine-tune the
courses offered to students studying project management, engineering and architecture. "We're also hiring interns," says Kay, 56. "We have almost a 1-to-1 ratio of interns to project managers and assistant superintendents." Hiring inexperienced students who are still in college gives Kay inexpensive part-time help now, she says, and an inside track to hiring them full time after graduation.
Solution #2: Cut Costs
Cutting costs, a new category added this year, jumped into fifth position among the top concerns for entrepreneurs. Hialeah, Florida, entrepreneur Michael McNicholas, 54, president of boiler distributor Enviro- Mechanical Inc., says cutting costs is one of the only ways he can improve profits in light of the slow-growth industry in which his company operates. McNicholas is working to save money on office supplies by e-mailing invoices and hopes to find a telephone plan that will cut telecom costs.
Rising health-care costs affect all businesses, but it doesn't have to be that way, says Bill Collier, author of How to Succeed as a Small Business Owner. and Still Have a Life! Taking advantage of Section 125 cafeteria plans, health reimbursement accounts, health savings accounts and flexible spending accounts can help many businesses reduce current health benefit costs by 20 percent or more, Collier says. Entrepreneurs have to invest the time and energy to become true experts on this critical
and costly element of doing business, he adds. He also advises business owners to manage compensation costs as a block. For example, take insurance rate increases into account when giving employees raises. Granting 4 percent salary hikes and then taking a 20 percent insurance increase leads you to overspend with-out realizing it.
Solution #3: Beat the Competition
A globalizing economy means intensified competition for entrepreneurs in almost every industry. Some deal with it by offering the best prices, while others believe taking care of customers will put them ahead.
Differentiating yourself as a customer-focused organization that can be relied upon is a smart way to go for service company entrepreneurs like Lorraine Kay, 56-year-old CEO of Kay Construction in Mount Laurel, New Jersey. That way, "you don't necessarily have to be the low bidder to be selected for the next project," says Kay, pointing to her company's 71 percent repeat customer rate.
Michael Shuman, author of The Small-Mart Revolution: How Local Businesses Are Beating the Global Competition, says small firms should band together in manufacturing networks, producers' cooperatives and joint local delivery systems. Lobbying economic development organizations to support small local firms with tax breaks that currently go to big companies can help too, Shuman says. Entrepreneurs should also leverage their built-in advantages against global rivals. Local producers, for example, spend far less to transport goods than importers do-an advantage that gets stronger when fuel prices climb. One of the best overall competitive solutions is selling directly to local markets, Shuman says, because it minimizes transportation costs, middleman markups, currency exchange risks, Homeland Security hassles and other issues that plague global competitors.