It’s an age-old dilemma for small business owners: You need help to grow your business, but you can’t afford to hire anyone. This common situation is a catch-22 that has driven many an entrepreneur into early burnout, if not an early grave. There is an answer to the merry-go-round of “I need more help but I can’t afford to hire anyone.” You can get off this ride!
In recent years, I have grown my consulting company from a partnership of two to a team of eight. With this sizable increase in staff, I have gained a vast increase in revenue. How? By always connecting hiring decisions to revenue results. Here’s how I’ve done it.
The entrepreneur’s hiring formula. In the last five years, I have grown my company four-fold by having one dominant financial mindset: get revenue. Of course I want profit, but you can’t make much profit if you don’t have much revenue. (How ‘bout that? Obvious facts have huge impact on reality. Shocker.) By applying this principle to my hiring decisions, I guarantee an increase in revenue with every new hire that I make. Here’s the formula:
I never bring anyone on board unless, by doing so, I can specifically anticipate gaining twice their salary in new revenue. That’s the formula, and it works.
In some cases, the math is easy: If I am paying a direct service provider X in compensation, they need to generate 2X in new business revenue. In other cases, I hire people who do not directly raise revenue (support staff), and in these instances, I need to know how their contribution will help other people in the company raise revenue before I hire them. For example, I have a part-time social-media expert who frees me up for more direct revenue generation and less time on Facebook. It’s a beautiful thing!
It is critical when applying this formula to identify the specific revenue a new hire will generate before you make a hiring decision.
A case study. Suppose you run an import-export business and you are trying to determine whether you should hire an administrative assistant. That individual will likely not increase revenue directly, so the question to ask is: “How could I bring in new revenue if I wasn’t tied up with administrative details?” If you could spend that time on sales calls, networking functions, lead conversion or lead generation, that is the bulk of your answer.
The next line of questioning: How will you find revenue equal to twice the salary of a new assistant? The topper is how much is increasing your revenue, freeing yourself up to do the tasks you actually love, and not working yourself into an early grave actually worth to you? (Oh, snap!) Those topper questions are big, but the answers are obvious. Use the formula, my friends -- you can thank me later.
A revenue culture. Everyone in my company knows that revenue is the name of the game. Do we focus on profit? Of course we do, but it’s not what we talk about most. We focus on how to find new ways to bring money to the top line. Profit is result -- revenue is the goal.
Get absolutely zealous about new revenue, my friends. It’s the fastest way to success and it will change your world.