Resolution #1: Make your employees matter
Entrepreneurs who want to compete with big companies for the best hires should focus first on offering candidates competitive retirement plans, says Barry Barnett, principal in PricewaterhouseCoopers' HR practice. "The issue you need to deal with is pension equity," he says. "Give them some sort of retirement benefits they can see." A 401(k) or other tax-deferred plan should do the job, he says.
Health-care benefits are also important for older workers, Barnett adds. Some older workers may already be receiving pension benefits from companies they have retired from. "They will work at a reduced salary for health-care benefits."
Attracting older workers is important, because some entrepreneurs say this is a key market of talented employees. Pete Radatti, president and founder of CyberSoft Operating Corp. in Conshohocken, Pennsylvania, says he has helped his company by removing the upper age limit on hiring. Many big corporations have mandatory retirement ages, while others have laid off large numbers of people in their 40s and 50s. Radatti says hiring these retirees provides him with talented and reliable employees no longer wanted by their former employers. "They appreciate that we care about our employees," he says, "and they like the small-company environment."
Small companies need to offer key hires the ability to share in the company's growth, says Barnett. "On the compensation side, cash itself is not the main issue in a small entrepreneurial firm," he says. "It's more about the ability to cash in as the company becomes successful." Sharing profits and equity can help employers fill critical positions with top-quality talent.
Resolution #2: Heal Your Health Plan
The hot new trend in health insurance is the consumer-directed plan. It comes in numerous varieties, including health savings plans and medical savings accounts. Its essential feature is that it makes consumers responsible for controlling health-care costs by making them pay many of the costs out of their own pockets. "It makes a lot of sense for the entrepreneur," says Barry Barnett, principal in PricewaterhouseCoopers' HR practice.
Consumer-directed plans have lower premiums and, since employees have more latitude to spend money from their health savings accounts, can provide better coverage as well. The savings accounts can transfer to different employers and can be used after retirement as well. "It's a tax-efficient way of funding retirement medical," says Barnett. Insurers are refining their consumer-directed offerings with many new options, including low-paperwork plans that allow employees to tap their health savings accounts with debit cards.
Joe Popper, 43-year-old owner of Computer Gallery in Palm Desert, California, is working to upgrade his employees' coverage as part of his effort to attract better hires. "We have to have reasonable health care to be competitive," he says. "You're not going to hire a top-quality person without reasonable health insurance."
Resolution #3: Spice Up Your Sales
Even in the second decade since e-commerce became a reality, many companies that could generate increased sales, build revenue and tap sources of demand online have failed to do so as well as they could, says Pete Collins, director of Barometer Surveys for PricewaterhouseCoopers. "Few people are doing business exclusively through e-business," he says. "But there are a lot of indirect sales that can come from it." Paying attention to a website's ability to provide information, direct shoppers to brick-and-mortar locations and otherwise augment traditional business can generate important added revenue, he says.
International markets represent another revenue-building opportunity for small companies. "If optimism in the U.S. is down, it's important to be doing business abroad," Collins reasons. "Among companies we surveyed, 45 percent were doing business abroad, and their overseas revenues are projected to be up 20 percent in the next 12 months."
Finally, small companies shouldn't overlook incremental opportunities available by extending product lines, introducing new colors, flavors, sizes and other variations. Although many firms start with one big idea, they can generate a lot of additional growth by refining versions of that idea. "It's very important to try to expand your line, not necessarily with blockbusters," says Collins. "Line extension can be a good source of volume."
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Entrepreneur magazine and PricewaterhouseCoopers' "Entrepreneurial Challenges Survey" is an annual telephone survey of more than 300 CEOs of privately held, U.S.-based businesses recognized for their sustained, rapid growth. They average $31.5 million in annual revenue with an average of 185 employees, and have an ongoing annual growth rate of more than 23 percent. Forty-seven percent are technology companies; 53 percent are nontech. Fifty-six percent are service businesses; 44 percent are in the product sector. Survey interviews were completed in the third quarter of 2005 by independent research firm BSI Global Research Inc. under the direction of PricewaterhouseCoopers.
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