Hire Power

Anticipating extra work? Line up employees before you need them.
Magazine Contributor
10 min read

This story appears in the February 1998 issue of Business Start-Ups magazine. Subscribe »

Q: I'm starting my own computer consulting firm, and right now, it's just me doing the consulting. I'm ready to begin my services. My concern is that if I get too much response and can't keep up with the demand, my company will lose credibility. I don't want to hire people until I have work for them, but I'm afraid to wait until I have the work lined up to begin the hiring process. Any suggestions?

S. Abdeen
El Segundo, California

A: This "chicken or egg" situation is a common one for growing businesses, but you have a number of options. First, network with other consultants who may be able to handle your overflow if you need them. Draw up an agreement that clearly defines your respective rights and obligations regarding the work, the clients and confidentiality.

Next, con-tact two or three agencies; describe the skills you are looking for and tell them you anticipate hiring over the next few months. They will run the ads, do the pre-screening, and have a pool of candidates ready for you to interview when the need arises. Finally, now and throughout the life of your company, collect resumes and screen candidates--even when you aren't hiring. Encourage your friends and professional associates to refer prospective employees to you. Maintain a file of people with a variety of skills you can call when you have too much work to handle on your own. Don't worry about whether they already have jobs; many people who aren't actively looking to change jobs may be receptive to an offer if you approach them.

Q: I would like to set up a secretarial service. The location I've selected is surrounded by commercial offices, a hotel and a shopping center, and is near a monorail main station. How do I determine if this is a good location?

Tess Chiew
Via e-mail

A: Your location sounds ideal, but it's a good idea to do a little more research to determine whether the market will support your . Call the companies occupying commercial offices in the area; ask to speak to the manager, and say you're doing a survey on secretarial services. Then ask if they ever use an outside secretarial service, what service they are currently using, what type of work they give to the service, and what type of performance they need. (Pay attention to what these prospective customers say they want and use that information when planning your service package.)

Next, ask the hotel if there's an opportunity to do work for their guests. Many hotels have business centers, but they are not always able to provide complete secretarial services and may appreciate being able to offer their guests a referral. Don't try to sell your services at this point; you're simply gathering information.

Once you have an idea of your potential market, you need to find out if you'll have any competition. This shouldn't stop you from starting your own business, but you need to know what you're up against. Find out as much as you can about your competitors--like what services they offer and how much they charge.

Once you've determined the size of the market and the strength of your competition, you should be able to decide if there is enough potential business in the area for the location to work.

Jacquelyn Lynn is a business writer in Winter Park, .

The Heat Is On

When it's time to renew your company's health insurance program, be prepared to take a serious financial hit. After several years of steady rates, health insurance premiums are expected to rise significantly this year.

Although hard data is not yet available, the anecdotal numbers are causing serious anxiety. John C. Erb, a principal in the Miami office of William M. Mercer Inc., a human resources consulting firm, has completed the 1998 health plan renewals for his larger clients and has seen a wide range of increases. "It's all over the lot. One client saw a total increase of about 3.5 percent, another had 12 percent, and one had 6 percent," he says.

What does this mean for smaller companies? "I think small businesses have benefited greatly over the last few years from the competition among health plans [that were] looking to garner a share of the small employer market," Erb says. "Also, we've seen a lot of states implement reform for small groups, making it easier to get insurance. I think all of that is going to come home to roost [in 1998], and small employers are going to see increases in health-care costs."

Though higher rates may be inevitable, there are steps you can take to reduce the size of the increase. Begin with a thorough assessment of your needs, says Richard Coorsh of the Health Insurance Association of America, whose members include accident and health insurance companies. Then research the market to determine what products are available and how well they might meet your needs. "There may be more cost-effective ways you can provide quality health care," Coorsh says. "You can structure plans to either have or not have particular types of benefits; you can adjust co-pays and deductibles [to control costs]. But what it boils down to is a lot of comparison shopping, because the options are out there."

Erb recommends using the services of a knowledgeable independent insurance agent who can help you separate the facts from the hype. He points out that insurance used to be a fairly straightforward product, but it has become an extremely complex benefit. Decisions you may make based on premium costs could have a major impact on the personal lives of your employees.

Businesses have a wider variety of sources for insurance than ever before, and those will probably continue to grow. In addition to buying insurance directly from an insurance company, you may also obtain coverage through associations, purchasing alliances and, in some areas, even your bank. And while it may seem convenient to take care of your insurance needs at the same time you handle other financial matters, keep in mind that a bank or other financial service entity that offers insurance is operating not as an insurance carrier but as a broker for a selected group of plans.

"When a bank has cut a deal with health plans, you're only going to get those plans presented to you," Erb says. "So be wary of trading the ease of selecting a plan with what's best for you and your employees. Even though you'll want to consider what your bank is offering, you still need the help of an independent insurance agent."

Calling To Collect

It's a $10 billion problem growing at a rate of 20 percent annually: corporate customers who take unauthorized deductions from their bills, creating a commercial collections headache that just keeps getting worse.

The situation began back in the 1970s, when retailers started taking deductions off current invoices rather than waiting for rebates or credits. Today, customers routinely deduct not only legitimate discounts, rebates and credits but also penalties for service failures and a variety of unauthorized and sometimes even fraudulent deductions. "That can take a big bite out of your bottom line," says R. Clive McInnes, vice president of CHI/COR Information Inc., a Chicago-based computer software company that specializes in financial management systems.

How can you protect your company from losses? First, says McInnes, make sure everybody knows and plays by the same rules. For example, salespeople must make realistic promises and then communicate with other departments so promises can be kept.

Second, never ship an order without a signed purchase order that clearly states the terms and amount of the sale. As simple as that sounds, McInnes says, "You'd be amazed at the number of companies that don't do it." He adds that whatever is on the purchase order is what the customer will pay--regardless of what you invoice or what the price should be. So get a signed purchase order and be sure you can live with its terms.

Third, respond quickly to deductions. Don't let them pile up or slip through the cracks. When a customer takes a deduction, take immediate steps to determine its validity and, if appropriate, initiate collection action.

Fourth, says McInnes, involve your salespeople in resolving deductions. Keep in mind that "resolving" doesn't always mean collecting; it means identifying the reason for the deduction and deciding whether it is legitimate. It's not unusual for a salesperson to have caused the deduction in the first place--perhaps with a commitment that was not passed along to accounting--so get them to help out in this area. McInnes says some companies even reduce sales commissions by the amount of unresolved deductions.

Finally, perform as your customers expect. Many deductions are actually penalties because you failed to meet the terms of the purchase order or the customer's procedure requirements. For example, most of the major retailers and manufacturers have written guidelines for doing with them and charge penalties in the form of invoice deductions when you do not meet those guidelines. They may, for example, demand that items be packaged a certain way and will take a deduction if you deviate. If you accidentally ship an incorrect item, you will not only have to replace it, but you may also be charged a handling fee. Or the company may deduct a service charge if you make a billing error, such as failing to include a promotional allowance or discount.

"Deductions and penalties are your customers telling you you're doing a bad job," says McInnes. If you're consistently missing deadlines, labeling products incorrectly or billing the wrong amounts, you need to take a look at your internal systems and develop a strategy to improve your performance--that should solve a significant portion of your deduction problems.

For Better Or Worse

It's becoming more and more common: Couples meet at work, begin dating and eventually marry. And while it's not up to you to meddle in their personal lives, it's still a good idea to think about what--if anything--this means to your company.

D. Allen Miller, senior consultant with IEC Group, a human resources consulting firm in Salt Lake City, says there are advantages to having employees who are married or have other family relationships, including:

  • A likelihood of similar values, work ethic and dedication. If an employee is a strong performer, chances are the spouse or relative will be, too.
  • An automatic mentor in the organization. Miller says the best mentors are spouses, because of the strength of their mutual commitment.
  • Peer pressure. Married employees will not only want to impress their supervisors, they'll also want to impress each other, which may improve their performance.

Of course, there are also drawbacks. The most common problem, Miller says, is that a conflict with one can often mean a conflict with both--and that can be especially difficult in a small organization.

Problems can also develop when the couple's work relationship is a supervisor-subordinate one. "If a personal relationship develops between a supervisor and a subordinate," says Miller, "it's difficult to maintain objectivity." Similar problems come into play if a promotion creates a supervisor-subordinate relationship between spouses.

Miller recommends having a clear nepotism policy in place before you need it. Be sure employees know what behavior is acceptable and unacceptable. Also, be sure the rules are applied fairly. If you decide to terminate employees who marry, it's a good idea to terminate both of them, and not just one. You might also add a statement to your policy that says policies regarding spouses and relatives also apply to domestic partners.

Contact Sources

CHI/COR Information Inc., (800) 448-8777, clive@chicor.com

IEC Group, (801) 526-5857, fax: (801) 451-8999

William M. Mercer Inc., (305) 447-3026, fax: (305) 445-8680


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