look at their time and put an actual rate too it. If these folks are not creating billable hours the business owner knows that the business is losing money.
It becomes tougher to see when your employees are not creating billable hours. With some employees it is incredibly difficult to quantify the revenue they generate but for others it can be looked at on a grander scale. If a manager oversees a department that generates $250,000 per month in revenue, why would you have that manager not focusing on that department? The department would likely not fall apart while the manager is handling some minor task but it’s not growing and there is no assurance that its running as efficiently as it could.
In the example above of the department manager, let’s say conservatively that he generates $1,000 per hour for the business. Instead of hiring an attorney, to save money you assign him the task to find the answer a legal question for you. Even if that task takes him 2 hours, how much potential revenue has your business lost? Even if it took an attorney making $500 per hour (which is way above the typical rate for a Grand Rapids business attorney) 2 hours to find that same answer, it would have only cost your business $1000 to get that same answer. And the business attorney can probably do it twice as fast as that department manager.
While you did spend the money to hire the attorney to handle the task, your business actually would have come out on top in the end by continuing to generate the revenue that you hired your department manager to generate and you got the answer to your legal question.
This is example isn’t to convince you to hire a business attorney, although I would highly recommend it. The legal question above could be any number of tasks. Updating a website, reconciling your accounts, set up a phone system, take photos of products and figuring out health benefits are other examples of tasks that many business owners try to take on themselves or assign to an employee. Generally we stumble through these tasks and they are not done to the professional level we would like; all in the name of not having to pay someone else. But it costs more than we often realize.
If you want to grow your small business into a middle-market business, you need to treat it like a big business. Big businesses do not have plant managers trying to update the company’s server. That plant manager shows up to work and manages the plant they oversee. Big businesses get to a point where they need to hire an in-house IT guy because of they have that much work for him. You might not be able to afford an in-house IT guy but then again you do not have enough work for him anyway. You should create your own “IT Department” by hiring someone to come in and do the necessary IT work and keep your plant manager on task of managing the plant.
This will not only allow your business to grow faster but it will add to the overall value of the business. Your businesses performance and needs will be much more clearly defined. How close are you to needing an in-house IT professional? Do you need to upgrade your systems? Does your plant manager really need an assistant when all he is focused on his duties and not his duties and those part time IT duties? These questions are much easier to answer by you and anyone that is interested in merging or acquiring your business. When rolls within your business are defined and adhered to, everyone has a clear picture of what the business’ needs are and that eliminates risk.
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