Hello, my entrepreneurial friends.
Today's episode, we are going to talk about the three slippery slopes that
you need to be cognizant of and make sure that you are not falling victim to
letting the profitability of your company bleed from these three slippery slopes
that just kind of take it and you just ride with it and then go What happened?
these slippery slopes all relate to probably the largest.
Expense category on your income statement or your profit and
loss report, and that is payroll.
Yep.
We're talking employees.
We're talking payroll.
The biggest expense on most businesses.
Income statements and profit and loss reports is payroll, and
that is employee related, right?
And it's how big your team is and who your team is.
so the three slippery slopes that you need to avoid, number one, is you need
to be cognizant of what the cost of a mis hire is because I too often see.
Employers hire people by half-assing their recruitment and hiring and
saying, well, they seem good enough.
We'll give them 90 days and we'll figure it out.
usually after those 90 days, they didn't figure it out.
And you really did make a mishi.
So when you hire someone and think, oh, we'll just give them a 90 day
probationary period, that's the sign right there that you shouldn't be hiring
them because if you do make a great hire, they should hit the ground running.
They should be going 60 miles an hour on week one.
They should be going 70 miles an hour.
By week two, they should be at a hundred miles an hour by like weeks five or six.
You don't need to give someone 90 days.
You want people who are ready to go outta the gate fast.
So if you do make a mishire though, let's calculate the cost of a mishire Now I know
you could Google it, but I'm gonna break it down for you how I get to the cost of
a mishire And in this case we're gonna say that the cost of a mishire is $23,000.
Yeah, the cost of one miss hire on the modest end is $23,000.
How do we break it down?
Well, if you're paying someone $25 an hour, $25 an hour times, 40 hours a
week, times 90 days equals $12,000.
So right there it's $12,000 in just salary.
Then we've gotta add another 20% on that $12,000 for employer taxes and benefits.
So that's another $2,400 added on to the.
$12,000.
And then what about your time?
What about the time of the other people in your team that were
involved in the recruiting, the interviewing, the hiring process,
the training and onboarding process?
I mean, let's just put that at a modest $5,000.
Okay.
Then one more piece to the equation is loss, customer confidence.
When you have someone who's not a five star fit for the role, who's kind of,
eh, muddling along and such, you are gonna lose some customer confidence.
A ball is gonna get dropped, something's not going to go well, and you know what?
That's gonna be worth probably $3,600 in lost customer confidence.
So how did we get to that?
$23,000 in the cost of a mis hire?
$12,000 in three months of wasted salary, $2,400 in employer taxes and
benefits, $5,000 in onboarding and training and recruitment and hiring.
Time spent by you and your team and another $3,600 in
lost customer confidence.
So make sure that when you make a hire, it's not a, well, maybe they'll
work out kind of thing, because that's your answer right there.
It's not to hire the person.
If you get this kind of high pitch, well maybe.
Then please don't make that hire Go back cast a wider net.
Go fish in other ponds and find that ideal 5-star fit employee for the role, and then
avoid the cost of a mishire going forward.
The second slippery slope that you need to avoid.
Is, uh, existing employee entitlement.
So when you made your first hires, and they've stuck with you through getting to
the first million, getting to the next 2 million, maybe to 3 million that's great.
And that's nice.
And they have worn many hats.
They've done lots of things But if you're trying to take a company from.
One, two, $3 million to $10 million.
Well, my friends, the people that got you to one, two and $3 million are
probably not the people who can get you to $10 million dollars because
these people that started with you don't necessarily have the experience.
You guys have figured it out while you were figuring it out, and that
works and that's fine, but no one.
At a company of any size should be the linchpin to your company
that you can't live without.
So if you have people who feel threatened, when you try to bring in other people who
have more experience, who are savvier, who have done the things that you want to
do going forward, and they've been at the places that you wanna take your company
to be, then you shouldn't be beholden.
to employees who feel entitled that, Hey, I've been around here the longest.
I should be the vice president.
I should be the chief operating officer.
I should be the one in charge.
'cause I was around here from the beginning.
That right there is a recipe to just kind of be stuck where you are because
that person, again, doesn't have the knowledge, the experience, that been
there, done that, that you need to get to that next level because if they did, why
are you stuck at one, two, or $3 million?
Right?
Loyalty is good, but just because someone has a job with you doesn't mean that they
should be a lifer in your organization.
Some people want to grow, and that's great, and some people
just like being comfortable.
So I too oftentimes see those people with entitlement that
I've been here the longest.
I'm entitled to the next big role.
I'm entitled to a raise.
Now I'm entitled to make more because I've been around the longest.
are the people that are the wrong people for your organization.
and I oftentimes see people that try to be the linchpin and
have this sense of entitlement.
Try to like close in on everything and say, I got this.
I got this.
Don't worry about this.
I got this.
And if you have an employee who is like, I got this and is wanting
no one involved and even you out of it and their hands are up.
and then when you talk about bringing someone else in, they get really sort
of desperate seeming and panicked of like, Hey, no, I'm capable.
I got this, I got this.
That right there is a red flag that they're hiding something.
if you bring someone else in, they're threatened and feeling
like they could be found out.
No one in any organization should be the one that you are wholly dependent upon.
You should be able to.
Let anyone go at any time and be okay.
Yeah.
It'll be rough for a week or so, but you should be able to recover from that
because whether that person leaves because they take another job or something else.
something tragic could happen and that person could be gone because
I mean, the proverbial, they got hit by a bus tragically story.
that's why you need great people in your organization who are not going to have
this sense of entitlement, not have this sense of, I've got this, I'm in control.
I'm not gonna share with anyone.
I'm going to keep this all a secret so that you're dependent upon me.
That right there, again, huge red flag that is going to cost you the ability
to scale, to grow, and might be costing you some other things like possibly,
embezzlement or other waste, fraud and abuse in your organization Again.
I'm speaking from the experience of working with hundreds of companies and
entrepreneurs over my 25 plus years of being an entrepreneur and a consultant.
then, the third slippery slope to avoid is, failing to
hire to scale to new heights.
So if you have a vision that you wanna take your company from one to 3
million to 10 million, well then you have hire people who have been where
you want to go, and those people.
can help you bring up your processes, your systems, your selling, your
marketing, your scalability.
It has to be someone who has experience.
so do not be afraid to hire people who are more experienced than you.
The thing is, is they're not a threat to you.
There's very few people in this world who are crazy enough to be entrepreneurs.
Most people don't like the risk that we as entrepreneurs.
Thrive on.
So the people that you hire, as long as they've never had their
own business, they're fine.
They're never gonna be a threat to you.
They're not gonna wanna start their own business at the age of 40 or 50.
so make sure that you are really going after people who have that
experience and that knowledge of where you want to take your business and.
The plus side of hiring someone who's experienced like that working for
your smaller organization is you're gonna be a delight of an employer.
There's going to be less bureaucracy in your organization.
You're not gonna be this corporate behemoth that, has.
Kind of held them back to certain degrees, things will move a lot faster
in your smaller, nimble organization.
And that is an attraction factor to people who are just kind of sick of
the corporate games and the politics, and the bureaucracy So don't be afraid.
And don't think that you can't hire someone who comes from a larger
organization and has the experience of where you wanna take your organization.
So how do you fix and avoid these, slippery slopes when it comes to
hiring, and building your team to take your organization to that next level?
It takes getting really clear on what you want and what you need
for the organization and how people are spending their time, right?
Because again.
every payroll dollar should be producing a return on that investment of what you're
paying someone in terms of their salary.
So we say that payroll should produce a 3.5
x return on salary.
So if you're paying someone $50,000 per year, they should be having
$175,000 positive impact on revenue.
Okay?
That's 3.5
x $50,000 in salary.
And that $175,000 positive impact on payroll, you should know exactly what
they need to be doing to hit that.
What I like to do when I'm considering a new role, or I'm working with
someone who's adding a new role to their organization or making a
new hire, is, Hey, let's look at what their week should look like.
Let's look at what their month should look like.
are there things that need to happen in the quarter?
get out a calendar with time blocks for the day and really
block out what you envision them spending their actual time on.
You are paying them per hour to spend on and really get it dialed in of how
they should be spending their days and what needs to get done that drives
that positive impact on revenue.
then from there, you are gonna see really clearly when you map out someone's ideal
week of how they should be spending their time, hey, it kind of boils down to
these three to five key responsibilities.
Great.
75% of what your employees are doing should be in the three to five key
responsibilities of their role.
And when you have those three to five key responsibilities, then we're
gonna quantify what success looks like for each of those responsibilities.
you're gonna quantify it with a number, a dollar value, a percentage, a timeframe.
So for example, with my team of claims adjudicators, when they're processing
long-term care claims to either pay or deny a claim, they need to produce 98%
financial accuracy, and they need to process on average 42 claims per day.
I've quantified with numbers and percentages what success looks
like when they are adjudicating and processing long-term care claims.
and when you give those success metrics to each responsibility, here's the best part.
Your employees in those roles that are quantified with success
metrics can manage themselves.
Everyone is on the same page of what success looks like, and
so they can manage themselves.
They can know, Hey, did I hit 42 today?
Oh, darn, I hit 40.
That means I'm below my average that I need to be.
I kind of need to squeeze out maybe 44 tomorrow to get back to 42.
Five star employees are savvy.
They're smart, they're driven, they are made for the role.
They are perfectly suited.
They are ideal fits for the role.
And when they know what's expected of them and how they should spend
their time and what numbers they need to hit, they'll hit 'em.
And if you've got someone who's not hitting it well, then you're on that
slippery slope there, my friend.
You've made a mishi.
You've got someone who feels entitled.
You've got someone who is just not getting it and not a right fit.
So the challenge to you is fix this.
Let's make sure that you are building a team that scales and grows with
your organization and you've got this.
So if you would like to get the resources associated with today's episode, then
please visit profit first nation.com
and click on resources.
And if you'd like to connect with a profit, first, professional
bookkeeper, accountant, or coach, again, go to Profit first nation.com
and click on contact.
Cheers to another profitable day.
My entrepreneurial friends.