six steps to help your company grow
Post on 19-Oct-2014
1.099 views
DESCRIPTION
Here are six steps that your business can take to not only survive this downturn, but actually thrive and grow during it and long after it’s yesterday’s news. http://www.cbiz.comTRANSCRIPT
Six StepS to Help Your CompanY Grow in CHallenGinG eConomiC timeS
auditing standard no. 5
are you afraid? in his 2004 letter to shareholders of Berkshire
Hathaway, investor Warren Buffet wrote, “Be fearful when
others are greedy and greedy when others are fearful.” today,
many small- and medium-sized business owners are fearful.
they’re afraid they won’t get the credit they need to run their
businesses. they’re afraid their customers won’t buy their
products, and they’re afraid they won’t make their payrolls. as
a result, they focus on survival, not growth.
smart business owners, however, have a different perspective.
they see challenging economic times as opportunities to
streamline expenses, maximize profits, and grow their bottom
lines — in other words to “be greedy,” as Buffet puts it. any
business owner can take six simple steps to make sure his or
her company grows when times are tough and emerge from a
downturn more efficient, more competitive, and more profitable.
Growth vs. Survival
Every business wants to grow and prosper, not just survive. it
may seem like an insurmountable challenge to do that in the
current business environment. Fear causes business owners to
question every expenditure, and many feel comfortable cutting
costs without too much thought as to where or why, in order to
protect their bottom lines. Even businesses that are doing well
are holding on to their cash and not investing. But owners need
to find ways to cut costs while growing their top line — and
their bottom line as well.
it’s up to small- and medium-sized business owners to plan to
thrive, not just survive. Companies can position themselves
to do well in this down cycle, as well as when the economy
recovers. Fortunately, downturns are great times to look at a
business’ health and make sure it’s being run as efficiently and
effectively as possible. When times are good, many business
owners don’t have the time or inclination to do this; good sales
numbers hide internal inefficiencies. But when things are slow,
wringing out inefficiencies and maximizing revenue are keys to
growing and prospering.
six stEps to HElp Your CompanY groW in CHallEnging EConomiC timEs
auditing standard no. 5
recessions and economic downturns are good times for
restructuring, as well. if your plan for growth calls for strategic,
targeted reductions in personnel, now is the time to do it, not
when business is booming. First of all, there may not be time
to carefully consider your personnel needs when the emphasis
is on getting orders out the door. second, the public perception
of layoffs is much different in a weak economy than in a period
of expansion. in an expansion, layoffs may be viewed as a
sign that the company is in trouble. But during a recession,
customers and shareholders are more likely to view layoffs as
either an inevitable result of the economic downturn or prudent
cost-cutting measures by a proactive management team.
(But as we shall see, personnel cuts should be done with a
scalpel... and not a chainsaw.)
Six Steps for Success:
planning and thinking ahead — being proactive and not reactive
— are what will separate winners from losers in this recession.
Here are six steps that your business can take to not only
survive this downturn, but actually thrive and grow during it and
long after it’s yesterday’s news.
Step 1: lower employee health care costs.
many employers view health care benefits as a line item that
needs to be cut during an economic downturn. the common
practice is to increase cost-sharing with employees by raising
their deductibles and increasing their co-pay amounts. However,
this is a mistake. providing employees with a competitive
benefits package actually increases the bottom line. this
seems counterintuitive at first. However, it’s important to
remember that in any organization, the most valuable asset is
the employees. not only are employees valuable in terms of the
skills, education, and experiences they bring to the company,
but they’re valuable in the sense that good ones are hard to
train and even harder to come by. a competitive package of
health care benefits can help to retain top employees.
six stEps to HElp Your CompanY groW in CHallEnging EConomiC timEs
auditing standard no. 5
any time an employee leaves, it impacts the company beyond
the immediate loss of his or her contributions. Everyone else’s
productivity decreases because other employees now have to
shoulder that employee’s workload. the people that relied on
the departed employee for information or instruction may see
a decrease in their productivity as well. morale can decline
when top employees leave, which further negatively impacts
productivity. moreover, the costs to the company are great:
lost relationships and missed sales with clients, losses due to
employees who are unfamiliar with the position they’re filling,
and the high cost of finding and training a replacement. some
authors have pegged the cost of losing an employee and
on-boarding a new one at up to $1 million.1
still, it’s easy to risk losing money in the long term when there
are employer insurance premiums to be paid in the near term.
How can you provide quality health insurance benefits now
without emptying the coffers? First, benchmark yourself against
your peers — others in the industry with a similarly sized work-
force. to be competitive, your plan needn’t be in the top one
percent of all employers. Being in the top 25 percent will allow
you to cut costs while still providing quality coverage. it will also
let your employees know that you’ve researched what’s out
there and where your offerings stack up. also, know the compa-
nies with which you compete for your top employees, and make
sure your health plan is in the same ballpark as theirs.
another new trend is creating a culture of health and
implementing value-based benefits. When a company creates
a culture of health, it makes healthy living and active lifestyles
a part of the company’s day-to-day culture. Employees are
encouraged through a variety of means, monetary and
otherwise, to make better choices about their lifestyles
and their health care. For example, there may be company-
sponsored sports teams, walking trails on the corporate
campus, or weight-loss contests. the thinking is simply that
healthy employees are less expensive to insure, show up to
work more often, show up sick less often, and are overall more
six stEps to HElp Your CompanY groW in CHallEnging EConomiC timEs
1 nathan, s. (2008). Help execs grip the flying trapeze. Business Insurance Industry Focus, January 2008. retrieved dec. 11, 2008 from http://www.businessinsurance.com/
cgi-bin/industryFocus.pl?articleid=23874&issuedate=2008-01-20
auditing standard no. 5
productive. as Capital one’s chief Hr officer matt schuyler
said, “reducing the need for health-care services in the first
place by improving associate health—creating a “culture of
health” within the organization—appears to be an effective
strategy for reducing costs over the long term.”2
Presenteeism, or sick employees coming to work, is a
major drain on resources. a study by advancepCs, a health
management company, showed that of the quarter-trillion
dollars in losses u.s. businesses incur every year due to
illness, nearly three-fourths come from presenteeism.3 a
culture of health can reduce employee illness and help to
shorten recovery time, saving businesses literally billions of
dollars in lost productivity.
similarly, value-based benefits encourage employees to care
for and prevent serious and chronic medical conditions that
would keep them from being as productive as they might be
otherwise. the medications and preventive treatments that add
the most “value” to an employee’s life — those that address
killers like heart disease, cancer, diabetes or depression — are
made the most available by reducing or eliminating deductibles
and co-pays for them. likewise, non-essential or voluntary
procedures and medications are the most expensive. in this
way, employers monetarily incentivize employees to take better
care of themselves, which in turns boosts productivity and the
bottom line for the company.
lastly, don’t ignore generational differences when determining
changes to employee benefits. generation Y or millennial
employees will appreciate and expect exercise programs and
opportunities that are both social and recreational in nature.
generation x will look for family-friendly health plans, while the
Baby Boomers may need access to affordable prescription
medications. By tailoring options to your employee’s
demographic profile, you can not only cut costs and improve
your bottom line, but also produce happier, more productive
employees who boost your top line as well.
2 schuyler, m. (2008). Creating a culture of health: the new corporate mandate. Employment Relations Today, fall 2008, 35-41.
3 stewart, W., matousek, d., & Verdon, C. (2003). The American Productivity Audit and the Campaign for Work and Health. the Center for Work and Health, advance pCs.
six stEps to HElp Your CompanY groW in CHallEnging EConomiC timEs
auditing standard no. 5
Step 2: maximize cash flow.
adequate cash to pay bills and meet payroll is the lifeblood of
any small- to medium-sized business. never get too caught up
in the day-to-day operations of the business or closing sales
to forget to collect your receivables. Having an automated
collection system in place will provide you with a tool that
automatically generates invoices, statements, past due notices,
and other tools you need to collect from your customers.
always negotiate terms with your customers that allow you the
fastest access to your cash. For example, require deposits up
front, and specify that payment is due upon fulfillment of the
order. if you extend payment terms out to 30 days or more,
your customers are getting a free loan from your business.
likewise, try to negotiate terms of 30 to 60 days or more with
your suppliers. that way, you can have the cash in hand from
your customers to pay vendors when their bill is due.
another important way to ensure a steady stream of cash is
avoiding a single-client situation. not only does over-relying
on one customer (such as a local government or major local
manufacturer) threaten the viability of your business, it puts you
over a barrel when it comes to payments as well. simply put,
if your sole customer can’t or won’t pay, you don’t have cash.
seek out multiple customers and spread your business around
if possible.
Step 3: minimize annual taxes.
there are several great ways to minimize your annual business
taxes in the current tax year. First, always make sure you
maximize your deductions. Your accountant can review your
expenditures and help to identify deductions for line items
such as training or business travel. a great way to increase
deductions is to make scheduled donations to charity by year-
end, which has the added impacts of casting your business in a
positive light and benefiting the community.
second, you may be able to expense certain equipment pur-
chases immediately instead of spreading out the deduction
six stEps to HElp Your CompanY groW in CHallEnging EConomiC timEs
six stEps to HElp Your CompanY groW in CHallEnging EConomiC timEs
over several years. this can give you a very large deduction all
at once and take a sizable chunk out of your tax bill. if you oper-
ate on a cash basis rather than an accrual basis, as many ser-
vice industries do, then you should consider taking next year’s
deductions now by paying January’s bills prior to year-end.
You can also be creative in your hiring. For example, you do
not have to pay payroll taxes on independent contractors, but
you do for employees. also, payments to contractors can be
structured to your maximum tax savings advantage. However,
know that there are strict rules about who qualifies as a
contractor and who doesn’t. Consult with your accountant or an
attorney to make certain you follow the law.
Step 4: reduce costs for payroll and flex plans.
Flexible health plans are great ways for employers to save
on payroll taxes. Why? they don’t have to pay FiCa taxes on
the money that employees contribute to their flex plans. For
example, suppose an employee contributes $2,000 in a year
to his or her flex account. at a FiCa rate of 7.65 percent, that’s
$153 that the employer doesn’t have to pay.
another key way to lower payroll expenses is simply wise
resource management. overtime, at time-and-a-half worse,
should be kept to a minimum. if possible, allow employees
to take compensatory time or be flexible with their schedules
in lieu of overtime pay — be creative! Examine employees’
workloads at various times of the year. For example, if year-end
is a particularly busy time for a certain group of employees,
while the spring and summer months are slower, determine if
these employees can be asked to do more during these times
of year. do certain employees have “discretionary” times
during their workdays or workweeks when they could take on
additional duties?
it’s also important to reward good time management and
build these recognitions into your corporate culture. recognize
employees who find ways to save time or reduce duplication of
work through low- or no-cost methods (“social” rewards such as
pats on the back, mentions in a newsletter, a gift certificate to
a modestly-priced restaurant, etc.).
six stEps to HElp Your CompanY groW in CHallEnging EConomiC timEs
a good automated time-keeping system can also be a time
and money saver. this system should be integrated into the
company’s payroll system. Without such a system, work rules
regarding penalties for lateness, allotted times for breaks and
meals, and grace periods are often ignored or circumvented.
With an automated system, work rules are built in. penalties
are applied automatically when employees break work rules,
and it’s reflected in their paychecks. also, consider reducing
grace periods altogether.
lastly, it’s essential to understand how every employee uses
his or her time and to determine if they’re being as efficient
as they can be. the simplest way to do this is to have each
employee keep a log of their activities. in addition, ask
employees what they would like to do if given the chance.
Employees who want to advance in the company will often find
time to help in other areas.
Step 5: improve productivity by utilizing technology.
the #1 technology inefficiency facing businesses is not spam,
viruses, or a lack of funds for new technology purchases.
it is underutilization of the company’s existing technology.
it’s common for companies to invest in technology such as
hardware, networking, or software. However, it’s expensive
and consumes a lot of employee energy and patience just
learning how to use it. after a typical tech install, everyone is
exhausted, the company is out of money, and everyone’s job
has been influenced in some way.
at this point, it’s typical for everyone — employees and
managers — to want to move on and forget about the
changes for a while. many workers don’t want to have to learn
any more or do more than they have to in order to get paid.
additionally, no one has the mental reserves to look back
at what they’ve been through and do a post-implementation
audit. However, that’s just what’s needed. the most important
question to answer is: did you get what you paid for? usually,
technology is implemented in the least painful, quickest way
possible so that you can “get the bills out” and get on with
six stEps to HElp Your CompanY groW in CHallEnging EConomiC timEs
the business. as a result, the company has missed a
golden opportunity to improve processes, enhance
information integrity, and ultimately benefit decision-making.
By not seizing this opportunity, the company didn’t generate
full value for its investment.
the solution? Without spending another nickel on new
technology, get the maximum value out of what you have.
this requires ongoing leadership from the top and continuous
attention. instead of being satisfied doing what you used to do
on paper, but with a computer, re-engineer the system to achieve
the true benefits of technology — increased speed, reduced size
(think: no more binders or file cabinets), greater mobility, and
reduced costs. this requires a leader who is visionary and takes
risks on new ways to do things, not a “we’ve always done it this
way” stick-in-the-mud. always remember that installing a system
is the beginning of a journey of continual improvement for your
business, not the end destination.
Step 6: reduce property & casualty insurance costs.
When looking at ways to reduce property & casualty insurance
costs, don’t risk a lot for a small amount of premium savings.
analyze your risks and consider the odds. don’t risk more than
you can afford to lose. Consider the basic principals of risk
management, that is:
n What losses can you avoid?
n What losses can you prevent through loss control and
prevention?
n What losses can you afford to retain?
n What losses can you transfer to someone else via contract
or other method?
n What losses do you want to insure against?
When you decide which potential losses you wish to insure,
don’t focus solely on price but look for broad coverage with an
insurance carrier that understands your business or niche and
is financially secure. Work with a trusted agent or broker who
will do periodic reviews of the company’s insurance program,
six stEps to HElp Your CompanY groW in CHallEnging EConomiC timEs
its claim history, and its loss prevention activities. obtain
evidence of insurance coverage and certificates of insurance
from your vendors, suppliers, and subcontractors so you don’t
get stuck paying a claim that should be paid by someone else.
another way to lower premium costs is to increase deductibles.
You can look at higher deductibles for your auto comprehensive
and collision coverage, property coverage, building and
contents, and a deductible on your general liability. in many
states, businesses can have a small deductible on their
workers compensation plan, ranging from $100 to $25,000,
which creates savings of anywhere from one to 15 percent of
the premium.
Every business owner needs to review his or her claim
frequency and severity and analyze risk retention capabilities.
if you can afford to take more risk, consider loss sensitive
insurance programs, which charge a premium based on the
company’s actual claim history.
review the amount of insurance you have on your building and
contents and be sure they are current with the appropriate
replacement value. this exercise prevents you from over
insuring or under insuring your property. are the values
accurate? With a downturn in the economy, are you reducing
inventories and supplies, and if so, should you lower your
content’s coverage amount? if you have not had appraisals
done on your property recently, now is the time.
at no time should you cut corners on risk management
programs, loss prevention, or claims management processes
and review. if you lose focus on safety initiatives or workplace
safety standards, fail to use protective devices and
equipment, or fail to properly maintain plant and equipment
or production standards, you may see higher future insurance
premium expenses. these will come through higher workers
compensation experience modification factors and higher claim
frequency, which will add to insurance costs. You may also incur
extra hidden costs in terms of lost productivity, lower employee
morale, and loss of reputation and standing.
six stEps to HElp Your CompanY groW in CHallEnging EConomiC timEs
Finally, if you find that you need to downsize employees, be
sure to have an employment practices liability policy in place.
use the resources of your d&o (directors and officers) or
management liability insurance carrier, including their legal
and human resource experts, to be sure that appropriate
procedures and risk management processes are followed.
this will avoid or mitigate costly wrongful discharge suits
and payments to employees that lose their jobs, as well as
potential fiduciary liability claims.
trusted advisers are Here to Help
in tough times, the tendency may be to avoid talking to service
providers, as they can seem to be trying to sell something, but
the best of them can offer guidance and advice that provide
value and save cost far beyond their fees. and history has
shown that companies that focus on growth when times are
tough are companies that succeed. through all past economic
crises — even the great depression — the companies that
advertised the most, streamlined their operations, strategically
cut costs, and focused on growth over survival consistently
fared better than their competitors. moreover, they continued to
fare better long after the economic downturn had ended.
the choice is clear, and the steps are straightforward for those
who aren’t afraid to take them. smart business owners will
take Franklin roosevelt’s advice and remember that the only
thing their business has to fear is fear itself. Contact your Cpa,
insurance agent, or technology advisor, or if you would like
another perspective, contact CBiZ.
© C
opyr
ight
2009. C
BiZ
, inc
. n
Ys
E l
iste
d: C
BZ.
all
righ
ts r
eser
ved.
www.cbiz.com