Are you a Business owner or just Self-Employed?

Many people who believe they own a business are in reality self-employed. Now, if you’re self-employed by choice it’s fine by me. However, make sure you fully realise the risks and negatives:

  • It’s hard to take holidays and days off
  • Your business has no value - no one will buy your ‘job’
  • You need to make sure you’re fully insured against being too ill to work
  • Be sure you have an exit strategy and strong pension/investments
  • Keep cash in reserve - you need to be able to weather a storm
  • Beware - if you aren’t working, you aren’t getting paid!

If you have all the above covered and choose to stay self-employed that’s great! It’s good to be doing exactly what you want to with a secure future.

But if you’re working alone and don’t have all the above covered, you might want to build a business. Our definition of a Business is a profitable commercial enterprise that can work without you.

If you’ve set up a limited company and call yourself a Business Owner, just consider whether you really own a business or you’re actually self-employed with a business name. The vast majority of ‘businesses’ consist of one person and don’t meet our definition, don’t have all the above points covered, and the owner runs in circles trying to do everything. Many tell me confidently that they don’t ever want employees. The reason they don’t want employees is because either they can’t afford them yet, or they don’t want the responsibility. Isn’t that interesting? If you employed someone and, as a result, the business made less additional profit than was being spent on the employee... it would be a bad choice of employee! Let me be clear - the reason you employ staff is so that the business makes more money.

Say you spend £25,000 per year on a new employee, you’re going to want to see the business generating £50,000 or more additional profit per year as a result. This might seem obvious, but I continually speak to people who haven’t got their head around this and think that an employee is a cost they can’t afford. In terms of employees being an extra responsibility or hassle, I understand, but it’s often a feeling or a fear that comes out of a bad experience or misunderstanding. Someone recently commented “I’m not sure I could generate enough extra business to cover the cost of one employee, let alone a team!”. My question in response was “would they be working for you, or would you be working for them?”. I admit there are plenty of bad employees around who will sit and do nothing unless you’re hassling them. But if that describes someone who works for you - why did you employ them and why do you continue to? Deal with it, you get what you tolerate. When you think of employing someone, consider whether there is potentially enough business out there that your company can gain to more than cover their cost?

Next, consider who’s going to get that extra business. Do you need to prioritise employing a salesperson or marketing person to get more business before or at the same time as an employee that will generate more work or handle more admin? Then, when you’re interviewing and certainly when you recruit someone, make certain that among other goals they know exactly what they need to be generating to keep their job and maybe to achieve a pay rise or promotion. If you have work that isn't yet or never will require a full-time employee, consider the alternatives.

You could employ someone part-time, or you could use a Virtual Assistant (VA). Using a good VA can be an excellent solution because you can contract as little as an hour at a time as needed, and get the specific skills you need at the time. What takes you three hours might take a good VA only an hour, so the saving potential is excellent. The necessary skills to manage employees are relatively easily learnt - there are hundreds or probably thousands of books on the subject and endless training courses. But first you need to start with a clear understanding and belief that you employ people to generate more profit for the company and that you don’t do the work for them. If someone has to work late... it’s the staff. If someone needs to get more money in to pay the bills... the staff need to do it. Your job is to set the direction, employ the team, make sure they know what they have to achieve, then make sure they’re constantly motivated and achieving the goals.  

If you’ve found this blog useful, why not subscribe to our monthly newsletter for more – click here!

By: Rob Pickering

Test & Measure

Half the money I spend on advertising is wasted; the trouble is I don’t know which half.

It always astonishes me how business owners will spend money on an advert and never actually know if it’s generating more profit than the advert is costing. I saw a great recruitment advert last year seeking a Marketing Manager. Written by the business owner, the advert read “Job description : For every £1 I give you, you’ll generate at least £2 of profit.”. That was literally the whole job spec! The reason I love it is because that encapsulates the financial purpose of successful marketing - you invest and expect a higher return. 

It’s common in marketing and business generally to speak of R.O.I (Return On Investment). If you spend £100 on marketing and it generates £200 of profit from the resulting sales, that’s an ROI ratio of 2:1 or 200%. As long as your ROI is greater than 1:1 you’re on the right track. Do you know the ROI on all your marketing investments? You must! Whenever you start a marketing activity, put in place a procedure to measure the results. Let’s say decide to try a small advert in your local paper and it costs £100. Ensure that you and anyone else answering your phone, checking emails or otherwise serving customers asks the question “Where did you hear about us?”. And at the same time, keep track of how much the customer spends. Assuming your advert resulted in 10 sales of £20 each, you got £200 of sales for your £100 investment. But before you celebrate too quickly, what’s your profit margin?

If it’s 50% you spent £100 to make £100. You wouldn’t want to keep doing that! So next week change the advert - a better headline, better call to action, and place the improved advert. The second week with your improved advert you get 20 sales so you’re winning with £200 profit for £100 spent. Now you can celebrate. You tested an advert, measured the result, tested a possible improvement, measured again, and saw better results. That’s usually how it goes… but not always. If the results had been worse the second week, you’d know that what you tried was a bad idea and the next week try something different. Keep testing and measuring to see what works and keep improving your results. I often see business owners just doing the same old thing, over and over, never knowing if it’s working OR if it’s the best ROI. Use test & measure to try different advert designs, different offers. But also use it to test between different advertising media - different newspapers of course, but also internet advertising, social media, LinkedIn, Google Adwords, and so on.

Stop spending on marketing that isn’t working. Test and Measure all the time and ensure that your marketing investment is delivering the best possible return.  

If you’ve found this blog useful, why not subscribe to my monthly newsletter for more – click here! Don't forget to pop on over and 'Like' our Facebook Business Page so that it's bookmarked and easy to find in future! Daily updates, quotes and useful articles to help grow your business!