Make your workers income earners, not salary earners

If you look through the questions posed by Aramide on the left hand side (question and answer column), you will appreciate the pains entrepreneurs go through in the day-to-day running of their businesses. Beyond her questions which have been attempted, we shall look further on fundamental issues business operators must get right in order for them to minimise loss and get their businesses out of the danger zone as fast as possible.

The number one challenge confronting small and medium-sized businesses today is how to cope with higher costs of doing business. What often makes these costs go out of control, at times, is the inability to find the right employment strategy to start small and medium-sized businesses with. In a normal environment, before a new business gets a foothold and stabilises to start making profit, it is exposed to huge costs and fewer clients’ patronages. Every business passes through this teething stage. If one now considers doing business in the Nigerian environment that is somehow hostile and harsh to economic activities, one can imagine what budding entrepreneurs are up to contend with in their attempts to operate profitable businesses in Nigeria. In the face of collapsed infrastructures, multiple taxation, poor purchasing power, high unemployment rate and high percentage of the population that are so poor, costs of doing business in Nigeria are ever increasing and can be so unpredictable.

How to cope with this demanding business condition is one tough question businessmen and women have to grapple with. Added to this are the attitudes of greater percentage of today’s Nigerian employees who see businesses as lottery centres where money could be drawn every thirty days without them having to really work for the money.

There are two costs in the books of small and medium-sized businesses that often stand out: staff salaries and promotion costs. One of the costs can be easily controlled but the other, due to high emotional display and quest for quick result, can easily go out of control. These costs are usually big compared to other costs incurred in small businesses. Also due to higher pay in other sectors of Nigerian economy, small and medium-sized businesses are often tempted to use higher pay to attract employees to look their sides. In their attempt to make good success of their businesses, entrepreneurs are tempted to load their businesses with employees who draw salaries and wages that the business may not be strong enough to pay. Not only this, the businesses need to inform and attract customers to buy their products by way of advertising and promotion.

Another incorrect decision often made by small business operators is that they believe employees should be engaged for all identified work positions in their businesses the moment they are starting out. But the reality is that at the early stages of small and medium sized businesses, employees’ capacities are often under-utilised; as these budding businesses will be having fewer clients to deal with and lesser operational activities to handle. Where this is the case, the employees will just be drawing salaries without really having work to do, and the business will be incurring higher costs without corresponding sales and profits to neutralise the higher costs incurred by the business.

Change your staff remuneration tactics

Budding businesses may not need all employees to be on salaries at the initial stage of the venture. Entrepreneurs need to learn to make some people, if not all that work in their businesses to be income earners. In this regard, certain tasks should be performed on ‘pay-as-you-go’ basis at the initial stage of a business. For instance, a new business may not need to hire marketers as full staff employees or employ full time accountant. These positions can be contracted out to professionals who will earn their income according to the level of work they do or on retainership basis.

A better arrangement may be where you need about five marketers, you can engage one or two as full time staff while others can be on ‘pay-as-you-go’. In the same vein, every entrepreneur owes it a duty to train and develop the employees working in his or her business to think and behave like entrepreneurs. The ones engaged as full staff can have their remuneration as a mix of fixed pay and productivity pay. In the same vein, an accountant may not be engaged as staff at first but to be visiting a new business once every month to tidy up the business’ books. What to be paid for these services may not be as much as if a full time accountant is employed by the business.

If a budding business starts by making use of professionals to carry out some of its operations, such a business can later get full time employee(s) to handle the tasks when the volume of work to handle is sufficient to keep the employee(s) maximally engaged. At that level, the professional fees of contracted professionals may be becoming higher than what employees would earn as salary if fully engaged. With this arrangement, an entrepreneur will be able to keep its overheads under tight control and close watch.

BY OLA EMMANUEL (OAKMEDIA@YAHOO.COM)