Have you operated close to the bone the past few years? Many owners have rigorously kept fixed costs and operating expenses low, working longer hours and relying on subcontractors during busier spurts. If your pipelines are more robust and you’re considering hiring, begin by reviewing your organizational chart or creating one. This diagram will help you decide what position to fill by revealing gaps, bottlenecks, and redundancies. How will a new employee shift the accountabilities of current staff?
A skilled field person, especially one who will be supervised by a lead carpenter or production manager, is the least disruptive hire and offers the quickest payoff. Use your production schedule to verify that you have enough work to keep the new person busy for at least two months. Since the increased costs fall above the line on your profit and loss statement, within cost of goods sold, the primary consideration is whether you can maintain the increased workflow at your budgeted gross margin.
With a non-field person, your volume needs to increase exponentially because the added costs must be covered by increased gross margin. If your gross margin is 33%, volume must increase threefold. Thus, an office employee or salesperson costing $4,000 per month would necessitate increased volume of $144,000 per year before you could generate additional profit. Can your production department produce this volume? Can your sales department consistently sign it?
Review your cash flow to make sure you have enough cash to cover increased payroll for at least the first two months. Hiring is rarely a short-term fix — there is usually a lag between hiring and increased productivity. It is best viewed as a long-term strategy and is most effective when it aligns with long-term goals.
—Richard Steven, president of Fulcra Consulting, specializes in helping remodeling companies create and implement effective management plans.
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