Hiring Risk vs. Investment

Business brain, episode 585 for Wednesday, September 25th, National Daughter's Day 2024. Greetings, folks, and welcome back to Business Brain, the show where we take a few ideas, we dissect them, we crunch them, we analyze them, we use them to tune our business brains, and every single time we get together. Our sponsor for this episode is shopify.com businessbrain. That's where you can go to sign up for a $1 per month trial period. We'll talk more about that in a little bit. For now, here in Durham, New Hampshire, I'm Dave Hamilton.

And out here in Northern California, I'm Shannon Jean. Man, I love Shopify.

Same.

They're the best.

They make life super easy. Yep.

Yeah, yeah, they're good. And help a lot of small businesses, which I love.

Which is great. Yes, love it.

Hey, we talk about org charts a lot. We talk about. Maybe a lot. But enough about why it's so important to create an org chart. Even if you're the only person in the company, you put your name in every one of those boxes and it helps build your, you know, break out whatever all the roles are that are required to run your business. So as you start hiring people, you can, you can pump and pump them in. I saw this thing the other day that I kind of, I thought was pretty good is adding accountability to your org chart. So instead of just like putting the function, the name of it, okay, you know, Shannon, and he's the cfo. That would never happen. But because I'm not the finance guy or Shannon is a sales, sales manager or whatever, all these things.

Sure, yeah. Add. Well, I mean, when you start the business, you would be the cfo, whether you, whether you're good at that or not.

Yeah, yeah, yeah, that's true. But what, what. In addition to you say, okay, you're going to talk about what your role is, what the role of that person is in that. So if you're the CFO or managing you and your name's on there, you are supervising payables, overseeing receivables. You're managing the budget and you're creating financial forecasts.

Okay. Adding responsibilities.

Responsibility. That's a better word.

I like that.

Into the chart. So anyone that looks at the chart and says, hey, I have this thing, or I have an idea, I have a problem I want, I need help with, they look at the org chart and they know who to go to because it lists who's responsible for what. Because it may not be, you know, it may not, you know, on the, on the surface think that, wow, if I have a budget question, who do I go talk to? Or if I, I'm interested in, I got a point person I want to introduce that maybe we could sell to. Who's the. Is it this salesperson?

No, this is brilliant because obviously on, on day one, assuming you are starting as a solopreneur, it doesn't matter, right? I mean, it's like it's all the questions all go to you, but if you, once as you start to grow the business, the questions are all still going to go to you.

Yeah.

And you have to transact for every one of them. Even if you're an excellent delegator, if you've got people asking you who to go to, you're not as excellent as you think you are. And I, and I say this as someone who is a career terrible delegator. Well, I'm good at delegating. I'm just terrible at delegation. Like if once I decide to delegate, I know what to know how to do it. Like, I have the skill. It's just I don't do it as often as I should. And, and if you can build a chart that fields those requests before they ever make it to your desk. That's huge.

And put it on the, put it on the wall right outside your.

Put it on the wall. Yeah. Does this answer your question?

So when they're walking in, it's like, oh, like. And I do believe obviously you want that interaction with your employees, of course. But you also want to encourage them to go to the right person because that's efficient. It's efficient, yeah. You want to do it. So I thought that was pretty cool. So adding the to your org chart, I think it's it, it, you know, it's a great upgrade to your org chart.

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Okay.

You know, all right, give it to me. Yeah, Backbeat. I, I know that adding another sales rep would help us, I believe.

All right.

I mean, it's, anytime you do anything, it's, it's, it's an unknown. It's a risk. Right. But I'm fairly confident that I would like to move a lot of the stuff that I'm doing to somebody else so that I can do other things. Um, I, but, and that's fine. Like, that. I, like, all of those things are great. And like, you know, it should be business one on one or at least business 201, I guess. I generally, when I add new people to the team, I generally fund it out of cash flow. Okay.

Okay.

I plan to fund it out of cash flow. Right. I know.

Yes.

And I always, I, I make a commitment to myself whenever I, I bring a new person on that I can do this for six months. The business can, can afford to do this for six months. Like, we're going to do this again. Like, you know, your, your thing with the guy that you were going to hire for a year, if it doesn't work out, I don't have to keep them around for six months. But I, I don't question the finances of it for six months. I know. Okay. We've, we've looked at this and all that stuff, and all of that's true. I can hire out of the war chest of the business, but I'm not sure I'll be hiring out of cash flow. I'm not fully confident that cash flow might cover this. And then we're great. But either way.

But you may go in the hole for a certain period of time, correct?

Yep. And I'm okay with that, but it's an atypical path for me. So, you know, this might actually open up a whole world for me. Right. Hiring out of. Hiring out of the war chest as opposed to cash flow. Because basically I'm hiring out of past cash flow. It's not like.

Yeah. You know, and is this person. It's a. You paying. It's a commission salesperson.

It's going to be both. It'll. It'll be a base salary that's fairly low in terms of what their job should earn long term. Right, got it. So because, because it sells like that's, that's how that works.

Of course. So you're somewhat protected there because you're not out and just hiring a full cost. Another employee that you're going to pay whether they get the job done or not.

Correct. And commissions are paid out of cash flow. So I guess in that sense it's half and half. It's half and half. Yeah. Yeah, yeah.

Okay. Yeah. And I mean, except.

Except a lot of the commissions that I'll be paying are things that I have not paid commission on thus far with the business.

Oh.

Because I'm taking.

That's a total different conversation.

Well, that's interesting. Yeah. I'm taking clients that I have.

Ah.

And moving them to someone else. So business from these clients has. I don't pay myself a commission.

Yeah, I understand.

Yeah.

Yes. Yeah, whatever.

So. So there's. So there's that. Right? Yeah, that's right. So in a sense, it is a new burden on cash flow in both ways. Yes.

Yeah, yeah, yeah. I think that if, especially because the context is it's going to free up more time, your time, that's the king. That is going to allow you to exponentially accelerate other things, whether it's, you know, I'm focusing on this business now. I'll have more time. I'll have, you know, a few hours a day extra or whatever it is. And even, maybe not even the. Your time during the day, but your, the time in your brain that you have, you're always thinking of, oh, I've got to follow up with this guy. I've got to manage this person, this client. Grant you. You're now going to be just managing that. The salesperson.

That's right.

You're going to give them. I mean, it's going to get some house.

There will be, there will be a transition period, of course, where I'm transitioning to her and like doing these things and stuff.

I think that's I mean, I, I, we've done very similar things. I have one question that's, I don't know if it's related to this or not, but I'm curious.

Doesn't matter.

We, we always get, when we gave house accounts, we called them if, like, hey, you're going to immediately get these house accounts that we already have and you manage them. But after a certain period of time, we reverted house accounts back to the company. So the, we always had a carrot for the salesperson to go get new business. It wasn't enough that you just kept your good. So, and it varies with every business. It could be that every year a certain percentage of your older accounts, these historical accounts, maybe they're two years old, you're going to not get commission on those anymore or the commission structure changes.

It's different. Yeah, yeah.

It's different because it's maintenance mode. It's not, you're not selling as much anymore. And that's a different skill. And we had relationship people because it.

Became so in our bit. Keep going. Actually, I have an answer for this, but go ahead.

The way I learned this is I realized that after a while, the customer service department becomes more important to the relationship than the salesperson. The salesperson is getting the customer and managing it, especially in the beginning, going, you know, bringing these in, these people selling everything, getting them going, and they need to be rewarded for that. But after, I don't know, a year, let's say use that as an example. The customer service department is managing the relationship and the success, you know, it's customer success. They're the ones that making sure everything is working great for that customer. So we would always revert some of those accounts back to the house, as we called it. Not like I owned a casino, but.

I, no, this is interesting. Part of the reason that I'm doing this is, you know, I, I, I always classify periods of time with backbeat as either periods of time where we were, we had so much business that it, and it really is dependent on the economy, so much of it. Sometimes the economy is such that we are just order takers and other times we actually have to do our job and sell. Right.

Sure.

We are currently and have been for about the last year and a half the way the economy is. We have been in a period where we have to sell, gotta sell. Yeah. And a lot of these house accounts that were on kind of just, I don't want to call them maintenance mode, but kind of autopilot, they now need more sales of our attention. So it is. It is. That's. That's the reason I'm doing this is those accounts are no longer just in the customer. They aren't house accounts. Right.

I mean, they're not house.

Yes, They, I can't treat them as house accounts.

So. Yeah. I think the takeaway for me is that you have to be able to go both ways. Yeah. So if the salesperson finds themselves back into like, wow, man, we really have to get back involved. Yeah. They need to get their, their, their commission back or their commission back. And I think that's great that if that happens because you, these people are tools in your arsenal. Right. They're your soldiers. So you have to. You reward them one way or not. And you know, I was always happy to like, okay, we're taking these back. But you know, we, we're going to increase some benefit or your base.

Sure. Yeah. You, you renegotiate in a way that, that doesn't. It.

But you just can't keep it. Those commissions just can't keep going like this. This, this, this. It doesn't work.

No, it does not work. And the problem.

Do another show on this, Dave.

Yet the salesperson's dilemma, right, is that, that you know, that, that the house will always wind up taking your commissions back if you, if you wind up earning too much. It's too much. And, and I always, I dislike when I'm in a position where that has to happen.

But yeah, but yeah, love to hear how you manage your salespeople, how you hire, you know, feedback, business, brain show. Or find us up on X at Dave Hamilton or at Shann. Us. Okay.

Yeah, come at us. Do at us, please. Yes, yes. Keep living that charmed life, folks, and we'll see you Friday.