Recently, my client came to me when he discovered that the person he had in-house managing his business was stealing from him. Beyond the emotions of betrayal and violation of trust, he now found himself in trouble financially. He learned that this manager had not only embezzled funds, she had obligated the business to a very expensive marketing campaign, and uncontrolled spending for who knows what else. Staff morale was at an all-time low and they were leaving and filing labor grievances. As you can imagine, sales were plummeting. This unscrupulous manager and her decisions had pushed this business to a breaking point and to the precipice of financial failure.
As business owners, we all want to believe that we have hired the right people. Sometimes, we make this decision too hastily. Other times, we linger and think about it for a long time and the decision is never made, caused by “paralysis by analysis.” In both cases, the business decision making is faulty or crippled. None of us has a crystal ball or can foretell the future.
So, in my client’s situation, what could have been done to avoid this situation? And now that we are deeply in it, what happens next? What are our options? Establish clear criteria and job descriptions for all positions that you need to staff. What is the job and its responsibilities? What specific experience, training, licenses, education, and skills are required? Vet your hires. Interview several candidates. Compare their skills and experience objectively. Reference and background checks are not foolproof, but they can let you know some warning signs. Why are there gaps between jobs? Why did they leave their last jobs? Do they have a criminal background? Did you speak with anyone who has a personal working experience with and directly supervised them? What were they like to work with? Did they play nicely with others? Do the dates on their resume match the dates of their employment? Once you place someone in a position of leadership or management, do not allow them to set off on their own and make autonomous decisions. Stay in constant communication with them. Make sure they know what is expected of them and what the expectations of their position are. Let them know that their performance will be monitored. Clearly define their role and responsibilities regarding duties, communication, decision making (operational, marketing and financial) and business culture. Train them and ease them into their responsibilities while you monitor their performance, guest, and staff interaction. Do not increase their responsibilities or access to financials, money, or confidential issues until you are certain that you can trust and that they have your business interests at heart. Have a spending plan and a budget and stick to it. This plan can be developed with your management team. Don’t be distracted by the next new shiny thing that comes along. If it is not part of the plan you don’t need to buy it. Clearly define the number of treatments you expect to perform with that new shiny laser, how much revenue you expect to generate, and what your profit per service will be if you decide to acquire it. Work with your management and let them know what they are responsible for managing and controlling on the budget. Develop marketing plans with your team. Similar to the acquisition of new equipment, investing in a marketing plan requires a SWOT (Strength-Weaknesses-Opportunities-Threats) Analysis and defined and clear expectations. A marketing plan should be implemented with the expectation that it generates revenues of 10 times the cost. Watch and review your financials. Have usable financial tools that tell you where you stand timely. These tools should be accessible to you constantly so you can monitor what is going on.
Compare this month to the same month last year. Note and question any unusual variances in number of guests, expenditure per guest, productivity, and profitability. If you are operating profitably, great. Know the total amount of your monthly overhead expenses. Know whether these have increased over the same period last year. Your numbers and profitability should be similar or better than they were during the same month last year unless you are aware of any extenuating circumstances. If these numbers are down or look weird, be prepared to step in and take immediate corrective action. My grandfather, a very successful businessman told me, “You will never go broke making a small profit.” If you have not been profitable, focusing on bringing in new sales will only increase your losses. Make sure what you are selling is profitable and understand how many services you need to do every day in order to break even. Know that you are profitable before growing or expanding your operation. If you need to take on new debt, take it on for acquisition and growth only. Do not take on debt to cover financial losses.
Don’t try to do everything yourself.
Stay in your lane. Do what you are trained and licensed to do. Ask for help and listen.
If something isn’t working, don’t be afraid of change. Take action.Not every opportunity (or person) is a good opportunity. Just because something looks like a great deal or a once-in-a lifetime opportunity, it isn’t. Step back, evaluate it, be clear as to what your expectations are for growth and profitability. If it looks positive and feasible, move forward, but only with a defined plan.
We are currently taking these steps with my client. Unfortunately, we are climbing out of an uncomfortable hole we have found ourselves in. Hopefully, our recovery will be quick and we will soon be back on our path to success.
Wellness Capital Management is always available to help you make good decisions. Call us now for your free initial consultation.
Be well,
Monte Zwang