The biggest mistake I see from business owners is making rash decisions in a vacuum without thinking about the long-term or holistic effects. To help ensure you don’t make any decisions in a vacuum, I’m continuing my examination of common risk scenarios for small businesses, so you can avoid the pitfalls and plan for success. (Part 1 of this series is here.)
Risk scenario 3: Making a big hire
Why are you making this hire? Evaluate it not just from an immediate need, but also think about what success looks like six months or a year down the road. And think about whether that success is predicated on something else. For instance, if you’re hiring a new salesperson because you’re going to be launching a new product, and you want to get this person specifically focused on that, what happens if that product isn’t a success? Will this person still be needed? Can their skillset be re-engineered successfully for another part of the business?
And don’t forget to consider the total cost of an employee. Salary is just one piece of it. There’s benefits, payroll taxes, insurance, supplies — what we call the “fully loaded cost” of an employee. Another thing to consider when you’re thinking about expanding your staff is what effect it’s going to have on your existing staff, especially if you’re bringing in an outsider. How is that going to affect people’s opportunities down the road? You can’t placate everyone, but bringing in new people and roles will have a ripple effect on your current staff.
Risk scenario 4: Launching your own business
OK, this is a biggie. There is something to be said for being your own manager and your own boss. But starting your own company is often romanticized. At the end of the day, you need to really think about what it’s going to mean to have to make every single decision for your business.
Start by asking yourself if you have the skillset to run a business versus the skillset of what the business is. They’re two VERY DIFFERENT THINGS.
Say you’re a writer, and you are amazing at what you do. But starting your own business means you also have to do businessy things like registering your new business entity and marketing your services. You need to know how to create a proposal, and invoice and get paid and, and, AND…
Many people make the mistake of not considering those things. They’re working in a company, and they think: “Oh, I can do it so much better than this company is doing it. Why don’t I just do it and keep all the money for myself?” There’s a lot that goes on behind the scenes of running a business. It’s more than just doing the job; it’s running the business. Ask yourself if you even want to do that. And do you have the skillset to do it? It’s not really so romantic, so think hard.
There are a lot of risky things that happen in business that are out of your control like global pandemics and interest rate hikes. The best thing you can do to mitigate risk in your business is to have a really good understanding of what you do and how you do it, so you can control it on the inside.
While it’s impossible to consider every single scenario, putting pen to paper and talking about what would be the best (AND WORST)-case scenario of the decision you’re making, will help you outline whether it’s a good idea or a bad idea — and figure out how to put in guardrails. And if you’re overwhelmed just thinking about it, call me; I’ll help you.