Grow Right

It takes considerable cash to Grow, and you can reduce the cash demands if you have the correct infrastructure to support the growth.  If you are not certain what this means please read about Stabilization.

To prove this point let's look at a typical growth scenario:

You need to hire a production person, someone who directly makes your company money every hour.  You interview several people and select a person whom you will pay $20 per hour or $800 per week or $3,200 per month, gross pay.  Even without considering any of the taxes we can quickly see how much cash it takes to hire this person.

• You hire them the first day of the month so you will pay $3,200 out of pocket the first month

• The first two weeks they are in training so there is no revenue generated from their efforts

• They are being trained by someone with experience who you pay $25 per hour or $1,000 per week or $4,000 per month

• The person training is operating at 50% production due to the training so you are loosing $500 per week with this person, plus the $1,600 you are paying the new person

• Week three the person produces at 50% so you are only loosing $400 that week, and the trainer is now at 75% production so you only lost another $250

• Now week four the new person is at 100% and so is the trainer so the experience is over - NOT!

• Thus far you've spent $2,750 out of pocket

• Your company makes an average of 30% margin so for the new person to cover the first month of training they need to generate an additional $9,167 and this is in addition to the base they must produce to pay their own way

• What happens if they take longer to train?

• What happens if they do not produce like you thought they would?

• What happens if they were trained wrong?

• What happens if you have to hire two or three at the same time?

• Oh yes, just for fun let's add some benefits into the mix so it increases your cash demands by 25% of their salary

• Do you have to purchase a vehicle or a desk?

• A computer, phone, fax, printer, business cards, copier or other required equipment?

• Hiring a new person can easily cost $10,000 and can you afford to float that out of the company savings?  If not, can you use a Line of Credit with the bank?  If you can, how is it collateralized?  What can you loose if you hire the wrong people?

So, does it take cash to grow?

Part of what we do is help people Grow Right, meaning to Grow at a pace they can afford.  To Grow properly and in a controlled fashion we recommend having a business plan that guides your company.  If you need one please attend our 12-hour BRS business planning class so you can be successful in your planed growth.  You can also give us a call at 303-678-2927 if you would like to discuss how to help your company Grow Right.