Focus on Assets Boost Productivity Reduce Liabilities

Introduction
In the dynamic world of business, especially for independent retailers, the balance between assets and liabilities defines your financial health. With rising costs and economic changes, it is crucial to scrutinize each part of your operations. Part 5 of our “Hitting the Wall Series” delves into a critical decision every business leader must consider: Do you focus on your assets or your liabilities? In this article, we will explore how people, often regarded as your most valuable assets, can either boost your productivity or become a liability when not utilized correctly. We’ll analyze productivity measurement, examine expense management, and discuss ways to enhance your team’s effectiveness for sustained growth.

Understanding Your People: Assets or Liabilities?
People are undoubtedly the backbone of any organization, and their capacity to contribute varies based on the opportunities you provide and the systems you set in place to measure their output. Employees who contribute to productivity embody the essence of being assets. Conversely, those whose efforts do not effectively convert into business gains can pivot from assets to liabilities quickly. A fundamental metric to measure this impact, especially for sales roles, is selling cost.

Measuring Selling Cost
Selling cost is a reliable measure of the productivity of your sales staff. It is calculated by dividing gross wages by net sales. Consider weekly, bi-weekly, monthly, or annual assessments to ensure your team’s contributions align with business goals.
Let’s take Susan Sailor as an example, whose gross wages are $950 weekly based on her $25/hour rate for 38 hours:

Week 1: $5000 in sales, selling cost is 19%.
Week 2: $7000 in sales, selling cost is 13.5%.
Week 3: $10000 in sales, selling cost is 9.5%.
Week 4: $9000 in sales, selling cost is 10%.
Total sales: $31000, total wages: $3800, selling cost for the period: 12.2%.

Adapting to Wage Increases While Protecting Profit Margins
Today’s market pressures often necessitate an upward adjustment in wages. While this change represents an increase in variable expenses, it opens avenues to rethink how other expenses, such as rent, are approached. For instance, if your rent is a fixed cost annually, revenue as a percentage marker needs revisiting.
Improving staff productivity could substantially increase revenues, thereby lowering rent as a percentage of overall expenses. This efficient repurposing leads to a higher net gain and better management of fixed costs amidst increasingly variable expenses.

Focusing on Human Assets for Growth
Assets aren’t solely confined to financial metrics; they envelop your workforce and the value they provide. Cultivating a productive and engaged team directly affects your bottom line. Strategic hiring and development can result in higher revenue, profitability, and mitigated fixed costs. Don’t shy away from investing in talented individuals—measured objectively, talent truly pays for itself.

Beyond Sales: Non-Sales Productivity
Not all roles revolve around sales; hence for non-sales positions, productivity must be assessed differently. Each person’s contribution, measured through KPIs (Key Performance Indicators), ensures that everyone from employees to senior leaders can be accountable to a specific performance number.
Consistent coaching and external consultancy bring new ideas and objectivity. External coaches offer this fresh perspective, validating the ideology that they too, when correctly harnessed, eventually pay for themselves.

Strategic Expense Management
Understanding your expenses fundamentally, by bifurcating variable and fixed costs, provides clarity. It enables creative avenues to reward employees beyond standard compensation and promotes a pathway to enhanced productivity.

Task Checklist for Independent Retailers

Calculate your team’s selling cost regularly.
Evaluate and adjust spending on wages against your revenue growth.
Hire strategically for maximum productivity output.
Engage external coaching for non-sales productivity improvement.
Review and optimize percentage allocations of your fixed costs.
Conduct a Break Even analysis with Indie Insights.

Conclusion
Managing a successful business requires a deep understanding of both people and numbers. By focusing on your workforce as assets and strategically increasing productivity, you can sustain growth and profitability even as wages naturally escalate. With effective measurement and coaching, every person can add significant value to your operation, mitigating liabilities and enhancing revenue. Remember, in a competitive marketplace, it’s not just about how much you pay but rather how productively you harness the resources and talents at your disposal. Strategically focus on growth through your assets, and your liabilities will naturally align towards fewer uncertainties.

Marc Weiss

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