What is the cost of being short-staffed?

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Most business owners can easily relate to the emotional toll being short-staffed causes. Knowing exactly the cost of being short-staffed or hiring the wrong person for your company can be difficult to measure, however.

When surveyed, 62% of small business owners state they have made a “wrong” hire or bad decision a time or two when it comes to hiring.

Five ways it can cost a business: 

Bottom line, profits, moola, cash in the bank: Whatever you want to call it, employee turnover costs money. There is the time it takes to hire, the training time to bring a new employee up to speed, the loss of productivity that can equal lost sales. The average cost for each person who quits is 125%. What does this mean? For example, if you hire an hourly employee for $20 per hour and that person resigns, it will cost you on average $25 per hour to hire, train and get the next one to be proficient. I realize this is hard to sometimes wrap our heads around, but your time as the business owner equals value and this cost affects the direct bottom line.

Grass is always greener theory: There has been a social media trend to celebrate quitting your job on social media. Hashtags such as #quitmyjobtoday #peaceout(insertnameofbusiness) have started to become a trend. Other employees watch this happen and then start to notice the aspects of their job that they do not like and focus on the negative instead of what your company does offer. The grass-is-always-greener theory then kicks in, which is when you look at other companies and think they will be better to work for — their grass is greener than my yellow lawn. Then they, too, quit, which starts point No. 1 all over again: turnover cost. Hiring the right people from the start will reduce this phenomenon. 

Stunts company growth: This is a real struggle. How can you as a business owner proactively focus on growth plans, strategies and networking when you are constantly working in the business? It is extremely difficult to navigate this when you are constantly reacting to the revolving door of employees. In addition, if you are in the business of creating a product, how can you produce enough products to meet demand without staff? You can’t. I see it often, companies turning off orders or turning down business.

Decreases profit: When business owners are faced with mounting work and not enough employees, quick decisions become the norm. Making quick, reactive decisions might not be in the best interest of the long-term growth of the company and profits. We might pay more for services or delivery because we don’t have the time to go get them ourselves. We might not have time to analyze costs and instead buy what is easiest to receive. Meanwhile, we pay overtime to our current staff because we simply do not have enough. All these little reactions erode our profit margin.

Increases burnout of owners: Sadly, I am talking with more and more business owners that are frankly tired. They are starting to question if they can continue at this pace. If they don’t start finding dedicated staff, they are close to throwing in the towel. What a heartbreaking way to go out. Most of these business owners have passed the scary five-year mark, they have more business than they can handle, they offer an excellent product or service, but they just don’t have the right bodies to assist.

What can today’s business owners do to start building sales and reducing costs when it comes to employee management?

The first step is recognizing what we did before to recruit talent is not as effective and it is time for a new strategy to hiring.

Jennifer Kok runs Next Wave Business Coaching and focuses on helping small business owners. She can be reached at jen@nextwavebusinesscoaching.com or by calling (616) 821-9623.

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