Obamacare—there’s plenty of controversy about it. Some contend it’s a good thing because, according to The New Yorker, 96 percent of all small businesses fall below the 50-employee threshold requiring all full-time employees to have health insurance.
Then there’s the other camp—the affected businesses. They’ll have to find a way to increase profits quickly, or cut other costs, in order to become compliant with the health care reforms. Whether or not Obamacare makes sense to you is a separate issue. But one thing is certain: Small business owners have to run their company as efficiently as possible at all times to account for unexpected financial situations like these.
1. Know your average cost of customer acquisition and average customer lifetime value.
Getting customers in the door takes much more work than it does to keep them. High turnover is a recipe for financial turmoil. Instead, as best you can, calculate how much it costs to acquire the typical customer, and how much revenue you make per customer. Look for ways to reduce acquisition costs (adding incentives for referrals is a good one), while doing everything in your power to provide exceptional customer service so your customers stay longer.
2. Use software to help ease the stress.
Quickbooks offers an accounting tool that lets you start small by handling basic accounting help like tracking sales receipts and expenses. Get ready to streamline complex processes so they take minutes instead of hours. But, it also scales with your business, allowing you to do more complex things like managing payroll and generating real-time reports. Tools like ABC Financial’s Merchant Prospect Marketing Services help you send automated email marketing campaigns to keep in touch with potential customers. They also offer unique features like giving people the ability to sign up for your services online. These examples show you what’s out there—keep your mind open to possibilities appropriate for your business.
3. Understand that it’s not all about the money.
Part of efficiency involves cutting costs and streamlining processes where possible. But another lesser known part involves knowing where to spend, and one place to do that is with your employees. For example, Costco pays its employees about $17 per hour on average, while Sam’s Club pays around $10. According to the Harvard Business Review, Costco pays around $244 million to account for employee churn, while Sam’s Club shucks out $612 million, a whopping difference of $368 million. The article also notes Costco experiences the lowest employee theft levels in retail, and generated $21,805 per employee in annual profit, compared to $11,615 at Sam’s Club. Even though you spend more up front, you save more and make more profit in the long run.