One of my clients, "Walker Promotions", sold business promotional items like coffee mugs and logo shirts. The business employed thirty people and had been growing nicely.  The problem was that overhead increased faster than sales, squeezing profits.  The business went from a good profit as a 15-person company to a small loss with 30 employees.

When business grows, we should be able to obtain a better division of labor.  Each person should more specialized and better skilled on the job. In addition, some tasks can be delegated from higher paid staff to less costly employees. In principle, as a business grows, profit margins should increase; not decrease.
 
King Solomon observed, “The more you have, the more people come to help you spend it. So what good is wealth--except perhaps to watch it slip through your fingers!” (Ecclesiastes 5:11, NLT)
 
I advise clients who want to grow their business to write out an organizational chart for their future, not just the present. The chart helps determine in advance what skills the next hires should have as well as how tasks should be assigned.
 
Here’s an example.  Walker Promotions had six people in the accounting department.  Each handled a wide variety of tasks:  billing, handling customer questions, paying suppliers, and paying operating bills. Each person did everything which resulted in reduced efficiency. I suggested that management reorganize the department using the supervisor to field customer billing questions and assign different people to each facet of accounting. This allowed each employee to develop increased knowledge and efficiency. In addition, simpler tasks, like paying approved vendor bills and ongoing business expenses, were delegated to a less costly person.  

A business owner asked me how he could cap the commission he paid his best sales person. The concern was that this salesperson was going to make more than the owner. The business made around $10 million in sales and employed 6 salespeople who received a commission of 9% of gross sales. The “star” sold $3 million, earning $270,000, a high salary. The next best salesperson earned just over $100,000 while others earned between $60,000 and $75,000 per year. 

When we use outdated business tools, it requires more work from ourselves and our staff.  King Solomon wrote, "If the ax is dull, and one does not sharpen the edge, then he must use more strength; but wisdom brings success." (Ecclesiastes 10:10, NKJV). Poor tools frustrate everyone because everyone works harder for fewer results.

Last year, I was advised to change from my IBM compatible PC to an Apple. My IBM was getting slow at times and requiring frequent restarts. The Vista program running my computer was unstable, causing performance issues. Besides, an Apple computer would be compatible with my IPad and Iphone. I was reluctant to change, but eventually took the plunge.

To keep your business tools up to date, make a list of all your equipment.  Examine your cash register, your computer software, other office equipment, and your plant machinery. Ask yourself, is each ax sharp?  Check to see where you need to repair, upgrade, or replace.  Focus on changes that improve productivity. 

Some clients I work with experience cash flow challenges.  They need to increase day to day income. One common issue is failing to bill promptly. Businesses don’t get paid until they send out invoices. 

I don’t watch much television; but while recovering from shoulder rotator cuff surgery, I caught Restaurant Impossible on the Food Chanel.  I found that it provided several worthwhile lessons we can apply to our businesses. While the show is scripted and dramatized, it still conveys solid principles. You can learn more about the program hosted by Robert Irvine here: http://bit.ly/i2LrOt .