Although the National Bureau of Economic Research has declared that the most recent recession was officially over in June 2009, many American business owners still remain haunted by financial instability. Economic experts warn that the 18-month recession, the longest since post-World War II, will have lingering effects. The recovery from such a significant downturn may take years.
If you are an American business owner, you are all too familiar with decreased business, financial instability, and unemployment rates. With unemployment rates reaching 14,265,000 in 2009, the last thing most businesses want to do is contribute to that statistic. But how does a business with a significant decrease in profit maintain a steady payroll?
The success of a business depends on the customers and clients. However, unlike past recessions, American consumers are not confident in the financial future. With little increase in wages, unemployment fears, and tighter loan restrictions, consumers are slow to pour money back into the economy. Consumers are carefully considering each purchase they make and scrutinizing competing businesses.
The slow recovery combined with cautious consumer spending is forcing business owners to evaluate their current efficiency logistics. Competitive business owners must increase productivity and implement cost cutting measures to avoid passing on higher costs to already restrained consumers.
Layoffs: A Solution, Yet Short-Term
When business is slow, production is down, and costs are high, panicked business owners initiate mass layoffs. Aside from the necessary legal regulations a business owner must follow, mass layoffs tend to significantly damage a company’s reputation, decrease moral in remaining employees, and in turn, decrease productivity. Should business pick up in the future, owners are left replacing their most talented, experienced employees with under qualified candidates.
While this cost costing method may save you money now, it should be clearly recognized as a short term solution. Cost saving measures such as shorter work weeks, lower benefits, part-time work, and hiring freezes offer excellent alternatives. Layoffs should only be implemented as a last resort when all other alternatives have been exhausted.
Hiring Qualified, Productive Employees
Preventative measures during the hiring process will help you screen for the most qualified candidates. In a majority of situations, business owners are in desperate need for another employee. This leads to a rushed examination of potential candidates. By neglecting to check out the candidate’s credentials, you may hire an unqualified candidate that could cost your company money. It is a disappointing feeling to spend weeks training an employee, only to find that they are not qualified enough to handle the job responsibilities. The Society for Human Resource Management estimates that replacing an $8 per hour employee could cost you $3,500.You must now make the choice to keep the unproductive employee on your payroll or lose thousands of dollars searching for another candidate.
In fact, the hiring process can be considered one of the most important internal aspects of your business. A qualified employee will satisfy customers, increase production, and greatly benefit your business. An under qualified employee will severely damage production and could cost you valuable customers. Before conducting an interview, you must prepare and plan questions that will determine the candidate’s ability to perform the job. Although you may feel an urge to rush the hiring process, taking the time to effectively hire qualified candidates will save your company time and money.
Cutting Costs With Customer Satisfaction In Mind
In another attempt to cut costs, business owners are evaluating their internal procedures. Factories may import cheaper raw materials from overseas. Managers may look at current production methods and look for ways to eliminate unnecessary steps. Shorter work weeks may be implemented in attempts to lower utility bills.
The key to successfully cutting costs while increasing production is to have satisfied customers. If you save money by importing a lower quality raw material, you may lose customers. It is very important to measure customer satisfaction in order to evaluate your current practices and receive constructive feedback. You can measure customer satisfaction with surveys and/or focus groups.
Customer Satisfaction Equals Customer Retention
The success of your business depends on customer retention. Offering a quality product at a reasonable price is not enough. There are three types of customers in your business: satisfied, dissatisfied, and neutral. The neutral customer doesn’t necessarily have a preference between you and your competitor. The satisfied customer sees something in your business that brings them back every time. The dissatisfied customer is sure to spend their money elsewhere. If your business mainly consists of neutral customers, you need to find a way to set your business apart.
Slashing prices and offering coupons is only a short term solution to draw in customers. You need to retain them. Often the easiest way to retain customers is by offering exceptional customer service. If your employees are not properly trained and lack essential knowledge, they may leave a customer confused and dissatisfied. Equally important, if your employees are unpleasant, the customer may feel like an inconvenience. Taking the time to properly educate your employees on exceptional customer service will lead to higher customer retention.
While many aspire to be a successful entrepreneur, the complex aspects of a business, particularly the retention of both customers and employees, can be overwhelming. Many business owners are too biased towards their business to effectively conduct the necessary critical evaluation. Rather than seek outside help and education, they continue to operate in a less productive manner. Unfortunately, decreased production and unsatisfied customers lead to decreased profits and in many cases, business closure. Seeking the help of a professional business consultant, however, can begin the shift from tragedy to success.
About Sozo Firm
Sozo Firm helps startup companies, small to mid-sized businesses & nonprofit organizations thrive through developing and implementing business optimization strategies. Our efficiency consulting addresses business processes, customer service, employees, marketing, public relations, and communication. Contact our senior consultant, Andrew Jensen, at 800.460.SOZO to learn how we can serve you.