Every business, primarily, meant to make profit. It is secondary that whether the business is to sell products or provide services. Though profit is mainly generated through sales or services, to calculate the overall profit margin of a company, various important key factors needs to be analysed too viz. the operational cost, marketing expenses, production cost, raw materials, wages, topography, demography etc.
For an entry level Entrepreneur, one should follow the principle of balancing resources to ensure growth and feasibility to achieve higher scales.
The principle of balancing resources
It has been observed that most of the start-ups focus on one core area i.e. development of a particular solution, product etc. Initially they allocate their lions share of the entire allocated fund and energy to bring up the solution and by the time they need to sell it and encash, their funds might have drained. Then they will start recruiting again to build a dedicated sales and marketing team. This process continues until they start selling, which takes up speed and reaches a point where they can’t produce enough to meet the demand. And this continues.
From the very first day of business, a balanced and dedicated team needs to be set and nurtured towards the profit making goal simultaneously. When these production and sales matches, as a businessman, one has achieved the first level of growth. From this point onwards he can work on scaling to the next level.
Normally businesses in the service industry are seen making this mistake of hiring more people in the production side. Since they are into service, they need to establish a HR system, which runs through a pre-defined process. The salary liability on these businesses is usually at higher end and unfortunately if they lay off any employee to reduce cost, a gap is created on that particular skillset of the company. Hence the founders cut down manpower in sales and marketing, which leads to the catastrophe.
Without manpower a company cannot function. So it is better for a businessman to analyse the entire process on papers and accordingly job descriptions can be made. The hiring should strictly based on that and also with turnover targets so that the liability doesn’t increase. If this simple formula is applied since the inception of a company, things might move smoothly.
If you need any assistance in building a system like this, you can get in touch with me.