Advanced Basic Training for New Business Owners: Staffing Guidelines
by Michael Rosenthal on January 16th, 2008
In the prior article, The First Three Guidelines of Owning and Operating a Small Retail Business , I covered what I refer to as the basic steps to take in order to own and operate a small retail business. These are the steps that take you to the point in the process where it’s nearly time to open your doors to the public. Now it’s time for what I call Advanced Basic Training. This is the stage that requires even more due diligence than the basics, as a lot of key financial issues are discussed here. So now it’s time to move into the final three stages, which are:
* Guidelines for staffing
* Wages and benefits issues
* Developing an effective marketing plan
In the basic steps I discussed in the first article, I tried to focus on some of the pitfalls you are apt to encounter during each stage. The big difference this time is that the financial aspects of your business really come into play.
Guidelines for staffing
How many people will it take to staff your business? This is difficult to calculate when you’re initially starting. My biggest headache was always hiring the right people that would benefit the business. Let’s face it folks, the "employment pool" as I call it is pretty damned shallow — not a lot of talent to choose from like there used to be.
Don’t be overly judgmental of a person based on their appearance. Boy, this is really the tough one and I feel it is the single most important recommendation of the bunch. Good looks, proper hair length, and the person’s physique are not always quality factors. Not every person out there is photogenic enough for the cover of People magazine, longer hair has become an acceptable standard today, and most people today need to lose a few pounds anyway. If a person appears neat and clean in the hygienic aspects of grooming, this is an indication that they care about themselves and how other people view them.
Can the job applicant carry on a reasonably intelligent conversation? If they can’t talk to you, do you think they’ll be able to talk to your customers? I look for a few key "hot words" such as how well they maintain eye contact during the interview, are they too fidgety when trying to respond to your questions, do they lack self-confidence in their answers, are they overly confident to the point of bragging — just to name a few. You can safely construe these as warning signs and reasons to shy away from these types.
Trying to find someone with experience is like looking for a needle in a haystack. Are you ready to be discouraged? Then this one will definitely do just that. I have discovered over the years that this can be very frustrating. It’s not that it’s hard to find someone with retail experience, it’s just difficult as hell to keep them.
Look for an individual that you and your business will benefit from. During your interviewing process, get into the habit of always asking the job seeker this question – "Why should I hire you instead of another applicant?" Listen for the key words customer service in the conversation; it means that they are a "people person" and will relate well with your customers.
Employing the use of a good labor matrix (or labor formula) enables you to staff the operation properly, and helps you reach a level of profitability within that 12 month parameter. What does it take to develop the right formula? Here are the variables you need to consider:
* Fixed and variable expenses (wages, rent, utilities, advertising, cost of goods)
* Coverage (i.e., the number of bodies needed for sales, customer service, shipping and receiving, store sanitation, merchandising, point of sale issues)
* Average monthly cost of inventory (this of course varies with sales volume)
When you’re just getting started, you need to calculate the total of the first item above so that you can calculate what it costs you daily to keep your doors open. Once you’ve established a rough idea on this, then you’ll have a better idea on how to start controlling this part of your overhead. The key here when it comes to adding additional employees is the customer service factor. When you can no longer handle certain aspects of store operations, then it is time to think about hiring another employee.
Wages and benefits issues
What does it take to find and keep good employees? The immediate consideration is a decent wage package at each level of employ. If you study the retail industry nationwide, most successful companies are multiple location types of operations or chain stores. Managers are usually salaried and receive an override based on a percentage of the total sales volume. Additionally, monthly or quarterly bonuses are sometimes paid based on net dead profits of the store.
Assistant Managers are salaried or hourly depending on the company. Sometimes they are afforded a smaller percentage of the profits as a monthly or quarterly bonus, but this is rare. Most salespeople are paid an hourly wage, and on rare occasions afforded a small commission on their sales as well. Warehouse personnel are paid an hourly wage.
Initially, you will not only be the owner, but the store manager as well since you probably won’t be able to shell out management wages to begin with. However, it would be a good idea to hire and train someone that you could trust running the store in your absence. You will probably start out as a 3 or 4 person operation, depending on size of the store, breadth of your product assortment, and your customer flow. If you start off as a 3 person operation, there are you, that assistant I urged you to hire, and a combination person. By combination, I mean someone who can work shipping and receiving, merchandising, and customer service.
With all this being said, I would urge you to formulate job descriptions for each level of employee in your store, yourself included . In addition to the job description sheets, here are a few more strong recommendations. First and most importantly, drug test everybody that you decide to hire . This one aspect will save you countless hours of grief down the road. I hate to be stereotypical, but 9 out of 10 "druggies" are not in control of their lives — the drugs are. Theft has the tendency to become an issue as well.
Secondly, without fail, investigate their prior employment history . Believe it or not, people are not always honest on their applications, and they can really massage a resume so it sounds exactly like what you want to hear (oh, say it ain’t so). Pick up the phone, call that former employer, and remember that legally there are only 3 questions you can ask, and these are:
1. How long was this person in your employ?
2. What was their wage or salary?
3. Would you consider hiring this person again? (This is the biggy. If the person you’re talking to says "no", you cannot ask them why. However, it is safe to assume that there is a valid reason for that employer not rehiring that person. On the other hand, if they answer "yes" you can ask the next question.)
4. How would you describe this person’s performance?
The next topic here is benefits, and there’s a good possibility that the only one who will have medical, dental, and vision coverage is you. At some point in time, once the business is deemed profitable and successful, a benefits package needs to be considered for full time employees, with part time employees being included with medical benefits. In most instances, benefits are considered more critical than wages if you want to entice and keep good employees for any length of time. A well-rounded benefits package usually includes the following:
*Health insurance including dental and vision plans (after 90 days)
*401k or some form of retirement plan (after 90 days)
*Vacation pay (after one year of employment)
*Sick pay (after 90 days)
Bear in mind that your employees are insured through your Workman’s Compensation Insurance, but that only covers them if they are injured on the job. And you are required by federal and state law to have this.
In the next article, we’ll talk about the third stage in your advanced training – how to develop an effective marketing plan.