In service-based businesses, your team is your greatest asset. Their dedication, skills, and motivation drive your success. Investing in your team isn’t just about creating a positive work environment; it’s about building the foundation for long-term business success. By understanding the true costs associated with your workforce and prioritising their development and recognition, you can create a thriving business.
The importance of understanding true costs
To fully support your team, you must understand the true costs associated with their employment. It’s tempting to focus solely on the base hourly rate, but the real cost includes much more: superannuation, workers’ compensation, payroll tax, downtime, public holidays, and annual and personal leave. These additional expenses significantly increase the overall cost, often surprising business owners when they try to achieve financial targets.
For instance, if an employee’s hourly rate is $30, you must add 11.5% for superannuation, plus the cost of workers’ compensation insurance and potentially payroll tax, depending on your business size. Additionally, paid leave entitlements, such as public holidays, annual leave, and personal leave, must be accounted for. When combined, these elements reveal the actual cost of an employee, which is essential for accurate budgeting and financial planning.
Why investing in employees is crucial
Service-based businesses often struggle with understanding the full scope of employment costs, leading to underestimating expenses and overestimating profit margins. One of the first exercises we undertake with clients is exploring actual margins, as your employees’ contributions directly impact service delivery and client satisfaction. Underestimating their costs can lead to pricing your services too low, eroding profit margins. Conversely, accurately understanding these costs allows you to set realistic prices that reflect the true value of your services.
The importance of looking after staff: retention over recruitment
A common misconception in workforce management is the belief that hiring new employees is less costly than investing in current ones. The truth is that the cost of recruiting, onboarding, and training new employees often exceeds the expense of retaining and developing existing staff.
Training and development programs enhance your workforce’s skills, boosting morale and job satisfaction. Employees who feel valued and see a clear path for growth within the company are more likely to stay, reducing turnover rates, creating a positive environment, and increasing overall business success. High turnover disrupts workflow, increases recruitment costs, and negatively impacts team dynamics and client relationships.
Celebrating achievements and rewards
Recognising and celebrating achievements is an often overlooked aspect of looking after your team. Achievements aren’t just milestones; they’re indicators of your team’s hard work and dedication. Celebrating these milestones acknowledges the effort your employees put in during the building phase.
Rewarding your team for their accomplishments fosters a positive work environment and reinforces their value to the company. This can lead to increased motivation, productivity, and loyalty, all contributing to better overall performance and lower turnover rates.
Investing in your team by understanding their true costs, prioritising their development, and celebrating their achievements is crucial for creating a supportive and motivating work environment. This investment not only ensures accurate planning but also propels your business toward sustained success.
Look after your team and they will invest in your business. This mutual growth and respect build a foundation for long-term success, ensuring your business thrives in a competitive market. By nurturing your team, you create a ripple effect of positivity, productivity, and profitability that drives your business forward.
