Labor Productivity: Understanding Labor Productivity for Sustainable Growth - Mission to Grow: A Small Business Guide to Cash, Compliance, and the War for Talent - Episode #121
What are the key challenges businesses face when scaling from $1 million to $5 million in revenue, and how can understanding the concept of the 'black hole' help entrepreneurs navigate these growth plateaus? In this episode, our guest Greg Crabtree, Partner at Carr, Riggs & Ingram, delves into the intricate dynamics of business growth, staffing strategies, and labor efficiency. Our discussion highlights the challenges companies face when scaling, particularly between the critical revenue thresholds of $1 million to $5 million. We explore the concept of the "black hole," the significance of labor efficiency ratios, and practical advice for breaking through growth plateaus without overstaffing.
Takeaways:
- The Maturing Funds and Market Dynamics: As funds mature, companies will need to roll off assets, presenting new challenges and opportunities. Special Purpose Acquisition Companies (SPACs) could emerge as a solution for private equity firms looking to offload portfolios, highlighting a significant demand for publicly traded companies amidst a shortage.
- Understanding Growth Plateaus: Discussing the realities of hitting growth plateaus, particularly when transitioning from a $1 million to a $5 million revenue model. Key insights on why businesses struggle between the $2.5 million to $3 million mark, often referred to as the "black hole."
- Staffing Strategies: The importance of strategic staffing versus overstaffing, particularly in the early stages of growth. Recommendations on pushing team limits to maximize potential before making staffing changes, and the risks of adding staff prematurely.
- Labor Efficiency Ratio (LER): Introduction to the concept of LER and its application in measuring productivity across teams. Discussing how to benchmark productivity for employees, particularly in service-oriented businesses where tracking output can be challenging.
- The Employee Lifecycle and Productivity: A breakdown of the employee lifecycle into three zones: Training Zone, Chasing Zone, and Replacement Zone. Insights into how to manage and assess employee performance as they progress through these zones, including strategies for compassionate transitions when necessary.
- Navigating Growth and Change: Personal anecdotes about navigating growth challenges and making strategic shifts to drive company performance. Emphasis on continuous evaluation of staff roles and ensuring the right people are in the right positions to support growth objectives.
- Best Practices for Employee Management: Tips for handling underperforming employees, including the concept of "mindful transitions" for those who may no longer fit the company's needs.The importance of maintaining a positive company culture during transitions to ensure team morale and continued growth.
Quote of the Show:
- “It’s crucial to hold your most valuable people accountable to high-value tasks, not just busy work.” - Greg Crabtree
Links:
- LinkedIn: https://www.linkedin.com/in/greg-crabtree-simple-numbers/
- Company Website: https://www.criadv.com/
Ways to Tune In:
- Spotify: https://open.spotify.com/show/2XThTdn7YC1lkAm0PgZUkj
- Apple Podcasts: https://podcasts.apple.com/us/podcast/mission-to-grow-a-small-business-guide-to-cash-compliance-and-the-war-for-talent/id1725890976
- Amazon Music: https://music.amazon.com/podcasts/328dddd0-3c4f-4b07-a0d3-13bdcb418486/mission-to-grow-a-small-business-guide-to-cash-compliance-and-the-war-for-talent?refMarker=null
- Audible: https://www.audible.com/pd/Mission-to-Grow-A-Small-Business-Guide-to-Cash-Compliance-and-the-War-for-Talent-Podcast/B0CS71KQFM?qid=1706208857&sr=1-1&ref_pageloadid=not_applicable&ref=a_search_c3_lProduct_1_1&pf_rd_p=83218cca-c308-412f-bfcf-90198b687a2f&pf_rd_r=A1ME8MBECSVZ6K4D7CNT&pageLoadId=QBtg12mqKsuZPLGY&creativeId=0d6f6720-f41c-457e-a42b-8c8dceb62f2c
- Podchaser: https://www.podchaser.com/podcasts/mission-to-grow-a-small-busine-5591006
- Transistor: https://missiontogrow.asuresoftware.com/
- YouTube: https://www.youtube.com/@AsureSoftware
Creators and Guests
Host
Mike Vannoy
Mike is a digital-first marketing executive with 25 years dedicated to helping HR companies thrive. As a board member of an AI software company and Chief Marketing Officer at Asure, he's been at the forefront of AI, HR compliance trends, and the changing demographics that shape today's marketplace. Under his leadership at Sales Engine Media, the company predominantly focused on the payroll, HR, and benefits industries, earning multiple spots on the Inc5000 list. Actively involved in multiple small businesses, Mike is a lifelong entrepreneur adept at navigating the changing workforce dynamics. He has held multiple executive roles at industry-leading HR firms, showcasing his expertise and leadership in the sector.
