We have created a simple spreadsheet that will help you determine how much each of your employee really “earns.”  You can download this spreadsheet at Compensation Calculator.  Some are in the form of benefit programs like health insurance, and others are through statutory benefit programs like social security and medicare.  With some help from your accounting staff and/or payroll company, you should be able to complete most of the gray boxes on the spreadsheet.  Then it will figure out the rest.

Did you know that almost 30% of the average total employee costs are for the extra stuff in excess of salaries, wages, and bonuses.  Click here for a free Total Compensation Calculator.  This calculator, which is in Excel 2007 format, will show you how much of your total employee costs are going toward all of the extras.

Do you know how much you are spending, in addition to annual salaries and bonuses, you are spending on your employees?  Are you using this information to accurately forecast your expenses and cash flow in the future.  I often see this part of a company’s projections overlooked even though it is often one of the company’s largest expenses next to wages themselves.

So, the take-away is two-fold.  First, download this spreadsheet and figure out how much your employees really cost you and then use that in your planning and forecasting.  Second, use the spreadsheet to educate your employees about the total compensation package they receive because of their employment with you.  Even if they do not believe in or buy-into all of the programs and initiatives, the cost is still real – and you need to get credit for it.

An ever-growing section of the labor market has become increasingly more interested in a full-benefits package rather than the size of their paycheck. A growing segment of the workforce is looking at an increasingly distant retirement date, worried their nest egg could vanish at the appearance any medical condition that will require ongoing treatment with a hefty prescription bill to boot. There are many well-seasoned and experienced professionals willing to work for the benefits package rather than higher wages.

Hanging on to your benefits package will give you an opportunity to scoop up these valuable employees at bargain prices when hiring becomes difficult again.

Is running a business any different?  Is there a way to know if you win or lose each day?  Each week?  Each month?  Each year?  The answer to all of these questions is yes, and I write about how to accomplish this in my recent American Express OPEN Forum Article: 4 Reports that will Keep Your Business Thriving.

Why do so many many business fail to report on this?  There are several reasons, ranging from time and resources to a level of discomfort with trying to predict the future.  The beauty of cash flow forecasting is that if it is done correctly, everything that does not happen according to your forecast becomes an important thing that needs to be understood, followed-up on, and fixed for the future.

In a recent article I wrote for American Express OPEN Forum, I share the  The 5 Secrets of Short-Term Cash Flow Forecasting.  This article will give any business a good start on the steps to getting this report in place and what should be included.

Lightweight Business Model

When I prepared my pack for this grueling adventure, every ounce counted.  And trust me, by the last day I felt every fraction of an ounce.  I started with the staple needs – tent, sleeping bag, stove, water filter, headlamp, etc.  Regardless how many days I would be gone, I would need the same amount of these items (one tent, one sleeping bag, etc.).  These are like the fixed costs in your business.  We want them to be as light as possible, because we will be adding more weight to them per day we are gone – changes of clothing, food, fuel, and more.  A lightweight business model is one that does not over-burden the business with heavy fixed costs and tries to structure itself to function, as much as possible, on variable costs.  The lighter the fixed costs, the lower the break-even point and the more flexible the business will be to change its course and take advantage of the right opportunities as they come along.

Foundation Determines Success

I quickly learned that feet, the foundation of the body, were the most important part of the body on this trip.  One person bought a new pair of shoes 2 weeks before the trip and had several blisters after just the first day of hiking.  He was plagued by these and the rest of the blisters that appeared thereafter throughout the duration of the trip!  He had to go much slower than the rest of his body wanted because of the pain from these blisters.  Those who experienced the least amount of pain and enjoyed the most comfortable experience were those with the right shoes and socks and they worked to keep their feet dry while hiking (we were rained on every day, with the worst torrential downpour I’ve ever experienced on Friday) and warm at night (temperatures dropped into the thirties each night).  In business, we have to strengthen and take-care of our foundation, which is usually a combination of working capital, the best employees, and our customers.  Without these three things we are in for a very painful business experience.

Difficulty is in the Eye of the Beholder

We hiked 12 miles on Monday, 15 miles on Tuesday, 7 miles on Wednesday, 13 miles on Thursday, and 16 miles on Friday.  Before Monday, the youth would complain before a 5 mile hike.  By Wednesday morning, after days of 12 and 15 miles, respectively, 7 miles was the easiest thing they had ever heard of.  Comments like, “Oh, we only have to go 7 miles today,” and “Today is going to be a piece of cake,” became the opinion.  The business application – what may look difficult today is likely not nearly as difficult when put into context.  You may be going somewhere you and your team have never been, but few challenges end up as hard as they might initially appear.

Snapshots are Less Valuable than Overall Perspective

Kings Peak is not all that intimidating when you are next to it.  On Wednesday night we camped just south of Kings Peak in Painters Basin, only about 2,400 feet lower elevation than the peak – it would take a hike of just over 3 miles to summit the next morning.  What was interesting was the reaction of the youth.  “That doesn’t look like the tallest mountain in Utah,” one young man offered.  How quickly they forgot how far and how high we had to hike just to arrive at that point.  Just two days later we would finish our adventure at 7,800 feet.  The point is this – our perspective is often limited to the immediate surroundings of that at which we look.  We need to broaden our perspective so we can see the whole picture of our business.

Conclusion

One of the leaders on this trip frequently said that it would not be an adventure if we knew the outcome.  Starting, owning, and running a business is, therefore, an adventure.  With these four lessons learned, we can hopefully create the outcomes we desire!