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  • Writer's pictureNick Andriacchi

Run Your Business Mean and Lean

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Mean & Lean

This little phrase may be the key between weathering the current COVID economic storm and going out of business. Revenue is down but fixed costs still have to be paid. One of the best ways to stay lean and mean should be obvious to staffers - keep costs variable, specifically based on billing.

Staffing companies with high fixed overhead like non-revenue producing employees, large rent expense etc. have those expenses regardless billing level.

Fixed costs are not output dependent - when sales are down, expenses do not fall proportionately with decreasing revenue.

Unfortunately, staffing companies using this model are desperately trying to reduce the size of their internal workforce, shuttering offices or going out of business.

Variable costs are output dependent – when sales are down, costs go down as well.

Savvy staffers who use a full-service funding company like Madison Resources have much lower fixed costs for back office (such as payroll, invoicing and collections) & technology functions plus unlimited cash to finance accounts receivables. Funders charge a variable cost based on actual sales and staffers that use them are managing much better than ones who don’t.

Less fixed cash commitments for items such as:

· Internal admin employees

· Internal software

· Management dollars focused on internal processes, employees etc.

· Less office space required, etc when outsourcing these items

Please look at the table at the top of this article. The bottom line is: when sales are down, corresponding overhead costs effortlessly fall using a variable cost model. That can keep a business in business.

Furthermore, staffing companies with higher fixed costs may have to use a chunk of their finite capital to finance operating losses and may not have the capital available to take advantage of a recovering economy.

Staffers that have a robust contract placement offering allow their customers to: control costs, provide efficiency and flexibility while adding employees. Contract staffing tends to come back first – your customers benefit from the variable cost model too!

The best part about using this model is as the economy turns around, staffers can:

  • Ramp up with very little up front costs

  • Have all the processes in place to handle growth

  • Have unlimited funding to fill any size order.

  • Staffing leaders can focus on the fun stuff - Sales, Recruiting and Customer Relations

Nick Andriacchi

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