If you already work too many hours and don't have enough black ink on your balance sheet to justify it, how can you cut back without risking financial disaster? Reading this in the middle an economic meltdown, you can be forgiven if you are thinking that it would be easier to find a unicorn in the back yard. Not so. If, unlike most small business owners, you take the time to truly understand the power of delegation, you can simultaneously cut your hours, improve your productivity, and possibly even increase profits.
The Power of Delegation
At the Acme Sandblasting Co., the New York City company Ralph's grandfather Frank "Stuke" Toors owned and ran during most of the first half of the last century, Stuke personally knew how to do almost every job in the business. He could make cost estimates for jobs, close a deal, machine a spare part, splice a rope, write payroll checks, and even collect overdue bills. A few days before he finally retired at 75, Stuke shed his three-piece suit, donned a respirator and some work clothes, and climbed a scaffold to prove he could still blast grime off a big expanse of granite.
Stuke was typical of the jack-of-all-trades American businessman whose heyday lasted from the end of the Civil War through World War II. In a far less bureaucratic, rule-bound, and technologically sophisticated world, these people really could cost-efficiently do a great many tasks themselves. Although it should be obvious in our hyperspecialized world this is no longer true, huge numbers of entrepreneurs work horrendous hours, still trying to run and control every aspect of their business. By doing so, they risk both exhausting themselves and ruining their business.
Since at least 1776, when Adam Smith famously noted in The Wealth of Nations that a group of people each specializing in one aspect of pin production could make far more pins in a day than could the same number of people each making whole pins, the principle of the division of labor has been well established as a huge engine of increased productivity. Even when times are tough and money is scarce, there is almost always a specialist who can accomplish all but your most core entrepreneurial tasks better, and ultimately cheaper, than you can. One good example involves preparing the payroll, something that for a modest fee you probably can farm out to a highly automated specialist, largely freeing you from the time-consuming task Ralph's grandfather performed every other Friday afternoon.
Delegation by Trading
Sometimes, you can delegate without spending money—instead, you can trade your surplus services or goods for those you need. For example, Margaret might help Jeremy with marketing in exchange for getting to share his office and equipment. One-to-one barter arrangements can be complicated to establish and sustain, but they come into vogue when cash is tight. If you engage in a barter with someone, be sure both you and the other party benefit from the deal enough that you'll both hang in over time, and write your agreement down in the form of a simple contract.
Online bartering exchanges let you barter your goods or services for "trade credits," which you can then use to buy other goods or services. Bartering has become a way to cover necessary expenses without using cash. For example, a refrigeration specialist who is having trouble moving inventory sells a display case to a florist for $3,000. The florist, who doesn't have the cash to replace her faulty old display case, pays with trade credits she earned from her bartering exchange. The refrigeration specialist gains $3,000 worth of trade credits that he can then use to pay for services from other companies, such as tax preparation or website design.
Many barter exchanges have spring up over the last few years. Three of the better known ones are bizx.com (BizXchange), bbu.com (Better Barter Unlimited), and greenapplebarter.com (Green Apple Barter).
Of course, it costs money to hire others to do routine tasks. But sensible delegation frees up your time so you can concentrate on the high-value aspects of your business including, especially, new product development and marketing, which will produce much higher profits in the long run. If, for even a moment, you doubt the wisdom of working with others, consider that without the phone company, your Internet service provider, and package delivery services, you would probably need to spend every waking hour just trying to deliver essential messages. Fortunately, because these companies are at our beck and call for a very reasonable cost, you can efficiently delegate your communications tasks for a fraction of what it would cost to personally deliver your messages.
Unfortunately, when it comes to many other business tasks—from bookkeeping to equipment maintenance and repair to graphic design to human resources management—the wisdom of delegation is less well understood. That's a big reason why so many Americans persist in wrongly believing long hours and high profits go together. People who work overlong hours often do so because they fail to grasp the crucial difference between routine work and high-value work. But what if you have so little income you can't possibly afford to delegate even the most time-consuming tasks to others? If you need to handle every routine task yourself, what you have is a bad job, not a good business.
EXAMPLE: Jeff is an architect whose firm, J&D Associates, designs big buildings such as schools and hospitals. Although he is a gifted draftsman, Jeff's real skill is selling potential customers the idea that they are in great hands with J&D. But when the recession hits and two of J&D's big projects are put on hold, Jeff begins spending his weekends and evenings in front of his computer anxiously helping do the design work for several new bids.
Fortunately, his partner Dale, a more introverted type who enjoys running the office side of the business, is smart enough to say "Get the hell out of the office. Even if we have to mortgage my house to hire another draftsperson, one thing is sure—if you don't focus all your energy on sales, we have no chance to survive."
What Do You Do Best?
Before you can delegate well, you need to understand the things you do that contribute the most black ink to your bottom line. Only then can you aggressively look for ways to get someone else to do the other bits. So your first step is to identify the tasks you must really do yourself, as opposed to those you handle either because no one else is available, you believe you can't afford to hire help, or for some other less-than-convincing reason. For example, if you are a website designer, and customers are attracted to your small design company because of your imaginative graphics skills, it makes sense for you to concentrate on the creative process. Even if money is tight, pay someone else to renegotiate the lease or collect past due debts—things that are important, but not critical to your long-term success.
How to Delegate
Many small business owners readily agree they need to learn to delegate tasks that someone else could do better. Nevertheless, they put it off. For example, one man who puts in 12-hour days at his Internet-based sports memorabilia business, whose wife had recently threatened him with divorce, came up to Ralph after he made a luncheon presentation and said, "I know I need to cut back, but I just can't spare a dime to hire help right now. How do I start?" Here's what Ralph told him.
There are two keys to making a delegation plan work. First, you need to find people who can do the necessary tasks better than you can. As long as you understand the basic point that productivity increases and costs drop when work is divided into a series of specialized tasks and assigned to people with access to state-of-the-art technology, you'll see that this shouldn't be difficult. No question, if you are a perfectionist who has trouble letting go of even the simplest tasks, learning to delegate can be a big hurdle. But perhaps it will help get you started if you are able to concede that there really are people in the world at least as competent and careful as you are. And this is just as true if you are delegating routine office tasks or work that is crucial to your business's success, such as making important sales calls.
The second key to profiting from delegation is to put at least some of the time you save into more profitable activities. For example, if finding new clients for your financial planning service is the activity that will most positively affect your bottom line and you have excellent rainmaking skills, you'll want to delegate as many routine tasks, such as bookkeeping, as possible, and use the time you save to find customers. That way you win three times: revenue goes up, the jobs you delegate get done better, and your total work hours might even go down.
EXAMPLE: Tina runs East Mountain, a rural yoga center that offers classes and retreats. Like many small business owners, Tina is stretched too thin, trying to deal with the workaday details of running the business and at the same time spend enough time with guests and teaching classes. But she's always thought she couldn't afford to hire help. Finally, realizing that something has to give, Tina makes two lists: one of the time-consuming tasks that wear her out without making much difference to East Mountain's success, and another of the tasks that attract clients. The routine jobs include meal preparation, bookkeeping, and designing promotional materials. The ones most important to customer satisfaction are teaching excellent, innovative yoga classes and spreading the word about East Mountain's unique programs.
Tina's new marketing efforts include writing a blog and articles for interested media, preparing press packages highlighting East Mountain's new and noteworthy offerings, and using email, regular mail, and the occasional phone call to stay in touch with former students, yoga teachers, and others in the yoga network. As a result, business increases by 40%. This lets Tina raise her rates by 25%, and East Mountain is more than able to cover its additional labor costs. Best of all, Tina can now afford to hire a part-time, yoga-loving publicist to help with the routine aspects of her marketing program, freeing Tina to take the occasional nap.
Tina's next step is to find good people to do the non-core tasks at a reasonable price. Because she is in a rural area with endemic unemployment, it proves relatively cheap to find experienced independent contractors to take over the bookkeeping and brochure design. But hiring someone for all the meal preparation turns out to be prohibitively expensive. Instead, Tina decides to hire a cook to coordinate dinners only, relying on workshop participants willing to trade work for a tuition reduction to prepare East Mountain's simple breakfast and lunch. To cover the additional cost, Tina decides to devote one-third of the hours she saves to teaching two more classes per week and the other two-thirds to marketing.