Overstaffing can break your small business — here’s how to know when to fire someone

Small business owners often have little time to develop strategies to effectively monitor their company’s financial health. As a result, many of them know what their company needs to survive, like how much revenue they need to cover payroll, but not what they need to thrive. The difference between surviving and thriving often boils down to whether or not a business is overstaffing. A company can be too lean, yet smart business owners always know the people they want to hire next. Training new employees every few months is a drain on your time and resources, yet carrying more overhead than your business can handle could also destroy your company. You have to know how many people you need to power your company, when you need to grow, and when you have just the right number of employees. Tracking a few key metrics will show how much work needs to be done and how many people you need to do it. Start by monitoring these three areas: 1. Keep track of your forward-thinking metrics Most companies don’t have a steady income each month. If you have a comprehensive view of your financial landscape, you’ll be better equipped to weather the ebb and flow of cash flow. Of course, you can’t react to every fluctuation — but you’ll be able to tell the difference between a seasonal slump and a significant downturn so that you can react quickly and intelligently. Most firms’ incomes fluctuate dramatically throughout the year. Here are some basic metrics you should track: • A long-range view of company cash flow. Start with a solid understanding of your industry’s standards and best practices, and then build a map of when your company’s income peaks. [...]