These days everybody is an “entrepreneur” which is usually code for “I don’t know how to run a business.” For over 20 years I owned a small business and experienced all its different phases from the start-up process to the exit sale, and everything in between (and I do mean everything).
In this series I will share some of my insights so that if you are currently running a small business or thinking about starting one, you can benefit from my experiences and hopefully avoid my mistakes (and there were a lot of them). And remember, every small businessman is an entrepreneur, but not every entrepreneur is a small businessman.
One of the key factors in determining whether your small business will be a success or not is your ability to attract and retain good, skilled employees. The pool from which to draw from is shaped somewhat like a pyramid. At the bottom is the largest amount of potential employees for your specific business.
Unfortunately, this group generally has the lowest skill sets and the worst people skills. As you go up the pyramid, the skill sets increase and the people skills get better, but the numbers of potential employees gets less.
Finally, you get to the top of the pyramid. These are the employees in your industry who have the highest skill sets, the best people skills, yet they are the fewest in numbers. Those are the employees you want to attract, hire, and retain for your company.
Obviously, offering competitive wages is one way in which to attract those employees, but another way to attract them and even more so, to retain them, is to be able to offer them a wide selection of employee benefits.
How do you do this as a small business?
The answer, a PEO, or “Professional Employer Organization.” A PEO in essence bundles together employees from hundreds, if not thousands of small businesses. They become a co-employer with you. This allows them to leverage a large pool of employees in order to offer better benefit programs than you could do with your company alone.
From a small business owner’s perspective there is no actual difference in the way your company runs or in your control over your employees. The co-employment agreement is merely a technicality, but its benefits are great.
Now you have the ability to offer employee benefits just like IBM or Microsoft does. For example, through the PEO you can offer health care insurance at reasonable rates to your employees. You can offer 401(k) and retirement plans. You can offer your employees travel programs and discount purchase plans. When my company joined up with a PEO, one of the greatest advantages it offered us, and one that my employees loved, was the travel assistance plan.
The way it worked was, say an employee and his family wanted to take a trip back East to see friends. Through a pre-negotiated program with the PEO, the employee could purchase airline tickets for his family at a discount. Better yet, the cost of the tickets could be taken out of the employee’s paycheck over four successive pay periods at no extra cost.
Imagine the advantages for your employee. Instead of having to shell out one lump sum for the tickets, your employee can now purchase those tickets at a discount and have a reasonable amount taken out of their paycheck over time.
In addition to employee benefits, a PEO allows you, as an employer, to have an HR department at your beck and call.
They will provide up-to-date employee handbooks and manuals tailored to your company and industry, at no cost. They will keep you apprised of any changes in labor laws no matter what state your business is in. Any HR problems can be directed through them. Employee disputes, disagreements, complaints, all handled by your off-site HR department.
A PEO will also do payroll and payroll processing. And best of all, provide you with competitive workman’s comp rates, rates better than you could achieve on your own.
Obviously, there is a fee for using PEO, usually a small percentage of your weekly payroll. However, the savings in workman’s comp rates, the benefits of having an HR department that’s up with the latest changes in the labor laws, and the ability to offer your employees a suite of benefits, that most of your competitors can’t, more than compensates for the cost.
Brilliant stuff like this rains down like..well, rain, on my stream during the week. If you want to get wet, follow me on Twitter and StockTwits. You can also pick up my book Trading - The Best of the Best: Top Trading Tips For Our Times by clicking here.