By Gerry Alvarado
As entrepreneurs, we are always looking for ways to grow our businesses and bring in more revenue while minimizing our investment.
For most of the 14 years since I founded my company, I have “minimized my investment” by cutting back in human resources expenditures. Because we had a slow and steady growth rate for years, I never thought twice about putting HR systems in place. Unfortunately, that turned out to be the biggest business mistake I have made as an entrepreneur.
Here is what I learned and what I hope you can take away from my experience.
You can’t succeed if you don’t scale
While we were able to get away with piecing together our HR when we only had a few employees, the holes in our process almost took us down in 2013 when we experienced explosive growth that propelled us from 24 employees to over 300 in a matter of months. Because we didn’t have the right processes in place to accurately provide new employees with benefits enrollment, workers’ compensation coverage, and other important HR functions, we were quickly overwhelmed with new hire paperwork. Among other issues, this led to some serious lawsuits.
We knew we needed help to relieve us of our HR nightmare, and we fortunately found TriNet, a professional employer organization (PEO) that is still helping us with the repercussions of our initial cutbacks on HR investments. Hiring TriNet has been one of my better management decisions. I only regret that I didn’t make the move years ago when I only had a handful of employees. Collaborating on getting our HR set up correctly could have helped us mitigate our employer risks from the beginning and avoid the damage of not being prepared when our growth opportunity came along.
You don’t know what you don’t know
When we first started out, we were confident in how to run a janitorial business, knew what our client base needed from us, and were well versed in how to provide excellent customer service. Everything we knew about the janitorial services industry helped us become successful.
Unfortunately, it was what we didn’t know that threatened this success. We naively tried to navigate the complicated world of HR on our own. Our lack of knowledge and preparation in how to handle payroll, wage-and-hour regulations, workers’ compensation insurance, and appropriate hiring/termination documentation got us in trouble. Some of our HR struggles were around laws and regulations we weren’t even aware of. It wasn’t until we brought in the professionals that we were able to resolve our HR issues and put the processes in place to seamlessly manage all aspects of the employment lifecycle.
When starting a business, finding those first great employees can be easy. Managing your administrative tasks for a small business might not be that big of a deal. But if you are in business long enough, you will hit issues that require deeper knowledge of areas outside your expertise. When that happens, you can either find yourself scrambling to get processes in place — risking your compliance and taking time away from your core business in the process — or you can get your experts on board early, increasing your chances of scaling smoothly. Had we done the latter, we could have saved ourselves a lot of time, money, and headaches.
Don’t focus on costs
Few of us start a company with limitless amounts of available cash, so I know saying “don’t focus on costs” probably sounds like terrible business advice. But it’s advice that will actually save you money in the long run. The reason is because, while you should absolutely take out-of-pocket costs into consideration when buying anything for your business, your focus should really be on the return on investment you can expect with that purchase and not on the upfront costs.
So, while it might look like you’re saving money hiring a payroll vendor over a PEO, or you might think it’s cheaper to have your office manager also handle your accounting over hiring a reputable firm, the long-term costs with both these strategies could be expensive fines, lawsuits, and missing lucrative opportunities to grow your business.
The key to a good ROI is to find third-party vendors who can take a holistic approach to helping you manage certain aspects of your business. TriNet, for example, provides us with benefits that help us attract great employees, payroll services that free us to focus our time on running our business, expert advice to help us stay compliant and manage our employees’ needs, and legal guidance to help us resolve our previous workers’ comp and unemployment claims.
Cleaning up and moving forward
Fortunately, we learned from our mistakes as a company, brought in the experts, and can now see the light at the end of the tunnel. While things turned around very quickly after we hired TriNet, we are still digging our way out of our previous mistakes. We’ll never get back the time and money we wasted, but our company has come back even stronger now that we are on the right path.
We are in the process of expanding our business into San Antonio and will continue to look for new markets. We now have the confidence of knowing we have the processes in place that will allow us to grow, while minimizing our risk.
Gerry Alvarado is the vice president and director of business for Geralex Janitorial Services, a janitorial services company with a focus on environmentally-friendly practices, based in the greater Chicago area. He is also a former board president for the Eighteenth Street Development Corporation and a former board member of the Hispanic American Construction Industry Association (HACIA).