Hamster Wheel
The more people we hired, the more work we created.
A pitfall of “staffing up” an agency is that it can lead owners into costly bad habits. A problem arises, and you think, “Well, John’s sitting over there, so John can solve it.” So John does, and you think, “Great, now the problem is solved.”
But the problem isn’t always solved in the most efficient manner. It’s solved in a way that someone on a salary can solve because they’re sitting there, ready to solve it, without constraints of time or an eye on the bottom line.
Perhaps the problem didn’t need to be solved in the first place. Or, worse, you, as the agency owner, might have found a way to solve it in less time because your time is more valuable, so you’re naturally seeking the most expedient solutions so that you can get back to your core job of making money.
However, if you had a smaller team, an employee would more urgently need to say, “I only have five minutes, what’s the most efficient way to solve this?”
The biggest change I made this year was reducing the staff at my own agency. Some of it was not my choosing, but most of it was. The surprising thing is that it’s forced me to rethink many of our business processes, which, in turn, transformed our P&L.
When I was forced to examine our business structure through the lens of having fewer humans, we started making decisions that sped up our work and decreased our costs.
It exposed how much inefficiency we had been carrying. Here are a few examples (out of dozens).
We used to put all client expenses on our company credit card. I think at one point, the theory was that this would maximize our airline miles. But, once a month, it required someone on our team to go through and code all the expenses on our credit card back to the appropriate client. Then we had to invoice each client, chase down payments, and code them back into QuickBooks.
It took about ten hours per month. Well, when the person in our agency who is in charge of this silly process left, I looked at this and said, “This is indeed silly, the airline miles aren’t worth it. We are no longer charging company expenses to our own credit card. All company charges for clients need to be charged directly to their own card.”
Boom. Ten hours saved every month. That’s thousands of dollars a year in salary.
Here’s another one. A few years ago, we got talked into hosting our QuickBooks files on a remote desktop solution so we could remote into the most powerful version of QuickBooks Enterprise. The cost seemed reasonable, and the added enterprise features were appealing at the time. However, every time we needed to get into the books, we had to first remote into a cloud server. That took a few minutes alone, and then the software was just painfully slow to navigate because it wasn’t a local file.
It cost 15 minutes in labor every time we needed to pull a report in QuickBooks, which, as it turned out, is often. This never dawned on me because I wasn’t the one doing it. I had someone on staff, earning a big salary, whose job it was to pull these reports. So, again, the problem felt solved.
As soon as I was left to figure this out on my own, I was like, “Well, this is crazy. Let’s just migrate each client to QuickBooks Online.” It lacks a few of the features, but I can log in and pull reports faster than the previous remote solution took to boot up. Clients also prefer real-time access to their books.
Internally, I called these invisible cost multipliers “paper cuts.” We had absorbed so many paper cuts over the years, but we didn’t notice them because we had a big staff.
Worse, it forced us to hire ever more staff. As soon as someone got bogged down with too many paper cuts, like the person pulling the AMEX statements, we hired more staff because that first person was already overloaded with AMEX work.
So we kept adding staff, thinking everyone was always busy. But the truth was, they weren’t. They were just doing shitty, meaningless invisible work. And all of these invisible paper cuts added up to tens of thousands of dollars in salary expenses and infrastructure bloat that we didn’t need.
When we were forced to think like a small team again, we became more efficient. And that efficiency saved us both time and money. And often with better results for our clients.
There’s something else fewer humans on staff forced us to do: we fired a bunch of clients. I’ll expand on that in an upcoming essay. For now, I’ll say that I used to treat all incoming money as a good thing for our agency.
But by saying yes to more clients, we were building a hamster wheel we couldn’t escape from. We had to keep chasing new money to support a growing staff, which led to more paper cuts, inefficiency, and waste.
Being a smaller team has not only led to greater internal efficiency, but it’s also allowed us to be more choosy about which clients we take on, because there’s only so much work we can handle. As a result, we’re…happier. We’re working with clients we’re better aligned with, and we feel like we’re providing superior value to them.
I’m glad we were forced to get off that hamster wheel this year. Once you realize you’re running just to stay in place, you don’t get back on.
