Peanuts to Profits With Thor Schrock
Peanuts to Profits With Thor Schrock

Every day in the news you hear more bad news about the economy, but great news about your 401-k value. How does this contradiction translate into opportunity for your business?

Easy.

You can hire the best talent available in the marketplace on a contract basis because people are out of work and they will be for some time.

If you hire clearly overqualified people, they will simply take your position until something better comes along.

Instead, hire the people you need on a contract basis. The differences between contract employees and regular employees are subtle (but important).

Most importantly it opens up a door of opportunity that can help your small business get the talent it needs to grow. Eventually you might grow to a point where you can permanently hire your contract help!

How can the stock market keep going up if the economy is tanking?

Remember that stock values are based on company profits and activities. The economy on the other hand, is primarily driven by individual consumers.

Companies can generate huge profits by reducing the number of people they employ, as long as they can manage to somehow continue delivering their products and services with their remaining workforce.

Experts often cite recessions as times when employee productivity goes through the roof. Employee productivity goes up because a company’s remaining staff must pick up the workload of the laid-off employees or face the chopping block themselves.

Fewer people doing more than ever is a recipe for business profits, and hence the stock market does well. On the other hand there are tons of highly trained and qualified people who are stuck on the sidelines polishing their resumes.

Turning on the 1099 Tap

With so many people out of work for such a long period of time, the small business owner has a unique opportunity to leverage talent they otherwise could not afford.

When you hire someone to help your company you can bring them on as an employee or you can hire them as a temporary contractor. There are certain advantages and disadvantages to each:

Regular Employees:

1. Advantage – You control their every activity
2. Advantage – You invest in their training and development to make them more productive
3. Advantage – The employee relies on you as their main income source
4. Disadvantage – You are responsible for benefits, including unemployment payments if things don’t work out
5. Disadvantage – Over-qualified people might take your under-paying position to tide them over while their resume circulates in higher-paying circles
6. Disadvantage – Employees come with HR nightmares like paid time off, sick days, maternity leave, office politics, and government compliance regulations

Contract Employees

1. Advantage – You tell them what needs to be accomplished, and they make it happen
2. Advantage – Lack of a regimented management structure can sometimes lead to better results and new ideas
3. Advantage – Contract employees are less expensive because you don’t have to worry about benefit packages, overtime, or payroll taxes
4. Disadvantage – Contract employees are like for-hire mercenaries. They can work for anyone, including your competitors
5. Disadvantage – Contract employees are typically less committed to big-picture corporate goals
6. Disadvantage – You can’t control them. If you have control and direction of their activities you have to pay taxes on them as regular employees

Using Contractors to Grow

From time to time my company has used contractors as gateway labor when launching a new division, testing out a new product or service, or simply when we could not hire an employee at an agreeable rate.

Eventually, all contract relationships end – abruptly. Typically, the best you can hope for is a 30-day notice provision in your contract.

While that sounds better than a voluntary 2-weeks notice form a regular employee, it can be devastating to lose a key person in the infancy of a product.

Employees are typically more loyal to the corporate goals, so the odds of them seeing a project through to a transition point are typically better.

Once your product, division, or service is viable, transition your contractors to employee status, or replace them with qualified people. Whenever possible, have the new employees train under the contractor.

Opportunity is Everywhere – Even in Bad Times

No matter how you decide to find your people, know taht the “bad economy” has created a pool of very talented labor that can be a game-changer in your business strategy.

All you have to do is know how to tap it affordably and control its growth to cash in.

Local Insight Yellow Pages is informing its advertisers that their contracts are being forcibly extended – at their existing monthly rates – for three additional months. 140 of the company’s 900 directories are being delayed.

While the company says the move is to allow time to install new printing equipment, it is also obvious that the delay will prevent advertisers who wished to cut back their ads from doing so. In Lincoln, the billing of yellow page directory advertising is linked to your telephone service. If you refuse to pay the bill, Windstream will cut off your phones.

In effect, the delay will allow Local Insight to delay what would most certainly be cuts in small businesses yellow pages advertising budgets.

A few weeks ago I received a letter form Local Insight Yellow Pages informing me that they were delaying the release of their 2010 book by three months. Instead of its normal release in November 2009, the 2010 book was being pushed back to February of 2010.

Remember the gold old days when you could get a free computer as long as you agreed to pay a monthly dial-up provider like AOL $30 a month for slow, overpriced Internet access?

Well grab your credit cards and put on your bifocals! The deal has returned courtesy of Best Buy and Sprint, but this time the screen is a bit smaller.

ZDNet is reporting that the two companies are partnering to offer a Compaq-branded HP Mini 110c netbook for only 99 cents when you sign a two-year 3G Internet contract.

These free computer offers are REALLY tempting because consumers in a recession-battered economy get what they want right now – a new computer – by signing a promise to give more money later.

Breaking Down the Numbers

Under this deal, you get the $389 retail value netbook for only $.99. The contract costs about $60 a month, so if you multiply that by 24 months, you would find that the contract will cost you $1,441 over its two year term.

Obviously the Sprint 3G connection is portable, so you are paying a price premium on your Internet connection to be able to take it with you anywhere you go. Additionally, there are limits to how much Internet connectivity you can use before additional charges get lumped in.

For the sake of comparison, the cost for you to buy this netbook and use it on a budget cable modem or DSL connection would be much, much less expensive.

Try $20 a month for the DSL Internet connection and $389 for the netbook. The total cost over 2 years is only $869 – a savings of $572 over two years (nearly $24 a month).