When it comes to building and sustaining a profitable business, it can seem like a never ending rollercoaster of highs and lows. Just when you think you’ve taken one step forward, you’re hit with a setback that can set you back in time and money. Getting in front of common pitfalls will protect you and your business long term. Additionally, safeguarding your cash flow will keep you from ending up in a cash crunch that can bankrupt your business.
Here are some common pitfalls business owners fall into and how to protect yourself before it comes:
1. Paying out lump sums of money to employees to incentivize them to quit
When I first met my client, a manufacturing company, they proudly shared they had never been sued and they didn’t have employee problems. They expected me to be very proud of them and very surprised. But rather than surprised, I was skeptical. As I asked more questions, I found that they were in a very costly and dangerous habit. When employee issues arose, instead of working through them with employees, they offered the employee a severance agreement to leave. Most of the employees took the pay out and they left and my client was left with a feeling of accomplishment that they had ridded the business of a bad egg. But what my client didn’t realize is that this practice didn’t rid them of anything. Instead, it made them more susceptible to legal action and it cost them a lot of money. By paying thousands of dollars to each employee, the company wasn’t safeguarding the business from anything-instead they were just wasting money. The best way to safeguard your business is to invest money into preventative processes and policies that will allow you to terminate employees for business reasons, not “pay them out (or off!)” to save yourself. Additionally, without a severance agreement that is reviewed and effective, by an employment attorney, this business was only fooling themselves.
2. Employee Lawsuits
The best way to bleed cash is to get sued by an employee. In addition to the damages you will have to pay out if you lose, you will have to pay for your attorney’s bills and possibly theirs as well. Employees can be awarded hundreds of thousands of dollars into the millions and so if you can’t afford to pay out that amount, then you must invest in preventative measures now. You may say, “oh if I get sued, I’ll just settle instead.” Well, if the other side is willing to settle, you could face a settlement amount in the six figures! Again, if you cannot afford to pay a former employee $100k, not to mention attorney fees, then you better start putting some preventative measures in NOW.
3. Constant Turnover
Have you ever felt like all you do is hire hire hire? Are you having a hard time finding and keeping great employees? Well, many of us feel that way! And, we blame it on “The Great Resignation” happening in our country. However, the truth is, that good people have always been hard to find and in order to find great workers and keep them, we have to be great employers. We cannot expect workers to want to work for the thrill of the job and without unique benefits that many other companies are offering. If it’s been a while since you’ve reviewed your companies health benefits, vacation, and sick policies, it’s time to review that now. Having a robust, flexible, and unique benefit program will help you attract great talent and retain them.
Don’t fall into these traps and thus, bleed cash. By investing into your business now, you can safeguard your business for the future.
San Gabriel Valley Law is THE Human Resources Law Firm protecting CA Business Owners. Protect your business by scheduling your legal strategy session today at www.sangabrielvalleylaw.com
*As always, information is not legal advice and is not intended to be comprehensive and should not be relied upon. Readers should consult a lawyer for current up to date standards. Intended for CA audiences only. No Attorney Client relationship is formed by the viewing or interaction of this information.