From: bizjournals.com
Image credits: GETTY IMAGES (SPXCHROME)
As entrepreneurs, we’re often focused on turning our ideas into success for ourselves. But how often do we strive to make our employees wealthy as well?
Effective entrepreneurs combine their vision for financial success with employees, too.
One way we achieve this is by opening our books as a teaching tool for employees. I was introduced to this concept by the book ” The Great Game of Business.” It’s a tough concept of transparency and trust for many business owners, but after years of following the open-books method, I know it helps our organization and is an effective “muscle builder” for employees.
At Nick’s Pizza and Pub we have weekly fiscal huddles that share the restaurants’ financials with the entire team. In addition to sharing a full profit and loss statement, we have a section of the income statement on a white board that we use to forecast our sales and other key fiscal metrics so we are being proactive about understanding and acting on our numbers instead of being reactive.
Learning budgeting tools
Through these meetings, the team learns the basics of finance and marketing and the costs to efficiently run operations. Because employees have the opportunity for profit-sharing, they have skin in the game and realize the payoff for learning the financials and working to increase revenue.
We’re also giving employees financial tools that can be applied at home to help them recognize the importance of personal fiscal health and how to budget, manage and save money. I hear from 17-year-olds to 40-somethings how the principles we teach have transferred to their personal lives. Monica is a bartender for us and a single mom raising two kids. She shared how, after owning the food costs line item in our huddle, she became more price conscious at the grocery store, budgeting better and using multiple stores to purchase for her family. And she improved our food cost!
Warren Buffett believes that creating wealth for clients makes him wealthy too. As small-business owners, we should take the same approach.
Leveraging financial wisdom
The open books concept works across industries; Jenner Ag, now in its 53rd year of business, is an agricultural equipment distributor for Illinois and Indiana farmers and gardeners. Since implementing open books in 2011, Jenner’s year-over-year sales growth has averaged 10.4 percent, compared to 1.5 percent growth rate over the two years prior. This has led to big rewards for employees; in that time it paid more than $1.6 million in cash and retirement contributions to employees, or 36 percent of EBITDA for that time period.
As owners of small- and medium-sized businesses — without multiple layers of bureaucracy — we have a greater opportunity than big corporations to leverage wisdom in our team members. With more transparency and a real intention to help build a stronger middle class by strengthening our employees, we will get ahead and lead the changing environment in the markets. We will tap into the creativity and innovation of our employees to grow a stronger sense of community and inclusion. By doing so we can build cultures of trust.
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