Saturday, June 8, 2013

Wisdom in Sound Bites?

Sometimes the news reporting defies logic. I hear people say things that make no sense with an understanding of how business works. I realize that part of the problem is in the truncation of a person's narrative to fit the guidelines of news reporter's timeframe; we end up with sound bites. But the reporter could be a little better in trying to provide balance.

Recently, in a story about the upcoming requirement for businesses to provide health insurance or pay a penalty, one small business owner was quoted as saying that the Affordable Care Act (ACA, or Obamacare) is influencing her thinking with regard to hiring. She has 28 employees now spread over two locations. If they expand and have to hire in the next few years, she might be subject to the rule because she will have grown to 50 employees. I admire her long-term thinking, but wonder at her short-sightedness with regard to business growth. If she succeeds to the point where expansion and growth makes sense, hiring employees will make sense and the revenue growth will be worth it. Of course, an addition of providing health insurance will cut into the margins. In absolute dollars though, would she be satisfied to make $1 million dollars in profit without expansion? Or wouldn't she go for doubling and make, not $2 million, but $1.8 million in profit? Who would turn down 80% growth in profit dollars?

In the news story, there was another sound bite of a small business owner who admitted just that. ACA was not going to interfere if he had the opportunity to grow. He was going to hire because he needed to hire in order to get more revenue and more profit.

To not hire is like saying, "No, thanks. I've got plenty of business. Go buy someplace else. I'll let my competition grow, expand and...hire my guys away, or buy me out, or run me out of business...or some other  outcome I won't like."

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