Oakland, CA, USA

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Staffing in an Uber World

January 24, 2017

Hello Friends & Family this rainy fourth week of January

 

This is your brother Reuben Ly

 

This week on Working Sunday we are talking about staffing.

 

We talked to local insurance agent Tiffany Won who has seen more turnover in the past year than a laundry machine.  

 

 

We also spoke with the owner of Seafood Plus – a wholesale distributor of the ingredients for all those yummy (or not so yummy) meals you eat on the airplanes – Mr. Joe Pickens.

 

 

Yes yes people - the housing market in the Bay Area is insane.  This is something we all know, and folks in LA NY Seattle are no stranger to it either.  By some estimates it takes a salary of $200,000 per year in San Francisco to live comfortably.

 

(tear-faced emoji)

 

The high cost of living here in the Bay Area not only wreaks havoc on our ability to pay rent but it seems that many of our small business people can't afford to keep up with the Jones' – you know – the uber successful tech startups that are vacuuming up low and high wage earners.

 

Uber and Lyft are sucking up Joe’s drivers, and for Tiffany she’s having trouble nailing down good reliable people at the price range she can afford.  

 

Nobody can afford to live in the area earning anywhere close to the average national income!

 

Her answer?  Turn to the retail industry and recent college grads – and take time to find gems in the rough

His answer?  Dammit, I gotta pay more.

 

A couple themes that ran through our conversation:

 

Don’t be desperate – Hire slow

 

Tiffany jumped at a well spoken East Coaster who looked good on paper.  He was late to the first interview and basically every day since.  His excuses ranged from “hit by a car” (he was fine) to “a bird shit on my head”...  (no joke - he actually said he was late because a bird shit on his head).

 

How long did he last before she fired him you ask?  A month.  How long did she have to deal with the ongoing unemployment and disability claims he lodged against her?  The whole next year.

 

The moral of the story is don’t judge a person by their resume - please do your due diligence before you have a weirdo claiming bird shirt distress cases at the EDD.

 

Correct Financial Incentives

 

Joe is realizing that he will need to get closer to $20/hour for his drivers to be able to compete with Uber.  No matter how much that hurts the profit margin.  Otherwise folks are quitting a week or two after he hires them.

 

For Tiffany, she’s developed a win-win-win profit sharing / bonus structure that makes sure that the non-weirdos who are kicking ass and taking claims are able to afford to keep a roof above their heads and maybe even afford that nice new car lease payment themselves.

 

Equity vs. Bonuses

 

In an uber world everyone is thinking about equity.  We all know about the idea of being "employee #20 at google" and how paid they got.  But for your small business, when you’re thinking about onboarding higher level talent the question is – how much of your company is it worth you giving up to get them on board?  What is your equity actually worth?

 

Joe is in that boat at this moment as he looks to expand his business.  He’s worked out a decent base compensation package for a potential new partner, then made the offer attractive by throwing a generous bonus structure on top based on financial results.  Then, to boot, throwing in somewhere between 5-10% in equity.

 

Even if someone loves you like a brother it’s gonna be tough to persuade them to give up their $100k+ per year salary to jump on board your little tugboat just setting sail.  Believe me - I speak from personal experience.

 

Sometimes you have to give up some skin in the game to show folks that you’re serious.  Word of advice though is unless they are fully financing your company, keep it under 10% – if possible under 5%.  A good incentivizing bonus structure will go much further in lining the pockets of that talented person than some stock certificates will.

 

Giving up stock is like getting married.  It’s all good while it’s good.

 

Finally – unless you are truly co-founders – when giving up equity make sure the person in question is bringing something to the table besides their talent.  Talent is great, but talent alone won’t build your business.  

 

For Joe, this potential partner is bringing along turn-key customers and a wholesale connection that will launch them into a whole new line of business.

 

Giving up 5% may seem like small potatoes for a guy who can potentially double the business!  Remember though, the key word is *potentially - and it’s you - the current business owner who is left holding the matches if the whole house goes up in flames.

 

That’s it for this week.

 

Stay motivated to keep doing you.

I’m proud of you all!

- Reuben Ly

 

 

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