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Owning Less

May 1, 2019

Youth Lead the Way

I was speaking with a close friend who was lamenting the fact that despite having a grandson old enough to be driving, he wasn’t, and didn’t show any interest in driving. Therefore, my friend was relegated to being a chauffeur for all the grandkids and their various activities.

We remarked that when we were approaching driving age (for us sixteen), we were chomping at the bit. My parents were also anxious for me to learn to drive. My father started me young, during the summer when I worked for him at his boiler construction and repair company. I learned to drive all manner of trucks, starting at about age fourteen. Of course, I was only allowed to drive on company property, but it was useful to have me put the equipment (welders, compressors, etc.) and trucks away while the adults did other more complex tasks.

Many youth today, however, know their parents will take them where they need to go. When old enough, they know that Uber or Lyft will take them where they need to go. So why bother to have a car with all the maintenance, insurance, and energy costs? Why put another polluter on the road?

Companies Join In

You may be noticing a trend that many companies, especially small startups, are following the “don’t own, rent” trend as well. As communications costs have decreased and connectivity has increased, we can get what we want, where we want it, when we want it.

It’s interesting to me, that back when I was working with my father, our work comprised maintaining or replace boilers in commercial buildings. Today, I work with a gentleman who makes a considerable amount of revenue renting boilers to companies who would rather not make the capital investment to purchase and install a new boiler needed for their energy requirements.

I am aware of many companies who essentially have no permanent finance employees. They hire contractors to maintain their books, do their invoicing, prepare for audits, and prepare executive reports. Few companies I know do their payroll — including our own small, two-person business. My wife, a financial controller, does all our accounting. However, taxes are too complex, and it’s difficult to keep up with changes to the laws. So we hire a CPA to audit our books and keep us on track, and we use a payroll company to prepare our payroll.

One of my wife’s clients contracts with her to provide the complete bookkeeping function for their company. They employ no other financial employees. As we move to the cloud, we will diminish or eliminate IT infrastructure. Why own servers? It’s cheap, safe, and convenient to rent servers from Amazon, Google, or Microsoft.

Changing Business Models

Back in the ’80s, businesses went through a re-engineering process. It seemed that every business process was changed and updated to take advantage of the investment in computer technology. It was painful, and many felt it was just an excuse to downsize. The companies I worked for during this period, preferred to call it right-sizing. Either way, what was happening was the realization of the benefits of investing in technology. It took a long time for those benefits to show up on the bottom line, but they finally did.

Today, the same will be true as we move from ownership to outsourcing noncritical or proprietary functions. I see a big one coming up. Most businesses are not in the health care or employee benefits business. They are locked into a model that requires that they add the cost of employee benefits to their overhead. Many of the companies I work with a figure that employee benefits are costing at least 25% of the employee’s salary. Why? We are the only advanced industrial country that burdens our businesses with health care costs. That will change. Moreover, it will be a painful change as we move to national health care.

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