How to Build a Strong Team?
Pay Competitive Salaries
Strong professionals won’t join your team unless you offer a market-level salary. You can’t just promise them great rewards someday in the future. Maybe a few idealists will work for less because they believe in your vision, but a strong team consists of multiple roles—from programmers to top managers. If you hire top-tier people for some positions and mediocre ones for others, the weak links will drag down the whole team. That’s why investing in people is crucial.
How Much Should You Pay Your Employees?
To avoid demotivating your team or going bankrupt yourself, you need to find the right balance. Here are five common mistakes business owners make when setting up their payroll system:
1. Payroll Costs Exceed 50% of Gross Margin
If more than half of your gross margin goes to salaries, there won’t be enough money left for marketing, growth, technology upgrades, or staff training. Ideally, total payroll costs (including bonuses) should not exceed 30% of the company’s margin.
2. Uneven Pay Distribution
Sometimes, regular employees earn more than their managers. I often hear stories where top salespeople make more than the director—this is a mistake! A manager’s responsibility is far greater than that of any employee. If a company allows subordinates to earn more than their leaders, it kills ambition and discourages employees from pursuing leadership roles.
In small businesses, a manager’s salary should be at least 30% higher than that of their subordinates. The larger the company, the greater the gap should be.
3. Salaries Aren’t Linked to Performance
If an employee’s salary stays the same regardless of their results, they have no reason to work harder. Many business owners make this mistake because they don’t fully understand how each role contributes to the company’s success.
A well-balanced pay structure should look like this:
- 50% – base salary
- 40% – performance-based bonus
- 10% – team-related incentives
4. Executive Bonuses Aren’t Tied to Strategy
If executives receive bonuses based only on short-term results, they won’t prioritize long-term strategy. Growth strategies often require short-term sacrifices, such as investing in staff training instead of squeezing maximum immediate revenue from the sales team. A proper incentive system should encourage strategic thinking, not just short-term wins.
5. Penalizing Employees for Mistakes or Missed Targets
Fining employees is counterproductive. They see it as money being taken away from them, which creates resentment and frustration. In reality, the small financial gains from fines don’t offset the cost of losing a valuable employee and having to recruit and train a replacement.
No Money? Find It!
If you have a great business idea, you can find investors. People invest in all kinds of risky ventures, so if your idea is truly strong, there’s someone willing to fund it.
And if you can’t convince investors, you might also struggle to attract customers. Learn to sell your product—and your company vision—to both investors and employees. As a business owner, your job is to secure funding for growth.
Find the money, build a strong team, and bring your vision to life!
