|
How do I improve my profit margine and cut my expenses?
I have a small, family-owned heating and air conditioning company. I have one secretary and three installers/service techs. An additional estimator/sales/service would be useful in the summer, but business decreases in winter. If I hired a second estimator/salesman I would not have enough profit to maintain salaries. I borrow money in the winter and work all spring, summer ands fall to pay it back. How does one determine when adding an additional employee is financially sound?
|
|
|
The general rule for hiring is to bring someone on when you can afford to pay half the employee's wage. This is a valuable benchmark because at that level, the employee will pay for himself by the work he does, and by the time he frees up for you to do more productive and profitable work on the business.
How can you do that?
By re-examining what you are doing "in" your business. Your type of company should have year-round revenue. How can you make that happen? What can you do in the winter to boost sales? Can you deliver wood to people who use their fireplaces? Can you do your air-conditioning maintenance in the winter as a "special" service?
Whatever the case may be, you need to be proactive instead of reactive, especially if you have a good client base. How can you upsell or add value? Can you raise your rates? Again, you need to grow your way to a bigger business instead of cutting your way to one, as you can only cut expenses so far before performance suffers.
Look at other similar companies in other locations to see what they are doing--and borrow best practices. Growth on the top line is the only way to grow the bottom line. That will entail you doing some things you may not be used to doing--but the results will be worth it in the end.
All the best.
Brad Sugars
Brad Sugars is the founder of ActionCOACH, a business coaching franchise. As a world-renowned entrepreneur, author and business coach, he has helped more than a million clients around the world find business and personal success. Sugars has owned and operated more than two dozen companies including his main company, ActionCOACH, which has nearly 1,000 offices in 22 countries.
|
More Questions from Business Operations
 Recent Articles & Resources
Insight from Business Experts
Can You Be ‘Counter-Cycle?’
Running a small business is a tough living. There is no reliable paycheck, no one pays your benefits, and the buck always stops with you. Not only are the rewards uncertain, but the work is challenging. A few people must fill all the same functions as large businesses: planning, sales, product, finance/accounting, ...
Turning Your Business Dreams Into Reality: Managing The Critic
Whether you're a solo entrepreneur, a small business owner, or a corporate executive, one of the things that can drive you absolutely nuts is trying to figure out how to silence the inner critic that rears its ugly head and stomps your business dreams into the ground whenever you try ...
The Art of Laying People Off
I hope that you never have to lay off or fire people, but the reality is that you will as you advance in your career. If you are scoffing (“Guy, you are clueless: We’ll never downsize, because we’re growing so fast, and I’ll never make a bad hire”), then you’re ...
Review of Guy Kawasaki’s “Reality Check”: Refreshingly Irreverent and Useful
"The Art of the Start" was my first introduction to Guy Kawasaki. I thought it was good.
Reading his posts here on the OPEN Forum, was my second experience. I thought those were good too. Then following and being followed by Guy Kawasaki on Twitter piqued my ...
|
|
