Think Before You Cut Payroll
Wednesday, April 11, 2007
Many business owners think the key to profit it to cut costs. You might choose to cut corners with your materials or with your overhead expenses. Businesses large and small have been using this method, thinking it's the perfect way to help out their bottom line. It's truly not the best way to conduct your business. A major home improvement store has tried this method over the last few years and has failed miserably.One of this company's major overhead expenses was payroll. They cut payroll to boost profits and have hurt their business in the long run. Many consumers used to shop there because they needed help and could always find an employee to answer their questions. With payroll cut, and less help available, customers stopped going. When they stopped shopping, guess what happened? Sales and profits fell considerably.
Stop and think about what the consequences will be if you do not offer adequate service to your clients. Every business needs to maintain a healthy profit margin to keep going. But there has to be a balance. Cutting costs is only one segment of the business triangle - there is also increasing prices and increasing sales. When sales fall, one of the biggest mistakes a company can make is to lay off their work force. You see major corporations do this all the time. With payroll cut, they figure they can ride out the financial storm. What usually happens? Service and product quality always, always suffers and the customers stop buying what was being sold. Which of course cuts further into profits.
In order to do your best work as a service professional, you need to have the staff and subcontractors available to make sure clients are happy. Happy clients will continue to use your company, will refer your business to friends and family, and will provide you with quality testimonials and references to keep revenue coming in and profit margins strong.
Labels: Small Business Advice
