Opening a Small Business - A balancing act...
So what do I mean - balance the needs of the customer - employee - and the owner? I will start with - if you fail to do this - it is just a question of time before you are out of business. Why - because if you tilt it in any one direction more than the others - either the customer - the employee - or the owner will not be satisfied - and if they are not satisfied - customers will not come - employees will find another job - owners will not continue investing time and money. It’s that simple - so let’s look at a simple example… Opening a Small Business - The customer… Let’s say you own a restaurant. You want to drive sales - but you still need to make a profit - so you price the menu where your food cost will be at or above 50% of your total expenses. In the simplest of terms - this means that you sell a hamburger for one dollar that cost you 50 cents. This means that you are pricing items/meals on your menu too low - but will seem like a great value to your customer - driving sales up. So you need to balance all three areas so that you can still make a profit - so either the employee is going to have to take a hit - or the owner/you. Opening a Small Business - The employee… So you decide it is going to be the employee - and the only way to lower your labor cost is to either lower wages or reduce hours. The problem is that you still have the same amount of work - and in some cases more - because you are serving more meals to more customers because of the menu pricing. You decided to reduce there schedule from 8 hours to 6 hours - and just ask everyone to work harder and faster to do the same amount of work they normally do in an 8 hour shift - and now do it in 6. Now the employee may put up with it for a short time - but guess what - they will have to adjust their life since they were use to getting a pay check for 8 hours a day - and now they have to live on 6 hours of pay. They will either have to cut their expenses - get a part time job - or they will quit you and go to work for someone else. While they are deciding to move on to a different job - they are very upset at you for cutting their hours and making them work harder - so guess what - their customer service goes into the toilet - and now your customers are upset also. Opening a Small Business - The owner… After reviewing this option - you decide that maybe you the owner should take the hit - so that the customer and the employee remain happy. Seems like the best choice at first. So you continue pricing the menu the same - you don’t cut hours or reduce pay rates. By doing this you see that now you are breaking even or losing a little money at the end of each month. Breaking even in this case means that you are neither losing money nor making money - but you are still getting up in the morning - putting in a 12 to 14 hour day - worrying about every nickel spent - dealing with all the things owners deal with - and at the end of the month - you get to load up your wallet or purse with nothing. Sounds great doesn’t it? How many days - months - years do you anticipate you the owner will keep this up before saying - I can make more money in interest doing nothing - than suffering in this way? Opening a Small Business - Balancing act… Staying in business requires that you handle the situation better all the way around - price your menu correctly - and serve what the customer wants - based on or around 30% food cost - pay your employees a fair wage based on the economy and geographical area you are in - and you the owner should expect to make a fair profit at the end of each month. Balance the needs of all three and you will be successful. Thank you!
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