National Clothesline

Everyone is so distracted by the headlines about hurricanes, bird flu, gasoline prices, earthquakes, floods, etc., that no one seems to be paying any attention to the state of “our” business economy.

When I say “our” business economy, I am referring to the economic condition of your company today and what it will be like in three to six months from now. All the indicators I see are pointing in one direction for the small business community in America — high speed train wreck!

Small companies in America — those employing 100 people or less — employ more Americans than all the other companies combined. If we, as a major business group, fall apart financially the whole country will be facing a financial disaster.

Right now all small business owners must look at the facts and decide what specific actions they will take to keep their business moving forward.

As we all know, prices of everything are going up: gasoline, fuel oil, electricity, supplies, insurance, wages, and even interest rates are going up November 1, 2005.

These problems are compounded when we consider the additional costs our employees have to pay for everything they buy. This forces the employees to look for a raise or at the very least try to squeeze a few more hours out of your time clock each week.

Then there are the additional costs our customers have to pay for everything. Do you see a pattern developing here?

What do owners of small to mid-sized companies in America have to do to survive during the next six months? Let’s briefly review some of the most common cost items on our income statements that have gone up over the past 12 months and that will continue to increase.

In the past 12 months these critical cost items have been increasing and the biggest problem (frustration) is that you have no control over the amount of the increases.

We have just demonstrated that for every $100 worth of work you bring into your plant your costs for the few items listed above have increased from $60 per $100 in work to $69.10.

Where is that $9.10 going to come from? The money has to come out of your pocket or it has to come out of your customers’ pocket.

The only way you can recover these costs from your customers is through a price increase. Don’t relax yet — a price increase is only part of the story.

Once again, we are facing truly new economic conditions and these conditions will have the biggest and most immediate impact on the small business community in the United States.

For years companies have been able to absorb cost increases and slowly pass them on to the customers over time. That is because in the past the costs increases were incremental or in smaller more digestible sizes. No more!

By the way, more than one half of the cleaners I’ve been talking to recently have said they will be increasing their prices four to five percent before November 1, 2005.

Now for the rest of the story. Increasing prices is the easiest part of the solution. Also, it should go without saying, when you increase prices you will improve your customer service and the quality of your work.

When you increase your prices, you may lose a few customers. Big deal! Fewer pieces; less work; lower costs; and more sales dollars. Once you increase your prices you must now begin to micro-manage every aspect of your business.

You must sit down with your key employees and explain to them in plain English that the company is in a crisis mode. They must understand that they will have to work harder and longer in order for the company to survive.

These key employees must understand that the company will not be here a year from now without some dramatic changes.

If any of these employees say they will step up to the plate, but only if you pay them more – guess what? They are not really key employees, are they?

What matters now is your company’s survival and this means that it is time for all you nice boys and girls to get tough. If you don’t take care of your business no one else will – no one!

First, if you have departments that need only four people and you have five on the payroll to cover for absenteeism — cut the department back to four employees. You have to eliminate every opportunity employees may have to milk the clock.

Second, make every employee start work when you need them to start work – not when it is convenient for them. Also, make sure that your employees clock out when they are finished with the work.

For those of you who have routes, do not add a fuel charge to the route customers bill. Instead, increase your prices for all customers.

Also, consolidate your routes so you are not wasting your drivers hours and fuel. Give serious consideration to implementing a monthly minimum on all route customers of $50.

You cannot drive back the cost of utilities and supplies, but you can control their usage. Micro-manage when your power goes on and off and do it every day. Also, don’t leave it to others because if you don’t follow through yourself, it won’t get done.

The economy is facing some tough days ahead. Prepare your organization to meet these challenges head on!