Conducting business Just to Keep Your Employees Employed? Noble Idea, But a Failing Technique

We must review this issue again, as I continue to talk to small business owners who tell me they are accepting marginal business, even loss leaders, non profitable business in order to keep their men employed.
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This particular must stop. There is no logic in any way to this strategy and in the end just about all it will do is put you out of business, costing all your workers including yourself, their job plus cost you your revenue you are so carefully trying to protect.

It is basic arithmetic. Every aspect of business has over head, not just the cost of goods. Not just the particular payroll. But also the payroll fees, the insurance, the fuel for the trucks, the rent for the office or building, taxes on everything, and on it goes.

So when you accept work that is not profitable, just to keep the men working you are in fact investing additional capital into this job, funds you do not have, the hidden costs which are not being satisfied. Yes you might be able to pull out the men’s paycheck, but if you are not covering everything which usually comes out of gross profit then you definitely are losing money and contributing to your personal demise, then all the jobs is going to be lost including yours. What is the stage?

Business is cruel, but the math never fails, it tells the facts. If you are bidding jobs below profitability, including all your overhead, or selling product at deeply discounted prices that wont support all your overhead out of profit, you are fooling yourself and it is pride that is driving you, not intelligent business sense and the arithmetic.

I realize that your employees are like family and you are feeling a sense of responsibility for them and their own families and you know how difficult it will be for them to find replacement jobs, however you may as well just send them house and mail them their paycheck as that would be better than having them work with below cost or without sufficient profit.

You must cease this emotional support of your employees; it is not your own responsibility. Get smaller, save several jobs, reduce your debt and reinvent your business so it works in this straight down economy that is what you should be performing for your employees so you can employ them meaningfully and profitably, not wastefully along with disaster looming in the future.


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