Tools You Must Consider to Control Profits in 2006 – And
Beyond
Part 2 of 3
June 2006
This is a three part article, check last month’s issue for part one. Last
month we talked about systems. This month we will discuss Purchasing and
Performance Pay.
Purchasing - You need a yard management system with a bid pad or you need
a yard management system and a stand-alone bid pad to purchase by requested
customer demand. Our best estimate of what customers will ask us for the near
future, is what they have been asking for in the recent past. This system will
allow you to easily track your stock levels, purchases, and projected sales.
Lots of yard owners ask me questions like: Why can’t I get sales up to $50,000
per month? When I look at the purchases they made and the projected sales from
those purchases in the last three months, it looks something like this: ($30,000
+ $28,500 + $34,000). If I average those last three months projected sales we
get $30,833.33. The $30,833 is all they have the opportunity to sell this month
because that is all they purchased. They may not even sell that, or they may
sell a little more from purchases prior to the last three months, but most often
that is all they will sell this month.
Performance Pay - Pay for performance allows you to operate with fewer
employees. It is only human nature to "watch what you are paid for." If you are
paid by the hour then you naturally watch the clock and track your time. If you
don’t believe this, then just try and pay an employee for three or four hours
less than they actually worked and see if they notice. I assure you they will be
asking why their check is short. Employees know how many hours they need to work
to pay their bills and live comfortably. If they have to take off three hours
during the week, they will try to come in early or stay late to make up the time
if possible. Some will also slow down the work to increase time on the clock.
However, time on the clock does not increase the company’s profit level. We need
to change what employee’s watch. We need them to watch the amount of sales,
deliveries, vehicles dismantled and parts pulled. In other words the quality and
quantity of work performed. So, if we pay them by the quality and quantity of
work performed, then that is what they will watch. When you change to pay for
performance, production will increase by 20% immediately. If five dismantlers
each increase production by 20%, you will have one too many dismantlers for the
amount of work. The strongest and best four dismantlers will get the amount of
work they need to insure the amount of pay they want, and the weakest one will
not. The weakest dismantler will look for work at another company.
Remember, only you can make BUSINESS GREAT!
Don’t forget to go the web site
for my new book,
www.greenweenies.com, to
learn all the backroom business terms. There are 1,200+ terms in over 300 pages,
with hilarious illustrations by world famous Gahan Wilson. You can register
there for your free weekly “green weenie.” If you want to know what a three
fingered booger is, or what’s in a train wreck envelope, it’s the only place to
go!
Please email if you would like me
to send previous articles.
AutoSalvageconsultant.com was formed in 2001 to help recyclers improve their
businesses. With over fifty years of experience in three staff members, the
group is THE definitive source for recyclers’ management and training needs. The
founder, Ron Sturgeon is past owner of AAA Small Car World. You can review his
resume, with skills and experience at our web site. In 2002, his book How to
Salvage Millions From Your Small Business was published to help small
business owners achieve significant success, and was recently reprinted in the
U.S., and published in China, Korea and the Czech Republic. You can learn more
about how to help your business at
www.autosalvageconsultant.com.
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