How do I improve my profit margine and cut my expenses?
By Brad Sugars •
Opinions expressed by Entrepreneur contributors are their own.
I have a small, family-owned heating and air conditioning company. I have one secretary and three installers/service techs. An additional estimator/sales/service would be useful in the summer, but business decreases in winter. If I hired a second estimator/salesman I would not have enough profit to maintain salaries. I borrow money in the winter and work all spring, summer ands fall to pay it back. How does one determine when adding an additional employee is financially sound?The general rule for hiring is to bring someone on when you can afford to pay half the employee's wage. This is a valuable benchmark because at that level, the employee will pay for himself by the work he does, and by the time he frees up for you to do more productive and profitable work on the business.
How can you do that?
By re-examining what you are doing "in" your business. Your type of company should have year-round revenue. How can you make that happen? What can you do in the winter to boost sales? Can you deliver wood to people who use their fireplaces? Can you do your air-conditioning maintenance in the winter as a "special" service?
Whatever the case may be, you need to be proactive instead of reactive, especially if you have a good client base. How can you upsell or add value? Can you raise your rates? Again, you need to grow your way to a bigger business instead of cutting your way to one, as you can only cut expenses so far before performance suffers.
Look at other similar companies in other locations to see what they are doing--and borrow best practices. Growth on the top line is the only way to grow the bottom line. That will entail you doing some things you may not be used to doing--but the results will be worth it in the end.
All the best.
Brad Sugars
