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August 2006

 

Tools you must consider to control profits in 2006 – and beyond
Part Three of Three

This is a three-part article. Check the last two month’s issues for parts one and two, or visit www.AmericanRecycler.com. Last month we talked about purchasing and performance pay. This month we will talk about employees and financial metrics.

Employees

Average your last three months net sales and divide that amount by $20,000. This is the total number of employees your revenue justifies.

Your job is to organize your yard with systems to get all the work done with that number of employees. If your yard has been in business for 10 or more years and you have no debt, you may be able to get by with as little as $15,000 per employee. If you have been in business less than 10 years or have debt, you will need $20,000 per employee. Any yard with less than $15,000 per month in revenue per employee probably has a negative cash flow and either is in trouble or soon will be.

Start with a blank sheet of paper:

1. Draw an organization chart with a box for each employee you are allowed.

2. List all your employees by name on the right side of the paper.

3. Determine which employee is best suited and qualified for each position.

4. Cross off their name on the right and place it in a box.

5. Those employees’ names left without a box must go.

6. Write down all the work performed by the employees without a box and assign that work to an employee in a box.

7. Finally, design a pay for performance system that will insure all the work will get done.

Financial Metrics

Metrics are monthly data points gathered on a spreadsheet. They are the pulse points of your business. They include things like the number of vehicles purchased, amounts of projected sales, number of invoices written, parts pulled, deliveries made, phone calls received, etc. You need metrics to compare with other yards, but more importantly, you need them to measure against yourself.

Have regular monthly meetings with your employees, set achievable goals, and assign each data point to an employee. Hold employees responsible to achieve the goals and compensate them accordingly.


Don’t forget to subscribe to Ron's free monthly auto recycling e-newsletter, with news and tips, register at www.autosalvageconsultant.com.

Remember, only you can make BUSINESS GREAT!

Ron Sturgeon is past owner of AAA Small Car World. In 1999, he sold his six Texas locations, with 140 employees, to Greenleaf. In 2001, he founded North Texas Insurance Auction, which he sold to Copart in 2002. In 2002, his book “Salvaging Millions” was published to help small business owners achieve significant success, and was recently reprinted. In June 2003, he joined the new ownership and management team of GreenLeaf. He also manages his real estate holdings and investments. You can learn more about him at WWW.autosalvageconsultant.com He can be reached at 5940 Eden, Haltom City, TX 76117, rons@rdsinvestments.com or 817-834-3625 ext 6#.

 


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