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.
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
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
5. Those employees’ names left without a box must
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.
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
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
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, email@example.com
or 817-834-3625 ext 6#.