Since
1992,
NSPG has been providing the tools that allow contractors to
increase profits and minimize business hassles. With our
simple-to-use-tools, you can make being a business owner
what you always wanted to it be -
successful, profitable and rewarding.
Million Dollar Salaries and Your Prices
Lately, the news has been filled with stories of
financial executives making millions of dollars and
constantly needing more. Believe it or not, the
reasoning that leads to these sometimes unreasonably
high salaries is also used by many small businesses set
their prices. In both cases, the thinking is
probably wrong.
 In
the financial industry, a business is often judged by
the salaries it pays. The higher the salary, the
better the company must be. Over the last few
decades, executive pay at wall street firms has risen
many times faster than other high level salaries.
The reason given for these
increases is that they are needed to attract and retain
the best and brightest. This is what makes the
company the best. We pay the most to get the
smartest guys, so we're worth more than the other
companies doing the same transactions.
The prestige of many
financial companies is judged by salary level alone.
 For
financial firms, the fallacy in this thinking lies in
the fact that they choose from thousands of qualified
applicants for each job they offer. If these
businesses were run rationally, supply and demand would
force their salaries to a much lower range.
This does not happen
because the people on the salary committee lose nothing
by paying too much. In fact, they can gain by
setting salaries higher than necessary because their
salaries are often set relative to other industry
salaries. When they give other people a raise, the
are effectively giving themselves a raise. The
biggest losers in the scenario are the shareholders.
So, how
does this relate to my business?
The service industry
suffers from the opposite mindset. In many
markets, prices are dragged down by the companies that
believe that their services are judged by price alone.
The lower your price, the more business you will
receive. Anyone who charges a price that is higher than
yours is gouging his customers.
 The
rationale for the low-price-at-any-cost business is that
consumers will always choose the lowest price supplier.
Lowering your price will bring in more business.
You'll appear to be more successful because your people
are always busy. You have a huge customer database
of people who have chosen the lowest cost company.
Who cares if you make
little or no profit on each job. You can make up
for it by working more hours, hiring more employees, and
paying lower salaries. Your cash flow is
tremendous, and it feels like you're doing well even if
there is no profit at the lowest price point.
But, like the super high
paying financial system, the owner of the company is the
biggest loser. No company can operate forever with
little or no profit. No employee can work forever
at the lowest salary level. No supplier will get
paid when a no profit company has a slow down.
Even the competition is hurt by the lowest price
operations who convince the market to expect to get more
than they pay for. Everyone loses.
The idea that ties the
super rich financial industry to the rock bottom prices
in the service industry is the disconnect from supply
and demand. The rich are paid more than they are
worth because there is no connection between salary and
performance. The low price service business
charges too little because there is no connection
between the price charged and their costs.
Neither situation is
sustainable forever. The rich will eventually be
reined in by the shareholders or government regulation.
The lowest price business will disappear because it will
run out of money. At least in the service business
case, the solution is supply and demand not some outside
entity forcing a solution.
 The
prudent course for any business is to know your costs,
and charge a price that earns you the profit you need.
If the business you're in allows you to set your price
so you pay yourself a million dollars a year, do it.
That's why you're in business - to do the things you
want and to earn the money you deserve.
Paying yourself and your
employees a ridiculously high or low salary makes no
sense. The market and the services you provide
will set the limits for your business. Know your
costs, set your profitable prices, present your business
professionally, and earn the rewards. This should
apply to Goldman Sachs just as it does to your business.
The products and services
that we provide here at NSPG can help you learn the
limits for your business, and improve the profits you
can earn within those limits. The professional
organizations we highlight at the bottom of each
newsletter can also help you build you business so that
you can achieve your service and profit goals.
National Standard Price Guide & Numbers Cruncher Hints
Here are a
couple of hints on how to get the most out of your
NSPG software.
Free Online Updates
 At
the bottom of the File menu are a couple of buttons you
may not have used on a regular basis. The On Line
Updates button will open your web browser and take you
to the Free Flat Rate software update page.
You can
download the latest version of the Guide that includes
all improvements and fixes. Just click on the link to
begin the download. Then run the install and
you'll be up to date.
It's Fast, it's Simple, and it's Free.
Automatic Data File
Transmission
Both the Price Guide and Numbers Cruncher have a button
to easily send us your data files with just a couple of
mouse clicks.
For the Price Guide users who want to have their
Flat Rate Books printed by us, this is the easiest way
to get your data files to us. You can also use this
button to get your file to
us to take advantage of our data evaluation services.
A single
click on the Send File button will compress your data
file and send it to our secure support server. No
fighting your email attachment limits or trying to
figure out how FTP works. Just click and go.
Getting your
data to us for your custom printed books, and the
Premium Numbers Cruncher Review Service has never been
easier.
- - - - - - -
Give Mike Conroy a call to
discuss your business, your numbers, your performance
benchmarks, or your flat rate
books. Take advantage of his experience working
with hundreds of companies like yours to help you achieve your own business success.
Measure Monthly, Adjust Quarterly
& Achieve Your Annual Profit Goals
On-Line
News
Solar Powered Wine
Roger the Plumber
Burning Water
Sappy Electrician
New Iowa Electrical Law
Call 800 841-8542 today
to learn about our
easy, no interest,
multi-payment plans for
NSPG software
products.
|
