I recently lost an accounting person who had been with me a few years. When I went to replace her, I found that I had to pay considerably more than I was paying her. These are unprecedented times we are in, and labor markets are certainly not acting normally. Most of your employees, and likely your best ones, are not looking to move. But don’t think that other employers won’t approach your employees, including your competitors. It’s not mean, folks. It’s just capitalism. We have been trying to hire a janitor for several months, offering $22/hr., with benefits. We are having no luck.
I know that you don’t want to go around and give everyone a raise, and I am not proposing that. But we both know that inflation appears to be here. The question could be should I give a raise now and keep the talent or wait 3 months then pay more to replace those who leave, a raise now looks even better (or perhaps just a spiff based on some apical accomplishment or achieved goal) especially when you factor in the required training and hiring cost.
I hear you when you say you can’t pass the costs along to your customers. Actually, those that are tuned in know that there are supply chain and availability issues for many OEM parts. When did you last look at setting stock levels, and studying Days in Stock (DIS) for the parts you just sold? In many cases, you sold parts within days of their arrival. When that’s the case you can raise the price for that part, likely considerably, and you may slow down the sales a little, which can be a good thing.
Saying yes in 3 weeks at a higher price instead of 3 days at a lower price is a non-financial event for you from a timing or cost perspective, but it can be huge for your margins. Also, if you are selling almost everything to other recyclers, who are almost certainly marking it up, it may be time to consider selling more to the shops and not loosing that margin. There may have been a time when it made sense to sell a high percentage of your parts to other recyclers, but those days are gone for many. If you are in an area with no population, and can’t or won’t deliver into the big markets, it could make sense if you can buy your cars cheaply enough.
I know, buying has become such a pain. The vast majority of recyclers are still buying on their gut, rather than actually figuring up the saleable parts on every car, like Bid Buddy does. I always laughed when competitors told me others were paying what they thought were “crazy” numbers for cars, and they were doing it week after week. If you are seeing that, you should be paying attention because you can pay more for cars and sell the parts for less when you buy the right cars.
What we all know:
- These times are unprecedented.
- Costs and cars are up
- Denial is not a river in Egypt. Stop being in denial. You are going to have to raise your prices so that you can take care of employees and still make a profit.
- It isn’t going to get better.
If you can’t raise prices, then your business is too fragile, you have waited too long, and it’s time to rethink, sell or retire.
Ron Sturgeon, Mr. Mission Possible, has been a successful business owner for more than 35 years. As a small business consultant, he can deliver wisdom and advice gleaned from an enviable business career that started when he opened a VW repair business as a homeless 17-year-old and culminated in the sale of several businesses he built to Fortune 500 companies.
Ron has helped bankers, lawyers, insurance agents, restaurant owners, and body shop owners, as well as countless salvage yard owners to become more successful business people. He is an expert in helping small business owners set the right business strategies, implement pay-for- performance, and find new customers on the web.
As a consultant, Ron shares his expertise in strategic planning, capitalization, compensation, growing market share, and more in his signature plainspoken style, providing field-proven, and high-profit best practices well ahead of the business news curve. Ron is the author of nine books, including How to Salvage More Millions from Your Small Business.
To inquire about consulting or keynote speaking, contact Ron at 817-834-3625, ext. 232, rons@MrMissionPossible.com, 5940 Eden, Haltom City, TX 76117.