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Consider Big Decisions Carefully

Diana Vollmer |

Every day, you make decisions about your business. The most frequent are decisions related to employee scheduling. Next comes processing; after that might be how to spend your time.
These decisions are nearly automatic. You’ve made them so often that now, you know the right answers intuitively. You don’t spend time calculating store hours, sales volume or the number of customers per day. You know how to staff a store effectively to hit your sales goals, give customers good service and make a profit, because you have done these calculations countless times.
There are other decisions that deserve more time and information. Decisions about wage increases, price increases, equipment purchases, new locations and advertising campaigns come less often, but offer significantly more profit potential. Nonetheless, these decisions are often made with the same casual attitude as day-to-day ones. And if you don’t know what you’re doing, snap decisions can have disastrous results.INFORMATION, PLEASE
A lack of information is the bane of small-business owners. Thinking that we know it all and have done it all before often lulls us into a false sense of confidence. For example, employee wage increases are often automatic: Last year, we gave everyone a 3% wage increase; this year, we’ll do the same. Next decision!
But wait — what’s the justification for a 3% increase? In the past, it might have been consistent with the consumer price index (CPI). This year, it isn’t. In fact, there may be no money in your budget to fund an increase this year.
Some people might deserve bigger increases than others — if 3% is affordable, maybe some people deserve 1%, while others get 5%. The easy decision is to retain the employees you’re happy with and maybe lose the bad ones. In times of high unemployment, you can be more selective.
Many operators are considering price increases. How much is the right amount? Let’s say that you’ve moved prices up 25¢ at a time over the years. That was great when pants were still $5.00 — a 5% increase. Now, pants are $7.00, so that 25¢ is only 3.5%. Was that the intent, or was it habit?
As the potential impact on your business increases, the data you collect to make a decision needs to increase, too. Buying a new drycleaning machine is often the single biggest expense a cleaner will have, and you may be making this decision more often.
This decision is no longer automatic. Which company will be around to service the equipment, given industry consolidation? Which solvent will offer the lowest operating cost and consistency of supply? What capacity will you need? What other equipment will the new machine require? Some of the information will come from estimates, but it all must be processed thoughtfully before you proceed.
Collecting information is always a time-consuming job, but not collecting it can have devastating effects. The cost of retaining the wrong employee can run into the thousands of dollars in lost productivity. A price increase that’s too high may impact volume, and a price increase that’s too small won’t provide profits adequate to continue in business. Inappropriate equipment causes daily headaches, which can result in late orders and lost customers.
It takes more time to make thoughtful decisions. Next time you take on one of these projects, make a list of the reasons you’ve made a particular decision. You can include others’ opinions and your own gut feelings, but be sure to include a few hard facts about the marketplace and your business. The final decision always comes down to a balance among options.
It’s your business and they are your decisions, and you have the most to gain. It makes sense to spend more time on the bigger decisions.
 

About the author

Diana Vollmer

Methods for Management (MFM) Inc.

Managing Director

Diana Vollmer is managing director of Methods for Management (MFM) Inc., a consultancy specializing in drycleaning businesses. You may contact her at dvollmer@mfmi.com, 415-577-6544.

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