Archives for March 2022

Just Add Value to Their Lives

By Dave Ramsey, Ramsey Solutions

Turnover rate is a vital measure of a company’s overall health

Turnover rate. It isn’t fun, it isn’t sexy, and it has absolutely nothing to do with delicious pastries. If you know anything about balancing the science of running a business and the art of having employees, you know it’s a vital measure of your company’s overall health and culture.

Employee turnover rate pertains to the percentage of your employees who leave your company over a specific amount of time. Think about all the people who quit voluntarily, are fired or choose to retire. That’s what you should factor in when calculating your company’s turnover rate. Why is it so important to keep that pulse? Because you need to know when and why employees “turn over,” not just wave goodbye and hope you can replace them quickly.

How to calculate turnover rate

As if employees leaving wasn’t painful enough, now we have to do math. Most companies want to know their employee turnover rate on a quarterly or annual basis. Why? It just takes that long for anything meaningful to show out of it.

Here’s how to calculate turnover rate:

                                                     Number of employees who left
Monthly turnover rate % =    ———————————————    x100
                                                     Average number of employees

                                                                    Number of employees who left                         
Annual turnover rate % =    —————————————————————    x100
                                                   (Beginning + ending number of employees) / 2
                                                                     

                                                 Sum of employees from all pay period reports                     
Average # of employees =   ————————————————————-
                                                                       Number of reports

What’s a high turnover rate?

The question every leader asks when it comes to turnover is: What is a high turnover rate? The answer is that it depends on the business. You’ve got to calculate it over time, combine that with what you know to be true about your specific business and industry, and factor in your understanding of your employees.

No one wants to be in a bad spot with employee turnover. It’s a huge, expensive pain that takes a ton of time and effort to fix. That said, a high turnover rate usually happens because of a combination of things: company culture, compensation, benefits, job market conditions, employee stress, and more.

If you want to compare your business’s turnover rate to national averages, the Bureau of Labor Statistics is a great place to start. Beyond that, the most effective way to reduce turnover rate is to take a long, hard look at how your employees experience working at your company.

Reducing turnover rate

Understanding where your employees are coming from and what they’re dealing with is like having a silver bullet to solve many of your company’s retention problems. It’s also vital to have a firm grasp on the competitive hiring landscape. What’s that mean? It means knowing where you stand in the marketplace, and not being behind the times—or your competitors—with what you’re offering employees.

While conventional benefits form a good base, today’s employees want and need more than just the basics. They need life-changing benefits to justify staying in one place for more than a few years. And your company stabilizing its turnover rate for the long-term depends on it.

Recruiting isn’t just about hiring new employees. You’ve got to continuously do things that build your culture, and make your employees want to stay with your company. That means your employee retention strategies—your culture, compensation and benefits—need to be unique and on point.

If your employee turnover rate is high, it doesn’t necessarily spell doom for your business. Having a healthy employee turnover rate is possible, and it doesn’t take a complex process to get there. It just comes down to adding more value to your employees’ lives!

* Leadership and small business expert Dave Ramsey is CEO of Ramsey Solutions. He has authored numerous best-selling books, including EntreLeadership. The Ramsey Show is heard by 18 million listeners each week on more than 600 radio stations and multiple digital platforms.

Knowing Your Numbers Increases Sales

By Tom Grandy, Founder

How did you determine the price of your last job?  Was it based on what others sell similar equipment for or was it based on your actual costs of doing business?  Do you discount jobs?  If so, why?  Did the customer tell you the job was yours at “X” price or did you simply discount the job because you felt like you could, should, or needed to, to close the deal?

Knowing what you need to charge for a retrofit or new installation job changes everything.  Going through the detailed process of setting hourly rates (from a cash flow perspective) provides the owner with the necessary knowledge to sell a job.  Knowing the price quoted will generate a specific net profit is powerful.  Knowing the breakeven price is another great tool when it comes to sales.

Below is a report from the Job Pricing Calculator of our newly rewritten Planning For Profit Software™ program.  Note, it shows the suggested retail price along with the dollar and percentage of profit, that price will create.  The below example tells us the price needs to be $4,207.00 based our on desired hourly rate for installation of $52/hour.  Note, it also tells us the breakeven price of $3,559.64.  That price covers all business expense, including salaries.  It simply does not generate any “net” profit.    

I don’t know about you but knowing those two numbers completely changes my countenance when I am talking to a potential customer.  I am far less likely to discount if I know what price I need to charge to hit a predetermined net profit.  If I find myself in a position when I need to discount, I at least know how low I can go and still cover my costs.

As a reminder, never just discount the price of the job.  That is why the customer needs to be presented three price options Best, Better and Good.  If the price goes down so does the offering.

Why show the Best price first?  Last year I bought a new car.  There were three cars my wife and I were considering.  One was a Honda; another was Toyota and the final one was a Nissan.  The same dealership handled all three brands.  We explained to the salesperson the three options we were considering.  He first had us drive the Toyota Highlander.  It just happened to be the most expensive of the three.  We went for a test drive.  Wow, it was amazing.  I had never driven a vehicle with electric steering before, but the difference was amazing as were many other features.  Test driving the other two brands (Better and Good) literally paled in comparison.  There was no question.  If we were to purchase a new car it was going to be the Highlander. 

The confidence provided by knowing your “real” numbers is hard to describe until you know them.  Knowing what your real net profit will be at each price level and knowing your breakeven price makes all the difference in the world when you are presenting the customer with the quote.  Secondly, providing Best, Better and Good options accomplish the same purpose as discounting…without losing money.

Many contractors are getting older and/or have parents or grandparents in that situation.  If you have any responsibility for those individuals, ask yourself a few questions.  Do they have a will?  If so, where is it located?  What banks or investment firms do they use?  Do they have a life insurance?  How much and who with? Do they have a safe deposit box?  If so, what bank and where are the keys?

These are the kinds of questions most of us ask when it’s to late!  This month’s Website Special is the What’s Where When You’re Gone? manual.  This 69-page manual literally covers everything you will need to know from debt summary to lawyer’s phone number.  The normal cost is $27.00 but this month it’s only $24.00.  Order today!

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