How Do I Pay My Employees?

I have a business mentor and neighbor who always inspires me when we get together, and he gives me great ideas and sound business principles. He is also very rich.

I have a business mentor and neighbor who always inspires me when we get together and he gives me great ideas and sound business principles. He is also very rich. I check his mail for him since he is very rarely at his home in our neighborhood. He has three other homes, all paid for with cash, and one that he has only been to twice in six years.

Last year I called him up to tell him there was a check from the IRS and he told me to open it up. It was a check for $400,000. Last Thanksgiving he was in town and I took him another IRS check that had been in his mailbox. When I gave it to him, he opened it and nonchalantly said, “Hey, look at this.” It was a check for $2,300,000!

He owns factories around the world and used to have thirty different companies. Two really important business questions that I have posed to him have influenced my business practices substantially and those questions are:

1. How do you spend your day, having so many businesses?
2. How do you treat your employees?

The answer to question number one ought to inspire you as it did me. He said that he looks at the numbers. If a company is doing well, he leaves it alone. If it has some numbers that don’t look as they should, he steps in.

Let me ask you this question about your company. Do you have those types of numbers handy in your business? Can you look at your P & L, Balance Sheet, Up-sells, Phone Log, Marketing Report, etc. and get an accurate picture of your company’s health? That ought to be the goal of every entrepreneur.

IF YOU CAN MEASURE IT, YOU CAN MANAGE IT. IF YOU CAN’T MEASURE IT, YOU WON’T BE ABLE TO UNDERSTAND IT!

Now then: How do you treat your employees? When I asked my neighbor this question his answer was quite simple. He said that he finds great people, let’s them have plenty of responsibility and pays them very well. As I already mentioned, when the numbers look good, he leaves well enough alone. If not, then a call or visit is in order.

Fortunately, for those of us in the carpet cleaning and restoration industry, we can pay our people well because we are in businesses that can have a high profit margin. If your profit margin is less than 20%, you need to do something about that because you may not be able to pay your people in  a manner that is going to keep them happy and around for a long time. I like my neighbor’s plan and you should, too. Find great people and pay them well.

By the way, one thing that I found out the hard way over the years is this. If someone is a low performer, they have got to get better or they will be let go. Don’t let low performers destroy your company and your life and mental health.

OK, great Dave, so in our industry, what does great pay look like? I am going to tell you how we pay our people at my company, located in Pensacola, Florida. Of course, every area of the country is different and has cost of living factors but you will get a general idea that should be helpful.

For the most part, every job has some sort of incentive pay. When I went from strictly hourly pay to incentive pay, my profits skyrocketed. People ought to be paid on how they perform. If someone is fast and can up-sell, they should be rewarded for that and not be paid the same hourly rate as someone who can’t hold a candle to their abilities. So, here goes.

Our technicians are paid $8 to $9 an hour plus a bonus of 8% of the production they bring in. we operate one man trucks. Additionally, they are paid a 12% bonus on any up-sells. So, if they do a job for $200 and have a $100 up-sell in which they also do the work of the up-sell, say they clean a sofa as an up-sell, they will make their hourly rate plus 8% of $300 and 12% of $100.

Our office manager makes an hourly rate of $11, and if the company does over $20,000 for the week, she receives a $50 bonus. Also, any job that she gets over the phone where she has to sell the prospect on our company, she receives a $3 bonus. Our office assistant is paid $9 an hour and she receives the same $3 bonus for booking a new job. She also takes flyers to our established customers on Fridays and if she finds a new office to display our material, she gets a $5 bonus. Notice, I always say bonus and not a commission because if you want to take a bonus away for any reason, tardiness or whatever, you can. You cannot do that with commissions.

Our operations manager is paid a monthly salary plus 3% of the gross profit. Why the gross profit, you ask? The reason being is that he is in control of the technicians’ hours and the more efficient they are, the bigger his bonus. The gross profit in our company is the sales minus service labor and chemicals. He supervises both service labor and chemical usage, so the items that he is in charge of, are the items that are part of his bonus.

Our marketing director is paid a salary of $30,000 plus a bonus of 3% to 5% of the business that she brings in. As long as she is employed by the company she will receive 3% to 5% of the sales generated through her efforts. She does a great job and has been averaging $30,000 and up per month in sales!

The only people in our company that continue to be paid and hourly rate are our restoration technicians. Incentive pay is a bit tricky to figure out for them. We want them to be thorough, so speed is not an issue and rarely can they up-sell anything. Consequently, we just pay them very well.

Finally, my vacation pay for all full-time employees is exceptional. They see me on vacation all the time and I figure that they can use time off, too. My folks get great vacation pay but I believe it keeps them happy, refreshed and with the company. After six months, they receive a week’s paid vacation. One year and they get two weeks paid. Three years, three weeks paid; five years, a month paid; seven years, five weeks paid; and twelve years, six weeks paid. You may think this idea to be very expensive but have you considered the enormous cost of training new employees? That cost is substantial, and a vacation program like the one I just described is one fabulous way to keep great people on your staff.

In conclusion, take heed and find great people, pay them well, and chances are you will be able to do lots of fishin’, golfin’ or whatever your heart desires!