Three Golden Rules

Plan OUT Cost Structure

Truly understand your cost structure and how it will be affected by planned growth. In other words, if we plan to grow from $100 million in sales this year to $130 million next year, what will we have to account for month by month? What will happen to our cost per unit at $130 million? Will it go up or down and how do we price accordingly ? Additionally, how might major investments in things such as technology and other areas change price per unit? One of two situations will surface:

1. a. Cost per unit increases : Do we increase pricing or eat the difference?

2. b. Cost per unit decreases: Do we leave prices the same increasing margins or do we lower pricing for easier sales?

Truly understanding your costs and how growth will affect them is critical.

Key IN on the Customer

Look at profitability by customer and not by your company as a whole. Based on the data, the most profitable situation may be to reduce revenues by eliminating the unprofitable customers depending on what else they bring to the table. However, this is a delicate line. For example, an unprofitable customer may have a well-known name and people buy from you because they see that name , or an unprofitable customer may be your best sales person and has brought you very profitable business.

We actually survey our staff to determine which customers consume the majority of their time and why. We look at all the factors affecting their costs and then make decisions based on that data each year. Unprofitable customers are evaluated and, if need be, assisted with finding another solution which is a win for them and for us. We never leave anyone hanging. Relationships are simply too important to us to approach it in any other way. Sometimes, it may seem like a step backwards but it might be a healthy move.

Earning Customer Loyalty

We believe that today, a simply satisfied customer just is not good enough. They will leave you for insignificant reasons. But loyal customers dont leave and eventually become your best sales people. The right combination of value and relationship earns loyalty, and loyalty earns profits. People are always willing to pay for something great whether it is a vacation, a meal or a valuable relationship.

This may seem to be a rather indirect way to look at the question of increasing profits, but so many factors change when loyalty exists. The more people talk about us and refer us, the bigger we get. The bigger we get, the more volume purchasing power we possess, and our expenses decrease. The bigger we get, the more business owners talk about us, thereby increasing sales opportunities. Even if someone does not buy from us, our reputation builds, and that will lead to future profits. It is a never ending circle of profitall based on great service, quality and ultimately, loyalty, from customers as well as from our employees .

John D. Hawkins is President & CEO of Employee Services Corporation. Employer Services Corporation (ESC) is a professional employer organization (PEO) founded in April 1995. An Inc. 500 Company, ESC serves over 200 customers and nearly 6000 families in seventeen states and reached sales of $89,000,000 in 2003 placing ESC in the top 5% of all PEO's in the country. Hawkins has been recognized by WNY's Business First Magazine as one of their 40 under Forty (2002) for his professional success and community involvement and a three time finalist for Ernst & Young's Entrepreneur of the Year. Hawkins lives in East Amherst with his wife and two children.