Adventures with lyrical - buying a business

"Never time to do it right; always time to do it twice."

Honestly it"s not that hard to stop theft.

Profit sharing. The crew police themselves. Sure you could get all the guys in on it together. But they won"t if some of the members have higher shares of profits than others etc.

It builds in extra sets of eyes. Your min wage guys, get profit sharing after 1 year. The guys that are above min wage/and get a share will watch them. Cause they won"t want their bonuses cut into. The guys above him will watch the middle guys, and your managers will watch those guys. They all want to make sure the guy below them isn"t stealing their bonus. Then you just watch your top guy.

Eventually you will get guys at the top you can trust. These guys will be pulling down a lot of money. You still watch them to make sure they know you"re watching. But they make it their job to keep the rest of the crew in line.

It will cost you more money in bonuses etc. But you make it up on less losses, and job turnover. The time it takes to hire/train employees slows your entire business down.

The biggest motivator for theft is doing extra work and not getting rewarded. If you get $9 an hour to flip burgers and one day you flip 25 burgers. The next day you flip 100 burgers. You feel cheated that you did so much work for the same $9 and look to recoup your lost effort. Human nature never kicks in when you only flip 5 burgers though for that same $9.

Hold weekly meetings on how the business is doing. People want to hear that last week was hell for them, but they each are gonna make $300 more each come bonus time etc.

If there is the appearance of extra work is not rewarded, you will simply do less work, or find a way to make it be rewarded.

This.

Its also a fantastic way to cut costs during downturns. As profits go down, so do the bonuses, so your essentially lowering their pay without actually lowering their hourly pay.

I imagine the problem with that line of thinking in low income jobs is that employees won"t accept going below x dollars per hour fixed. Thus you can make them share the upside, but not the downside. That increases your average wage cost.

Contact your state representative/whoever pays them. Most of them are somewhat sensitive to things that would make the lives of their small business owners harder (or at least, could give the appearance of doing so when you write your newspaper).

As far as shit you can reference, try to find out who is paying them and go from there.

The only thing I could think of to help that situation Lyrical, is to make the bonuses public.

This goes against general business practices, where people know how much eachother makes hourly etc.

But if your top guy gets 5% and thats 5k. The guys below him got 1.5% and thats 1500 etc.

You then get the guys below him, wanting to stick it out to get 5k. Also when the wambulence comes from the guy at 5k, the crew tells him to stfu. He still made 3x what they did on the bonus.

Percentages are a very strong concept. This is why a lot of marketing use % based discounts for clothes etc. If you hear 20% off, you think wow, I could save a lot of money. If that same shirt is $10, you save $2. You think, hmm I don"t have to have that right now. If I do need it next week I"ll just pay $12.

Likewise with bonuses. If your top guy got 5k last year. This year he only got 2600. But if you have the % keep going up, hopefully the guy will realize that this year he got 6%, and next year he"ll get 7%. Next year he busts his ass and takes home 8k instead of 5k. Then those 3 years average out to roughly 5k a year.

Also I think it"s important to have meetings and show employees how much you"re investing in them. If you"re providing benefits, it might be costing you $700 per month for each employee. If it appears like the owner is taking a beating, they"ll be more understanding and they will have more apathy to a lower payout.

This won"t work if you"re showing up to work every day in your luxury car. Smart business owners leave toys at home and commute in their toyota camry etc.

Finally if all of that has been tried/doesn"t work. Offer them something on top of their bonus they haven"t gotten before. If they"re all unrational, then simply offer them 401k employee match program. Say you"ll match the first 3% they invest into their 401k. When they tell their family/friends that comes out like a pay raise. Cause that"s how you pitch it to them. You get a 3% pay raise if you invest into your retirement. Now since we know they"re irrational, they"ll still tell their family that, but never invest. Costing you nothing. Sure you"ll have a couple guys who do plan for retirement. That"s great. Cause once they start investing into retirement they"ll never leave. They"ll have to be vested for 5 years to keep that employee match.

Candiarie said:

Contact your state representative/whoever pays them. Most of them are somewhat sensitive to things that would make the lives of their small business owners harder (or at least, could give the appearance of doing so when you write your newspaper).

As far as shit you can reference, try to find out who is paying them and go from there.

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I just had to quote this because at least in WA, this so much the opposite of the truth it"s funny. All the FLAM"s (fucking liberal arts majors) around here are basically convinced that small business owners are made of money and we spend most of our days swimming in our money vaults. Our representatives cater to them.

Lyrical said:

Aligning interests makes sense, and it is a framework Microeconomists use. But, if you listen to what is said in b-school right before that statement, it only works if the individuals behave in a rational and logical manner, and if they don"t, throw it out the window.

The problem with bonuses is when people start thinking they should be automatic and not earned.

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We have this problem as well. I pay my managers/supervisors bonus that is based on a % of net sales and to earn it they must keep their labor and food costs below a certain thresh-hold. They have tools to track their labor usage daily and the food cost numbers are easily attainable with even moderate portion control.

However, if the bonus is smaller than they are used to they grumble, even after I show them the sales numbers. And if they don"t make their labor numbers it"s always because "omg it was SO hard to schedule this month, NOT OUR FAULT!" or if they are over on food cost they don"t understand how that is possible and are convinced that I made up the numbers just to avoid paying out bonus.

Lyrical said:

All of that makes sense when you aren"t dealing with irrational individuals.

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I actually thought about that some after I posted. It could be that your industry just doesn"t attract long term employees.

Maybe you need to identify your typical demographic of employees, before we can figure out how to reach them. Perhaps all your min wage guys are dudes out of high school or quit college. Basically in their party phase, where they just need to make enough money to party next week.

Your crew runners are 28-35 yr old guys without a college education. Maybe used to be construction workers through their younger 20s?

Your top guy or 2 are 40 yrs or older with lots of experience in the field. With or without college education.

All those could be way off, cause I have no idea how your business is run.

But if your low end guys are that out of high school/college drop out. They do have a sense of entitlement. The problem there is, no matter what you offer them. They still think the grass is greener out there. Cause everyone else is making tons of money right?

Your crew runners, are they doing this job because they have too to keep their wife and kids fed? Basically, they jump on the bandwagon cause it"s a decent paying job. But either hate it, or would take any chance to get a different desk job that paid the same?

I"d guess your couple top guys, have gone through tier 1 and tier 2. Now that they"re on tier 3, they think they"re worth more because they"ve stuck it out. Over the years while they stayed in the industry, they"ve watched a few hundred people come and go. They do realize the stability is worth money.

The top guys already have power over the crew, so you can"t entice them with that. You can"t give them more money, as revenue is down from previous years.

Perhaps you need to offer them something that has perceived value. Maybe invest in a get a way place. Say a cabin or time share or whatever. Where your top guys can take their families once a year as a work perk. Give em 3 days off in the middle of your super busy time. So they come back fresh. Sure you"ll be missing them for 3 days. But a relaxed worker will be more efficient when they return.

For the low level peons, if they"re gonna be retarded, give them retarded incentives. Like a badass week/month in sales? You buy the crew lunch! Oh sweet, the boss is buying us all we can eat at olive garden. I"m gonna destroy this bill via my pasta eating capabilities.

Then you"ve got your mid level guys who if they"re just making ends meet. Might really appreciate gift cards. Movie passes, sports game tickets, gas giftcards etc.

The goal on all of these isn"t to break the bank. But to show them you care. Now if you"re thrifty a lot of this is bought in bulk and ahead of time etc. So when you hand them a $50 gift card or 4 movie passes so the dude, wife, and 2 kids can go to the movies for free. It should have cost you like $30. Perhaps use groupon and buy like a spa day for $40 bucks. Give it to your secretary etc.

I guess the real goal here is to understand your employees. Learn what their home life revolves around. If it"s drinking or sports or toy trains. Get incentives that lend itself towards that. If a guy works 2 jobs just so he can buy diapers. Give him a gift card for a night out or something. Your top guys already making a shit ton of money? Give them time off, something they can"t buy.

The thing I do is to make my employees realize how well compensated they are. The way to retain your best workers is to make them realize that they would be hard pressed to make more money elsewhere, and if they are happy at my company, they will have no incentive to leave.

At our end-of-year reviews, when I go over each employees perfomance, etc, I tell them how much they made for the year. Then I compare their annual salary to the average salary of someone in their position. I tell them if they don"t trust my numbers, they can go to salary.com, or ask others in their field who they can trust how much they are bringing in.

My very best employees are in the top 1% paid in their field, and I make sure they know it. I also don"t discourage them from sharing their earnings with other employees in the company, because if anything, it should give others in the company something to strive for. Basically the more you work, the more you sell, the more you make. The formula is very simple, and transparent for everyone to see. There are no hidden bonuses or targets to reach.

Here"s the truth about employees - very few are keepers. Most don"t want to work hard to make the big bucks. Some aren"t bright enough. Some aren"t industrious enough. Some aren"t curious enough. Most set the bar extremely low for themselves. Honestly, I don"t care what the reasons are for their poor work ethic, that"s on them. These are the employees that are the most easily replaced, since finding a mediocre employee has to be the easiest thing in the book. You can hire any Tom, Dick, or Harry to replace them.

It"s the rock stars, the employee who gives you 110%, doesn"t cheat you, doesn"t complain, loves his/her job......these are the ones you have to bend over backwards to keep, the ones you want to insure loyalty to.

Lyrical said:

The grass is always greener, I guess. If they had behaved rationally, they would have realized that no one else pays like we do, so it would be smart to not threaten to quit if you don"t get more pay. When you threaten to quit as an employee, you better be able to accept the circumstances, and know what the hell you are doing.

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lol, so true. Remember that story I told about my estimator who quit back in June? He emailed my bro the other day asking if he could come back. Not as an estimator, but back on the tools as a plumber. He left on reasonably good terms so my bro told him that it"s possible at some point, but right now we"re not looking for journeymen and we don"t have work for him. His mistakes as an estimator were honest mistakes, so we can"t hold them against him. We just would have appreciated him being a bit more honest, as we had several times asked him how he was doing, if he liked it, if he was going to stick with it etc and he never gave any indication that he wasn"t happy doing what he was doing until the day he gave his notice. His leaving when he did completely destroyed my summer, I have been working most weekends and long weekends, 10-12 hour days and so on to essentially do two jobs because of his leaving.

If we do bring him back, we will outright tell him that part of his job going forward is to tell everyone who will listen how good they have it with us, what a bunch of disorganized shit shows most other mechanical contractors are, and to be happy they have a job with us. Most of our crew of 60+ guys started their apprenticeship with us and have never worked for anyone else, so they really don"t know any better.

Corndog said:

The only thing I could think of to help that situation Lyrical, is to make the bonuses public.

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When we did a company wide "loyalty reward" a few years ago (we didn"t want to call it profit sharing or a bonus), there was a scale for it. Second year apprentices got $1,500 or whatever, journeymen got $4,500, and so on. Anyone who"d worked for the company for at least the past year and that met a couple other criteria got it. We did it for two years because those two years were so profitable, and it was more or less a first for the company. We haven"t the past couple years because the company has barely made a cent, but now we have guys asking why it"s not happening and one of my project managers in particular has been sour that he"s not getting a bonus.

It"s frustrating to deal with that kind of shit. The project manager in particular actually has a higher base salary than me and my bro does, and he"s technically made more money the past couple years than either of us has. Yet when we tell him that, he complains that it feels like he"s not getting ahead and things are so much more expensive etc, to which we respond that inflation has been damn near flat the past two years and that if he"s having such a hard time making ends meet maybe he could sell his lake lot or Harley (not literally, but that"s what I fucking wanted to say). He"s terrible with money, and that"s not my fucking problem.

If you mean make the company books public so that people know how much it"s making and what "share" they"re getting of the profits, then no fucking way. It"s no one"s business what my company makes at the end of the year other than me and my partners. If they want to approach my bro and I about buying in to the company if they"ve been loyal and a good employee for a long time, they"re welcome to do that and we"ll certainly consider it as neither of us has a succession plan at this point and would be happy to slowly cede control to partners over the next 5-10 years. Instead a lot of guys are cowards, never say anything, and walk out the door after telling everyone that it was bullshit we weren"t just throwing shares around like candy and sharing profits (never losses right?) with everyone. Sorry, that"s not how it works.

Unfortunately it"s very difficult for us to come up with a bonus system that would tailor bonuses to each person based upon performance, because performance is extremely difficult to measure in construction. If a job ends up 20% over on labor, is that because the original estimate was too low? Was there a run of bad cold weather in the winter, or the GC refused to provide adequate temporary heat? Was the framer a drunk dumb fuck who made us drill twice as many holes as we should have? So on and so forth, both for site staff and the project managers, estimator, and purchaser. Really the only way for us to bonus out is across the board, based upon seniority/experience in years where the profits justify it.

Wouldn"t an easy way to fix that be to let people choose a flat shitty salary if they"re so put out vs. giving them the option of having a variable income?

I agree, some people are really so bad at planning and shit they would prefer to get a static 40k / year vs. 36-60k even if you sit down and point out how they would actually earn more over the long haul.

You keep the extra in flush years, they"re happy.

I think the point that is clear is that employees are fucking retarded. No matter how you present it or sugar coat it, employees will always bitch and moan about wanting more money while doing the same amount of work (or less).

So many people have the self inflated perception that they are worth $XX but can"t back that up with their work. They inevitably convince themselves to go get their money"s worth and, more often than not, they come crawling back because they realize "holy shit, I can"t find a job that pays as much that doesn"t require a lot of work!".

Lyrical said it best: these incentives/profit sharing/bonuses/whatever work best when dealing the rational people. People, in general, are not rational.

Lyrical said:

Aligning interests makes sense, and it is a framework Microeconomists use. But, if you listen to what is said in b-school right before that statement, it only works if the individuals behave in a rational and logical manner, and if they don"t, throw it out the window.

The problem with bonuses is when people start thinking they should be automatic and not earned. December of last year, my Manager tells me he"s expecting a 5k bonus based on profits, because he"s had that in the past. The problem is that profits were down, and he was comparing last year to when the economy was great. The attitude was that he was getting screwed, when the reality is he got paid the same % of profits he did the other years. The guys also get 35 hours even if they work 10 in the Winter, and no one else in the area does that (they all layoff everyone in December and then hire back in March). But they still pouted, ended up threatening to quit, got fired, tried to come back when they realized that no one offered close to what I did, and I told them to GTFO.

They"ve all been starving this year, and I don"t feel glad about that, but when people come to work expecting bonuses they didn"t earn, and then ban together to try to force you pay it, good riddance. They"ve worked for other companies and have seen how generous I was, and they been getting ass raped all year. With me, they would have had 20-30 more hours a week, 15% higher pay per hour, volume and profit bonuses and pay through the Winter. Most of these guys aren"t drawing a check anymore because they company they were at folded, and they are sitting at home looking at their starving kids in the eyes. My competitors aren"t hiring right now, and given the time of year, a guy without a job right now in our industry will be out of work until March of next year.

The grass is always greener, I guess. If they had behaved rationally, they would have realized that no one else pays like we do, so it would be smart to not threaten to quit if you don"t get more pay. When you threaten to quit as an employee, you better be able to accept the circumstances, and know what the hell you are doing.

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I think grass is greener syndrome really fucks people over sometimes - seen it happen a LOT and to be honest its the biggest thing keeping me from making a move right now.

I walked into an executive board members office that I directly support but do not report to and laid it out yesterday - that I want to keep working here with him but I feel taken advantage of salary wise. I was already getting a decent flow of calls but since a few things happened where I updated my linkedin profile its now the executive search/headhunters calling too.

He knows he"s got a good thing going; he agrees. I told him I wanted a 33% salary increase - which was still 10-20% less than what I was getting calls about and he knows I can get. Colleagues of his internal and external joke about stealing/poaching me and his response, depending on how well he knows the person, is some variation of "I"ll fucking kill you." (Not real threat obviously in the physical sense of the word). He"s fully aware of the fact that there are a lot of folks waiting at the sidelines for when/if I"ll leave-which I"ve tried to not be shady about (ie telling him that a CEO and Ops Director of a small-mid sized firm that we just wrapped negotiations with is bugging me about going out for a drink - which I"m not an exec so its not normal but its not totally weird either).

I explained that I"m willing to forgo that extra 10-20% because I know the grass isn"t always greener and there are a LOT of intangibles right now I have at my job that make it worth it.

I tried to be very rational and pragmatic in my approach - and it worked. He doesn"t have the direct power to change it since he"s no where in my chain of command so to speak - but he"s going to take it up with the COO as an internal champion on my behalf and see what he can do.

He didn"t try and manage expectations, he didn"t think I was asking for too much (he would have told me), and he agreed with how I was approaching it - I"m giving them til January to make it right. If its not, then I"m going to start looking.

It was a great conversation actually because it alleviated some of the guilt I would have had if I just up and left out of nowhere. And his responses weren"t "please don"t leave I can"t live without you" - he was very empathetic.

Now I"ve also told my boss what I want to be making - he"s currently blaming the fact I"m not making that on the CFO which I don"t know if thats bullshit or not. But my boss is a fucking joke so working that angle was a complete dead end. He has zero political capital to spend - in fact that was the biggest driver of the above conversation with the exec I support - he basically was like "well the COO knows your value and knows your boss" value and if you leave he"s going to be stuck with your boss so you have that going in your favor."

I dont know how its going to turn out - but if anyone can get this done its him.

I dont want to leave but sometimes it IS about the money. I don"t need to be making as much as possible but I dont want to feel taken advantage of either. It hasn"t been overt exploitation - I took an 18% raise to go there in 2010 and since then my salary has increase by 11% and I"ve taken about an additional 6-7% in bonus home as well. I just want to be paid commensurate for the work I do. And it was nice to hear that he agrees with my perspective. To be fair so does my boss but this guy isn"t a douche.

I suppose this is the right thread, so I"ll post this here rather than starting a new one.

I"m thinking about starting a small, cottage online business just as something to do on the side. I"m not in a position to uproot myself from my current job (which I love), and I don"t have the capital to do what I really want, which is start a brewery. However, I"d like to find a way to fill some of my off-hours, and make a little more income on the side.

I have access to a very niche product out of Europe. While there are similar products available, the particular vendor I have a relationship with does very low US sales, and they make a very affordable and damn fine alternative to what"s available. It"s not something with a huge local market, though there"s some, and with the ability to sell online that market improves dramatically. There"s not a great deal of competition in this space, mainly one or two big sites and a whole bunch of extremely unprofessional mom-n-pop style sites dedicated to particular crafts.

I"m not really looking to answer the question of "is this a good idea". It"s extremely low overhead to run a drop ship online store, or even keep a small amount of international stock on hand to toe the waters. My financial commitment could (and would) start very low, and give me time to build. Mainly what I"m curious about is other folks" opinions on the most obvious pitfalls, or things that new businesses most often forget.

So far, I"ve started the process to get a business license, tax IDs and the usual groundwork done. I"ve also set up relationships with a couple of vendors, and am working on more. Oddly enough, it"s the US vendors that are being a huge pain, while the Euro ones have been a dream to work with. I"m also in the process of building a site, but that"s literally just begun. We"ll be doing some in-person sales, but I suspect an online presence is really where it"s going to be at.

I"m not looking for this to make me rich. In fact, I don"t really expect it to develop past a small, part time business. If it makes enough to net me some hobby money, or pay off my bike then I"d be satisfied with that.