Now the difficult work begins. If your current VA/Payroll Dollar is below 1.5 it is unlikely that you are making any money. Obviously exceeding this level is mandatory. Examine staffing levels, pay rates, machine speeds for the periods above on an absolute basis and on a per VA Dollar basis.
Make the difficult decisions. For instance if sales have dropped by 20 percent, five customer service reps now needs to be four. If sales reps are not covering their draw—reduce the draw or fire the rep and transfer the fired rep’s customers to the house or performing reps. Today most employees are happy to have a job. Although unthinkable two to three years ago, many firms have successfully reduced salaries across the board without a significant reduction in employee morale. You may need to rethink how you staff shifts and rethink your attitude about sending people home when you don’t have work.
The bottom line: Profits can only be achieved when your labor costs are in line with your Value Added. Matching your costs, particularly labor costs, to your lower sales is the first step to returning your printing firm to profitability. This is difficult work and must begin with the attitude that many firms make good profits. Your current sales levels and you can do the same.
Think smaller, match cost and look forward to great profits when sales return to higher levels. For example, if you were a $20 million printer and now can reasonably expect sales to be at the $15 million level—match your cost to a $13 million sales level and enjoy great profits as you achieve $15 million in sales.
Stuart Margolis is a CPA and partner of MargolisBecker LLC. He provides information that helps firms operate profitably. For more information, visit www.margolisbecker.com.