Payroll vs. Owner's Compensation

Payroll Costs Vs. Owner's Compensation

I've talked about the correlation between payroll costs and owner's compensation many times in the past. Payroll costs play a greater role in determining bottom line profitability than any other major expense category. If you're having trouble in your business the chances are very good that many of those problems can be traced to payroll costs that have gotten out of hand.

Believe it or not, key expense categories such as cost of goods or general overhead expenses have remained, as a percent of sales, almost the same as they were 30 years ago in this industry. While COG and Overhead Expenses have remained the same, owners have allowed payroll expenses to continue to increase. I've provided the chart below to illustrate my point.

Note the difference in total payroll costs for those companies in the bottom 25% of the industry (0-25%) against those in the top 2quartile (76-100%).

By the way, contrary to popular opinion, companies with the lowest payroll costs typically pay the highest wages, they just employ far fewer people to do the work and the people they do employ are far more productive due to their skill levels and the equipment they are asked to operate.

Gov. Perry Believes in Noah's Ark

BEDFORD, N.H. (AP) — GOP presidential candidate Rick Perry told New Hampshire voters Wednesday that he does not believe in manmade global warming, calling it a scientific theory that has not been proven.

"I think we're seeing almost weekly, or even daily, scientists that are coming forward and questioning the original idea that manmade global warming is what is causing the climate to change," the Texas governor said on the first stop of a two-day trip to the first-in-the-nation primary state.

According to insiders attending the meeting, Gov. Perry also went on to staunchly support the Biblical account of Noah and his Ark, as well as his believe that a whale did indeed swallow and later spit out Jonah! He said that while their is ample scientific proof of the latter, scientists are coming up far short in proving that "Global Warming" really exists.

One New Hampshire resident, after attending the early morning breakfast meeting, noted that aftger hearing Gov. Perry speak, it became quite evident why so many who surround the governor wear tall leather boots when in his presence. "You have to wade through a lot more than tall grass when you're around this guy."

Gov. Perry, Rep. Bachmann, etc. Have It All Wrong!

Conservative Republicans, especially members of the Tea Party, all seem to be parroting the same line about the economy, and that is that small business owners are staying on the sidelines and aren't hiring because of all the government regulations and the impact of what they like to refer to as "Obamacare."

Ok, let me tell you something - I think these folks are full of crap, don't know what they are talking about and most of them haven't the faintest idea about how to run and prosper in a small business. When they speak, they are catering to the lowest common denominator of the electorate and unfortunately they have found a large number of listeners.

I have spent more than 30 years conducting research, publishing financial studies and providing individualized consulting services for small businesses - specifically printing firms ranging in size from $400,000 to more than $5 million in annual sales.

I have published more than 30 statistical studies in this industry dealing with profitability, pricing, wages & benefits, etc., etc. You name it, and I've probably published it!

I know the big players and the little guys in this industry and I know them by name. I know the firms that fall in the top quartile in terms of profitability and those at the bottom.

And you know what? I have never met nor confronted a print shop owner who was holding off making a major decisions because of "Obamacare." I also have never heard a print shop owner blame government regulations for the reasons he is having trouble surviving.

I don't know of a single owner who could look me straight in the face and blame either Obamacare or government regulations as a major cause for the problems they are currently facing! And yet, to hear politicians like Perry and Bachmann talk, these are the very reasons for our current economic crisis! What a bunch of crap!

I know firms that continue to grow and prosper in this current economy, and they don't give a rat's ass about future healthcare regulations and what the govenment might do next month or six months from now. Why? Because they know in the scheme of things they can't control the outcome so they don't let it interfere with what they can do and that is manage their businesses the best they can. They leave all the other stuff up to the politicians.

If your experiences are truly different that what I have noted please contact me. I would love to hear your story.

Anonymous Posts (arrrgh!)

In more than three years of publishing a blog, the comment I received to my post regarding Rep. Posey was the very first anonymous post I have ever received. To be blunt, I have little if any respect for anyone who will not stand behind their comments with a signature. That's just plain gutless.

As to the specifics of the comment, while the listener may have heard me speak at one or more seminars or conferences, he has have never, never heard me suggest that the way to higher profits was by avoiding paying expenses you have already incurred.

If you want to change your buying habits in the future then go ahead and do so, but don't decide to suddenly not pay for the copier you leased two years ago or the paper you ordered last month. The speaker clearly did not understand what raising the debt ceiling was all about.... it had nothing to do with future spending but rather with paying past and current obligations.

While the author's business might be failingor in trouble I must tell him that others are doing quite well. Not everyone is quite as ready as the author of the comment to place all the blame for all the country's problems on Obama's shoulders, there's lots of that to go around.

It just infuriates me that people like this author don't have the guts to identify themselves and choose instead to hide behind "anonymous." Please note that I allowed that post to remain.