
Our employees can make or break profitability in our businesses.
The actions they take, or fail to take, on a daily basis impact our profitability. As the majority of small businesses barely break even, this creates a precarious situation for small-business employees.
There is no job security for those who work for a business that is not profitable.
For employees to receive raises and advancement opportunities — and for business owners to sleep better at night — the business must be profitable.
But talking about profit with employees can be an uncomfortable conversation for business owners, who might think:
► “What if they think I’m greedy?”
► “What if they judge me?”
► “What if they misconstrue what I say?”
These are just a few of the fears that come up. It doesn’t have to be a difficult conversation.
How do you help employees understand what profit is, how they affect profit and why profit is important?
It helps to equate profit to having an emergency savings account in your personal financial plan. Profit allows a business to weather crises (e.g., COVID-19) as it ensures there is a cash cushion for unexpected events.
Profit is money that is not being used to run the business. While your team might be aware of large sales being made in the business, they might not be aware of what it costs you to run the business, pay a team and cover hidden costs of mistakes, rework, etc.
In my “Guide to Talking to Team Members About Profit,” I detail the hidden costs of payroll to help employees understand their take-home pay is only part of what it costs to employ them.
This is a springboard into discussing how each employee must be an investment for the business. Each employee has a responsibility to create a return on the investment for the business.
Every employee has the opportunity to identify ways to work more effectively and reduce inefficiency. Many can spot opportunities to increase sales.
When employees are aware of what profit is, and educated about how they add to or detract from profit, it’s possible to create a team goal for profitability. The healthiest, best-performing companies produce 10%-15% profit or more. Hitting this target requires everyone on the team to work together.
To make this conversation easier, I collaborated with small-business owners to create a guide for talking to employees about profit. It’s an actual script that you can use word-for-word, or adapt for your own needs. You can print it out and share it with your employees as a handout to follow up from your discussion with them about profit.
You can download my “Guide for Talking to Team Members About Profit” at tapthepotential.com/guide. Because it helps to hear how this conversation might sound with your team, I also recorded this as an episode on the “Profit by Design” Podcast, which you can access at arkansasbusiness.com/starlingprofit.
Here’s to your profit (and peace of mind) in 2023!
