July 3, 2020

You’re the Boss Blog: Thinking About Layoffs Again

Staying Alive

The struggles of a business trying to survive.

Everyone else has gone, and I’m sitting in my office, checking our cash-flow numbers. Three weeks without sales mean much less cash on hand than usual (we normally expect to collect $20,000 a week in deposits). I’m not in trouble yet — we still have more than $150,000 in the bank — but next week I’m scheduled to pay my people, and that’s $35,000, every two weeks. And the news from the outside world is dreadful: Europe is collapsing, the stock market is collapsing, the government is likely to stop spending, it never ends.

And then all of a sudden, poof!, and there is a little devil on my right shoulder. Another poof! And there is a little angel on my left shoulder.

Devil: Those numbers, they stink.
Me: Tell me about it.
Angel: What do you mean? You are still up for the year — $44,000 more than on January 1.
Devil: But your backlog is disappearing. And the amount of cash that you know will be arriving in the next month is dropping, too. With your normal backlog of four to six weeks, you can count on $80,000 to $120,000 coming in. Now, you are down to two weeks, and you’ve only got $40,000 on the schedule. All of the cash you squirreled away since the beginning of the year is going to be gone in 3 weeks, and you’ll be dipping into your reserves.
Angel: But the reserve is more than $100,000, and something is bound to turn up before then. It always has in the past.
Me: I guess you forgot all those times it didn’t, and I had to dip into my own pocket or call my relatives and beg.
Devil: She always forgets that stuff. Maybe if you hadn’t kept it such a secret, she’d know.
Me: I hated doing that. It’s humiliating. I never want to talk about it.
Devil: Fantasizing about happy endings won’t help you now. Man up. Cut costs. Fire someone. You’ve got the staff to build $2.5 million per year, but your sales probably won’t top $2 million.
Angel: Aren’t you going to cut your own pay first, like you did in 2008? That would save some money, and you wouldn’t have to fire anyone.
Me: But I finally got my pay up to a reasonable number this spring, after nine years without a raise. And I have my kids’ college tuition to pay — it’s not like I’m living large. I still drive that ‘92 Camry, brown-bag my lunch, and wear thrift-shop clothes.
Devil: I hear you, brother. And it’s about time you wised up. You’ve worked yourself to the bone, and the company owes you more than $350,000 for all the times you covered payroll yourself. Not to mention what it owes your father and brother. Let someone else feel some pain. You’ve proven you can make money at $1.6 million in sales, using 11 employees instead of 14. Get out your knife and start cutting.
Angel: You are spending $520 dollars a day on advertising! Google doesn’t need more money. Cut that first!
Devil: Are you out of your mind? Google is where all of our sales come from.
Angel: But your site is on top of the free listings for a whole lot of valuable search strings. You don’t need to pay them anymore.
Me: Don’t you think that they put us on top of the free listings because we pay them so much money? Why would they just hand out those positions for nothing? I’m afraid that if we stop paying, then we end up on page 31. I really don’t want to find out if that’s true. I can’t afford to lose a single sale.
Devil: Remember when we turned off the campaigns for three days while we updated the site? Incoming calls dropped in half.
Me: Yes, I remember it perfectly. [He shudders.]
Angel: But that was before you revamped the site. Are you really going to cut your payroll? Layoffs are the reason our economy is in the toilet. Why don’t you just scale back work hours? If everyone worked 35 hours a week, you’d save thousands.
Devil: And all the jobs would be late, all the customers unhappy, and all the pre-shipment and final payments would be even further in the future. That will cost us more thousands.
Me: Workers really, really hate to have their pay cut. They like it a lot better if I get rid of people — that way they don’t have to suffer themselves, and the poor chump who got the axe quickly fades from memory.
Devil: So there you have it. [He rubs his hands.] Now, who are you going to get rid of?
Me: Hmmm. The problem is, everyone we have is a good worker. No dead wood in this shop. I’d hate to lose any of them. What if things turn around? We won’t be able to keep our backlog under control. Then we lose sales.
Angel: And just remember how hard it is to hire good people. What a crap shoot that is. You always complain about it. Even in a recession, you were lucky to find such a good crew. Smart bosses always keep their best people close at hand — you never want to send them to your competitors.
Devil: But if you run out of work, what are you going to do? You can’t pay them to do nothing. You’ll be out of money in a flash.
Me: I’m awfully sick of being broke. I don’t want to lose good workers. I can’t stop advertising.
Angel: Maybe our political leaders will take sensible and prudent steps that restore the people’s confidence, and they will start spending again, and the problem will solve itself?
Devil: You had me until you said “sensible and prudent.” We’re on our own with this one.
Me: Well, I don’t have to do anything for another couple of weeks. I guess I’ll just keep on keeping on and see what happens. Are you guys going to be around to kick around some ideas?
Angel: Absolutely.
Devil: Wouldn’t miss it.

Poof! They’re gone. I’m still staring at the numbers, which haven’t changed. What should I do?

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside of Philadelphia.

Article source: http://feeds.nytimes.com/click.phdo?i=e0bc69feb839ee54013dcaf5b18c8a65

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