Yesterday my friend Kelly over at Facebook shared a story about a one-day strike underway in several cities by McDonald's employees demanding a raise from minimum wage to $15 an hour. Her question...should they get it?
The consensus said no, while we sympathize with their plight, it isn't exactly skilled labor, and there are people waiting in the wings for each of those jobs. It's simple supply and demand (of labor). If they need more money (who doesn't?) they should learn a skill.
But then I wondered....
If a McDonald's franchisee took it upon himself to pay his employees $15 an hour, reducing his profit margin, and advertised his experiment to the public, I wonder if his customers would be appreciative enough to bring in their friends and buy MORE burgers, ultimately making him MORE net profit? Would you go out of your way to patronize such a business?
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Years ago my dad shared with me some business advice that I follow to this day. He said, "A fast nickel is better than a slow dime." He meant it's better to deliver good service and value than to just hold out for top dollar. At the end of the day you'll make more money.
Over the past 30+ years I've put together an excellent group of craftsmen who build my homes. I know for a fact I could get cheaper carpenters, brickmasons, painters, etc, but these guys are good and they take very good care of me and my customers. From what I can tell my gross margin is somewhat less than most of my competitors.
I routinely go back 2...3...4 years after a family moves in and patch a hole in a wall that their rowdy kids kicked in, or replace a piece of hardware that has tarnished, even though their state-mandated warranty period has long since expired, all for free. I'm sure I spend a thousand dollars or more all totaled doing these things every year.
But here's the payback: When the economy went into freefall back in 2008 (and before that 2001, the mid-90's, the mid-80's, etc) and most of my competitors closed their doors (literally), we muddled through thanks to repeat business (unheard of in the homebuilding industry) and direct referrals from previous customers. We never advertise, yet 80%+ of our business comes looking for us.
We're never going to get rich doing business this way....we understand that. We just don't have that "win at all cost" mentality. But we're modestly profitable, we owe no one, and we can sleep at night knowing we haven't screwed anyone.
This is a business model that IMO is suitable for private companies. Few of those companies publicly traded can be this generous. Shareholders demand every last penny profit they can get, and if you can't give it to them, they'll jump ship for a .01% higher return elsewhere.
They don't care who they have to step on to get it, they want their damn money! That's one reason the banks are so crooked. (Another is their bonus depends on it.) Kinda makes you wonder if maybe the Anglo-American version of capitalism hasn't taken just a few too many steroids?
This is a business model that IMO is suitable for private companies. Few of those companies publicly traded can be this generous. Shareholders demand every last penny profit they can get, and if you can't give it to them, they'll jump ship for a .01% higher return elsewhere.
They don't care who they have to step on to get it, they want their damn money! That's one reason the banks are so crooked. (Another is their bonus depends on it.) Kinda makes you wonder if maybe the Anglo-American version of capitalism hasn't taken just a few too many steroids?
My point is....well....I'm still standing. Dad was right. "A fast nickel really IS better than a slow dime." It's a shame more businesses don't "get it".
S
You hit the nail right on the head there. The real problem with big businesses is the Wall Street system that forces companies to cut every corner just to please some jerk analyst somewhere so him and his buddies can get a new Porsche. And of course so that CEOs and other execs can hit their targets to trigger their enormous bonuses. In most cases it forces the humanity out of the business. The ludicrousness of the system is on full display when a company like Apple will post billions in profit and yet investors will panic and sell the stock in droves because they make enough billions. I mean for you or I making a billion dollars is pretty damned good but the bigger the company the more pressure there is to reach ever higher heights, which at some point becomes unsustainable.
ReplyDeleteFace it Pat....the world is run by beancounters, and they know how to cook the books and get away with it. At least long enough to cash their million dollar bonus check.
DeleteI wonder if the instant success of so many dot-com companies has changed the view of "success" among the younger class. But then there are the huge companies sporting CEO's with huge salaries, bonuses and stock options. It just may be that your business plan is something out of the distant past, Scott. But stick with it. You'll sleep better at night.
ReplyDeleteExcellent point Bruce. When something comes too easy you often don't appreciate it.
DeleteI wish I was in the market to build a home and could convince you to come to Oregon to build it for me. Quality and pride of workmanship are so rare these days. You might not have the largest profit margin but I'm sure you have the most satisfaction in delivering quality construction for reasonable prices.
ReplyDeleteMe being willing to travel to Oregon wouldn't necesssarily get you a quality home Steve. That's because I don't swing a hammer, spread concrete, pull wire, or handle a paint brush. My tradespeople do all that. It would be THEM who you would need to travel to Oregon to work for you. All I did was have the good sense to hire good people. ;)
DeleteIn answer to the McDOnald's question...No.
ReplyDeleteRegards your business model...bravo! We are planning to redo a bathroom this fall and will go with the same contractor that has done work for us before because he was fair and reliable and did a solid job.
Regards to Wall Street and big business...yes, yes, and yes. Our system has problems and needs tweeking, but lets not lose track of the fact that it beats the crap out of other economic models.
You betcha Joe. Reminds me of a poster I once saw. It says "Capitalism. Funding all the other ism's since 4,000 BC."
DeleteYour Dad is right and I love the saying, but shouldn't it be "A slow nickel is better than a fast dime?"
ReplyDeleteEither way I get his point and it is a very good one.
No, it means you will make fewer dimes by holding out forever (slow) to get top dollar, while you can in the long run make more nickels by offering better value and being content with a lesser margin. (lesser margin, faster sales)
DeleteI like your business model - it's a lot like Henry Ford's. He raised the wages of his workers so much that he had great people working for him. In order to keep good people working for them, other companies had to raise their wages. This is turn had the effect that many workers now were able to afford the cars produced by Ford.
ReplyDeleteIf a minimum wage worker has to spend 50% or more of a paycheck on housing, then something is wrong. "Yes" to capitalism, "no" to out-of-control greed.
I sometimes think that decisions like that are based more on the concept of keeping the employees "in their place" than what would be the best financial decision.
ReplyDeleteI love your business model and wish more business owners would adopt it. Unfortunately, the franchise owner at McDonald's is bound by corporate policy, so I'm not sure they could offer a better wage without permission from corporate.
ReplyDeleteI guess my whole point in the original "capitalism" post was that I believe business owners should be able to decide what they will pay, the benefits they will provide, etc. If they aren't suitable to your situation, then you're free to look elsewhere for a job. Yes, we need a minimum wage, which I feel is appropriate for most unskilled workers, but I also feel it is the responsibility of the business owner to decide whether he wants disgruntled employees making a barely livable wage as employees of his company. Pay a little more and you'll get a lot more in productivity and loyalty from your employees.
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ReplyDelete