Would you come to work for me for $150,000.00 a year?
I’ve asked this question of many jewelers and over 60% say YES! For many this would be a substantial raise in their pay. I also pay 100% of your medical expenses and have a company 401K plan in place. The month of December is mostly time off for my company, it’s slow then.
Would you work for me for $150,000.00 a year? You would? GREAT! You will start June 1st. Casual dress.
Oh, I forgot to mention. I only give out one pay check a year (like a teacher) and it’s for the $150,000.00.
I pay every year on May 31st!
Is there a problem? I mean $150,000.00 is probably more than you make now. What? You can’t afford to go a year without a paycheck? Surely you can do some night work, weekend work or maybe your spouse works? Maybe you can do some repair work in the evening-there’s lots of money in repairs.
O.K., it’s settled then. You’ll come to work June 1st and I’ll give you a paycheck a year later for $150,000.00 on May 31st…
ONE YEAR LATER, May 24th
Hi, I have a small problem and wonder if you could ride this one out. I can’t pay you next week, May 31st. Just hasn’t been a good year, competition and all. Can you hold out one more year, please? Great! I know someone will give us money this coming year and I can pay you the promised $150,000.00. Just hold on as $150,000.00 is a boat load of money.
TWO YEARS LATER, May 24th
Hi, I have a small problem again and wonder if you could ride this one out too. I can’t pay you next week, May 31st. Just hasn’t been a good year (or 2 good years for that fact), competition and all. Can I either pay you $75,000 this year with a promise to then next year pay you the $150,000.00? So you’ve decided just to hold out one more year. Great! I know someone will give us money this coming year and I can pay you the promised $150,000.00. Just hold on as $150,000.00 is a boat load of money.
THREE YEARS LATER
Phew! Thank the lord; we finally had a good year! I can now pay you your $150,000.00. In fact I’m even going to pay the taxes for you (I’m such a nice guy). Here’s your check for $150,000.00 and it’s good, you can go right to the bank. I’m happy and you’re happy.
FIVE MINUTES LATER
Me: “What seems to be the problem?”
You: “I’m short.”
Me: “Yes, I know but that has to do with genetics, why is this my problem?”
You: “No, the problem is I only got $150,000.00.”
Me: “That’s what I promised you and I paid up, in fact I paid the taxes too.”
You: “Yes, that’s very kind but I’ve been sitting in this company for THREE YEARS and I expected to get $150,000.00 EACH AND EVERY YEAR I SAT HERE.I should have received $450,000.00, not $150,000.00.”
Me: “Listen, I know people who’d die to work here for me and get a check for $150,000 for a year’s salary!”
You: “If you had paid me $150,000.00 each year as you promised I would have received $450,000 in three years, not $150,000. I LOST $300,000 not being paid for the 1st two years! Heck 3 years ago Smith & Company offered me $75,000 a year to work for them. It was a discounted salary compared to what you promised me, but at least I would have received $75,000 a year and in 3 years I would have collected $225,000.00 rather than your $150,000. Gee, I lost $300,000 waiting for you to pay me from your profits and if I had taken a lower paying job but got paid each and every year like clockwork. Just working for Smith & Company I would have received $75,000 more than waiting for 3 years for your large salary. Working for you and waiting to get paid has caused me to:
- Have a large accounts payable as I can’t pay my bills on time.
- Have a lot of credit card debt.
- Haven’t been able to upgrade my home and car, nor send my kids to college.
- Put any money away for retirements, and
- I’m really stressed out.”
Me: “Welcome to my world!”
In this scenario just replace being paid a salary per year for Gross Profit Dollars a year from inventory. Just like you might be able to wait a year to get a good salary check, but it’s tough to wait three years, isn’t it? But you wouldn’t mind even waiting three years to work for me because you’re expecting $450,000 in 3 years. But I only paid you one years SALARY in the 3 years.
Move the decimals over my friend. Don’t look at $150,000.00, see it as $1,500.00. That’s the gross profit per year you should receive from selling a diamond bracelet as an example. It costs $1500, you keystone it to $3000.00. You wait for one year for it to sell and you get your “salary” of $1500.00 (the gross profit).
If you did sell this each and every year for 3 years you would have collected $4,500.00 in 3 years.
But if it takes three years to sell, you’d have only $1,500 rather than the $4,500 you expected in 3 years. You’d be short $3000.00 because you waited and it did not sell. It’s exactly like working for me and only getting paid 1 year’s salary every 3 years. And yes in this example you’d been better off to had a “discounted” profit (or a lower salary), even though it was a smaller one, but once for each year for 3 years. You’d have more money. In other words:
If you can’t make a years salary (Gross profit) find another JOB! (Or deep six the item and find another saleable product to replace it with or just take the lower salary (profits) and pay your BILLS).
Read this story over again. Replace salary with “Gross profits” and where you see my employee talking about his debt, think about yours. His debt came from not being paid yearly. Your debt comes from not selling the item yearly.
My new employee finally got his FULL SALARY CHECK, but just like you who thinks you come out ahead if you sell a 3 year old item for FULL TAG PRICE, you still come out short by the 2 years of profits you thought you were going to get.
You’d be better off right after the 1st of the year to find another job, even if it pays less. In inventory you’d be better off find a lower profit (discount it) and replace it with a better performing “job” (item that will sell).
The position is still open by the way. Can’t figure out why I can’t fill the position. Oh well, someone will buy it (I mean apply for the job).