Sharing Your Financials with Your Employees Might Just Get You More Sales & Profits
In today’s episode: We discuss a debate that happens within the business world. Should you share your profits and sales with your employees? By the way, Sharing Your Financials with Your Employees Might Just Get you More Sales & Profits
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Episode 39 – Should You Share Your Financials with Your Employees?
The Local Small Business Coach Podcast
Welcome back to The Local Small Business Coach Podcast I am your coach… Tammy Adams. Here we discuss everyday challenges local small business owners face and help to provide the information you need to increase your profits, boost your sales, improve your processes and develop stronger teams.
Today we are going to discuss….. Should You Share Your Financials with Your Employees
As I mentioned, today I want to discuss something that can be a little controversial. There are folks that will completely disagree with what I’m about to tell you but hear me out and why I feel the way I do.
Let’s start with the question: Should you share your financials with your employees.
For example, should they know your sales goals? Your profits? How much stuff costs?
What are your initial thoughts? Do you do it? Would you do it? Should you do it?
Some of you probably already make this a habit within your business. Some of you are thinking hell no, those people do not need to know what I make and some of you are thinking, hmm, I never thought about it.
I am a big fan of sharing this type of information. Maybe not 100% of the numbers, but enough of the numbers to get them excited about the business and to help educate them on the “why” of some of the things you require them to do.
Let’s break this down a little.
Let’s head back in time to my Home Depot days. Here is a company that has stores that do millions of dollars in business annually. But so do each of the departments. Even the smallest of departments can do several million a year. The larger ones can do over 8 figures. Here is the cool thing. Each and every employee can know the sales goals of that department. If a garden department is expected to do 8 million that year, odds are the employees who care know this.
I say care because not all employees will care. Or they just can’t get their heads around numbers that big.
But, each department as well as the store, has a daily goal they need to hit. Many nights we would read over the intercom what each department did that day. We would celebrate those wins and great challenges between departments. We made it fun.
So why would a major retailer share these numbers so openly? They understood that many of the employees are very competitive. What happens when we are competitive? We push for more. For example, if my plumbing department knew we needed to do $10,000 that day and around 5pm we were only around $6,000. A competitive team would turn it up a notch and try and do more up sales and unsure every customer got helped. So maybe they were on track for only hitting $8,000, maybe this extra push would get them to at least $9,000. Closing that gap.
Now think about your business. If your daily sales goal was $1,000 and you kept hitting $900, what do you think would happen if your employees knew that for just a $100 more a day you could hit new records? Do you think they might turn it up a bit? If you have a team that cares, and a team that supports you and love what they do…you bet your bottom dollar they will! They will get so freaking excited you will be shocked at what that motivation will do. Now think about that extra $100 a day x 365 days a year. You are looking at a potential additional $36,500 a year! Even if we are half off, you are looking at $18,000! All because you shared the numbers, gave them a target and got them fired up to hit that target!
What About Your Profits?
Now, should you share your bottom line profits? Yes and no. I mean, you don’t have to tell them you actual bottom line, but you should take the time to help them realize that when you sell a $100 item, it doesn’t mean you are making $100 profit.
You will be amazed at how little most people understand sales, margin and profits. What a great opportunity to teach and grow your people. Especially to help them in their future jobs and endeavors.
I’ll give you an example. When I had my Baskin, I wanted to help my kids understand this lesson. So one thing I usually did during their first 6 months was do the following exercise.
I would have them stand on one of the 12×12 tiles. With both feet firmly on one tile, I’d then ask them what they thought I paid for that one tile each month.
They would look at me strangely and I’d get answers from 50 cents to $100 dollars. I’d then share with them that before I bought ice cream, before I paid electricity, before I bought the stuff in the racking and before I even paid them, I had to pay for that one little tile. Only problem was, there a bunch more just like them.
I explained that I paid $40 a month for that tile. That the tile cost me $480 a year.
I’d then ask them how many scoops of ice cream they thought I had to sell to pay for it. I’d watch them do the math and they would do what most kids would. They divided the $40 by the cost of a scoop. So they would then say 13 or 14.
I’d confirm that their number sold did equal the cost of the tile…but…..
They forgot one thing. I’d then go on to explain that out of each sale, part of it went to the rent, the ice cream, the utilities, etc. I used the time to explain that while the ice cream cost one, thing, I still had to pay all the other things as well. After going through the exercise I’d ask them again how many scoops of ice cream they now thought we had to sell to pay for that one tile. They were shocked to find out that this number was triple what they originally thought.
I then explained every time they over scooped, I had to sell more ice cream to offset it. I explained that when they dropped a cup on the ground that we had to toss, there went more ice cream. Example after example to help drive home the point.
They were on cloud nine after this fun. They felt like they were an insider now. They knew what others didn’t. After this day, I kept talking about it. When there was waste, I’d tell them what it just cost us. Notice I said US and not ME. By making them part of the inside circle, they cared more than they would as just an ice cream scooper.
Did they need to know my bottom line? No. But they needed to know their actions had consequences. That they came with a cost that they had the power to help control.
Fear of Them Thinking You Make Too Much Money
Were there people that thought Home Depot made to much money? Probably. Who wouldn’t when you share numbers that say you had a million-dollar week? Did it cause them to think that no one would miss that $2 items they just swept up and tossed vs picking it up? I’m sure.
It was no different than them thinking that cup they tossed or that cone they broke wouldn’t break me. Just like your employees don’t think your items mean anything to you. You really need to get them to see the object as quarters, dollars, etc. The pain of tossing an object is very different than tossing actual money.
Just like a child that learns the value of money when they finally pay for something their self, you owe this teaching moment to you team members.
So we discussed the pro’s to sharing your sales and profits with your employees. But you might be wondering if there was any cons?
As with anything, there will always be cons. We are human and can always find the negatives. Did I really want these folks going home telling their family and friends what we did each day? Heck no. But you are foolish if you think they don’t know now. If your closing folks see numbers, it is happening already. But to offset this, I always let folks know that these numbers were to remain at the store. Did they? Yea, I’m not that naive. But soon that excitement of knowing wore off.
Was I worried that some punk would find out and try and rob us? I think that is always a fear. But if you are going to get robbed, you will. They key is good money handling. Good processes in place to get that money into the safe. Scheduled drops are critical and are a deterrent.
But, you know what I loved? That my folks got excited. If they knew the goal was a $1,000 day, they pulled a reading hourly to see if they were on track. They wanted to hit the goals. And I’ll take a team who is pushing for more sales any day. I’ll take a team that is taking more care in their waste.
New Ideas to Produce Sales
In my mind, these empowered employees often times took the initiative to also develop new sales ideas. They would think outside of the box on how gain more sales. They would come up to me so excited and wanting to tell me their sales ideas. Where they all winners? No. But some were. Some needed a little tweaking but they were on to something.
So now, instead of just me trying to create sales, I now had a team of sales generators. They often wanted to run with their idea. I got to teach them how to put pen to paper and figure out not just how they would do it, but what the costs would be. It was all about creating a great teachable moment. I was building the future leaders of business.
So when you mull this decision over in your mind, hopefully you can see there are some great things that come out of sharing your financials. The key is to have a plan and know what you hope accomplish by sharing this information.
Trust me, that $40 tile exercise was an eye opener. So was explaining a $2,000 a month electric bill. They took way better care of my freezers and fridges. Think of what you could share to impact your folks. Leverage knowledge to increase your bottom line and having those teaching moments at the same time.
Hopefully by sharing my experiences both in big box retail and in my small business, you can see the value to sharing your financial with your employees. It is a business practice I will continue to do. I’ve seen the power of it for 30 years. I believe in it and hopefully, I’ve provided a reason for you to at least try it.
Start with sales. Have fun with it. Make it competitive. Pick an item to start with. Challenge them that items. Share the sales increase. Trust me, you will like the results.
And as we wrap up this episode I want you to know, that I realize being a local small business owner can be a lonely gig at times. But you don’t have to do it alone. Just know, I’m always here for you.
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Meanwhile, I wish you the best in your business and remember: Great Customer Service, coupled with Great business practices will set you on the path to Great Profits!
Bye for now…..
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Two Great Books to Help You With Your Small Business:
Highly Recommend all Local Small Business Owners Read the eMyth by Micheal Gerber. You will learn some critical things about running your business.
The second book is one I wrote based off a popular example I always use when folks are trying to understand their role as a leader with their people. Check it out.