“Overhead” is often referred to as indirect cost, as opposed to direct cost. Direct costs include the wages-benefits you pay to your field workers and your cost for materials. They can be calculated rather precisely for each job.

Indirect costs include expenses for items such as tools, mechanical equipment, office supplies, trucks, fuel, advertising, liability and health insurance, utility bills, administrative salaries and various other things required to run a successful business, but for which it isn’t practical to figure the amount used in conjunction with each job. Instead you must measure the total expense over the course of a year and apportion it to every job performed.

Along the way you have to grasp the technique of providing for replacement of “expendables” – trucks, tools, etc. that wear out or become lost. Who should pay for the truck or tools that wear out? You personally, or the customers you serve?

The answer obviously is the customers, all of them. You could not expect the last customer served to pay for a new truck if the old one fell apart at his door, so its cost must be distributed among all the customers it serves during its working lifetime. It naturally follows that all customers must be called upon to share in the replacement cost of other expendables you provide in order to maintain an efficiently operating business.

In my first article on Markup, I revealed that PHC contractors earned an average of only 2.7% net profit on gross sales before taxes. Evidently, this information shocked quite a few readers, judging by the letters I have received from contractors around the country, as well as conversations over the phone and in person. Typical comments were “sad,” “ridiculous,” “stupid,” “inadequate,” “we ought to have our heads examined,” “what can we do about it?”

What we can do about it, of course, is to educate ourselves to become better businessmen. That is the point of this series of articles, and it’s time to get down to the task at hand by learning one of the most important business skills of all – how to figure markup.

In the last issue of the Buzz I mentioned the need to associate with a group of people that can help you with your business. One such associate of mine is a very gifted man I met while attending Nexstar’s famous Gold Star Academy (a course on Service Management). We were both students at the time and we both ran similar sized union businesses.

Bill Raymond, of Frank and Lindy Plumbing and Heating Service Company, not only runs a very profitable business, he is also a very talented trainer. During a subsequent training session, Bill told a story of a fictional logo character named “Jack Stone.” For a period of time Jack Stone became a model for our company, mainly because of his famous slogan “Can Do, Will Do, Done!” Our company took on this slogan to help us stay focused on what we could do at our business.

As the team was clearing the field from their turn at bat, the umpire looked at her watch and declared the game was over as time had expired. As our seven-year-old, Lucy, was packing up and getting ready to leave I asked her who won. She looked at me with that devilish grin of hers, shrugged her shoulders and said “I don’t know. We weren’t keeping score!”

“If you’re not keeping score, why do you play?” I asked. She just smiled and said, “Because it was fun.”

As we left the ballpark and headed for home I was reminded of a conversation I had with industry great, Frank Blau, back in 1991. I have been blessed with many things over the years and meeting Frank up close and personal is right up there at the top of the list.

I can’t help but peek across the parking lot to see if I can recognize any faces through the window of the supply house. Not always, but most of the time I can see the same guys jawing at the counter who were there when I’d go in to buy my supplies. They’re still driving the same trucks, wearing the same uniforms, having the same conversations about how business is down.

The only thing that’s changed for most of these guys is the color of their hair.

What these guys don’t realize is that they’re only verifying to one another that it’s okay for business to be slow. The thought among the group is that as long as times are slow for everyone, doing less business is okay.

Matt Michel, President and CEO of Service Roundtable, contributed these 50 Observations About the Art of Service which he compiled to our website as well as our email newsletter this week. Special thanks to Matt, Service Roundtable (www.ServiceRoundtable.com) and Comanche Marketing (www.ComancheMarketing.com) for this week’s valuable contributions.

 Dana Hannon
Service Consultant
We can all agree that we are living in a challenging economy.  I cannot count the number of times I have been told by various and sundry supervisors and managers, “You have to do ‘more’ with less…” 
So, being the “glass is half full” person who I am, I have continued to push forward by doing MORE with less.  I have discovered over the course of my business experience that when times are tough or circumstances are spinning out of my control (i.e. a stagnant or down-turned economy) that …

R. Craig Chambley
Purchasing Manager
In any organization or business, maintaining inventory accuracy must be a primary commitment. The inventory, in most cases, is your largest monetary investment.  Like quality, customer service and safety, accuracy must be promoted throughout the organization as everyone’s responsibility.  This attitude and commitment must start at the upper levels of management.  Business owners, managers and execs out there want an accurate inventory, but are they doing their part through everyday business practices to promote it?
Well planned Inventory Control Procedures are often a shortcut in the name of …

In any company, no matter the size or the industry, it’s important for a business to put together a great team of employees to help propel the business forward. It’s equally, if not more important to keep that team united and working towards the same goals. In a society where everyone is focused on winning at all costs, the idea of teamwork has been pushed to the backburner in many businesses – that’s unfortunate when you really think about it. Without a doubt a business is a team. It’s made up of employees in different departments with different roles, all doing their individual parts to reach the same goals. Individually, when employees are satisfied with their jobs and motivated, they use and strengthen their skills maximizing their benefit to the company. Happy employees work hard on they’re own, but when they work together, the outcomes are multiplied exponentially!

At ShuBee, we have always taught our clients customer service techniques and I have always told our staff, “If we are going to teach customer service, then we better have the best customer service ever!”

So with this customer service mindset, I figure what better book to read than one about a company who is the best in the world at it. I have always been intrigue by the mystic of the Ritz Carlton; What is it that is so special about this place? What draws people to it? How has it stood the test of time? Why do people rave about their customer service?