Mike AndesFounder, Augusta Lawn Care and Homeworks · Founder of Homeworks and Augusta Lawn Care

Get rid of FIXED expenses... before it's too late!

9 May 2022 · 1 min

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This short transcript excerpt (from a Mike Andes YouTube video) argues that many small businesses fail because of excessive fixed expenses. Andes offers a diagnostic question to identify fixed costs and recommends shifting labor from fixed wages to a pay-for-performance (P4P) model where employees receive a percentage of labor revenue, thereby making wages more variable and responsive to workload.

Questions this video answers

Mike Andes

May 9, 2022

Pay-for-performance (P4P): pay employees a percentage of the labor revenue.

Chapters

Most small businesses fail because they have too many fixed expenses. If you had absolutely no work or halved next month, would that expense stay the same? If the answer to that question is yes, it's probably a fixed expense. What can you do to reduce your fixed expenses right now and put as much of them over into variable as possible? I'm going to zero in on just one of these, and this is where this book comes into play. P4P where you pay a percentage of the labor revenue to the employees. If there's not a ton of work coming in, they're going to be less wages going out, and therefore. Therefore I'm able to move wages over to the variable side.