Business Information for Entrepreneurs by an Entrepreneur

Here's a quick tip on negotiating price that you will find invaluable when someone asks you for a breakdown of your costs:

• Make sure that the total cost, when you add up each item, is MORE than what you are bidding.

Why? The sum of the parts is more than the whole.

Have you ever taken your car in to replace an automatic window?  It can cost over $400 and it is just a small part of your car. If you bought a car part by part, a $20,000 Toyota could cost you $50,000. But by buying it as a whole, your cost is significantly less.

When a prospect asks for a price breakdown, they want to see how you came up with your final number so they can negotiate your price down.  They'll say things like "Well, we don't really need this piece so how about trimming that out of your proposal" or "I didn't realize this component costs so much... let's take that out."  If you are bidding time and materials, they might say "Whoa!  It's going to take HOW long for this subtask?!?  You either have to do it faster or reduce your rate."

If you add up each line item price and it equals the cost of your bid, it's very easy for them to tell you what to trim off.  That could include profit that you tried to bury in some of your high margin line items.

So, if you make each line item a little bit more expensive so that your total works out to be 20% higher (or more) than the actual fixed price that you are bidding, you can include a line item labeled "Discount" to subtract the difference from the sum of the parts and your actual bid.

This gives you leverage to reduce your discount if they cut out a line item.  You can then say "Well, we can take that out, but that will reduce the discount we are able to give you since that is based on the project as a whole based on our initial proposal."

Have a negotiation tip?  Comments are welcome.

Should Your Employees Telecommute?

More and more employees are taking advantage of telecommuting. This allows the employee to work at home - and it can work well in many situations.

If you have not considered offering this option to your employees, now may be the perfect time due to the high cost of gas.

Not everyone is a good candidate for telecommuting. Some administrative personnel, such as receptionists who greet visiting clients, are needed in the office. Still others, such as account payable and receivable clerks, can work just as easily from a home office.

You will need to evaluate each position individually to decide whether or not it is suited to telecommuting. You will need to do the same with each employee.

Just as every position is not a good match for telecommuting, neither is every employee.
Self-motivation is an important quality that must be present. Also, only reliable and trustworthy employees are good candidates for telecommuting.

Here are some tips to ensure a positive telecommuting experience for both your small business and your employees.

• Employees Should Be Available By Phone During Working Hours

Other than lunch and scheduled breaks, they should answer when you call.

• Telecommuters Should Be In The Office At Least Once A Week

This helps ensure they maintain a relationship with other employees and gives an opportunity for any necessary face to face meetings.

• You Should Own The Equipment Telecommuters Use At Home

Rather than putting sensitive information about your business on the employee's family computer, it is best to purchase a computer that is only for the use of the employee for business purposes.

You should also pay for the employee to install a dedicated telephone line.

Telecommuting can work well for both employee and employer as long as both the position and the employee are well suited for it.

Is it Time to Fire an Employee?

The decision to let go of one of your employees is never going to be easy. There comes a time, however, when such a decision is necessary.

When this time comes, it's best to handle the matter as soon as possible rather than allowing a negative situation to continue.

There will be some situations in which immediately terminating an employee is the only correct thing to do. Some examples include illegal activity, sexual harassment of another employee and misrepresenting the business to vendors or clients.

Knowing When to Act

But how do you know that it is time to fire an employee rather than continue to work with them when the offenses are less serious?

Naturally, every situation is going to be unique, but here are a few questions to ask when trying to make that decision:

• Have you counseled the employee about the behavior/performance in the past?
• Is the employee disruptive to the workings in the office or to other employees?
• Are the actions of the employee hindering the growth of the business or the performance and/or morale of other employees?
• Do you think that counseling or additional training will help this employee?

Based on the answers to the above questions, you should be able to decide whether it is time to let them go. If so, be aware that they may file for unemployment benefits.

Keep Meticulous Records

That is why it is so important for you to keep detailed records of every meeting, counseling session and training that is related to the behavior for which he is being fired.

For example, if the employee is chronically late, you should keep documents of that in his file. Dates and times of lateness should be included as well as proof of any counseling sessions - signed by the employee - related to the lateness.

Such documentation will be necessary should you choose to oppose the payments of unemployment benefits.

Once you have made your decision, it's important to stick with it. You have to do what is best for your other employees - and your small business.