Shop Talk: Practical answers for tough business questions

by : 
Kim Perkins
March 1, 2011

Question: I attended your seminar at INATS on cutting costs a few years ago. You talked about implementing an across-the-board pay cut (owners and management included) for all employees in your store. Have you reversed that cut now, and how did you do it?

Answer: Implementing that pay cut was one of the hardest decisions we ever had to make. (And taking the pay cut personally wasn’t too great either!) It was a last resort after we had cut as many other expenses as we could. When faced with the dilemma of an across-the-board pay cut or layoffs, we (my business partner and I) talked with our staff and explained that we were all in this together and we wanted everyone to keep their job. Surprisingly, we did not lose a single employee because of the reduction in pay. I saw that as an incredible blessing and act of faith on their part!

At the time, I hoped we were in a temporary recession cycle that would reverse quickly. So much for my crystal ball! In Southwest Florida, where our store is located, the economy was hit early (October 2007) and hard due to the reliance on inflated housing prices and booming construction that ground to a halt. Three-plus years later, our area still has over 13% unemployment, although sales are slowly increasing again.

So far, we have not reversed the pay cut and have relied on offering bonuses (monthly and then daily during the holidays) to increase employee compensation. Now, with healthy holiday sales behind us, and a trend of slightly but solidly rising monthly sales, we are ready to begin increasing compensation. I plan to do this slowly (perhaps 2–3% at a time over the next year) as sales dictate. I want to be sure the business can sustain the increased expense so we never have to take that kind of drastic measure again.

Kim Perkins is co-owner of Elysian Fields Books & Gifts for Conscious Living (www.elysianfieldsonline.com), an award-winning store in Sarasota, Fla. Send your retail questions to kim@retailinginsight.com.