“S E C T I O N I I

J o b P e r f o r m a n c e E x p e c t a t i o n s

Y O U R R E L A T I O N S H I P W I T H
C U S T O M E R S A N D C O - W O R K E R S

Your Company, Inc. operates on the basis that every individual deserves to be treated with respect, courtesy, tact, and consideration. Therefore we expect you to treat the customers and fellow employees accordingly. You should be aware of and sensitive to any behaviors that are offensive to others. If you observe, or are the object of such unprofessional conduct, you are responsible to report it to the President.

D E F I N I T I O N O F E M P L O Y M E N T

Your Company, Inc. will maintain definitions of employment consistent with the Ohio State Labor Department, and will classify employees according to the following definitions:

1. FULL-TIME - employment involving at least 35 hours work per week, 52 weeks a year, after a designated probationary period of ninety (90) days.

2. PART-TIME - employment less that 8 hours a day, or less than 35 hours per week.

3. TEMPORARY - includes all employees during the first ninety days of employment, or in a position or job established for a specific period of time, such as student employment, seasonal employment, etc.

P R O B A T I O N A R Y P E R I O D

Employees are hired for a probationary period. During this time, ninety (90) days, Your Company, Inc. decides whether or not an employment relationship should be established with new employees. In addition:

1. The new hire decides whether he or she is ready and able to make the necessary commitment to our organization.

2. The supervisor decides whether the employee's skills, productivity, quality of work, attendance, and personal conduct meet our requirements.

A provisional evaluation of the Probationary Employee will occur at the end of the first week of employment. At the end of ninety (90) days, a final evaluation of performance will occur, ending the Probationary status.

None of the above is intended to be construed as an Employment Contract. Ohio is an "employment-at-will" state, thus, management reserves the right to terminate any employee at any time with or without cause, and the employee may stop their employment at any time.

W O R K S C H E D U L E

Work schedules are established in order to ensure that the company will have the proper number of employees in each necessary job classification to handle the anticipated work load at a given time. Schedules are carefully worked out by either the Sales Manager, the Production Manager or the Office Manager and must be adhered to by all employees. Tardiness causes serious problems in maintaining schedules. Frequent tardiness is grounds for dismissal, and is covered under "DISCIPLINARY PROCEDURES".

W O R K W E E K

The regular working schedule for all hourly employees shall consist of standard hours and days of the week for office, production and sales employees as determined by the Office Manager, Production Manager and Sales Manager.

Regular Business Office hours are Monday through Friday, 7:30 a.m. to 5:00 p.m. Regular Store hours are Monday through Friday, 7:30 a.m. to 6:00 p.m. and Saturday 8:00 a.m. to 5:00 p.m.*

* Note: The Company recently changed its hours to open at 7:30 a.m. rather than 8:00 a.m. on a trial basis. Winter hours may be altered from the above schedule.

The hours and the days of the week to be worked are determined by the Office Manager, Production Manager or Sales Manager. Employees must check with their Supervisor for the specific schedule. No one is allowed to work alone in the building with machinery, loading or unloading trucks, and any other situation that might be hazardous when working alone or due to company or OSHA safety regulations.

M E A L / B R E A K P E R I O D S

All employees are required by law to have a one-half (1/2) hour meal break per five hours of continuous work in any one day. It is the policy of (Your Company), Inc. to permit an employee to choose either a one-half (1/2) hour or one (1) hour meal break. Meal breaks are scheduled by the Department Manager. The meal period shall be unpaid and the employees will eat without performing work. Employees may leave the building and property during this period.

N O T I C E P O L I C Y

It is the intention of Your Company, Inc. to keep its employees informed as to general company policies, procedures, and other pertinent information by
posting notices on a bulletin board located in either the main office or in the Break Room on the second floor. Non-business notices may be posted only with the prior written approval of the President.

S E C T I O N I I I

P o l i c i e s a n d P r o c e d u r e s

P R E - E M P L O Y M E N T P O L I C I E S

All persons seeking employment must first fill out a company application. This will be reviewed with previous references and employment dates checked. Your Company, Inc. will verify statements concerning proficiency in a stated area, or test for basic skills that are critical for the successful performance of their job Applicants must furnish a copy of his/her drivers license if they are assigned to drive a Company vehicle or reimbursed for driving a personal vehicle on company business.

P A Y R O L L

Prior to placement on the payroll, each employee must complete a W-4 form,
XX(Your State)-W4 form, and an I-9 form as required by the government. Each pay check will include your wages for the indicated pay period minus the following deductions:

1. Federal/State Income Tax - deducted at specified rates determined by your entry level and the exemptions to which you are entitled.

2. Social Security Tax - deductions are made each month in order to provide an allowance for you when you reach retirement.

3. Medicare Tax - Deducted at a specified rate.

4. Other deductions that are authorized by you and accepted by the company, including insurance, donations, etc.”

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“There are a couple of important points about the above. Firstly, we need to track Labor Burden and periodically recalculate the Overhead Factor (usually quarterly from our income statement). For a review of tracking overhead, please see the Institute’s QuickStart Operating Procedure® OP-48, “How to Measure, Track and Control Overhead”.

Secondly, using this technique, we need to add an appropriate profit to the break-even cost to arrive at selling price. To determine a selling price for a given net profit margin, we use the following principle:

In other words, we always divide by one minus the margin expressed as a decimal (it’s not important to know why this works, just that it does. Take the Allied example:

Note that the profit determined in this way is NOT marked up from costs. In the example, our markup is $2,052/$11,628 = 18%. Markup will always be greater than Margin, but we always manage to margin because this matches our budget and our profit goal for company. Markup, on the other hand, has only a coincidental relationship to budget or profitability.

We set our profit goals in the strategic Business Plan (see ISBM’s QuickStart Operating Procedure® OP-9, “How to Write a Business Plan”) and more particularly in the Budget (see ISBM’s QuickStart Operating Procedure® OP-42, “My Profit Plan This Year (The Budget). Now we have a pricing tool that we can manage to that directly relates to the planned profitability in the Budget. If we accept business below the goal budgeted profitability, we need to offset it with an equal amount of business at an equally higher profitability.

Balderdash, you say! Price is set by the market.

Sometimes yes, sometimes no! These things are certain about small and emerging businesses:

1. Many small businesses undervalue what they do and are timid when pricing. We must fully charge for the value we provide.

2. Most customers of small businesses don’t buy a product. They buy a product/service/convenience package. Are we giving enough weight to the service and convenience we provide? Conversely, how can we improve the total service offering to add value to the sale?

3. The tools above allow you to check the products or services by product, product group, customer, market or any other grouping of sales. If we find losers, what are we going to do about it?

The job of management is to achieve reasonable profit levels according to pre-determined goals and objectives. If we cannot do this, we need to change something. Increase the price, cut the cost, add value, change the product, change the marketing approach, find new products or find new markets. If we can’t do these things and achieve decent profitability, then get out of the product or even the business and find something else to do.

Pricing Method Calculator

An Microsoft Excel®-based workbook has been developed to permit quick and easier determination of pricing exercises. A workbook is included with this Operating Procedure and is called ISBM’s System 8. Please open the system and refer to it while reading below or make a printout for reference. You can easily modify System 8 to customize it to your business.

The system is used in the following manner (sample data was extracted from a custom window fabricator and installer, anonymously labeled “Ikansea Cleerly Glaziers, Inc.; all lines are numbered in the margin to the left):

• Lines 1&2. General Data about the Job # (Quote #), contractor (customer) and location is entered at the top. As with all ISBM Systems, only the fields highlighted in GREEN are input fields; all others are calculated and should not be overwritten.

• Lines 4&5. Also entered at the top are the current values for Overhead Factor (35%) and Direct Labor Burden. In Ikansea’s case, they both fabricate and install glazing and they have determined Labor Burden rates for both the Installation (41%) and Fabrication (33%) departments.

• The estimates for various materials pertinent to a glazier’s business are entered into Lines 10-22. A second column labeled “Other” provides for miscellaneous materials cost associated with each item if pertinent.

Note: Some businesses may require more than 13 lines to list their materials. In that case, add a second worksheet to list all the items, quantities, unit costs and extensions and have the Pricer sheet “read” the totals from the second sheet (if you are not sure how to do this, ask someone who knows Excel® better or pick up an instructional book such as the very popular “Excel® for Dummies”).

• Lines 25&26. Estimates of the number of hours to fabricate the job and to install it are entered here along with the labor rates for the plant and installation crew. You can enter the average rate or, if you know the precise people who will make or install the product, you could “assign” specific rates related to them. Note that these are the gross wage rates. The burden is handled separately. Note also that a figure for subcontractor labor was entered here ($500).

System 8 extends the labor cost data, applies the appropriate burden and reports the total cost of fabrication and installation in the far right summary column.

• The last section for input data is Lines 28-33 where miscellaneous direct job costs such as scaffolding, cranes etc. are added.”

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“Elements in the Value of a Business

The components that go into the value of a business are:

1. The net or market value of hard assets (facilities, equipment, inventories etc.).

2. The present value of any licenses, agreements or contracts that the company currently enjoys that will continue in then future.

3. A value placed on “excess” earnings of the company that accounts for the profitability of the company, its position in the industry and the underlying value of the industry it’s in.

System-11 Business Valuator

Supplied with this guide is ISBM’s System 11 Business Valuator. You should open the file for reference or print out a copy when reviewing the procedure below. This is a Microsoft Excel®-based spreadsheet, each line of which has been numbered and referred to below.

The information given in the System as received refers to a fictitious company called “Outtasite Distributors”. To use the system for your own business, replace only the data in the yellow cells with your own – all the remaining cells are calculated by the system.

So as not to lose the formulas, it is best to add your company name at the top of the form, zero out the yellow fields and save it as something like “Valuator-Master”. The form can then be used to generate different examples and saved under the particular example names, retaining the Master for future use.

Procedure for Determining Value

Step 1 - Company Revenue, Adjustments and Stabilized Earnings

Line 1 Replace with your company name (cell G1)

Line 3 If you would like to tag the example, replace “Business Value Estimator” with your example description.

Line 9 Enter the date that represents the Period of the data you will be using for the estimate. Normally this would be your last annual statement data or a statement generated from the last twelve contiguous months of operations. If you use a quarter or half-year statement remember the final value will need to be adjusted (multiplied by four or two, respectively) at the end of the exercise.

Line 10 Enter the Sales or Revenue for the Period. (Don’t be concerned about the “Negative” and “Positive” adjustment or “Stabilized Income” columns; this data is supplied by the system.

Line 11 Enter the Cost of Goods Sold. If you’re not certain what this is, you may want to refer to the Institute’s QuickStart Operating Procedure® OP-43, “Organizing Financial Statements for Profit”.

System 11 calculates the Gross Profit dollars and Gross Profit % to Sales automatically.

Line 14 All other expenses on your Income Statement are considered fixed or overhead and the total of these expenses are entered here.

Line 15 The amount paid in salaries to Owners is entered here. This is considered a negative adjustment to overhead cost as selling the business would eliminate the owners’ salaries.

Line 16 Provision is made here for increasing cost due to hiring a manager to replace the owner. In the example used, the Owner’s salary and manager’s salary were offset. If another business were to buy the company and the owner not replaced, the offset would not be used and the value of earnings and the business would be higher (this is a small version of what merger and acquisition specialists call “synergy” or consolidation efficiency).

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