PDA

View Full Version : Marginal inputs, marginal revenues.


Mark McC
02-18-2005, 02:19 PM
Okay, let's hear it from the experienced hands here.

We're all familiar with the notion that the first employee on your truck is more productive than the second. It may (or may not, you tell me) follow that a second truck will not be as productive as the first...perhaps mainly because the owner of the LCO is not on that second truck and they will tend not to work as steadily.

I tend to think that there are economies of scale to be obtained with multi-unit operations, but I don't know how significant they are. Does the economic law of marginal inputs of labor/equipment yielding lower margins of revenue nonetheless prevail in this case?

rodfather
02-18-2005, 03:42 PM
I don't understand the statement that the 1st employee is more productive than the 2nd Mark?

andersonmowing23
02-18-2005, 03:46 PM
Think he means the original worker (owner usually) is just gonna work harder and be more productive then the person he hires (2nd worker on first truck) Could be wrong just my guess. But I do agree with you, If you put two people on a truck I don't think they would work as hard as if you went out with them. I do think that you can find the right foremen and if you pay him right and fair you should be just fine. No one is going to work as hard as you do for your buisness. Afterall it is your buisness.

rodfather
02-18-2005, 03:48 PM
Does the economic law of marginal inputs of labor/equipment yielding lower margins of revenue nonetheless prevail in this case?

IMO, no.

Some of my fixed expense (rent, utilities, some types of business insurance, telephone, advertising,etc.) is now spread out more over larger numbers of employees.

Yes, variable expenses such as WC, payroll, fuel, equipment acquistions, taxes, etc. will go up. BUT, hopefully your base hourly pricing covers this already.

Am I making sense? I hope I am...

rodfather
02-18-2005, 03:51 PM
Think he means the original worker (owner usually) is just gonna work harder and be more productive then the person he hires (2nd worker on first truck) Could be wrong just my guess. But I do agree with you, If you put two people on a truck I don't think they would work as hard as if you went out with them. I do think that you can find the right foremen and if you pay him right and fair you should be just fine. No one is going to work as hard as you do for your buisness. Afterall it is your buisness.

I'll go along with that. But then the issue here isn't productivity so much...it's more like compensation IMO.

Mark McC
02-18-2005, 04:02 PM
You are making sense, Rod, but there is--or perhaps "was" is more accurate--a school of thought regarding industrial production that argued that each additional input of production would produce progressively less. In this scenario, the industrialist would figure out how many employees/production units to add until the generated revenue matched the concommitant expense. At that point, the industrialist would stop hiring and buying equipment because the additional expense would not generate enough revenue to break even on that last, or "marginal," investment.

Anderson, you're on track as to what I'm thinking in terms of a one-truck operation. I could be wrong...an employee working with me might be just as productive as I am. But would a second employee (meaning me and two employees rather than me and one employee) be as productive as the first? My guess is no.

You're also right about employees not working as diligently as the owner. That's just human nature, one supposes.

Frankly, I'm projecting way down the road, but my business plan doesn't go out far enough, so I'm trying to pin down, what sort of returns I can expect for investments on down the line. This sort of thing won't affect what I'm doing this year or next, but there's no point in waiting until 2008 to develop at least a rough outline of what I'd like to be doing in '09.

I do have a VERY basic spreadsheet of what I'll be doing for the next nine years, but it doesn't include a lot of especially solid numbers and I want to firm those up as much as possible.

rodfather
02-18-2005, 04:13 PM
This sort of thing won't affect what I'm doing this year or next, but there's no point in waiting until 2008 to develop at least a rough outline of what I'd like to be doing in '09.

Smart thinking...kind of like thinking about retirement in a way? Ok, now you guys can make fun about my age LOL...

Mark McC
02-18-2005, 04:18 PM
Smart thinking...kind of like thinking about retirement in a way? Ok, now you guys can make fun about my age LOL...

I was born in '58, so I really cannot crow. The thing I like about middle age is that I don't make as many mistakes as I did earlier in life. The thing I don't like about it is that...well, I'm no longer young.

I hear tunes that are thirty years old and I remember very well when they came out. They came out when I was already old enough to reproduce. That kinda crap just makes me cringe. Can this be happening to me?!?!

Gilla Gorilla
02-18-2005, 04:38 PM
YES Mark it is happening to you!!!!!!!

Bye the way have you got that new mower yet?

Mark McC
02-18-2005, 04:55 PM
YES Mark it is happening to you!!!!!!!

Bye the way have you got that new mower yet?

Oh, thanks Justin. I needed that. Just wait until it's your turn. I'll be sure and pour you a healthy shot of Geritol...assuming I can still lift the da**ed bottle.

No, I haven't picked up the new mower. Been waiting for Brandell's to call me and let me know it's in. Maybe I should give them a ring. My truck has been in the shop this week and I just got it back last night.

I just called. Not in yet. On the other hand, that means I'm getting an '05 model for sure. Let's hear it for the latest and greatest...other than me, that is!!!!