[et_pb_section bb_built=”1″ admin_label=”section”][et_pb_row admin_label=”row”][et_pb_column type=”4_4″][et_pb_text admin_label=”Text” _builder_version=”3.0.51″ background_layout=”light” text_orientation=”left” border_style=”solid”]<\/p>\n
Q: Is there an ideal percentage\u00a0of revenue that should go to payroll?<\/strong><\/p>\n A:\u00a0In my opinion, anyone who claims such a thing exists is full of it. Truth is, the figures vary widely among not only entire industries but also among the companies within them.<\/p>\n Some industries pay low wages but\u00a0have high rates of employee turnover (fast food being the prime example). The low wages may be great for owners, but turnover usually results in high costs for acquiring and training replacements\u2014expenses that need to be added to the total cost of payroll.<\/p>\n The age of your staff can make a difference, too. Having young workers may provide opportunities to limit your costs for medical insurance, life insurance and retirement plans, since many young people won\u2019t avail themselves of these benefits even if offered. (This is no excuse to practice age discrimination. I bring this up to point out the sizable\u2014and growing\u2014costs associated with benefits beyond wages.)<\/p>\n To find the right percentage for your business, start with a competitive analysis, but don\u2019t strive to find an average number for your industry. You want to figure out what the highly profitable companies in your industry are doing. Trade associations can be a gold mine in this respect, especially for learning about members outside your local market with whom you don\u2019t compete directly.<\/p>\n Depending on what industry you\u2019re in, there may be journals or reporting services that track this financial information. If a subscription to such a service is too expensive for your company, seek out a resource who may be a subscriber, such as your financial advisor, an accounting firm or an outside\u00a0CFO like me. When I share reports from these services with my clients, they are usually shocked (in good and bad ways) by what they learn and then delighted to have the information.<\/p>\n Most important: Don\u2019t obsess over achieving the \u201cproper\u201d percentage\u2014it\u2019s a guideline, not a law. If labor is a relatively unimportant cost for your business, you can still complete this exercise, but focus on other areas first; doing so can help you reduce overall costs. Additionally, keep in mind that if your long-term growth and profit strategies require creative types or high-level (read: expensive) sales, operational or management experts, you\u2019ll have to pay for them now to set things in motion for the future.<\/p>\n <\/p>\n https:\/\/www.entrepreneur.com\/article\/238460<\/p>\n How to calculate the percentage<\/strong><\/p>\n To reach your revenue number, use your gross revenue minus sales taxes or items such as freight charges that you collect but then pass on to the shipping company, or equipment rentals that are billed to your client. Then tally up your total labor costs, including every item associated with employee compensation. Here\u2019s a quick list:<\/p>\n Divide your payroll number by your\u00a0revenue number, multiply by 100, and\u00a0that\u2019s your percentage.<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":" Q: Is there an ideal percentage\u00a0of revenue that should go to payroll? A:\u00a0In my opinion, anyone who claims such a thing exists is full of it. Truth is, the figures vary widely among not only entire industries but also among the companies within them. Some industries pay low wages but\u00a0have high rates of employee turnover […]<\/p>\n","protected":false},"author":1,"featured_media":295,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[8],"tags":[],"class_list":["post-294","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"yoast_head":"\n
\nFigure it out<\/strong><\/h2>\n
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