Enterprise Insight:
FINANCIAL ANALYSIS Part III: Labor Control and Costing
In the hospitality business, we say it is all about the staff. What does this mean? You need to source, hire, train and manage your staff for longevity. That is the key, you cannot be complacent about these 4 key roles to managing your business, your staff and ultimately managing your costs. The other big number to the prime costs is the labor costs. Labor cost percentages including benefits can run enterprises 25-35% of sales. Having said that some enterprises achieve a lower labor cost percentage but may have a higher food cost percentage. The important piece here is that together these costs do not exceed 65% of sales, and then you have already put your business in a good place to be financially viable.
For all enterprises, a budget for all operating costs should be prepared. To really understand your labor costs, you must first present a staff schedule for each revenue center. Creating a schedule allow you to have a greater understanding of what positions you will need for that business, what you will pay for each position and ultimately is the labor cost percent in line with industry standards above. Let us say, hen calculating these numbers your labor cost comes to 40% of sales for your budget. What can you do to achieve a lower labor cost percent? 1) Produce more sales to pay for the existing staff you have on budget. 2) Streamline processes to reduce the number of staff needed on any given shift. 3) Make changes in the wages of employees and the number of hours worked in order to reduce your overall labor budget. Awareness of the budget and percentages needed to keep in line, you will be more empowered to understanding how best to manage your staff and labor costs. Sourcing, Hiring, Training and Managing your staff will invariably create a positive culture around your business and reduce employee turnover.
Happy Staffing… TaraPaige Group
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