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My Business Needs Cash - 3 Ways to Lower Your Labor Cost


Measure Efficiency

Each business has its own key performance indicators. Some examples include a coffee shop produces 20 cups of coffee per labor hour. A mechanic services .6 vehicles per labor hour. A Dentist, number of chairs turned per hour. Measuring this data over a 12 month period will tell you a lot about when you are most efficient and challenge you to improve on those numbers.

Outsource Business Tasks

A business owner is responsible for so many items. Tax preparation, payroll, scheduling. In some cases they may do the marketing and technology work. Instead of hiring someone in house or delegating a responsibility to someone who has little expertise in the task. Outsourcing can be a very cost effective way to get maximum results. In some cases eliminating a need for some positions internally. Virtual accounting, marketing and other paid services provide a lot of value and can significantly reduce your labor costs as percent to revenue.

Reduce Hours of Operation

Does your business need to be open 7 days a week 12 hours a day? Measuring efficiency should begin to tell a story about your business. What hours of the day are the busiest? Would part time workers be more appropriate? If it’s an office scenario, how much work actually gets completed on a Friday afternoon for example. Converting to Monday - Thursday schedule be more appropriate? Challenge your management team or yourself to consider what work is critical to success and does it require an individual 40 hours a week to perform?

 

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