Labor Efficiency Musts from and Expert

  • Maintain a minimum pretax profit of 10 percent or greater as you grow to the $5 million revenue level, and leave any profits after taxes in the business to fund the growth instead of relying on debt or outside capital.

  • To maximize your productivity of labor, avoid labor creep, and don’t hire an employee for a function that you can do. Consider what functions you can outsource, and refine your management team.

  • Calculate and maintain your salary cap (including your own market-based wage). If you are exceeding your salary cap, decide what to do about it. Are you going to hold wages constant until you hit your profit target, are you going to cut staff, or are you going to do some of both? Get to 15 percent pretax profit before you raise your salary cap and drive your profit back down to 10 percent. The higher your pretax profit, the quicker you reach a cash-positive state.

  • Control your profit by getting the most productivity out of every labor dollar you spend.