The Bottom Line and Labor Costs
Labor costs are essential to calculate in order to determine the bottom line of your business. Labor is more often than not the largest portion of a franchise’s total expense, so any changes in wages directly influence business success. No matter the franchise, even one in windows and doors, employees play a vital role in any organization’s success and profitability.
However, many franchise employees are often lower-wage workers, particularly in retail franchises, and as we’ve seen filling those positions can be difficult in some situation. As a result, some franchises have limited their services or hours because they have limited staff available. Others are committing to full services but are paying higher wages to keep their employees. And all businesses are looking for ways to mitigate the increasing average cost of hourly workers.
Controlling labor costs in any franchise requires a deep understanding of your costs and a willingness to do things a bit differently.
The first thing to do is to calculate total labor costs via payroll. You may have to research your true costs and consider all aspects of having employees, including benefits, worker’s compensation, payroll services, uniform purchases, and other costs related to having employees.
Top of Form
Bottom of Form
Once costs are accurately calculated, it is time to see which aspects of labor costs can be cut in order to reduce expense. Here are some following expenditures that can be considered:
- Examine overtime. Overtime skyrockets labor expense, so it cannot be a standard way of doing business. To reduce its impact, cross-train your staff to fill in for others as needed. Check that processes and technology are efficient so that employees can complete their tasks within normal hours. And use technology to avoid overtime fraud.
- Reduce Turnover. If turnover is high in your franchise, work on the reasons that cause the turnover. Employees might leave due to scheduling issues, lack of upward mobility, or other reasons. Regardless, it means that other employees must fill in (causing more overtime), and you spend more hiring and training someone new.
- Adjust schedules. Maybe greater flexibility will work for employees and help reduce your wage expenses. You know your high-need times and busy days. Split shifts or on-call shifts might help manage expenses. With good software options, flexible changes could work for employees and your bottom line.
- Consider Outsourcing. Benefit costs can run up to 40% over an employee’s wage. In some cases, it might be better to outsource some of your labor expenses. For example, maybe you could outsource bookkeeping or other administrative tasks at a rate that reduces overall expenses.
Examining these aspects of your labor costs and cutting expenditures will be the best avenue to increase your bottom line. If you’re considering starting a franchise in windows and doors, reach out to us at Shield BP today!