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Permalink Reply by Mike McGinness on October 8, 2009 at 7:14am

As low as possible:-) My target is 30%. Not just the hourly pay rate, but including all employer paid payroll taxes.

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Permalink Reply by ray peck on October 8, 2009 at 7:25am

Thanks for your reply.

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Permalink Reply by Jared Rutledge on October 8, 2009 at 7:39am

are you talking about a per-unit labor cost? when i did some business stuff with Mountain Bizworks, the accountant running the class told us to count labor as overhead, since it's kind of the same no matter how many coffees you sell (unless you bring another person on, i guess).

so when i did my budget, unit cost (i used a $3 double latte as an example) consisted of espresso + milk + cup + lid, while overhead for a month would consist of labor, rent, insurance, utilities, equipment, loan repayments, etc. i think with my most pessimistic set of numbers labor sat at 43% of total sales in a month but that was counting paying myself $10 an hour for every shift i worked (which will obviously be the first thing to get cut). out of the overhead, it was 54% but again that's counting paying myself.

hope that helps, i can upload a good spreadsheet if people need it

P.S. this is the wrong forum for this question

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Permalink Reply by Bob Von Kaenel on October 8, 2009 at 9:53am

It really depends on your volume, and the product mix. Generally speaking, a low volume shop might run up into the mid-thirty percent range while a really busy shop could run in the low twentys. My shop runs about 28%, but we are a bakery & deli also so this might not be comparable to your situation.

Ditto to what Mike said, "total cost of labor" includes payroll taxes, crew and management salaries, group insurance, other benefits, vacation pay, bonuses, recruiting costs, etc.

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Permalink Reply by Brady on October 8, 2009 at 10:19am

Jared Rutledge said:

are you talking about a per-unit labor cost? when i did some business stuff with Mountain Bizworks, the accountant running the class told us to count labor as overhead, since it's kind of the same no matter how many coffees you sell (unless you bring another person on, i guess).

so when i did my budget, unit cost (i used a $3 double latte as an example) consisted of espresso + milk + cup + lid, while overhead for a month would consist of labor, rent, insurance, utilities, equipment, loan repayments, etc. i think with my most pessimistic set of numbers labor sat at 43% of total sales in a month but that was counting paying myself $10 an hour for every shift i worked (which will obviously be the first thing to get cut). out of the overhead, it was 54% but again that's counting paying myself.

hope that helps, i can upload a good spreadsheet if people need it

P.S. this is the wrong forum for this question

This has always seemed to me to be a much smarter way to look at this when planning a new store. However, if you are examining an existing operation to compare it to some benchmarks, I think the percentage approach makes a little more sense.

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Permalink Reply by Tammy and Dave on October 8, 2009 at 11:08am

The general rule of thumb that we learned is the 30% rule, in essance labor cost should not exceed 30% of your gross revenue. Hope this helps.

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