What % Of Revenue Do You Invest In Employees?

[Growth & Learn]

Hey all,
What % of your revenues do you invest in employees?

Do you have a formula for how much monthly burn you should have?

Trying not to cut my salary but getting sick of all the work I have to do in one of my businesses. Hopefully somebody has dealt with this before?

 

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[deste]

I know this formula to understand if you business is going good.

- max 35 % of your revenues should pay employees
- max 10% of your revenues should pay to rent your office or shop.

 

[Growth & Learn]

Thanks. Where did you get that formula?

Also, do you think that includes positions that are also revenue generators? i.e. we spend 90k on the position but assuming they perform well they'll bring in 180k of revenue.

 

[deste]

I have found this formula on blogs and forums and I think it can be "real".

If I have understood you question, if you spend 90k on your employees and they bring 180k of revenue I can think your business can have some problems because you spend 50% on employees.

 

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[ZCP]

Create a budgetary P&L. Massage the percentages of each allocation and do a lot of 'what if' scenarios. You need to understand the important factors in your particular business. Then you will see what you can allocate to staff / commissions / etc.

You also need to answer this important question ( took us 5 years to figure it out)...... Profit per ________ . This will be very important in how you structure your business.

 

[Growth & Learn]

Create a budgetary P&L. Massage the percentages of each allocation and do a lot of 'what if' scenarios. You need to understand the important factors in your particular business. Then you will see what you can allocate to staff / commissions / etc.

You also need to answer this important question ( took us 5 years to figure it out)...... Profit per ________ . This will be very important in how you structure your business.

What do you mean by profit per _____. Are you referring to employee or month or what? Thanks.

 

[ZCP]

Exactly. That is what you have to determine!

Some examples...... Profit per employee means you will have lower staff costs and and push for maximum profitability per employee...... Profit per transaction means you will push to make the most per transaction no matter what the customer thinks.......

Once you determine profit per _____ for your business, it helps with how you structure to maximize it. Note: think long and hard on this one!! As said, it took us years to figure out and now drives everything we do......

 

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[Vigilante]

Less. Automate and outsource where ever possible. Ruthless expense reduction.

 

[Growth & Learn]

Less. Automate and outsource where ever possible. Ruthless expense reduction.

Doesn't this require you to manage freelancers all the time or do you have someone to manage them?

 

[DaRK9]

Doesn't this require you to manage freelancers all the time or do you have someone to manage them?

Automate.

Once you have trustworthy freelancers you can set up systems to feed them the info needed to work. Just have to check in, or have someone else check their work.

 

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[ChrisJTurner]

Create a budgetary P&L. Massage the percentages of each allocation and do a lot of 'what if' scenarios. You need to understand the important factors in your particular business. Then you will see what you can allocate to staff / commissions / etc.

You also need to answer this important question ( took us 5 years to figure it out)...... Profit per ________ . This will be very important in how you structure your business.

I like this; and strangely enough, has come at the right time in my life.
Such a simple question, though I was totally oblivious!
Thanks
Rep+

 

[ZCP]

So @Vigilante might go with profit per 'owner hour to operate'. He is ready for freedom and sees that he should have done it sooner.

My engineering company landed on profit per 'account'. We work for the best accounts and get continued work from them. Word of mouth brings in a lot of business. Our manta and core philosophy are centered around it.

Are you profit per store ...... so only the best locations....
Profit per employee .... so you are lean and push deadlines
Profit per job .... so you slash job expenses above all else
Profit per office square foot .....

You get the idea..... would be interested in hearing the epiphany of others on this.......

 

[BlakeIC]

just to keep in mind when hiring people is the opportunity cost when it comes to hiring employees and other such things

 

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