Labor Expense Will Eat Away At Profits – If You Don’t Watch It
When I started really analyzing my labor costs several years ago, my goal was to come up with some sort of ratio that I could have staff use when scheduling. The first year all I did was gather departmental labor figures. The second year I started playing around with various formulas for comparing them to the number of dogs in the house.
While it will be different for your business, in my case, my initial hypothesis was that I needed one labor-hour for every dog. This has proven to be fairly accurate over the course of my study. The lowest ratio [monthly average] I’ve been able to achieve is .74. You can probably guess this was in July when the occupancy numbers are at their highest. On the other side of the scale, February, March, and April all come in around 1.2 -1.5 due to the lower occupancy number, which brought my annual average to be between .98 and .95 for both of our sites.
I’m finding the real value of the exercise has been the ability to look back on the same time periods for the previous year and be able to project labor needs with a fairly high degree of accuracy, which takes the guessing of staffing out of the equation. It also provides a very accurate way to see where your labor inefficiencies are by graphing the information so you can see the trend line. It will literally show you the specific day where you had a labor problem so you can explore the cause then correct it.