September 2, 2014

What Do People (And Things) Cost?

Spending a dollar in business costs way more than a dollar.

How much does it cost to pay a person, let’s say, $40,000 a year?  With labor burden and overhead, it’s likely $60,000.  But wait, how much do we have to sell to pay them that?  $60,000 divided by our gross margin on sales of (let’s say it was) 40%, equals $150,000.

Using a 40% gross margin, we have market and sell and deliver $150,000 of business to pay an employee ($769 a week) $40,000 a year.  So in this example, for every $1 in payroll, our breakeven goes up by $3.75.

 

Does that explain something about what’s happening in your business?

 

 

 

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Larry Janesky


Larry Janesky Larry Janesky is the Author of Think Daily for business people - a collection of daily business tips. He is an award wining author and the founder of a number of successful businesses, most notably Basement Systems and Dr. Energy Saver.

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