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?