Are You Spending Too Much on Labor?

Labor costs are a big expense for many business owners. If you own a growing business then the money you spend on labor is likely at or near the top of your list of expenses. As with any of your expenses, it is a good business practice to evaluate what you are spending on labor costs from time to time. There are a few questions you can ask yourself to help determine if you are spending too much on labor. Are my profits decreasing despite continued growth? Am I paying a premium to get routine tasks completed? Am I getting behind when it comes to hiring and training the additional labor the business needs? If you answered yes to any of these questions then you may be spending too much on labor in certain areas of your business. If you determine that you are, in fact, spending too much on labor then you need to look into options for reducing those costs.

Are my profits decreasing despite continued growth?

In a perfect world the profits of your business would increase along with growth. The unfortunate reality is that sometimes expenses increase so fast that profits can actually decrease with growth. If your profits are decreasing despite continued growth it could be a sign that you are spending too much on labor. This could be a temporary problem that will work itself out over time or it could lead to major problems as your business continues to grow. It is important to take a close look at the reasons why your profits continue to decrease during times of growth.

Am I paying a premium to get routine tasks completed?

There are elements of your business that are routine but still essential in order to keep things running smoothly. It can be difficult to find the right people to complete those tasks because reliability is so important. But, you have to be careful not to overpay for these types of tasks. In order to determine if you are paying a premium to get routine tasks completed you need to research the going rates for that position in your area. If you are paying significantly more than the average for your area it is time to look into other options.

Am I getting behind when it comes to hiring and training the additional labor the business needs?

In order to keep up with the growth of your business, you and/or the leaders in your organization have to make sure the necessary help is in place. The traditional way of doing this is to hire and train new employees as the need arises. In a business that is growing quickly, it is easy to become consumed with that task to the detriment of other areas that require your attention. This can quickly cost your business money because you are spending all of your valuable time focusing on hiring and training. If your time is better spent elsewhere then you are spending too much on labor.

Options for reducing your labor costs

If you have determined that you are spending too much on labor then you need to look into your options for reducing those costs. You may need to change how you handle your growing labor needs. One option is to outsource any processes that can be completed remotely. This will solve many of your issues related to the cost of labor and time spent hiring and training. A high quality outsourcing agency will likely cost less than additional in-house labor and they take care of the hiring and training that has to be done on a continual basis. Another cost saving option is to integrate automation into your business wherever possible. This can minimize the amount of people you need for certain tasks and is a scalable option.

There is no reason to continually spend too much on labor. Carve out some time over the next weeks or months to take a close look at exactly what you are spending on your labor. If you are spending too much, then take action. Outsourcing and automation are two cost saving options that you can implement quickly into your business.

Infinit-O is the trusted customer-centric and sustainable leader in Business Process Optimization to Small and Medium businesses in the Financial Services, Healthcare and Technology sectors by delivering continuous improvement through technology, data and people.