What people (and things) cost

Larry Janesky: Think Daily

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

How much does it cost to pay a person, lets say, $40,000 a year?  With labor burden and overhead its 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 (lets 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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