Lower your labor cost while keeping the quality. Watch this video to learn more.
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Read video transcription below.
Here’s the big idea: production is a pay-for-performance model, just like sales is. What this means is each of you in your industries will have a certain percentage of labor that’s the sweet spot. That’s the number you really need to get to, to be profitable, right? Because if labor is too high, it eats away at your profitability.
So the goal is to find out what that number is and in an ideal scenario that’s what you’re working on. Then you’re going to bring people on and you’re going to pay them a reasonable, hourly wage. You’re not going to overpay them hourly. You’re going to bring them in at a reasonable, hourly age. And what you’re going to tell them is this is the foreman that we have a bonus program in place that allows you to earn significant income beyond the minimum hourly wage.
That you’ll make your hourly wage. If you hit a certain labor percentage of the job. So in this case, I worked with 13% – 20%, depending on what industry you’re in. But the goal is to lay that out there and say, if you beat that number, which we will show you, that you can, you get to own the rest of that profitability. You’re saying, why would we do that?
Because it’s in your best interest to do that.
If I could tell you that you could have fixed labor costs, you’d be like, wow, that’s amazing right now I’m talking about in-house crews. I’m talking about people that you control the substance the same way. You’re going to pay them a percentage, whatever, but you don’t have the quality control. You don’t have the ability to kind of manage that. I’m talking about people that you want to hire, like four that are going to be part of your team.
All right? And so what happens is, as you go through, when you’re doing it, and I just did this with a client, we realized their labor costs were like 23%. We got it down to 16% and we did it. And what we realized was there was an average waste of 10 hours a week per crew, times three guys, 30 man hours, a week of waste. Why, they were coming in loafing around.
They weren’t low. Why? Because their hourly wages I’m on, I’m on the clock. I don’t care. I’m not, there’s no incentive for me to move fast. There’s no incentive. And then you’d start peeling that back. And then you talk about quality and quality control. And then every step off the truck here’s how to maximize every step you take. Next thing you know, these guys go from making $45K – $50K a year, to $80K a year just like that.
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