Australian Newsagency Blog

A blog on issues affecting Australia's newsagents, media and small business generally.

Labour cost ratio

Mark Fletcher
October 28th, 2008 · 3 Comments

More and more when talking with newsagents I am asked what percentage of revenue labour ought to cost. In a retail only newsagency the figure I consider okay is between 10% and 12% depending on product mix. There are only two ways to achieve a healthier labour cost to sales ratio: increase sales without increasing labour or cut labour costs without decreasing sales.

If you need to cut labour costs, start by analysing sales by time and see whether there are pockets where you can eliminate casual hours as these are the easiest to adjust.  A good sales by time report viewed in association with the roster ought to help uncover opportunities to trim certain shifts.

To drive a healthier labour cost to sales ratio, you could consider sharing the current data and your target with staff.  This sets a shared goal.  Sometimes retail staff will engage more proactively if they know there is a specific outcome which can affect them as well as the business.

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Category: Newsagency management

3 responses so far ↓

  • 1 Manni // Oct 28, 2008 at 12:34 PM

    Mark,

    What labour costs would you say it’s reasonable if a husband/wife team is running a newsagency and has a few casual staff?

    Manni

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  • 2 Mark // Oct 28, 2008 at 4:23 PM

    Manni,

    I’d cost the husband and wife team as regular employees in calculating the number. Use the award rate.

    Mark

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  • 3 Derek // Oct 28, 2008 at 6:50 PM

    Most Newsagencys do employ people I am assuming. Mine is a husband / wife business.

    I am sure most of your employees are top notch employees where they upsell, dont chew gum and follow some basic customer relations work as list here.

    http://towerblog.towersystems.com.au/wp-content/uploads/2008/10/ba3-positive.pdf

    That is why I think their maybe a third way of helping with the cost ratio, employing the right staff and getting them to the point where they enjoy their workplace but put in a 110% on a daily basis. It may seem insensitive of me but you all should ask yourselves am I getting value for money out of your staff, it can increase your profit theirfore lower your labour costs.

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