Why Labor Costs Matter
Labor is one of the biggest expenses to consider as you’re starting up a new venture. As such, it’s important to form an accurate assessment ahead of time. When figuring out labor costs for a new venture, the easiest way to do it is to start with a sample schedule. What will it take to staff your new operation? Who’s going to open, close, cook, clean, serve, and so on? What will you pay each of those people? You don’t need to identify the exact people right from the start, but having a sample schedule in place will give you a good idea of what your staffing needs will look like.
How to Calculate Labor Costs
Once you have the sample schedule, assign hourly wages to each position and calculate the total labor cost. As you think about your growing business, your labor will increase. An easy way to think about it for future growth is to take your first year’s labor expenses and your projected first year revenue, and calculate labor as a percentage of revenue. In subsequent years you can assign labor costs just as a percentage. Or you can use our handy template.