What can I do with my high labor overhead?

The question: How can I get my labor costs lower?

Steve’s answer: It doesn’t have to be about lower wages or working faster. Instead, why not make more money (profit) on each job?

high labor overhead

Hey Steve,

When I attended SFS I learned that I should focus more on my labor percentages. And I’m sure my “numbers” should be lower but I just don’t see how that’s humanly possible to get my techs to accept lower wages. Got any thoughts or would you like to come work for me? LOL

Confused in Connecticut

Dear Confused,

First, I’ll remind you that ALL the numbers/ percentages we share in SFS are just a guide. Each company has its own situation. But I agree you are smart to be more “conscious” about high labor overhead. Wages are usually the biggest percentage on your P & L!

However, remember that there are at least four ways to improve your “labor percentage”.

A) Cut wages and/or move over more to a commission based pay. (I would be careful on monkeying around initially with pay, Confused. It get’s your employees paranoid and then many times you have to change again. So tread softly here.)

B) Get more efficient. This works great in commercial where the customer usually can’t see your techs “running”. But in residential a super efficient operation can leave the home owner a bit confused/ let down as in “The carpets look clean but they just didn’t seem to be here that long. I felt like they were rushing around…” HERE is a Residential Set-Up List that does increase your efficiency.

C) Raise your prices. (I like this one, Confused. Even if you raise your residential pricing by 15% that will do dramatic things to your percentage of labor. And please don’t tell me “I am the highest priced cleaner in my area”. This means nothing! 🙂 HERE is how I recommend raising your residential pricing you therefore offset your high labor overhead.

D) Do more (higher profit) Additional Services while already in the home. I LOVE ASO’s! (Additional Service Options) If your techs apply Scotchgard, etc you will see their production time actually applying the product zoom up to the well over $200.00 per hour range. (It is pretty darn easy to hit that 20% labor with a $200.00 gross per hour!) HERE is a Special Report I did up on how to sell ASO’s!

NOTE: HERE are some thoughts on how to bonus your techs when they sell an ASO.

So Confused, I hope some of the resources above are helpful. Please let us know your progress and we’d love to see you again at a SFS seminar!


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