Understanding wages.
It’s important to know how much you are actually paying per person. Ideally, you should never pay more than 45% in labour costs and 55% to the business, and ideally 33% to labour and $67% to the business. Somewhere in between those two figures usually lays a reasonably successful business.
Many people will know how much they charge for a groom most often, and roughly how long it will take for a groom, and what they pay their employee (or themselves) per hour, but those figures are seldom correct.
Let’s say the most common price you charge is $70, and you know your staff can do it in 90 minutes, and you pay $20 per hour, that sounds like a good enough deal.
The reality though, is that some grooms are less than $70 and staff will spend
more time outside of that 90 minutes cleaning up and answer phones. The $20 per
hour you are paying does not include holiday pay, sick pay, stats, Super funds
and other staff costs that you pay on top of that figure. The $70 also usually includes GST whereas you
cannot claim GST back by paying staff, so for a quick calculation, add GST plus
20% onto your base hourly rate to get a truer indicator of how much you are
actually paying for labour.
There are only a few ways to make the percentages better…
(a) Raise the groom price
(b) Speed up the groomer
(c) Lower the wages
If you show this to your groomers, I am sure they will quickly decide that
option (c) is out of the question, so that only leaves (a) and (b) to fix your
money woes.
The reason I do not add product sales into the pricing, is that the service industry should be able to stand on its own two feet. You should not be relying upon someone needing a bag of food or a new collar to pay the wages of your staff (or yourself). So it is easier to leave that out and make a profitable business even more profitable by adding that on top later.
These base figures will either make you smile or make you squirm, so at this point, I am going to leave you to work on increasing your groom prices if appropriate, or speeding up your grooms if that is where the problem lies.
You might try re-running the figures based on an extra dog a day, or an extra few dollars per groom, and see if it helps solve your problems.
In the next section of the premium version of the business calculator we will address other costs of the groom with rent, power, etc, so we can get an exact cost per dog, and also work out which is more beneficial to your own circumstances… full grooms, mini grooms, wash and dries etc.
Now that we have entered all your figures you can start to see how much each dog groom is actually taking in terms of all expenses, all labour costs, and it includes any down time that gets missed when you look at grooms one at a time only.
If you look at the percentages of full grooms, mini grooms, wash and dries, you will be able to make some clear decisions on marketing. If wash and dries are yielding a high percentage of profit per visit, but overall they are only a small part of your business, you should invest in advertising for more of this type of work and employing more washers or junior groomers to do the work as the hourly rate will be lower. If you make more money from mini grooms, promote that, etc etc.
Save your results and make a new one as a budget, altering
figures where you can save some money in expenses, and try adding in one or two
extra dogs a week to see what the figures look like.
A way to save money on expenses is to analyse each thing carefully.
We used to go through a lot of shampoo, so I got a micro scale and asked each
groomer to pour in the exact amount they use in their groom… the usages were
anything from 15mls to 150 mls!! As you
can imagine that makes a huge difference once it is standardised. You might consider using a higher quality
shampoo, but measuring each use exactly, so as not to have wastage.
Ring around electricity companies and phone companies to see if there are better options. Sometimes it is actually worth changing every year or two to a different supplier to stay on top of the savings. Monitor your bank fees, they can add up quickly.
Again, look at your full groom, mini groom and wash/dry figures to see where the highest percentage of profit is to be made and market for those customers. Ring around your peers (I hate the word competitors) and see where you sit in the market. If you are priced too low, its time to make increases. Ideally, all new customers should come in at a higher rate than your regulars and regulars should be increased every year or two at the longest to keep up with rising costs.
You can only make money being the cheapest in town if you are lightning fast and “production line” (in which case burn out is likely) or you have little to no overheads. But even if you have low overheads, why not make money while you can in case you later move to somewhere with higher overheads and find you can’t significantly increase your pricing without losing all your customers.
On top of that, budget customers are seldom quality
customers. The next time someone new
opens offering a $5 discount they will be off… it’s hard to foster loyalty in a
budget market.
Think about your favourite restaurant.
You may pay more, but frequent it whenever you want a nice meal, but
when it comes to a quick drive through meal, any place will do without thought
of being loyal to just one branch.
If there is anything you need clarifying please do not hesitate to contact me and I will personally respond in due course and help you to get back on track.
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