A Few More Tricks for Saving Money
After inventory, labor is your highest controllable cost. Any dollars you can save on labor translate directly into improved profit.
Labor is deviously expensive. For every dollar you spend on the employee’s salary, you might pay an additional 7-22% in taxes, worker’s compensation and payroll handling fees. Thus, cost-cutting when it comes to labor is more productive than cost-cutting in other areas.
What tools do you have to reduce labor costs?
The Right Schedule
Learn the sales volume capacity of your crew. Conventional wisdom says that a clerk can handle $100 an hour in sales. Sometimes you ring up a $300 Warhammer army in 10 minutes. Sometimes a kid spends 45 minutes going through singles to buy a Revised edition Lighting Bolt. On average, though, a number close to that is a reasonable expectation to start with.
Once you know what you and your crew can handle, schedule that. Scheduling too many people costs money. Yes, it grants some benefit in better service, but a good attitude and attention at the counter can make up for a little wait. Better service might yield increased sales, but too many clerks on the clock always costs money.
Paying in Product
Many small business owners try to cheat the system by paying employees under the table in product instead of cash. That practice exposes you to legal trouble. You can find yourself in jail for avoiding taxes. Your store might be closed. You might be hit with fines from which you’ll never recover. It’s a bad idea.
On the other hand, you can do this legally. If you do pay somebody in product, the income is taxable as if it were cash. Paying somebody $100 worth of product on which you spent $55 and a couple of bucks in taxes is cheaper than paying them $100 worth of cash, plus twice the taxes.
Although people normally associate salary with management, you might be able to pay your sales staff a salary, too. If you pay them a salary and schedule them for more hours than they would otherwise work, you save money. They gain the benefit of knowing how much money they’ll make each week and the ability to take a day off once in a while without suffering from loss of pay.
If you do have a manager, you should consider paying him a salary. You should also check with your state for additional laws concerning paying salaries. Some states regulate the number of hours salaried employees can work, require overtime rates, and other factors. Don’t wait for a surprise visit from the Department of Labor.
Minimize your nightly record-keeping so that employees don’t stay at the store for hours calculating numbers that you can generate at will with your POS’s reporting capabilities. Have them clean with their down time rather than doing it all after close. Make shift-change paperwork quick.
Likewise, anything you can do to enhance the sales that one person can handle is beneficial, too. If you reduce the number of hours you need double or triple coverage by four by making it so that your sales clerk can handle $120/hour instead of $100/hour, you’ve saved that many hours of labor and all the attendant taxes. Store plastic bags and receipt paper under the counter instead of in a supply cabinet. Pre-stuff bags with flyers and notices so that you don’t have to do it when you bag somebody’s purchases. Spend down time to make sure that your critical time goes smoothly.
Likewise, any time you don’t have an employee on the clock other than yourself is time you don’t pay for. If all of your chores are getting done, and you can cut a shift that you had assigned to someone else, you can work it and keep the money in the bank.
You can pay independent contractors a flat fee for doing a job. They’re responsible for their own payroll taxes, although you have to report the income if it exceeds $600 per year. Jobs that you might pay independent contractors for include
- construction when you build or improve your store
- installing a LAN
- entering data into a point-of-sale system
- running a league or tournament series
There’s a danger with paying regular staff as independent contractors. If the IRS feels that you’re doing it specifically to avoid payroll taxes, they’ll charge you for the taxes anyway. The IRS maintains a list of things that you can do with employees that you can’t do with independent contractors. Check www.irs.gov for details.