In this episode of The Moving Mastery Podcast, Louis Massaro shares how you can increase profits by managing your labor expenses.
- “As a moving company, one of your biggest expenses is labor. So in order to be profitable and make money, you’ve got to get your labor percentage under control.”
- “Your labor percentage is directly tied to the amount of money you’re charging for your moves, and the amount of money that you’re paying to your movers. And if you don’t get this number under control… Well, let’s just say, I’ve seen companies go out of business because of this.”
- “Or, you may end up in what may be an even worse situation. When you put in years and years of hard work and being in this business, but you’re stuck not making the profits that you should.”
- “Start looking at your labor expenses and you’ll see for yourself, week after week, how it all plays out. You can be more profitable and you can get your labor percentage under control.”
- Watch the video to get full training.
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As a moving company, one of your biggest expenses is labor. So in order to be profitable, in order to make money, you’ve got to get your labor percentage under control. And what do I mean by that? I mean, if you’re doing, let’s say 100,00 in business and you’re spending 25,000 on your labor to do the 100,000 in business, you’re paying 25% in labor, right? That’s your labor percentage. Well, your labor percentage is directly tied to the amount of money you’re charging for your moves and the amount of money that you’re paying to your movers. And if you don’t get this number under control, I’ve seen companies go out of business because of this, all right? And the worst is like years and years of doing hard work and being in this business and not making the profit that you should, right?
If you’re joining me for the first time, my name is Louis Massaro. I am founder and CEO of Moving Mastery, where we help moving company owners set up proven systems and processes to increase profits, reduce stress, and live a better quality of life. Recently, I’m working with a private client who, they came in, they’ve got great crews, they’ve got a great reputation, they’ve got a great business, that they’ve been operating great team, but their profit margins are way too low. So I’m working with them on a few things. We’re taking a look at the different areas of their business. One of the things that we were able to identify immediately was the labor percentage being too high, right?
And you might say, “Well, Louis, what am I supposed to do? Am I supposed to just cut my labor cost? Am I supposed to just pay my movers less?” Absolutely not. You definitely don’t want to do that. Number one, these days, it’s hard to find labor, right? I’m advising a lot of companies to pay more for labor than they used to in order to be able to get and keep the good help. So reducing your payroll percentage is not about reducing the amount that you pay your movers. Let me just make that clear.
What it is about is looking at the entire pie, right? There’s only 100% of the pie. And if you’re spending 25, 35, 45% just in labor, that leaves that much less for everything else, right? So now you’ve got your other expenses, your other cost of goods sold. You’ve got your other fixed costs that you need to spend, and you’ve still got to be able to make a profit. So what we need to do is we need to lower the percentage of your payroll in relation to your gross revenue. So I’m going to give you three tips on how you do that today so that you could start making more money in your business without even needing to think about paying your movers less, right?
The first one is, sounds obvious, but raise your rates, all right? This is one of the fastest, quickest ways to get yourself in a position where you’re profitable, where you’re making money. You’re in this business to make money. You’re not in this business to provide free service, right? To go and be stressed out about all the work that you’re doing that to not have the money left over at the end of the day. Costs are going up, right? Everything from insurance, to fuel, to labor, across the board costs are going up. Your costs could go up too in order for your business to be able to thrive. And a lot of people are afraid to do that. That’s why you need a strong sales process to be able to raise your rates and do that strongly. I talked about that in other videos.
The second thing you want to do is every week you want to run your payroll percentage, okay? You want to know what your percentage is on a weekly basis, right? So let’s say you did, for round numbers, again, I’m just going to say 100,000 in the week, right? Good size company, right? Doing 100,000 a week. And you’re spending 25,000 in payroll. That’s 25%, okay? So start tracking that number, whatever it is for you, and establish your benchmark. From there, you want to monitor that every single week, because any dip or any increase in that number tells you that there’s something that’s changed, there’s something that’s different.
Which brings me to the third point, which is you want to monitor your overtime activity, right? You want to monitor overtime, because if you’re sending 60 hours to one crew, 60, 70 hours to one crew and they’re getting burnt out, and meanwhile, you’ve got other crews that are at 20 hours and they want more work, well, if you’re able to spread that out, that’s going to save you on overtime. It’s going to save you from burning out the other crews. But what happens is, typically, dispatchers or even the owner, if you’re the dispatcher, you kind of got your go-to cruise, your favorite cruise, and it’s just easier to give them the jobs. But you’ve got to be able to monitor the overtime and make sure that it’s not excessive.
It happens. Great. Guys are getting overtime. Awesome. But you just want to be able to spread that out. So raise your rates. Every single week, look at your payroll percentage to see where you’re at. This will help you identify all kinds of things. High overtime, theft, people working off the clock. There’s a lot of different things that that’s going to help you to identify. Start tracking it. And you’ll see for yourself week after week how it all plays out, all right? And then of course, monitor the overtime.
So I hope that this was helpful. I hope you enjoyed it as much as I enjoyed making it for you. Until I see you next time, go out there every single day. Profit in your business and thrive in your life. I’ll talk to you soon.