Ouch! Tricky subject or what?! Pub, restaurant and hotel operators understandably find this the trickiest to get right. A bad week can see wage % soar as a proportion of total costs, especially if you haven't been able to control expectations of customer flows and customer spend.
'Average' wage % vary hugely, from as low as 20% of sales (probably a proprietor family owned and run establishment) to as high as 40% of sales in managed outlets with large, difficult (to control and serve) customer seating areas and top notch chefs in quieter weeks of trade. No wonder then that wage levels are the first to be cut in 2011. But caution needs to be exercised, to avoid cutting out your most talented customer huggers or best cleaners at key times and most importantly, to prevent slipping into the habit of dragging management and leadership into roles that can be delegated.
Here's an article I love from Nigel Jew, of ACTIONcoach which is SO relevant to hospitality:
Nigel Jew of actionCOACH says -saving a wage is killing your business. And, I mean that literally …
I know. I see the accountants saying, you have to run lean to get a decent profit, right?
That’s partly true. It’s also true you need to grow to make profit. You can’t cost cut your way to a fortune.
In business, it seems there are always two sides. For example, if you’re an owner of a retail business, you need to get product on the shelf and also get product off the shelf.
In a service business, you need to deliver the service, and you also need to manage your customer base from the sales and marketing side to build a demand for the service.
So, as an owner, faced with dealing with both sides, which of those areas should you focus on?
If you want your business to be big, you need to focus on getting the business, rather than managing it once it is brought in.
That means you have to get out of doing anything in your business that doesn’t contribute directly to both top-line and bottom-line revenue.
It also means you have to start hiring people to do the things you may be already doing – things that may be more comfortable for you than selling.
And don’t think you can’t afford to start paying those wages. Truth is, you can’t afford not to.
See, many owners hide behind the “managing” side of things, preferring that process to the sales side. They spend hours doing the books or creating spreadsheets or even answering phones in the misguided belief that “busy” equals “business.”
The reality, of course, is that sales equals business, and nothing in business happens until a sale is made. Many owners also have no idea how much their time is actually worth – causing them to engage in tasks or activities that do little or nothing to grow the business.
The way forward is to start delegating routine tasks to wage earners so you can start focusing on the top-line activities that will drive revenues. You need a plan to start, however, because delegation without a system is abdication. And for most owners, there’s simply too much abdication in their companies for anyone’s good.
How do you start? By following these five steps to make sure you are fully engaged on the “bringing in” business side of things at all times in your own company.
1.Know what your time is worth. If you should be worth £100 per hour – why are you doing things that you could pay someone £15 an hour to do?
2.Figure out where you spend your time. You may be surprised how little time you actually spend growing your business.
3.Delegate routine, administrative or basic tasks.
4.Get more training – for yourself. Take an honest assessment of your sales and marketing abilities, and if you need help – go get it.
5.Just do it. Get out and actually start to engage with your customers and potential customers.
(Nigel Jew, 7.06.10)
In summary, although 'Cash flow is king', 'Sales is everything'. Play to your key strengths, know your team and constantly ask yourself, 'Is this the best use of my time, right NOW?' . Chances are if you have this mindset, it will spread amongst your staff team. (PA)