As a business owner, you may have heard the term “critical mass” before. It refers to the minimum amount we need to start or maintain a venture. However, we all know that when operating your small business, you never want to have just the minimum amount of money to pay the bills. Nor do we want to provide our customers with the minimum amount of customer service. We don’t work as hard as we do to only have, or provide, the minimum. One aspect that we can run by critical mass however, is our small business payroll, or rather, our Burdened Labor Costing (BLC).
What is Burdened Labor Costing (BLC)
Burdened Labor Costing is the sum of your direct labor, taxes, benefits, vehicle costs (if applicable) and an adjusted percentage of your indirect labor and overhead costs associated with a specific department and individual. Simply put, it’s the sum of the costs associated with an employee (and their vehicle, if applicable) per hour. Or even more simply put – what does that employee costs you every hour of every day?
Some may ask why we call it Burdened Labor verses loaded labor – we have found that when the term loaded labor is used, it is used in reference to just some of the costs associated with having an employee – and even those costs vary. Loaded labor doesn’t usually include overhead, indirect labor, and all expenses required. It usually just provides a quick view of the employee’s pay rate along with some taxes and benefits.
However, you need complete visibility of your total expenses and small business payroll to make informed answers.
How to Calculate your BLC
Well let’s go back to the beginning– critical mass. We already know we don’t like running our businesses at critical mass; it is not acceptable in many areas. But in calculating your Burdened Labor Costing, critical mass is crucial, as the critical mass needed to cover your BLC determines your retail labor rates.
Therefore, because your Burdened Labor Costing is the minimum amount you need to start or maintain your small business, it is also the minimum amount of information you need to determine to ensure your small business can run successfully. Calculate your BLC today with the Apex eSuite Burdened Labor Costing SaaS program. Take control, move forward, manage your small business payroll, set proper retail labor pricing, and see the profitability you have worked so hard for. Don’t settle for critical mass (unless it’s your BLC)!
The SmallBizRising Blog is designed to be an educational content hub pulling information, best practices and practical advice for the small business owner and features topics including accounting, marketing, technology and more. Be sure to subscribe to stay up to date with new content as it is posted. The blog was created by The Neat Company and receives contributed content from a group of contributing companies that provide technology, services and solutions to small businesses.