Today, I’m going to talk about getting the most out of your investment in employees.

Employee costs are the largest expense for medical spas and other service-based businesses and with the current labor shortage, they have only increased.

It’s more important than ever for you to make sure you’re maximizing the return on your investment.

Out of control labor costs are the biggest threat to profit margins

I’ve worked with many business owners to improve their profit margins and many times it has come down to labor.

You may be paying too much in employee costs if:

• Cash is tight
• Your client schedule isn’t full
• You’re accruing more debt rather than paying it off
• You don’t have enough money left over for owner distributions
• You’re paying more for employee costs than others in the industry

Overspending on employee costs can keep you stuck on the hamster wheel of generating more in sales, but not increasing profitability. This makes it really hard to scale and grow your business, because you won’t have the extra cash to do the things you want to do.

Here are six strategies to improve labor efficiency and supercharge your employee return on investment.

• Compare your employee costs to industry benchmarks

  You can’t focus on what you don’t measure. Looking at your employee costs as a percentage of revenues in comparison to the industry is key in determining whether or not labor is even the issue. Reviewing this KPI monthly will help you ensure that it’s improving month over month.

• Streamline processes

  Processes should be well documented and employees trained on them. Look for tasks that are overly complex and can be simplified or even eliminated. Use software where possible. Clients should be able to schedule, fill out paperwork, and pay online.

• Cross-train employees

  Encourage cross-training among employees with similar job duties. If your manager can step in and help your front desk employee during busy times, it might save you from hiring another employee who would otherwise have a lot of downtime.

• Eliminate white space in the schedule

  Fill the schedule of all providers  seeing clients. Look for gaps of white space in the schedule and put extra marketing efforts into filling those last-minute appointments. Providers should be nearing capacity before additional providers are hired.

• Implement performance-based incentives

  Tying pay to performance is a powerful tool to drive both motivation and productivity. Commission-based pay or bonuses based on sales and efficiency metrics are a great way to improve the bottom line.

• Outsource positions that don’t require a full-time employee

  This one is obviously my favorite. Outsource things like bookkeeping and fractional CFO services. Marketing and HR are other common areas that don’t require a full-time employee for small businesses. Hiring these services on a fractional basis is a much better investment.

Implementing these strategies will maximize your investment in employee costs and ultimately improve your bottom line. You’ll have more cash to pay out those owner distributions, pay down debt, and invest back in the business.

If you’d like help reviewing your employee costs, we’re here for it. Book a discovery call to get started.

If you'd rather watch helpful content, here is the link to this week's YouTube video!