Thinking about labour costs

Paul Downs is a US business owner who writes on the NY Times Small Business blog. Here is a nice post in a series he wrote on “the numbers I track”.  In this post, he focuses on the importance of tracking labour costs. This quote from the post gives a good summary of Paul’s thinking:

“I’m not sure what to think about my labor costs. I have two conflicting theories running through my head. The first: pay people what they deserve. The second: pay people just enough so that they don’t leave. In reality I’m somewhere in between the two. Payroll is our biggest single expense, and it’s easy to let it get out of control and suck up all of the profit in the company”

I’m sure many small businesses experience this same sentiment. Read the full post for more.