You own a little cafe or a brick and mortar shop on a good street. You’ve got a handful of staff. They’re all good people.
Business seems fine. You have traffic; you’re busy on weekends. In fact, sometimes you’re so busy you kick yourself for not putting more people on the schedule because the busiest hours have you bursting at the seams.
But then you sit down to payroll and find the numbers don’t add up. You process payroll and hope your weekend deposits hit the account before the checks clear on Monday.
Everything seems to be going so well...so why is payroll such a killer?
You don’t want to pay your staff less. They work hard and you want to give them the best you can. But you know you can’t go on like this- skipping your own paychecks, putting your own money in to boost cash flow, and juggling expenses on credit cards hoping you’ll catch up later.
“I don’t have to imagine this….I live this!”
I’ve been there.
A lot of variables affect staffing in small business. Even worse, under or over staffing often masks deeper issues like poor process management or undertraining.
All good business practices begin with data, the right data. Yet, finding the right staffing balance for your business is tricky without a guide to follow.
When we started Maeva’s Coffee, I found nothing to help me understand the ins and outs of staffing.
The successful businesses I looked to held their numbers close. And the unsuccessful ones? You know the ones. They look great on social but are bleeding money through overstaffing while quietly racking up bad reviews because of slow service.
They just went of business.
In the end, all I had were general articles stating “labor costs for food service should be around 30% of revenue” and, my sister, a career barista, telling me that standard barista wages for our region were $9/hr plus tips.
Those variables are a good starting point for hiring and evaluating your year-end P&L, but if you’re losing money through
or high turnover
you can’t wait a year to make scheduling adjustments.
In our business, a single hour over-staffed means we have to bring in an extra $26 in revenue to break even. If four hours are wasted a day, which is easy in a shop with both a morning and evening shift, that adds up to an extra $3k in sales needed per month just to do as well as an optimally staffed business.
So what’s the solution?
How many people should I have on schedule?
I’m going to show you a calculation you can use to optimize your shop’s weekly schedule.
If your business is retail-only store, where you aren’t assembling or producing anything, the calculation is simple.
First, find the industry standard for your business’ niche.
Here’s how it would work if you ran a clothing shop:
If your staff’s wages are $9/hr, $9 is about 15.1% of $60.
This means any hour in which you sell $60 or less, you should only have one person on staff. That’s your breakeven point.
When do you add a second person? It depends on your business model.
Let’s dive further into our clothing shop example and pretend we have a boutique dress store. Formalwear requires more customer attention and additional services, like fitting for tailoring. You might decide to add a second staff member on any hours averaging more than the minimum ($60) to make sure your customer service is top notch.
It’s a risk though. You can’t predict exactly how much you’ll sell in a given hour. If you have two people on staff and sell less than $120 in revenue/per hour- you’re losing money.
Most small businesses assume some loss in labor cost. We value customer service more than our corporate counterparts. We cover this loss by hiring staff who perform better than industry standard.
Niche small businesses attract staff who have great energy, a knack for multitasking, and we invest more in training.
In our formalwear example, a veteran staff might be able to serve three prom-dress seeking customers without a problem. If this is so, we might not decide to schedule a second person until sales are averaging $300-500/hr. That’s an incredible boost to the bottom line over industry standard!
Let’s take this back to a simple clothing boutique, one that doesn’t have time consuming services like tailoring, etc. To maintain good customer service and lessen the chance of employee burnout, I recommend adding a second person at 1.5x the volume of the previous.
Assuming that each staff made $9 per hour:
<$60 revenue (sales) per hour 1 staff
$61- 90 revenue per hour 1 staff
$91- 180 revenue per hour 2 staff
Those are the basics. Here’s how I take this a step further and fine tune to take into account behind-the-scenes labor when creating weekly schedules.
A Look At Maeva’s Labor
At Maeva’s, our small and mighty coffee shop at The Milton Schoolhouse, we have three staff in our kitchen. They come in for a couple of hours a day to create our fresh baked goods. In addition, I pay myself for office work, scheduling, etc.
Both of these payroll expenses need to be considered when thinking about how much money we have to budget for staffing behind the counter.
I need to remove these non-shop payroll expenses from our industry standard to determine how many people per hour we can afford behind our counter during operating hours.
Industry standard for coffee shops is 30%- but the number is 30% of total revenue. Our kitchen and office work comes at large intervals throughout the week- we don’t have a constant payroll expense for these. I may have a $50/hr payroll expense on Mondays when our shop is open and our kitchen staff are hard at work receiving deliveries, making soup stock and prepping food for the week. But Mondays are our slowest day- we’d never see the $150 sales hours to account for it!
We can’t work with the 30% industry standard hour by hour to staff our counter. That is why we need to find out:
what percentage of our weekly labor is accounted for in the kitchen and office
2. subtract it from industry standard
to find a true percentage-per-hour on which to base our scheduling.
Last week, our kitchen and office payroll was $960.86, or, 37.6% of our payroll total.
Let’s forget the actual payroll expense and gross revenue of our shop and use a nice round number to find the percentage we should be using to calculate how many people to staff our counter by hour.
Assume revenue was $1,000 in one week and 30% ($300) was spent in total payroll.
37.6% of that $300 was kitchen and office work ($112.80) - leaving $187.20 for your counter staff. $187.20 is 18.7% of total revenue.
We can now use this 18.7% to calculate hourly staffing in the real Maeva’s Coffee.
The average hourly wage of our staff is $9.50/hr. If I add an additional staff member at 1.5% the breakeven volume, staffing would look like this:
$0-76.5 / hr in sales revenue 1 staff
$76.5 - 153 / hr in sales revenue 2 staff
$154 - 229 / hr in sales revenue 3 staff
$230 - 306 / hr in sales revenue 4 staff
Note: This is a VERY LOOSE calculation that doesn’t take into account your processes, your shop’s layout, how much automation your shop has, etc.
If you haven’t already put the processes and expectations in place for your staff to handle what you’ve calculated….and you find you are overstaffed... you MUST implement changes slowly.
Getting your current staff up to performance standards won’t happen overnight. You’re setting yourself up for disaster if you expect your current staff to be handling 20-50% more an hour on the next schedule without communicating these expectations and giving them the resources to do so.
Help! I’ve overstaffed. What do I do?
You’ve struggled along for years making very little profit from your business, knowing payroll is out of control. But you’re also anxious about putting fewer people on staff.
Will they be able to maintain good customer service if you set the bar higher?
What if they just don’t have the skills to handle the increase?
12 months ago, I was in the same boat with Maeva’s Coffee. I was fine working long shifts by myself, confident in my ability to multitask during fast-paced hours. During slower times, I always kept busy with extra cleaning and organizing.
One surly barista complained they didn’t like closing by themselves because it was too much work. I reacted by overstaffing. I didn’t want to be an inconsiderate, hard-ass boss after all!
The effect was instant. Overstaffing lead to boredom. In only took a few weeks morale began to slip.
One night, I was covering for a staff member and realized there was nothing to do. By the time our evening shift came on, there was literally nothing extra to stock, to dust, to wash. I was only on shift for an hour and I was dying!
I scaled back to where we had been immediately and was relieved when our disgruntled barista moved on.
After the experience I took a more critical look at our numbers to see what we could do better. Our shop labor expenses were averaging 22.3%- 3.6% above where we should be according to industry standard.
Here’s how I brought payroll costs under control without stressing out our staff:
I tested the staff’s efficiency.
I ran a speed test on our baristas after business hours. Using a series of order tickets from the day’s business, I had our baristas make the drinks while being timed. To make sure quality wasn’t sacrificed, our staff took turns tasting and temping the drinks being made by each other during the test to verify consistency.
This wasn’t able to show how they could multitask on a solo shift but it gave me data to support my assumptions of who my strongest staff were.
I didn’t fire or discipline low-performing staff. As I had expected, newer staff were slower at making drinks. I paired them with our strongest performers during our highest volume shifts; shifts where we naturally had two people on behind the counter. I asked our best staff to take time to share their own insights, tips, and tricks with our lowest performing staff. At the next testing, average production hovered just under a minute and a half with a deviation of 6.3 seconds. No one was lagging behind.
I met with staff and started a conversation-
about their own individual strengths and weaknesses. My full time staff and I talked about how making a commitment to longer solo shifts would leave more room for hourly wage increases and paid time off.
Think about it: My best staff can work by themselves happily and perform well above industry standard, working $80-100 sales hours without any problem. By putting them on shifts that stretch into our daily rushes just a bit, they typically save me $38 per day in labor. I saw an opportunity to split the savings as an incentive. Our best performing staff make 23-27% more than our new or slower performing staff.
Pro Tip: Conversations like this work at Maeva’s because, if you haven’t already noticed through this blog, I’m open with numbers. My staff are smart people, most of whom are in school for business or have aspirations of someday running a business of their own. They understand that even a simple business like our small coffee shop is full of complexity. By creating an open environment where our staff have access to many of the same financial reports I use, I’m able to make changes to our business model more easily because we’re all on the same page.
I made changes to the schedule gradually.
I knew our baristas could handle more traffic. Pacing, flow, multitasking, etc have to be learned by practice. However, much like weight lifting, you’ve got to work your way into the challenge.
On shifts I found we had been overstaffing, I started to schedule myself as that second person.
My staff all know that, in addition to Maeva’s, I run operations at The Milton Schoolhouse incubator and consult as well. I’d tell the barista on bar upfront “Hey- I’m super busy. I’m going to sit over here and work on x but, if you need help I’ll be right there.”
At first, I’d jump right in at the first sign of stress. Gradually, I’d let them work through longer ticket lines on their own. They began to find their flow. After a week or so, I’d get up to help and they would motion me to sit back down. “Hey, you keep working on what you’re doing...it’s only a couple of drinks. I’ve got this!”
The key to making this successful is framing your intent. I wasn’t sitting in the corner waiting for them to stress out so I could patronize them for not being able to handle the workload. I was their spotter at the gym, jumping in as they grew comfortable pushing their limits in a safe environment. When they changed their workflow and discovered new ways to multitask, we’d celebrate together.
Keeping your payroll expenses under control is critical to growing as a healthy business.
Maybe you’ve run these calculations and still aren’t seeing the results you want for your business. Perhaps your brand isn’t up to your standards of quality, customer service is still poor, or profitability isn’t high enough. In my next article on staffing, I’ll help you troubleshoot these issues as we talk about
How to schedule with the happiness of your staff in mind
Creating an efficient shop layout and automating your process to increase productivity
And lowering your labor costs by offering better training and higher wages