What % of turnover should your wages be?

[Findermonkey]

Hi,

I wonder if anyone can tell me what percent of your turnover your wages (I mean all staff and directors) should be for a profitable company.

I remember something about football clubs not using more than 50% but don't want to follow Leeds Uniteds business model!

[Alicatt]

It depends on your type of business.

If you're a service provider, like a web developer, then salaries will be the major expense. A retailer with a wages bill of 50% would be in big trouble!

[Tom McClelland]

The question has no application.

In a petrol station gross margin might be lower than 5%, so you're probably in big trouble if wages exceed 2-3% of turnover.

In a pure service industry gross margin might be close to 100%, with low business-operation expenses so wages might exceed 70% of turnover.

You can't budget just by looking at one element. You have to look at sales, cost of goods sold, wages, establishment costs, etc. The balance of these is different for every industry sector.

[DickM]

In other words .............. get yourself a good accountant ;)

[profitxchange]

Creating wealth is what business is all about. What you pay yourself is driven by the success of the business. I have an old client that paid himself 75% of turnover! several
£ million because the business was very profitable. Your expertise should be aimed at creating the most efficient wealth creating business you can.