Understanding Your Internal Labor Rate Calculation is More Important Than Making Money | Episode 019

The whole point most of us even started our agencies was to make money; so how can anything be more important than that?

Money doesn't mean anything if it isn't associated with the labor that's put into it. If you made $50,000 in one year, that doesn't seem like a lot -- that seems like a normal full-time salary. However, most people equate that to 40 labor hours per week.

$50,000 starts to look a lot different when you say you worked 80 hours that week to earn it. On the other hand, it looks like the opposite when you say you only worked 10 hours in a week to earn that same $50,000.

That $50,000 is worth a lot more in the 2nd scenario than it is in the first.

That's the whole principle of this episode. Labor Inventory.

If your business is making $100,000 per year but you're clocking in 6,000 labor hours between you and your partner, you two have a better shot at making more money working full-time at McDonald's.

In this episode, we go over:

• A healthy labor rate (including what we are doing)
• How we assess labor hours given a service for a client
• How we allocate available employee labor hours versus leaving space for internal labor hours (60% client, 40% internal)

Knowing our labor rates and available labor inventory lets us know:

• When we're stretching our employees thin
• When we need to hire
• How much we can pay our employees or how high we can give raises
• how valuable and how profitable our company is

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