Forums: Discussions for entrepreneurs and small business.

Hi,

I have a dip mix business, as well as a wine slush drink mix business. Since I have introduced the wine slush mix (www.vinoslush.com), the business has more than doubled in 6 months. The exploding demand for this new product forced me to have to move into a large commercial kitchen and hire several employees.

When I was a smaller company, I would have my dip mixes packaged and labeled by the piece. I paid a flat fee of 14 cents per piece. This fixed cost allowed me to know my exact labor cost per unit and I could price my products accordingly.

However, now I have grown larger. I have moved into a commercial kitchen and now have employees doing it at an hourly rate. I used to do the other things required when the business was small, but now that I've grown I can’t do it all anymore. So I have to pay employees to do such things as sweeping, mopping, unpacking delivered goods, receiving orders, counting inventory, filling out forms, prioritizing projects, washing containers and utensils, etc.

This is why I have to pay them by the hour instead of by the piece. They have all of these additional chores in addition to the packaging of the dips and wine slush mix. You can’t separate the chores from the packaging. I’ve tried it. It just doesn’t work.

My concern with this new arrangement is that I’ve lost all control of my labor cost for the packaging. Instead of 14 cents per piece, I have no idea what my labor cost is because it’s interspersed with these other chores they have to do.

I need to know how to price my products, and labor is a major cost. Any advice on how to deal with this situation would be greatly appreciated. I’m sure many of you have been through the same thing before.

Thank you.

Jim Miller

President - Cherry Orchard Foods and Vino Slush.com
www.cherryorchardfoods.com
www.vinoslush.com

Here is a suggestion. It cost an employer roughly $8.00 per hour in benefits and government required cost per employee. Take the hourly wage per person and add this $8.00 to it. Then add up this cost for each person. Then divide by your piece count.

That's one idea. Thank you.

You need to take into account all the money you are spending on all your employees and categorize it into one field. Basically until now all you had to do was pay someone for packaging, so you knew what your labor costs were. Now that you have expanded your business you need to take on more employees or at least give your employees more tasks to carry out. That being said your labor costs have gone up. I would suggest you add up all your costs for labor, and on top of that the amount it cost you for parts, and see how much you can raise your prices in order to make the maximum amount. If you can't raise your prices too much because your competition is charging the same, then try to figure out where else you can squeeze something out to make more of a profit.