26 FABRICARE FE ATURE Cost Per Piece – How much does it cost to produce each piece? To calculate the average cost per piece, divide the total expense amount by the number of pieces cleaned. Again, it is important to use data from the same time period. This formula can be used to calculate information for the entire operation or for specific departments such as laundry or drycleaning. Payroll Percentage – The payroll percentage will tell what percentage of your revenue is going towards wages. As with most calculations, the payroll percentage can also be broken out by individual departments. To calculate the payroll percentage of a department, divide the revenue generated for the week in that department by the wages paid for the same week in that department. Three components ultimately affect the payroll percentage: • Speed of production • Cost of labor • Revenue Per Piece POH/Pieces per operator hour – Pieces per operator hour is not the same as the number of pieces produced per hour. POH considers the number of pieces produced per hour and divides that figure by the number of people required to produce the pieces. For instance, a single shirt presser may press 54 shirts per hour (pieces per hour) but you may also have two additional people such as the touch up person and the person that washes the shirts contributing to the process for a total of three people required to produce those 54 shirts. HOW OFTEN DO YOU REVIEW THE NUMBERS? Sales should be reviewed weekly along with revenue per piece and total pieces. Examine your labor costs every other week. Each of the parameters—efficiency, quality, overtime, wages—that make up your labor cost should be evaluated. Financials should be evaluated monthly and plan every six months so adjustments can be made if necessary. Mike Nesbit is President/CEO of EDIT TX LLC DBA Tide Dry Cleaners and currently serves as Chair of DLI’s Board of Directors. He is also past president of MW Cleaners, a Men’s Wearhouse/Joseph A. Bank Company, past president of the Southwest Drycleaners Association, and a founding member of Tuchman Training Systems management group. He can be reached at mnesbit@tdc-edittx.com. continued from page 25 Formula for Calculating the Average Revenue per piece: Example: Drycleaning Revenue # Of Pieces Drycleaned Average Revenue per piece for drycleaning = $5,000/week revenue 833 pieces/week $6.00 average revenue per piece for drycleaning = Formula for Calculating the Payroll Percentage: Example: Drycleaning Revenue Drycleaning Wages Drycleaning Department Payroll % = $5,000/week revenue $500/week wages 10% drycleaning department payroll = Formula for Calculating Pieces Per Operator Hour: Example: Pieces Per Hour # Of People POH (pieces per operator hour) = 54 pressed shirts per hour 3 people contributing 18 (pieces per operator hour) =