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OPINION: How much profit-per-person does your business generate?

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OPINION: How much profit-per-person does your business generate?

​Staff are expensive. When I say that, of course I don’t mean it negatively but instead as an opener to remind us all that people are the biggest cost in business.

No matter which industry you consider, employees will nearly always be the line in your P&L that is the heaviest and with a bunch of related costs such as PAYE and National Insurance, with the latter having just been increased by the Government.

And when you add recruitment fees to all of this it deepens the financial responsibility yet further.

Nationally, wages are rising at one of the fastest rates in a long time at 4.2% annually. For the average employer that means a hike in cash terms of over £1000 a year per person employed.

In estate agency, employees are definitely the biggest expense. And our industry is far from immune from the pressure on wage costs especially as the property market has been so strong in recent years and has meant that to a large extent good candidates could command better salary packages from new and expectant agency bosses wanting to capitalise on the market and an expansion of their businesses.

Many of us look upon salaries as just a cost. An expense and an overhead. A chunk of cash that’s sucked out of our bank accounts on the 1st of every month leaving a massive hole in our fortunes until the completion commissions roll back in again. In fact I once heard an estate agency MD who shall remain nameless state that ‘pay day is the worst day of the month – it hurts’.

Ok, so why am I, the boss of a recruitment agency, setting out the woes of employers and their increasing costs? Surely it’s in my interests to sugar-coat the labour market and to tell you all how wonderful it is? Well, there is another way of looking at costs …

The saying, ‘Your people are your biggest asset’ is inarguably true because without your managers, your directors, your listers, admins and negs, your business wouldn’t turn a wheel. So let’s look at the cost of staff in another way – as a return on investment.

If you agree that your people are indeed your biggest investment (feel free to disagree in the comments below and good luck with that) then you’ll surely see that your revenue and profit is generated by them. And this means that the correct way of looking at your team and what they cost is as an investment instead.

Investments pay dividends and that’s what staff do.

Here’s an example of what I mean…

Savills‘ total staff costs were £1.4bn in 2021. But rather than look at this as a colossal expense, instead see it as generating £2.1bn in revenue and £183m in profit. Or, put another way, Savills earned £20,700 net profit for every person that they invested in. All 8840 of them.

Here are more examples from recently published financial results:

Connells/Countrywide – earned £11,300 profit per person employed

LSL – earned £8,903 profit per person

Foxtons – also earned £8,900 profit per person

Isn’t this a far better, more productive and more optimistic way of looking at your team and its impact on your company? It’s the ROI that matters, not the ‘cost’.

I’d love to hear your thoughts on this – and to learn of anyone that can top the Savills number!

Josh Rayner is CEO of Rayner Personnel.