Calculating labor costs in a dance or yoga studio is crucial to knowing how to start a dance school business and to creating or updating a dance school business plan. Small business owners need to be the jack of all trades when it comes to all the aspects of business, in addition to being experts in their trade. This can be overwhelming. Here we break down how to calculate labor cost, which is essential in understanding your current and potential profitability.
Labor costs are the total amount paid to employees or contractors for a time period. For the calculations in this article, let’s make our time period one month.
You may find it helpful to separate out direct costs, or those paid to employees directly teaching classes at the studio, from indirect costs. Indirect costs are any wages paid that don’t directly result in instruction for which the studio is getting revenue. Examples include paying a cleaning crew, or wages for reception or running a cash register. If you want to separate these out, simply run through the steps below once for direct, and once for indirect labor costs.
- Gather a list of all the employees that got paid for the month, and what their pay is, e.g., $16/hour or $9/student/class.
- For each employee hourly rate, add together the total number of hours for the month, and multiple that by the dollar amount per hour. Then, if you have more than one hourly rate, add the total for each hourly rate together to get your total labor costs for hourly employees.
- For each per-class rate, add together the total number of classes for the month, and multiply that by the dollar amount per class. Then multiply that number by the total number of students in those classes. If you have more than one per-class rate, add the total for dollar amount for each class rate together to get your total labor costs for employees paid on a per-class basis.
- Add the totals from Step 2 and Step 3 to get your total labor cost for the month.
Labor is a major cost in running a dance or yoga studio. Consider supplementing class revenue with sales of retail items you know will move, workshops, trainings, and other special events. Good luck!