You're over-spending on payroll
When you look at your financial statements each and every month, I know you’re probably comparing current numbers to the previous month, quarter or year and asking:
“Did we make more money?”
“Did we spend less doing it?”
Good.
But what if your expenses are wayyyyy out of whack compared to your competitors?
And what if you’re not asking the most important q:
“Are my expenses normal for a business in my industry?”
Most service-based businesses try to have income statements that look something like this:
Revenue (100%)
- Direct labour (30% - 50% of revenue)
- Operating Expenses (20-40%)
= Profit (10-30%)
But not everyone is successful.
And one of the biggest culprits when I see small businesses overspending is…. payroll.
Big data tells us the following about what wages/benefits should look like (Source: IBISWorld, 2025):
Accounting firms: 42.1% of revenue
Law firms: 36.7.%
Insurance brokerages: 14.5%
Wealth management firms: 34.8%
Physiotherapy clinics: 29.1%
Interior design firm: 23.8%
Graphic design firm: 27.7%
As in, if you have $100 of revenue in your interior design firm, approx. $23.80 of that should go towards wages / benefits. (and if I missed your industry above - hit REPLY on this email and I’ll send the numbers over for you)
These numbers aren’t just benchmarks - they’re like a mini-litmus test for whether you’re getting the right ROI on your team’s time (or not).
And in my 15+ years of advising small businesses, I can confidently say: most small businesses are dramatically overspending on payroll.
Why? Well….
A merger caused a lot of unanticipated role overlap and it’s unclear to you (and others) who does what
You have a sneaking suspicion that some team members are under-utilized but don’t have any data to support the need for concrete changes
You panic hire too often because employees seem to leave as quickly as they arrive. The constant onboarding / training / off-boarding cycle is majorly hurting your bottom line.
The funny thing is - people often think they are helpless to manage / decrease this expense. That's because overspending on payroll is a financial problem that very much needs an operational fix so focusing on the numbers alone won't get you to where you want to be.
As in, higher-than-average payroll costs (symptom) will often be a result of a poorly managed team (root cause).
And what is the consequence of a poorly managed team?
Well, the top two are that your employees will vote with their feet (i.e. hello turnover rate) and, ultimately, you’ll have less $$ in your pocket as the captain of the ship.
This is where my team and I come in.
We are not your bookkeeper.
We are not the CPAs that you see once a year to sign your FS / T2.
We are the management consulting team that you bring in when you need to get to the bottom of a complicated team structure, unclear roles and responsibilities, and a compensation structure that’s causing you to bleed cash.
Every Management Consulting project is custom, but if your payroll expense is higher than it should be, your project might include:
Letting a poor-fit employee go.
Hiring for an extremely hard to fill position in a small job market.
Developing key performance metrics to track financial and operational performance of your team
So, if your payroll expense isn’t anywhere near industry averages, your company is bleeding cash, you’re wondering where it’s all going and you’re not quite sure why… you’re in the right place.
This is exactly the type of project my team and I love to do.
Book a virtual consult at the link below and let’s get to the bottom of what’s really going on:
Here when you're ready to clean this up,
Tanya