Stop Assuming Labour Costs — It’s Hurting Your Margin
There’s a strange epidemic going around in food manufacturing and bakery circles.
It’s the assumption that labour is “about 20%.”
We hear it all the time:
- “The team starts at 1am and finishes at 9am, so we’ve got a rough idea.”
- “It all evens out over time.”
- “We just work it into the cost of goods.”
It might sound harmless — even logical. But it’s not. Blanket labour costing hides the real truth: you actually don’t know your margins. And when you try to scale something based on those assumptions, things can go downhill fast.
Not all products are created equal
Let’s break it down.
Say:
- Product A takes 15 minutes of labour
- Product B takes a full hour
If you apply a flat labour rate — say 30 minutes per product — across the board, you're already miscosting. And if you try to scale Product B thinking it’s quicker than it actually is, you’ll run into a wall of blown-out wages, missed margins, and mispriced SKUs.
This is where good products turn bad. On paper, they look profitable. But in practice, they bleed cash.
Two real-world examples
1. The café that was losing $6 per item
One of our clients recently took over a café and costed a popular product properly for the first time.
- Ingredient cost: $3
- Retail price (based on 70% markup): $10
- Labour cost: $12
By the time you add wages, tax, and super, they were losing about $6 per sale. Every time they sold one, it felt like progress — but it was quietly draining cash.
They’d never tracked labour before. Now they do. That product got removed.
2. Bonbons vs Bars — the margin myth
Back when I was running a chocolate business, I assumed chocolate bars were our best product to scale — they were quick to make, and we could pump them out fast.
Bonbons, on the other hand, were fussy and time-consuming. But when we actually ran the numbers:
- Bars had a 60% retail margin
- Bonbons had 80%
- Bonbons also drove more total revenue
So what did we push? Bars.
What should we have pushed? Bonbons.
Because I didn’t track labour properly, I scaled the wrong product.
Labour is part of your product. Track it like one.
The good news? It doesn’t have to be hard.
With Supply’d, you can:
- Track labour per batch or production run
- Allocate it by role, not just by time
- Automatically include labour in your margin reporting
That means no more spreadsheets. No more “it’s probably around 20%.” Just real numbers — so you can scale the right things and price with confidence.
Final thought
Assumptions might feel efficient. But when it comes to labour, they’re costly — not just in money, but in time, strategy, and growth.
Want to get a handle on your true margins? Book a demo and we’ll show you how easy it can be to track labour properly.