Quick – For every dollar of gross revenue, what do you pay in wages?  This number should be at the finger tip of every thrift retailer.  In their book, Start and Run a Retail Business, James E. Dion and Ted Topping suggest that if your sales associates are actively engaged in selling on the floor, sixteen percent (16%) is acceptable.  If not actively pushing goods to shoppers, that number drops to about eight percent (8%).  In a finding specific to nonprofit thrifts, the National Association of Retail Thrifts (NARTS) reported that whereas store ratios varied by dollar volume, square footage, and years in operation, the average percent of gross sales spent on wages ranged from forty-three percent (43%) for stores with less than $200,000 in annual sales to about thirty-two percent (32%) for those with sales greater than $400,000 annually.  (Operating Survey 2005).

Whatever your wages to gross revenues percentage is, it is important that you know this key retail indicator and understand its application.  This is powerful information at your fingertips. For example, you’re considering whether to add another staff person to your sales floor ($18,000 wages) but would like first to determine the potential revenue impact of doing so.  You know already that wages are thirty-five percent (35%) of current gross revenues and expect this sales associate to function in the same way as your others.  With those assumptions, here’s how you get your answer.

• $18,000 = 0.35 X
• X = $18,000/0.35
• X = $51,429 (Expected Gross Sales Impact) 

You can do this for any wage or ratio by following the same process.  Now that’s good information . . . and it will benefit you time and again if used properly.  Finally, let me say that being continuously of your wages to gross revenue percentage will keep an important reality squarely in front of you, i.e. that the purpose of a sales associate is to produce revenue.  Do your sales associates know that? Are they actively engaged in selling on the floor?  Are you training them to be more effective at doing so?  Do you track and post individual performances, daily?  A shrinking wages to gross revenue number means more dollars are available for developing your store and if yours is nonprofit, more dollars that can be redirected to cash-starved programs.

(So, how do you compare?  Email me--I’d love to hear from you. Please be sure to note whether you are a for-profit thrift, or nonprofit.)