Benchmarking Expenses

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PhineasSwann's picture
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09/25/2012

Well, time to do some major pruning on expenses. 

We've done a good job in renegotiating and bringing down our insurance and some utility costs, but now we need to start pruning further.

One help would be to know which categories are out of whack with the industry in general. Unfortunately, I don't think everyone would be OK posting their expense categories percentages on this board. 

Anyone have any ideas of how we could share our expense percentages in confidence? I'd love for someone to tell me that spending 18% of our sales on payroll is too much. Or 15% of it on our mortgage. Or 8.5% on utilities or 5% on insurance and 4% on advertising. You get the idea. 

Any thoughts?

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Darren Drevik
Innkeeper & Owner, Phineas Swann Bed & Breakfast Inn

 

Lee2014's picture
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   At the NE Inn I would do all the shopping on one day for the week since I drove out to where prices were cheaper since it wasn't in the tourist area.  Doing this and having friends buy stuff for us and bring it over when they visited and we would pay them back, we cut the food bill for 2016 by $7,000.

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OnTheShore's picture
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08/28/2011

I found on my computer the paii's 2013 Innkeeping Report, and although the survey form asked some questions about expenses, there was nothing in the report addressing that information -- the focus being on revenue. So I don't think it will be very helpful.

But back to the differences between properties, one factor to consider in trying to draw comparisons is the legal entity form of your business's organization. For those that are sole proprietorships (schedule C), your personal income from the business is what is left over after you've covered all of your other expenses, and thus would not be included in your payroll expense. For those that are corporations (form 1120 or 1120s), all of the people who work in the business -- even if they are owners, who have to be paid a "reasonable" wage or salary for their work -- would be included in the payroll expense (the owners might also draw a distribution from any profit as well....). Morticia sees 18% as high, I see it as low!

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gillumhouse's picture
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It is also nigh on to impossible to do since some ar large, some new-built with insulation and some old houses that never heard if such a thing. Some have harsh winters with high heat bills and others die in the summer of heat stroke if not for A/C (both of which are dead seasons for some) Real estate taxes are killers for me along with the insurance. Then a Councilman in my City got the bright idea that B & O taxes should be raised  to the highest level allowed by the State - mine went up 100% on July 1.

Even saying percent does not do it as, small as I am and in my puddle called Shinnston (where I am a medium-sized fish BTW), I do not exactly have a revolving door of guests. I keep down expenses by doing everything myself except my grass. And that is something I will start doing if ned be - I lost a blueberry bush tothe weed whacker last night - my lawn guy is having health issues an sent in the subs No, I am not going to demand a replacement, he is just barely making a living and I am not going to add to his woes over a blueberry bush. I will put a tomato cage over the replacement until it gets big enough to be identified (it did not help that my yard was a hayfield)

Morticia's picture
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05/22/2008

When we looked at a place in Stowe, the owner was very forthcoming with percentages and why he spent what he did. He was spending 10% on marketing to pull in $200k+. Marketing is different now, but it might still be worth a look at spending more to bring in more.

So, rather than cutting expenses, can you raise income?

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Most people die of a sort of creeping common sense, and discover when it is too late that the only things one never regrets are one's mistakes. - Oscar Wilde

 

Morticia's picture
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05/22/2008

I think 18% is pretty high for employees. Our one helper costs us 3 room nights/week. But, what do you get for your 18%? I only get room cleaning. Does spending that money also add to the bottom line where reducing staff might put a bigger dent in the pocketbook?

I'd look at expenses that annoy you to pay them and work on those. Other places are behind the scenes things to bring the utilities down.

I'd avoid those things guests will notice. And think of as cheese paring. (The PO's here had a list of things - one tablespoon of ham per person, don't run heat or A/C or turn on lights.) We're not profligate, but some of those things reek of disdain for the guests.

Right now we are having a disastrous year so expenses are thru the roof in re % of sales. So there's that too consider also. Working on percentages may not be the solution.

Generic's picture
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02/24/2011

I guess that depends on where you are... I'm paying an agency around $22 an hour (3 hours per day) for someone to do the housekeeping. The standard rate around here is $15 an hour, but then there are all the taxes, paperwork and insurance to worry about. When I say insurance, I mean the employee being bonded.

Incidentally, all the taxes, pensions, parental leave, healthcare, employment insurance, etc is about 10%, so that would bring it up to like $16.50 an hour. Not sure what the bonding would cost, but it's just easier to write a cheque and let the agency deal with all of it, hiring, firing, replacing when sick, etc.

PS: Around here, there is a 3 hour minimum employment window per day by law. Minimum wage is about $11, but very tough to find anyone at minimum wage.

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OnTheShore's picture
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The PAII used to collect this kind of information and aggregated it anonymously, we participated in their survey once even though we're not members; the report we got back was interesting. Do they still exist? Do they still collect this sort of benchmarking? I don't know. If I can find the old report I'll send it to you, Darren.

Tom
Tom's picture
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10/11/2009

A few numbers alone won't mean much -- it's really how you allocate certain expenses to classes for tax accounting and pro rata expenses like utilities will depend on what % of the residence is business only.  A lot of variables.  Really what you'd need would be the whole US IRS schedule C and that's asking a lot to share.

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