Last month, we used a spreadsheet to calculate how much a lead carpenter should produce in a month. Change some variables, and you can also use the spreadsheet as a quick way to determine how much additional labor you need to hire to handle growing sales. In the following examples, we'll assume a revenue growth goal of $500,000 (to a total of $2 million) and the same "givens" as last month: overhead of $440,000 and an employee pool of three leads (at $35/hour), two carpenters (at $25/hour), and one helper (at $15/hour).

All small jobs. If most of the new work consists of small jobs, a single lead carpenter could probably handle each project on his own. But the spreadsheet shows that, all things being equal, his productivity limit is about $350,000.

Mixed-skill jobs. If, as is more likely, the new work varies in size and complexity, you will need to consider hiring a lead plus a lesser-skilled carpenter. The spreadsheet shows that these two additional employees can handle about $433,000 worth of new work.

Changing overhead. Adding two people brings the crew total to eight, which raises the question of whether the company can function without also adding a production manager. Such a hire may increase overhead by, say, $100,000, but with the increased revenue, overhead percentage drops to 27% ($540,000 ÷ $2 million). If this nine-person team works as efficiently as the eight-person team, the company could pick up about $20,000 in additional net profit.

With this information, we will adjust the spreadsheet. --Tim Faller, Field Training Services,

  All Small Jobs Mixed-Skill Jobs Changing Overhead
A Avg. # of people on crew/hour 1 1.5 1.5
B Avg. cost per person $35.00 $28.75 $28.75
C Avg. crew cost per hour [A x B] $35.00 $43.13 $43.13
D # of hours per month * 166 166 166
E Labor cost per month [C x D] $5,810 $7,159 $7,159
F Labor as a % of production costs 33 33 33
G Total production costs [(E÷F) x 100] $17,606 $21,693 $21,693
H Reciprocal of gross profit ** 0.6 0.6 0.63
J Produced volume per month [G x H] $29,343 $36,155 $34,434
K Produced volume per year [J x 12] $352,121 $433,864 $413,203

* Based on 1,992 working hours per year

** 40% in first two columns; 37% in last column