Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

PPR = Personnel Productivity Ratio

1,112 views

Published on

In simple terms...
PPR = The relationship between TOTAL Payroll Cost vs. Gross Profit


Your largest Cost after COGS (Cost of Goods Sold)...Is always Payroll Cost

Published in: Business
  • Be the first to comment

  • Be the first to like this

PPR = Personnel Productivity Ratio

  1. 1. The Evans Group on PPR PPR = Personnel Productivity Ratio Chip Evans, PH.D., Ron Voelker White Board Solutions vs. White Paper Problems
  2. 2. The Evans Group LLC on PPR www.theevansgroupllc.com In simple terms... PPR = The relationship between TOTAL Payroll Cost vs. Gross Profit Your largest Cost after COGS (Cost of Goods Sold)...Is always Payroll Cost Payroll is a factor of many decisions:  Compensation Salaries & Wages  Commission & Bonus Programs  Benefits Offering  How you have Built your Structure  How you do or don’t Train  Your Turnover Situation  Pure Headcount  How you Manage your Business A Key Formula for Success! BDP=Best Demonstrated Practice PPR = Maximum of 55%
  3. 3. The Evans Group LLC on PPR www.theevansgroupllc.com White Board Example A: Let’s Say your: Wages & Salaries were: $310,850 (Incl. Temp Help, Bonuses & Commissions) Payroll Taxes were: $29,680 Benefits were: $9,384 (Incl. Medical, Dental, 401K’s) Then your Total Payroll is: $349, 914 Next Divide by the Gross Profit: $1,000,000 PPR = 35% PPR of 35% is below 55%....but IS IT TOO LOW?  A decent GP$, but could you do more GP$?  Could more key personnel in focused job descriptions create more sales?  Are your sellers performing too many non-selling activities?  Are you holding yourself back?  What key positions could you add that could increase your Gross Profit?  Could you simply benefit from additional or outside Sales Reps?  Each industry has a different PPR that is right for what they do.
  4. 4. The Evans Group LLC on PPR www.theevansgroupllc.com White Board Example B Let’s Say your: Wages & Salaries were: $310,850 (Incl. Temp Help, Bonuses & Commissions) Payroll Taxes were: $29,680 Benefits were: $49,384 (Incl. Medical, Dental, 401K’s) Then your Total Payroll is: $389, 914 Next Divide by the Gross Profit: $600,000 PPR = 65% PPR of 65% is above 55%....That is TOO HIGH …. Now What?  Chances are your company is losing money?!  Do you have Dead Wood on the Payroll?  Are your Commission and Bonus programs working effectively?  Do you have an A-Team or a C-Team?  Can you afford your benefits program as-is?  Should your Gross Profit be higher?  How long can your Balance Sheet maintain this level?  Do you need a new plan? Remember: In these examples…..We are saying that 35% PPR is most likely too low of an overall payroll. That is usually indicative of a payroll that is too small and the organization usually does not have enough time to sell. In other words we are saying to be cautious about payrolls that are too small as they create logjams or unproductive selling environments. As well as PPR’s over 55% are usually indicative of need for restructure. We are not saying that 55% is the most profitable or optimal PPR%…. we are saying that it represents the high end of the sweet spot in one specific industry. It will vary by each industry.

×