How much should each person
in your business
contribute to the bottom line?
Robin Lee Allen,
managing partner
with Esperance Private Equity,
shares
“Most businesses have profit margins
averaging somewhere around 15 percent.
To be conservative,
let’s make that 10 percent.
If you run the numbers backward,
it means that
every dollar spent on costs
needs to be offset by
10 dollars coming in
simply to stand still.
This includes human capital costs,
which include payroll taxes and such.”
This doesn’t mean that person
has to earn 10 times her costs
in sales.
She could free someone else up
(like yourself, the business builder)
to increase revenue
by that much.
Consider using the 10 times cost figure
as a rough guideline
when hiring.