Every growing agency faces the same question: Can we afford to hire?
It sounds simple. Look at the bank account, check the pipeline, make a decision. But anyone who's run an agency knows it's more complicated than that.
The problem isn't the math — it's the data. When your books close 45 days after month-end, you're making hiring decisions with stale information. That $50K cash cushion you're counting on? It might not be real anymore.
Here's a framework for making hiring decisions with more confidence:
Step 1: Know your fully-loaded cost. Salary is just the beginning. Add benefits, payroll taxes, equipment, software, and overhead allocation. A $70K salary easily becomes $90K+ in fully-loaded cost.
Step 2: Calculate your breakeven utilization. How many billable hours does this hire need to generate to cover their cost? If your blended rate is $150/hour and fully-loaded cost is $90K, you need 600 billable hours annually — or about 50% utilization.
Step 3: Assess your capacity. Do you have the work? Look at your pipeline, current utilization rates, and signed contracts. If you're already turning down work, the math gets easier.
Step 4: Model the cash flow impact. New hires cost money before they generate revenue. Model the first 3-6 months assuming ramp-up time. Do you have the runway to absorb the investment period?
Step 5: Build in a buffer. Things rarely go exactly as planned. Add 20-30% buffer to your breakeven calculation for unexpected gaps, training time, and learning curves.
The most common mistake? Making hiring decisions based on revenue alone. Revenue is vanity — you need to look at margin, cash flow, and utilization.
At Laya, our decision tools include a hiring affordability calculator that does this analysis for you. Input the role details, and we'll show you the breakeven point, cash flow impact, and recommended decision based on your actual numbers.
Don't guess. Model it out.