Hiring a new team member is a milestone, but for a time-challenged Small Business Owner, it can also be a source of financial anxiety.
Whether you are hiring a Front-Line Producer (who sells or bills hours) or an Operational Support role (who frees up your time to sell), that new salary doesn’t just need to be paid—it needs to be fueled by growth.
To move from “I think we can afford this” to “I know exactly what we need to earn,” use this structured method to calculate your Required Revenue Increase. Blue Belt
Step 1: Calculate the “Total Cost of Employment” (TCE)
The salary is only the starting point. To find the true cost, you must account for “on-costs” and the physical tools required for the role.
| Cost Item | Description | Estimated Annual Amount |
| Base Salary | Gross annual pay. | $ |
| Superannuation | Current statutory rate (e.g., 11.5%+). | $ |
| Workers Comp/Insurance | Additional premiums for a larger headcount. | $ |
| Software Suite (SS) | licenses, access, etc. | $ |
| Equipment/Hardware | Laptop, monitors, desk, or specialized tools. | $ |
| Total Annual TCE | The sum of all the above. | $ |
Step 2: Factor in Your Gross Margin
You cannot simply increase revenue by the TCE amount. If it costs you $0.40 in materials or direct costs to make $1.00 in sales, you only keep $0.60 to pay for that new staff member.
To find the revenue needed to cover the hire, use this formula:
Example: If your new hire costs $80,000 (TCE) and your Gross Margin is 65%, you need to increase revenue by $123,077 just to break even on that new hire.
Learn about Gross Margin using our Gross Margin Prefab Routine
Step 3: Identify the Revenue Source
How that revenue is generated depends on the “Face” of the business the new hire represents:
1. The Direct Producer (The Rainmaker)
If the hire is a sales rep or a technician, they should directly generate the required revenue.
The Target: Their individual KPIs should be set at a minimum of the “Required Revenue” calculated in Step 2.
2. The Capacity Builder (The Time-Saver)
If the hire is an admin or coordinator, they don’t “sell.” Instead, they perform tasks that allow you or another high-value staff member to focus on revenue-generating activities.
The Calculation: Estimate how many hours per week this hire frees up for you. Multiply those hours by your effective hourly billing rate or sales conversion rate. Does that bridge the gap?
Step 4: Easing the Cost Shock
Although you have mapped out how much your revenue needs to grow to afford your new hire, they won’t hit that figure overnight.
So you need ways to ease into the full cost of the new hire while revenue increase. Here are two.
Set up a Piggy Bank to cover early expense
We use this term to the process of putting some money aside before you hire and then drawing down on those savings after the hire. Check out our articles on “Piggy Banks” to help you set them up.
Ease into Full-time Hires with Part-time Hires
You may be able to ease into a full-time staff member by using part-timers and contractors whose hours match the growth in your revenue. Eventually, you can replace them with your full-time hire.
Another advantage of this approach is that you get to experiment in a manageable way with the hiring process. This is especially useful if you are not experienced hiring and leading or if you are uncertain how fast you can grow your revenue to cover the new hire.
Step 5: Monitoring for Success
Once the hire is made, you must ensure the “Revenue Leap” is actually happening. We recommend setting up a monitoring routine to track:
Monthly Revenue vs. Increased Payroll Costs.
Gross Margin stability (ensure the new hire isn’t “leaking” profit through inefficiency).
Sprint progress on the new hire’s onboarding gameplan.
More on Hiring
You can read more on (especially) early hiring in our lead article “Hiring Staff: When and Who”
This article was provided by Scott Williams AO FAIDC. It describes the way best practice in many management areas has been brought together in the 12Faces GamePlan System. The Goal is to provide an easy to use and repeatable “flywheel” to improve small business owners’ outcomes. Scott is the Founder of NFP small business support services 12Faces and MentorSME and has a Philanthropic Foundation supporting students in education. Scott’s business Petals Network was National Small Business of the Year and 4 times in the Top 100 Fastest Growing Australian Businesses LinkedIn