To see if an offer is scalable, factor in your own labor as a direct cost. Ask, "What would I have to pay someone to do this work?" Including this "founder salary" in your unit economics reveals the real profit margin and whether you can afford to hire help to grow.
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High top-line revenue is a vanity metric if it doesn't translate to profit. By setting a high margin target (e.g., 80%+) and enforcing it through pricing and cost management, you ensure the business is sane and profitable, not just busy.
Chasing a top-line revenue goal like "$1 million" is a vanity metric. A business earning $1M at a 5% margin nets only $50,000 for the owner. The focus should be on maximizing profit percentage, not just the revenue number, to build a sustainable and rewarding enterprise.
Capital allocation isn't just about multi-million dollar acquisitions. Hiring a single employee is also a major investment; a $100k salary represents a discounted million-dollar commitment over time. Applying the same rigor to hiring decisions as you would to CapEx ensures you're investing your human capital wisely.
Many founders run "too lean," maximizing short-term profit at the expense of long-term growth. Strategically investing in a team, even if it lowers margins temporarily, frees the founder to focus on scaling, leading to greater overall profitability and less burnout.
To conserve cash, especially in a downturn, founders can pay key employees 10-30% below market rate in salary. The key is to compensate for this deficit by offering double or triple the industry standard in equity. This strategy attracts top talent aligned with long-term success while keeping the company's cash burn rate low.
Don't hire more reps until your current team hits its productivity target (e.g., generating 3x their OTE). Scaling headcount before proving the unit economics of your sales motion is a recipe for inefficient growth, missed forecasts, and a bloated cost structure.
Entrepreneurs often assume the product generating the most revenue is the most valuable. However, when factoring in the time and energy required for delivery (return on time), that "bestseller" might actually be the least profitable per hour, making it a poor candidate for scaling.
The primary goal of hiring should be to reclaim the founder's time from low-value tasks. This frees up the business's most valuable asset—the founder—to focus on high-leverage activities that truly drive growth, rather than simply adding capacity.
Calculate your effective hourly income, then divide it by four. This number is your 'buyback rate'—the maximum you should pay someone per hour for a task. If you can delegate a task for less than this rate, you achieve a 4x return on your time, making delegation a financially sound decision.
A founder's ability to sell is not proof of a scalable business. The real litmus test for repeatability is when a non-founder sales hire can close a deal from start to finish. This signals that the value proposition and process are teachable, which is the first true sign of a scalable go-to-market motion.
