5 Employees for Every $1m in Growth

Mid-market agencies have to grow - almost all know that. Without growth they become less and less relevant to carriers and their own talent. Without growth they risk a downward spiral leading to their acquisition. With growth they stay independent and perpetuate the business into the future.

 

Most agency leaders have a growth number or percentage they are aiming for - 8% organic growth, $5m new business by 2020, etc.

 

What they know is that growth can only happen with strong talent. What they may forget is the level of hiring required to hit the growth they want to achieve.

 

Agency revenue per employee ranges between $150k to $225k with a few exceeding those numbers. For every $1m in revenue growth, plan on the FTE count going up by 5. What is your agency's revenue per employee and how many FTE's will it take to get the growth you want?

 

For a $20m agency that wants to grow 10% organically ($2m additional revenue) they should anticipate at least 10 new hires which does not include natural attrition! And, what about the following year?

 

Aside from the basic logistics of hiring 10 to 20 new people key questions include:

- How will we pay for them and how will this impact the P&L over time?

- How can we speed the break even point and maximize the ROI?

- Who are we looking for and where will we look?

- How do we attract them and keep them engaged?

- How will they be organized and mentored?

- When and how will they become profitable contributors?

- What job path can we offer that will retain them long term?

 

The number of new employees required can be lessened by gaining operational efficiencies, pursuing larger accounts, and other methods, but the basic economics can not be escaped.

 

To make matters worse the industry continues the long honored tradition of having an extreme talent shortage.

 

Recruiting the best millennials, and now those from gen Z (born since 1998), has to be part of the solution. It can be done and it can be done well.


The take away?

 

Know your growth goal, support it with a sound strategy and plan, and put the people in place to make it happen.

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