Capital & Operations
The revenue a new hire must produce.
Hiring is the second-biggest capital decision an owner makes. Most owners do it by feel.
The formula
Required revenue = loaded annual cost ÷ gross margin %.
Loaded cost is the all-in number, not the wage. Gross margin is what’s left after direct job costs. Divide one by the other and you get the floor: the revenue this person must attach to their hours just to break even.
Loaded annual cost
A climbing crew member, fully loaded.
- 01
Base wage: $50,000
The number on the offer letter. Owners often stop here. They shouldn’t.
- 02
Payroll taxes (7.65%) + workers comp: $13,825
$3,825 payroll taxes. $10,000 workers comp at the 20% rate that’s standard in tree care.
- 03
Health, PTO, training, gear: $8,600
$4,800 health. $2,300 PTO + holidays + sick. $1,500 training, gear, certifications.
- 04
Total loaded: $72,425
At 42% GP, required revenue = $72,425 ÷ 0.42 = $172,440/year of work this person must touch.
Breakeven isn’t the target
Aim for 2.5x to 3x loaded cost.
$172,440 is breakeven. To contribute to overhead and profit, target $180k to $217k in attributable revenue per year.
The trap: hiring before the work exists. Owner is slammed, hires someone, then spends 60 days training instead of selling. Pipeline dries up. By month 3 the business is worse off than before the hire.
Right sequence: quote backlog is 3+ weeks consistently, you’re turning away $20k+/month, you have 90 days of payroll for the new hire in reserve. Then hire.
The bottom line
Hire when the work already exists.
The math says no until the pipeline says yes. Trust the math.