I had a 1-1 call with an 8-Figure Franchisee last week.
Let’s call him Tim (not his real name).
Tim will make $400k this year doing everything himself.
It’s the most money he’s ever made but he’s burning on both ends.
His phone is blowing up all day & night.
He barely has time to spend with his wife & kids.
Tim is the perfect spot for massive growth.
We mapped out 4 key hires that’ll "cost" $240k annually:
- One recruiter
- Two salespeople
- General manager
Those hires should increase his profit to $800k per year AFTER all new payroll costs
More importantly, they’ll give him freedom.
Less customer BS to deal with.
Double the money and half the headaches.
But here’s the rub....
Wouldn’t Tim’s income drop immediately from $400k to $160k after $240k of new payroll?
What if they don’t work and all that money is wasted?
All very real possibilities, which is why most owners never escape the day-to-day.
The solution:
First, think in monthly terms vs. annual.
His true cost is $20k/month if he hired everyone at the same time.
In reality, he’ll ramp it up over the next 6 months.
So maybe it’s $5k → $10k → $15k → $20k in incremental payroll
Every new hire should be adding new revenue.
If not, fire them and find better people.
Payroll should always be an investment that you get a return on.
Not an expense.
Even the recruiter whose only job is to hire other people produces a return.
If they do a great job hiring, the business saves money on turnover and can be more aggressive with sales, knowing they can service it.
Here’s the math that made Tim comfortable:
His average customer is worth $14,000 with a 40% margin after direct costs
So $5.6k in “contribution profit” ($14k x 40%) for ever new customer
If the first salesperson lands 5 new customers per month, that’s $28k of incremental contribution profit
Minus his “investment” of $6,000 payroll for this employee, Tim nets out $22,000 more each month
He can use that additional profit to fund the next key hire: a recruiter who costs $3,000 per month (100% remote)
Now he’s ahead $19,000 in profit but still doesn’t have the freedom so he finally hires a General manager for $7,000 per month
It takes some time to ramp up, but eventually this person takes over 80% of his operational responsibilities.
He’s still ahead $12k vs. before the hiring spree
Now there is more bandwidth between the new recruiter & GM so they hire another sales rep.
The 2nd salesperson should also produce another $22,000 in incremental profit
In total, he’s up $34,000 per month ($408k/year)
Mission accomplished.
Cheers!
Brian
P.S. If you want direct help growing your franchise? Reply here telling me where you’re stuck. Maybe I can help
