Q: How are staffing assumptions entered into the model?
A: The model simplifies staffing assumptions while at the same time calculating a very robust output on overall staffing and staffing-related expenses. Hiring assumptions are very simple to enter and are entered in three different ways:
Direct Staff and Direct Labor
Employee-Related Expenses such as taxes, insurance, etc.
Direct Staff and Direct Labor – These assumptions are entered in the assumptions input for each Offering as various products or services will have distinct sales staffing, direct labor staffing requirements, and account management/support staffing. The rationale for this is that your level of sales automatically builds up your staffing requirements for you.
This is staffing that is directly attributed to each offering in three categories:
Sales Staff – enter the number of customers a salesperson can sell each month, the annual base salary for the salesperson, and any applicable commission percentage. Think about the implications of these inputs. For example, if one Sales Staff member at 50k base salary can sell 100 widgets per month at $1,000 each, the per-customer sales cost is $50,000 / 100 = $500. If the salesperson has a 10% commission, add $1,000 * 10% = $100 to this cost to come to $600.
Direct Labor – enter the direct hours involved to deliver the given product or service and the rate per hour. If the offering is recurring, this will be applied on a monthly basis.
Account Management/Account Support – enter the amount of revenue per month from the given offering that each Account Management Staff member can support. Then enter the annual base salary for that staff member.
You can check the applicable Offering tab to confirm that the gross margin for that offering makes sense with your assumptions.
Overhead Staff – This staffing that is general in nature and is added by category of employee:
General Sales and Marketing
Within each category, the staff members are modeled by level/base compensation. For example, the levels might be entitled: CXO, Vice President, Director, Manager, Assistant, etc. For each level, you can enter the name of the level, the base salary, and the number of total employees at that level on a monthly basis throughout the plan. This is a quick and simple way of modeling overhead staff and creating a plan with consistent compensation by level.
Employee-Related Expenses – This is one area of expenses that are often left out of business plans, and one reason financial models and are often a negative surprise for entrepreneurs. There are many employee-related expenses that scale up with overall staffing that can often run 25% to 50% of base salaries. Our model allows you to input assumptions by category of employee that are then automatically applied to all employees to give you a more precise cost estimate for overall staffing. As you can see, the model also includes suggested values for each category.
After these assumptions are entered, our model’s calculations kick in to produce a very thorough report on overall staffing levels and expenses for each month, quarter, and year of your plan to help you properly forecast your cash requirements. The Staffing report, like all reports included in our model, also have nicely-formatted annual summaries to make it easy to quickly absorb the impact of your assumptions as shown below: