Below are a couple of key foundational concepts that I think most agency or service business owners should consider before they hire, along with a few major issues I see most of them fall prey to.

1. Track & optimize revenue per employee (RPE)

The purpose of staff is to help a business produce revenue. Whether that's at the front end of the business (sales and marketing) or the back end of the business (fulfillment and operations), logically every hire should add to your bottom line.

But the vast majority of the 7/8-figure agencies I work with never track RPE explicitly—and it's one of the most important metrics in any company.

Some guidelines:

1. If you don't know your RPE at present, calculate it now. Take your annualized revenue and your employee count and divide the two. For instance, $1M annual revenue / 5 employees = $200K RPE.
2. Today there are a number of ways to hire. The average agency usually has contractors, in-house staff, freelancers, etc. To make sure your math is relevant, group them into categories before running the numbers. I.e if you have 15 contractors in addition to your in house employees, calculate "Revenue per Contractor" and set that aside.
3. Have a rough understanding of the RPE you're looking for before you hire for a position. If you're hiring an account manager, for instance, they probably cost $X. How much do you want them to 'generate' for you? Call that $Y and track it religiously.

2. Clearly define daily accountability

"You can't improve what you don't measure.”—Peter Drucker

You would not believe how many people in the average agency I work with spend 3/4 of their day doing absolutely nothing. And I mean nothing.

These are people paid $5K per month, $10K per month—once I even saw this with an "outside salesperson" with a salary of over $15K!

Humans are animals. Like all other animals, we aim to economize energy usage wherever possible. We may no longer be prowling the African Savannah, but don't think for a second that we don't employ similar strategies in the modern day jungle (the office).

If you don't define daily, habitual practices, and then hold your staff accountable to those practices... I hate to break it to you, but team productivity will almost always disappear.

It's not because they're bad people. They're just people—and that's what people do!

So how to fix?

1. Ensure every job position you hire for has a set of daily duties. You don't have to make this the whole day (I recommend estimating how long it takes to complete those duties & then leaving 2-3 hours available for overages and other projects).
2. Implement simple tracking for each of those duties. It can be a one-step Typeform, or some sort of spreadsheet. But make sure that your team knows evidence of their work is going somewhere—it's key to maximizing accountability. For instance, if you're hiring a full-time writer, get them to fill out a one question form at the end of every workday that asks them how many words they wrote today.
3. In your/your manager's 1:1s, review their output with the team member and compare it to previous periods. You don't even have to provide constructive criticism if you don't want to. The simple act of monitoring is usually enough.

3. Before you hire, make sure you explore every alternative

In 2024, hiring should be considered a last step rather than the first one.

Most entrepreneurs' hiring process is roughly:

1. Get busy.
2. Have some need that you don't have the time to fulfill.
3. Rather than think critically about how to solve said need, resolve to hire someone to "deal with it for you".
4. Bloat your company unnecessarily, and spend additional time putting out fires (while now being responsible for an additional salary!)

But most of this can be avoided.

Next time a need arises, place an artificial constraint on yourself: pretend you can't hire a human being to solve it. We're all extinct now. Sorry!

Then, spend an hour working through alternative ways to achieve the same result. What you'll often find is you can "chunk down" or operationalize various components of that need, and then either distribute them amongst your current staff, or build automated systems that do the majority of that work.

Case in point: one of my clients is an SEO agency. They write articles for client blogs. At the time of this writing, they have 3 full-time writers. A couple of months ago, their chief editor was momentarily overwhelmed, and told the business owner something along the lines of "I really need someone to rough draft these pieces for us. It would really improve our productivity and help us get through these slumps".

So, the business owner decided to hire. He spent five hours of his time, interviewed a couple of candidates, and settled on a novice part-time writer for ~$2,500/month. His time is worth perhaps $300/hour—so let's call this a total expense of $4,000 for the first month.

Had the business owner thought through this problem critically, I doubt he would have made the same mistake. But he felt a pressing, momentary need, and his reflexive response was "I'll get someone else to fix it" rather than "I should block out an hour of my calendar to determine the best path forward".

Here are some other things he could have done:

• Looked for a productized agency to deliver rough drafts for ~$15 per. They could have then produced 266 articles for the same first-month expense that their hire took. Except with a much shorter turnaround time, no training, and no ongoing liability. For reference, this team is only producing ~60 articles per month, so rough drafting all of that content would cost less than $1,000/mo!
• Restructured the current team to solve the same need (rough drafts) without hiring. He could have experimented with using one of his current writers to create rough drafts, for instance, and then looked at the impact on the rest of the pipeline—I did this at 1SecondCopy and we ended up ~20% more productive for $0 more spend! ($0/mo)
• Used an outline platform like SurferSEO or Ahrefs to automatically create outlines given a few keywords. ($99/mo)
• Experimented with ChatGPT or related technologies to do much of the rough drafting process for him. ($30/mo)

He ended up firing her. Which took more time on the back end, as well as some company/team morale during the process. This could have been avoided if he treated hiring as a last resort, not a first resort!

In closing

I'll leave you with a lovely graph posted by @jasonleowsg on Twitter.

If it's not clear: this graph shows how the average revenue per employee has skyrocketed over the last few decades. And RPE is probably going to continue increasing with the advent of flexible artificial intelligence. To remain competitive, then, you need to know how to hire!

Hopefully these tips help you like they helped me.