According to consultant Don Libey, multi-channel merchants (catalogers, e commerce businesses, retailers, direct marketers) should generate at least $375,000 in annual sales per employee (that includes the business owner).
If you’re a small business or home-based business with low overhead and a lean operation, I think even $200,000 per employee is acceptable.
That means if you are a solopreneur earning $75,000 a year, you haven’t reached the level of revenues where you can justify hiring an employee.
A small business or home-based business with sales of $300,000 a year, by contrast, can afford to hire a part time worker (say 20 hours a week).
I’m all for delegating and outsourcing, which can increase your own productivity and earning potential.
But based on Libey’s ratio, don’t over hire like a local company I read about with half a million in gross annual sales and 17 employees.
If the worker to sales ratio is too high, all your profits will go to others in the form of paychecks and not enough to you, the business owner.
You’ll essentially be working, operating a business, and taking risk just to give your employees a job.
Source: Libey Economic Outlook, 7/08, p. 4.
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