Every Hire You Make Is a Permanent Liability the Buyer Will Price
Growth funded by headcount arrives at a lower incremental margin than your company average. The faster you grow that way, the further your margin falls.
Fabien DarollesOperations ExpertWhat a growth year actually costs
A hundred staff, €15M revenue, €95k fully loaded per head. Payroll is €9.5M, or 63% of revenue, and the business runs at a 20% EBITDA margin.
Now grow 30% by hiring thirty people. Payroll rises €2.85M. Recruitment at roughly 15% of salary adds €360k. Ramp drag — four months at around 60% unproductive — costs about €19k per hire, so €570k. Add one manager per eight new people at €140k and that is another €560k. Total: €4.34M of new cost against €4.5M of new revenue.
The incremental margin on that growth is roughly 3.5%, against a company average of 20%. You grew 30% and made the business worse.
The number most models get wrong
Fully loaded cost is 1.25 to 1.4 times salary once employer contributions, workspace, tooling and the management overhead are counted. Owners model the salary and forget the rest, which is why the plan works on the spreadsheet and not in the accounts.
Replication is not scale
"Margin will improve at scale" is only true if something in the model actually scales — software, process, reusable intellectual property. A people business does not scale, it replicates, and replication carries its cost with it every time.
This is the one growth strategy a buyer discounts rather than rewards. Headcount reads as permanent obligations, key-person risk and a management layer to fund.
Chart revenue per full-time employee by quarter for three years. If revenue rose while that line stayed flat, you did not grow. You got bigger.
Has run organisations above €100 million in revenue with teams exceeding 10,000 people.
Meet the team →Questions we get asked
What is the true fully loaded cost of an employee?
Typically 1.25 to 1.4 times salary once employer contributions, workspace, tooling and management overhead are included. Modelling salary alone is why the hiring plan works on a spreadsheet and fails in the accounts.
Why does headcount-funded growth reduce margin?
Because the incremental margin on it is far below your company average. In our worked example, 30% growth via thirty hires produced roughly a 3.5% incremental margin against a 20% company average.
Does margin automatically improve at scale?
Only if something in the model actually scales — software, process or reusable IP. A people business replicates rather than scales, and replication carries its cost every time.
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