mile 14

How can we avoid layoffs?

That’s what one of our customers just asked me,

I told him the only answer I knew: avoid vanity metrics like the plague.

In the early days of Tonic, I used to take pride in the burgeoning number of our employees. I’d proudly share updates – “We’re 100, now 200, soon 300 strong…” However, a sobering reality check came when our revenue fell short of projections, leading to the dreaded L-word.

Confronting layoffs is a harsh revelation – a stark reminder of the consequences of suboptimal business management. And my vanity had caused me to be more than suboptimal.

Hey, but live and learn, right?

Recently, I’ve been focusing on a better metric: revenue per employee.

And remember, it should be your current revenue per employee, not future revenue per employee, which can mislead you into over-hiring.

Establish a sensible revenue per employee baseline and maintain the discipline to only hire when your revenue growth justifies it. This approach may feel restrictive but it helps maintain a healthy equilibrium, minimizing the risk of layoffs.

Indeed, rapid growth may occasionally result in overtime, but with extra revenue in hand, you can adequately compensate your team for their additional hours. This strategy is far less disruptive than over-hiring in anticipation of revenue that may not materialize.

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