What's the optimal team size and cost for my small business?

I’m super-impressed if you’re asking yourself this question. After all, there’s a direct correlation between how big and costly your team is, 👥 how big your profits are 💷 and how happy your customers and employees are 😎

I must fess up though, there isn’t one magic formula to answer this question, because it depends on the type of business and industry as well as the maturity of the business. 🙅 Every business – including yours – is totally different in terms of what you do, how long you’ve been trading, and what your goals for the future are.

However, as a general guide some online commentators 🗣 quote the 30% number. In other words, your staff costs shouldn’t really be more than 30% of your gross revenue.

But, I think it’s more complicated than that.

With that in mind, here are at least six questions you need to be asking yourself when it comes to sussing out if your team is the right size…

1. What does an optimal organisation look like for YOUR business? 👌

For me, a perfectly designed organisational structure – has the right number of people, with the right skills, in the right positions, doing the right work, reporting to the right people – on a daily basis.

This is the nirvana I think all businesses need to be striving to achieve. So, against this seventh heaven ambition 👼 how does your business currently fare

Symptoms of a poorly sized organisation include things like high employee turnover rates, and extortionate staff costs.

An easy way to look at this is to calculate sales revenue per employee and profit per employee and track this every quarter. If the cost of your employees are going up and yet your sales revenue and or profit remains flat, your team may be a bit inflated. 

2. Am I consistently meeting my customer’s needs?

Your ability to serve your customers is a pretty good indicator of whether you’ve got the right size team or not.

Don’t just think about meeting deadlines as the benchmark. Think about quality too. 

For example, if you’re skimping by paying someone an hour to do a job that takes half a day – then the output may not satisfy your client’s requirements.

If you track NPS scores or customer satifaction, this should give you a good indictor of how things are going. 


3. How’s my business doing? 📊

Hiring decisions need to made in line with the performance of your business, both today and in the future.

This may sound like teaching granny to suck eggs 🥚 but it’s mind-blowing how many times I see small business owners shell-out for staff they simply don’t need, or can’t afford!

A rough and ready way of doing this, is to work out how much money is coming in, and how much is going out – both now and in the future. Then, try and forecast the impact your new hire will have...

📈How many extra sales they help you to make?

📈How many more orders will they help you to fulfil?

📈How many more customers will you now be able to take on?

📈How much faster will we be?


But also…

📉How much are they going to cost you going forward? Not just salary, but ALL their expenses. From a faulty laptop, to maternity leave. If you don't currently have any employees in your team but you're thinking about going down this route, check out my hiring book which covers the costs you're likely to incur from this. 

4. How are my employees doing? 

Another totally obvious indication of whether you have the right size team, is how your existing employees are performing 📈 and feeling 😱

As a responsible employer, you have a duty of care to your staff. If they’re stretched too thin and they suffer burnout, then you lose out too.

On the other hand, if they’re not being challenged enough, they’re likely to walk. For example, have you got three people doing the job, when you only need two?

Wrongly-sized teams can cause conflict in the workplace too, mainly due to people working on the same thing like the 'too many cooks' story (By the way, I’ve written blog on how to get your team to work better together. Read it here.)

5. Am I on auto-backfill? 📬

Your employee leaves to go travelling 🌏 and what do YOU do? You post a job ad, before they’ve even told you where they’re going 🙄

You’re on auto-backfill. I see it a lot.

My advice to small business owners, is to pause and consider if losing an employee, could actually be an opportunity in disguise 🙏

You could take a minute to consider the skills gaps within the team and which role or skill set could add more value to your team. 

6. What’s my pay strategy? 💷

Have you even got one? Are you paying £30 per hour, when you could be paying £20 per hour?

The reason I ask, is that too many small business owners I work with, don’t seem to be paying their staff in a consistent way.

One employee could be getting £40 an hour, and another employee could be getting £15 an hour – for doing EXACTLY the same job. But when I ask, leaders are often unable to articulate why 🤔

Pay decisions should be based on sound logic ✅ This STOPS you from being out of pocket, reduces friction amongst your team members, and determines the size of your team 📏

To suss out if your pay rates are spot on, why not…

🕵 Check job boards for what your competitors are offering?

👓 Read online salary surveys from companies like Reed, that show you how much people are typically being paid for various roles?

🗣 Ask your accountant what you can afford to pay your staff?

🌍 Consider your location? For example, pay in London may need to be higher than in Liverpool.

⚖ Familiarise yourself with what you’re legally allowed to pay?

GET EVEN MORE HELP TO RIGHT SIZE 👇

If you’re still struggling to know what size your team should be, why not grab a 45-minute FREE consultation to see how I might be able to make some tangible, positive changes to your business?

I’ve also written an entire blog outlining how a virtual HR director like me, could help to transform things for a small business owner like you. It’s called: HOW CAN AN HR CONSULTANT HELP ME?

TO SUM THINGS UP THEN

❓ It makes perfect business sense to re-assess whether your team is the right size. In all honesty, not enough small business owners ask themselves this super-important question.

📈 Online research points to 30% as the number your payroll costs should fall below, in order for you to make yourself a tidy profit.

🤔 There are several questions you should be asking yourself, to suss out how big your team should be. From whether you’re meeting your customer’s needs, to what you can afford.

📲 There isn’t a simple answer. But, if you need more help, I’ve tonnes of experience in this area, and I’d love to chat.

Feel free to book a free consultation with me if you have questions, and I can explain a bit more. 

Mandy Hamerla

Mandy Hamerla​


Virtual HR Director & Leadership Mentor. I create game-changing HR & Hiring Strategies for ambitious small businesses in the UK and support you to lead your team with confidence. Check out my shop to download HR Templates & Contracts designed to make life easier. 

​www.modernhr.co.uk