Break even… or leave.
It will be a short post today… for 2 reasons.
- I’m flying solo in the office this week… Luke’s enjoying some time back in the UK & honeymooning in Crete, whilst Jen is over in Perth… showing off her bubba belly to friends & family (am I allowed to say that?)
- I wrote a blog last night that I thought was pretty good! It made sense and it was all ready to go with it this morning… then… when I re-read it I realised that it was almost the same as the one Luke posted last week… he’s always telling me I should take more notice of him… point taken.
Soooo… I thought I would look at a topic I have touched on in the past. (Not the same way that I almost touched on Luke’s blog, but we have covered it in some way nonetheless).
I met a candidate last week… let’s call him Dudley ‘Booger’ Dawson… Booger had been an IT Recruitment Consultant working a hybrid desk, in the contingent – mainly PSA – space for the past 4.5 years. All at the same employer. On paper he’s looking pretty damn good.
‘So, tell me Booger…’ I asked. ‘What are your billings like?’
Booger smiled smugly and said, ‘I billed $47k last quarter and have been averaging about $15k months.’
‘OK…’ I replied. ‘And what salary are you looking for in your next role?’
Cue Booger. I knew what he was about to say before he said it… I had heard it a million times… Don’t get me wrong… I hoped he’d be different… hoped.
‘I’m currently on a package of $80k… One of the reasons I’m leaving is I haven’t had a pay increase in almost 2 years, so I’d want at least a $5k increase for my next role… oh… and under the commission structure at my current employer I’m not currently earning any commission…’
‘No shit Sherlock…’ I whispered… clearly not quietly enough.
‘What?’ Booger asked…
Let’s leave the interview there… I certainly wrapped it up pretty quickly.
Listen Consultants… I need you to understand something. Your bosses are in business to make a profit. They will (in most cases) gladly share that profit with you in the form of commissions, but you have to break even first!
I’ll make it easy for you & let’s use Booger as an example…
Well Booger is on a package of $80k per annum. That includes his base salary, tax & on costs (in Australia this includes superannuation).
Great… you think. That means once Booger has billed $6,666.66 in a month ($80k / 12 months) he has broken even… wrong.
What about the cost of you being in the business?
- Business taxes
- Support Staff
- Etc. Etc. Etc.
Usually this adds up to around the same as an individual’s salary package.
You with me? I see you nodding your heads… you’re now 1 step ahead and saying… ‘That means once Booger has billed $13,333.33 per month ($80k x 2 / 12 months) he has broken even… wrong.
Businesses need funds to strategically grow. Launch new offerings, buy new technology, invest in consulting… and the owner/s need to be paid as well.
This equates to… you guessed it… about the same as an individual’s salary.
So… Booger needs to bill $20k per month ($80k x 3 / 12 months) to break even. Get it?
Our friend Booger was billing $15k per month, meaning he was costing his current employer $60k a year in losses. If you owned a business would you carry an employee like that?
It’s simple guys… and girls. Work out what your monthly break even point is… and don’t forget the simple formula…
Your Annual Salary Package x 3… then divided by 12 (months).
If you are billing below that… do something about it.