Entering Staffing Assumptions
Q: How are staffing assumptions entered into the model?
A: Hiring assumptions are very simple to enter and are entered in three different ways (Direct Staff, Indirect Staff, and Employee-Related Expenses such as taxes, insurance, etc.) to greatly simplify staffing assumptions, while at the same time calculating a very robust output on overall staffing and staffing-related expenses:
1) Direct Staff and Direct Labor - This is staffing that is directly attributed to each offering (direct labor, sales, and account management/account support). These assumptions are entered in the assumptions input for each Offering as various products or services will have distinct sales staffing, account management or support staffing, and direct labor staffing requirements. The rationale for this is so that your level of sales then automatically builds up your staffing requirements for you. For example, this is how direct labor expenses are entered at the offering level - with only two entries - the hours required per unit of offering and the base hourly rate - the model will automatically calculate all direct labor staffing required each month (we've opened up the Tips in the screen shot below to show you the explanation):
2) Overhead Staff - This staffing that is general in nature and is added by category of employee (General Sales and Marketing, R&D, and Overhead) and by level/base compensation of employee (CXO, Vice President, Director, Manager, Assistant, etc.). By estimating the number of total employees at various levels, this is a quick and simple way of modeling overhead staff and creating a plan with consistent compensation by level. For example, this is a Vice President level staffing plan where only one VP of Sales is required. Note how an auto-fill feature very quickly fills in your staffing assumption for you for all 60 months of your five-year plan:
3) Other Employee-Related Expenses - This is one area of expenses that are often left out of business plans and financial models and are often a negative surprise for entrepreneurs. There are many employee-related expenses that scale up with overall staffing that can often run 25% to 50% of base salaries. Our model allows you to input assumptions by category of employee that are then automatically applied to all employees to give you a more precise cost estimate for overall staffing. For entrepreneurs and business planners that aren't sure about the typical expense rates, we offer an easy "one-click" insertion of all 52 values:
After those simple entries, our apps calculations kick in to produce a very thorough report on overall staffing levels and expenses for each month, quarter, and year of your plan to help you properly forecast your cash requirements. The Staffing report, like all reports included in our app, also have nicely-formatted annual summaries to make it easy to quickly absorb the impact of your assumptions as shown below: