Revenue growth is essential

The ratio of revenue-to-salary is greater for more junior employees because salaries tend to rise more rapidly than billing rates. As a result, as employees receive raises, margins decrease unless you can get clients to pay more for the same service. This is difficult to achieve and unreasonable to expect.

The more realistic option is to move the work to new, more junior, employees as your current employees move up. So, to maintain healthy profits you must regularly hire new, junior personnel to keep your ratios in line. To do this, you need growth.

– Darryl Salerno, Owner,  Second Quadrant Solutions and Strategic Management Consultant