M3
Agency Payroll Benchmarks: What Team Cost Should Be
Be crystal clear if you are overstaffed, underpriced, and how to grow without losing profitModule 3 of 10 · Team Pay System
Your team cost structure is the biggest variable cost on your P&L. Get it wrong and margins compress even when revenue is growing.
Goal
Be crystal clear if you are overstaffed, underpriced, and how to grow without losing profit.
Benchmarks: People Cost Target (W2 + Contractors) as % of Revenue
| Revenue Range | Ex. Owner Pay | Inc. Owner Pay | Your Number |
|---|---|---|---|
| $300K–$600K | 30%–40% | 45%–60% | |
| $600K–$1.2M | 25%–35% | 37%–52% | |
| $1.2M–$3M | 22%–32% | 30%–45% |
Decision Rules
- payroll is > 40%: freeze hiring, reevaluate compensation, pricing, and utilization
- payroll is < 25%: risk of burnout and bottlenecks, consider hiring
Tradeoffs
Lean teams increase margins but raise founder workload and risk team turnover.
Bonus
Agency Financial OS Calculator
Google Sheets: apply the system to your own agency in minutesA companion Google Sheet runs the math from Modules 1 to 6 automatically. Enter your numbers, get your targets.
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Next Step
Install this with someone who does it every dayMonthly bookkeeping, Fathom-based financial reporting, and fractional CFO advisory for marketing and creative agencies doing $300K to $5M. Logan works every account.