The conversation I have most often with SME founders isn’t about raising money or selling the business. It’s about hiring. Specifically: “can I afford this hire?”
And the answer is almost never the one they came in with.
Most founders calculate affordability by looking at the salary on the job advert and asking “is that less than my surplus cash each month?” That’s the wrong question for three reasons.
Reason one: the salary isn’t the cost
For a UK employee on £45,000, the true employer cost over 12 months is closer to £58,000–£62,000. Here’s where the extra comes from:
- Employer’s National Insurance at 13.8% above the threshold — roughly £4,900 on a £45k salary
- Pension auto-enrolment minimum 3% employer contribution — £1,350
- Equipment and setup — laptop, software licences, desk, onboarding — £1,500–£3,000 one-off in year one
- Training and development — a modest £500–£1,000 budget if you’re doing the job properly
- Holiday cover and knock-on productivity — harder to quantify, but real
A 1.3x multiplier on base salary is a sensible rule of thumb. Some roles (field-based, heavy travel, specialist equipment) run to 1.5x.
Reason two: they don’t deliver from day one
Almost no hire delivers at full productivity from month one. A reasonable pattern for most knowledge roles:
- Month 1: 25% productive — onboarding, learning your processes
- Months 2–3: 50% productive — contributing, still with support
- Months 4–6: 75% productive — largely autonomous
- Months 6+: 100% productive
For a customer-facing role with a long relationship build, add another three to six months on top.
The financial consequence: you’re carrying the full cost from day one but only banking the partial output for months. Your model needs to show this explicitly or you’ll tell yourself a story about affordability that isn’t true.
Reason three: the second-order effects
Every hire triggers cost you didn’t think about:
- Your time — or someone else’s time — managing and mentoring them (10-20% of their manager’s capacity for the first few months)
- More meetings, more process, more tools
- Sometimes a knock-on hire (you hire a senior, they want a junior underneath them)
Not enough to kill the hire. Plenty enough to matter when your margin of error is thin.
The simple model
The version I build for clients has five inputs and two outputs.
Inputs:
- Base salary
- Multiplier for employer costs (default 1.3)
- Ramp profile in months (default: 25% / 50% / 75% / 100%)
- Expected revenue contribution per month once fully ramped
- Your current monthly cash surplus (revenue minus fixed costs minus director drawings)
Outputs:
- Month-by-month cash impact for the next 18 months. Shows exactly where your runway dips during the ramp period.
- Break-even month — when the hire stops costing more than they contribute.
Most of the clients I build this for come into the meeting expecting a “yes, you can afford them” answer. About half leave with a different plan — sometimes phased start, sometimes part-time first, sometimes a contractor trial before making it permanent, sometimes deferred by a quarter so cash builds up.
None of those are “no”. All of them are better than making the hire blind and discovering the shortfall three months in.
The point
You’re not trying to model every edge case. You’re trying to make sure the decision survives five minutes of scrutiny from someone who isn’t you. Your model doesn’t need to be fancy. It just needs to be real.
If you want the template I use for this — pre-structured with the ramp profile and the runway impact view already built — grab it for free. It’s the same model that lives inside every Clarity-tier engagement with C8.