December 16, 2023

Fwd: The unfortunate math behind consulting companies

Founder of WP Engine, Jason Cohen, shared an article with his mailing list that goes into the specific numbers behind why it’s so hard to scale an hourly billing model by hiring employees:

The unfortunate math behind consulting companies

TL;DR: As I’ve long said, you’d probably have to hire at least six “mini-mees” before your profits start to increase meaningfully, at which point you’ve created a whole different class of problems for yourself.

(Of course, if you price based on outcomes instead of bill for your time, you can increase your profits without hiring at all, but Jason doesn’t mention that in the article.)

BTW - Thanks to everyone who sent this in!