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Let’s be real: The past few years have been hell for business owners.
Easy capital evaporated. “Growth-at-all-costs” lost its luster. Disciplined profits became doctrine. All of which leaves mid-market businesses circling that dreaded, existential question…
“Can we afford to hire?”
That’s a tough one, especially when you’re navigating a narrow cash runway. Even with loosening interest rates and optimistic growth outlooks, hiring too soon could cut an otherwise healthy runway shorter than you think.
All said, there are clear, data-backed methods to answer the hiring question. And that’s exactly what we’re about to discuss.
When your team’s bandwidth is stretched thin, the pressure to hire ASAP is intense. But as a leader, your job is to ask whether the runway can afford it.
The following four steps offer a solid starting point.
We’ve spoken extensively on runway and burn rate before, but to recap, the formula is straightforward:
Each of these numbers will eventually come into play when hiring, so you’ll need accurate figures here.
That might mean ‘smoothing out’ the runway formula to account for seasonal fluctuations, one-off expenses, and deferred liabilities to reflect your true financial health.
Runway tells you how long you have left to achieve liftoff. Burn multiple tells you how efficiently you’re burning fuel.
So for growth-hungry verticals like SaaS, which need to “stretch” every dollar spent for a maximum return, this metric is worth paying extra attention to.
To keep it easy, let’s calculate burn rate based on Monthly Recurring Revenue (MRR):
And these figures, in turn, can be calculated as:
In plain English, a 2x multiple means that you spend $2 to earn $1 in revenue. Anything higher than that implies heavy reliance on outside capital.
How does this relate to hiring?
New salaries instantly raise your burn multiple, creating fresh costs that will take time to generate returns. So your burn multiple should be healthy enough to soak up those onboarding costs… without stalling out the runway.
How deeply does a new hire cut into runway? Unfortunately, finding the answer isn’t as simple as subtracting salary from your reserves.
As a rule of thumb, the US Small Business Administration recommends calculating 1.25 to 1.4 times a potential hire’s base salary to estimate true employment expense.
That delta covers the not-so-obvious costs to keep someone on your payroll, including:
This overhead compounds. What might have been an $80k salary on paper could easily push you past $100k at the end of the day.
While tax credits and savings programs can help soften the blow, I recommend leaving some headroom in the final calculations. It might save you a surprise later.
As I just noted, the biggest hiring risk is usually these hidden “landmine” expenses.
To truly hone in on the full cost of getting a new hire up to speed, you might need to probe deeper with questions like:
Remember: Hiring is a people-first process.
As easy as it is to get lost in the numbers, keep the human element top of mind. Because that is the real key to making a hire you won’t soon regret.
I’ve only covered a snippet of everything that goes into smart hiring. Each business has its own unique equations, from growth stage and vertical to the realities of cash flow.
What is universally true, though, is this: Hiring full-timers is expensive as hell.
But instead of putting off hiring entirely, what if you could achieve the same high performance at a fraction of the cost and onboarding time?
You can. With a fractional model.
A fractional team lets you tap into fully-trained and equipped expertise without the full-time overhead. No getting in the weeds with payroll taxes, PTO, or insurance.
Quadrant Advisory’s fractional CFOs specialize in crunching the very numbers discussed in this article, empowering you to forecast cash runway and hire with confidence. And all our fractional finance teams plug in exactly when and where you need them, for a fixed cost and defined engagement period.
With 2026 peeking over the horizon, that might just be the competitive edge you need.
Curious how it could work for your business? Book a free consultation with myself or Ramsey.
Let’s figure out the best way to grow your team without blowing your runway.
Sources:
US Small Business Administration. How Much Does an Employee Cost You? https://www.sba.gov/blog/how-much-does-employee-cost-you
Wall Street Prep. Burn Multiple. https://www.wallstreetprep.com/knowledge/burn-multiple/
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