Bill Canady shares a growth metric: material margin divided by fully loaded employee cost. Below 2.5 means you're not ready to expand. Between 2.5 and 3.5 is healthy. Four or higher is exceptional. Track the direction, not just the number.
The ratio rewards capability, not thrift. First, material margin divided by total fully loaded employee cost. Below 2.5, you've not earned the right to grow. 2.5 to 3.5 is a healthy middle market band. 4 is exceptional. You're a rock star. Calibrate the level to your industry's capital intensity and watch the direction of travel harder than you watch the level. It's more important where you're going Are you going up, down, or flat? The number is a starting position, not the grade. Every business on this scale can move it whether it sits today, wherever it sits today, and the unit of work is the next 2 tenths, not the whole band.
