Eric Siu explains why service businesses stop growing: you're waiting too long to hire. When your team hits 90-100% utilization, you're already in trouble. Aim for 80% utilization, because overworked people do bad work, lose clients, and force you to rebuild everything.
It's not so much about how much revenue you should dedicate to hiring. It's more so how much capacity is your team at right now? And so if you're a services business, as an example, ideally you set each team utilization rate to about 80% or so. And so let's say they have 40 hours in a week. So 32 hours of that, they're focused to just doing client work. But you have that 8-hour margin of safety where they can focus on other areas. Maybe it's personal growth or experimenting with other things. And if you find that their utilization rate's going up 90%, 100%, and they're overworking, that's when you need to start to think about hiring. Because if your people are constantly overworked, they're not going to be happy. And if they're not happy, they're not going to do good work for your your customers, your customers are gonna churn. If customers keep churning, your people see that as well, they're gonna churn as well. And then what ends up happening is you're gonna have to rebuild the team from scratch. Take this from someone that knows what that feels like.
