Using Financing & Accounting Data to Get Resourcing Right: A Guide for Small Businesses
Small businesses face a delicate balancing act: matching resources to demand while navigating growth, capacity, and performance. Effective resource management requires managing the flow of resources into the company, the flow of resources out of a company, and the matching of resources within a firm to the work required on behalf of its clients.
Too often we at Ballast see small businesses ignore this vital element of management. It can stunt growth and, worse, even cause failure.
Here’s how small businesses can think through this challenge and avoid common pitfalls while overcoming barriers to growth.
Balancing revenue and people for sustainable growth
For many small businesses, revenue and people are inextricably linked. Growing revenue often requires scaling your team. But scaling your team comes with its own set of challenges, like ensuring new hires become effective contributors without overburdening your finances.
In our work with clients, we’ve found that small businesses often encounter bottlenecks on one side of this equation or the other:
Revenue bottlenecks: Insufficient revenue growth or demand to justify additional hires
People bottlenecks: Lack of team capacity to meet growing demand or execute on booked work
Understanding which side of the equation is causing the issue—and having a framework to address it—is key to growth.
Why balancing resources and demand is so hard for small businesses
Unlike large organizations with dedicated departments, small businesses often lack the infrastructure to manage this balance effectively. Labor in small businesses is a "step function," meaning hires don’t scale neatly with demand. You’re often hiring too early or too late:
Too early means financials take a hit and employees may face boredom or underutilization.
Too late means your existing team risks burnout, or your ability to grow may stall.
A lot of it boils down to this: without clear metrics and planning, many businesses find themselves reacting to problems instead of proactively solving them.
The benefits of effective resource management
Because Ballast acts as the outsourced finance & accounting team for so many small businesses, we see and feel the impacts of resource management often. And we have some insights into the frameworks and data needed to help you effectively navigate this common challenge.
All too often resource management is lumped together with ‘HR’ and, all too often, small businesses ignore the issue. This is dangerous because ineffective resource management is a very real risk. But doing it right has many benefits. Small businesses that proactively manage the balance between resource and demand and plan effectively experience:
Predictable growth and better financial performance
Higher employee satisfaction and retention
Confidence in scaling teams and meeting demand
You can get started by asking yourself some of the questions we first pose to new clients who are experiencing growth challenges.
Key questions small businesses should ask for matching resources with demand
At Ballast, we work closely with clients to ensure their resourcing strategies align with revenue goals. These are some of the critical questions we recommend asking:
1. In a perfect world, what is the right balance of people to the level of demand or work at your company?
We find it helpful to start by mapping out a perfect state. A perfectly balanced state is impossible - we know this - but starting with this question requires your team to think through all of the elements of delivery and execution and identify the team size to match a certain level of work. We use our experience and knowledge of comparable industry margins (for example, gross margin for direct and variable labor) to inform this desired perfect state.
2. What are some of the reasons a perfectly balanced state is unachievable for your business?
For example: training, onboarding, failed hires, and different levels of competencies for employees. Once named, each of these can be identified as being material or immaterial, and they can be prioritized, assigned, and potential mitigants implemented.
For instance, if the team identifies that the largest risk to a perfectly matched resource state is failed hires, a potential mitigant would be improved filtering of inbound candidates (e.g., implementing a more robust interview process).
After you’ve answered these first two questions with your team, here are a few more questions to help you further refine your analysis:
3. How long does it take for a new hire to be effective?
Define productivity metrics for each role and determine how long it takes for a new hire to meet them.
For example, if it takes 6 months for a new entry-level hire to handle 6–8 clients effectively, you might need to reset your expectations about how much you want them to produce and how quickly.
4. How long does it take for a hire to reach break-even?
Break-even and full effectiveness are not the same. Accelerating break-even—even if it delays full effectiveness—can reduce financial risk, improve planning, and improve employee turnover.
5. What is the probability of success in hiring for this role, and do you need to structure your hiring process differently?
What is your “hit rate” for the role you’re hiring? If one in four hires is successful, you must account for this in your hiring strategy.
For example, if the goal is to land a single productive, effective person in a role and you know your hit rate is less than 100%, this highlights the need to either hire more than one person to eventually fill this role or contingency plan with other resources at the firm should the hire not work out. We find this sort of planning provides multiple paths to success and does not pigeon hole you into a role.
The Nerd Corner
For our clients, we like to do a ‘j-curve’ analysis on the cohort hiring approach: we map out the monthly costs of the hires, we show departures at various estimated times for the roles, and then we show what success looks like for the one of four hires (for a 25% hit rate). This approach reveals how much capital it will take to achieve the desired result and helps you understand the true cost of scaling your team. This can be especially important for communicating to your team or a board just how much capital will actually be needed to hit certain growth objectives.
6. Where is your firm in the resource cycle? (Yes, we at Ballast are well aware we need a sexier term for this!).
Think of a resource cycle in the following context: when most firms start, the rate of inbounds and flow of candidates exceeds the rate of attrition (this is purely mathematical because of team size). But at some point, as the firm grows, the rate of inflow matches the rate of outflow, which puts the business in resource equilibrium. At this point, the firm may make changes to how they attract talent, and they increase the inflow to be greater than the outflow (“Yay! We’re growing again!”).
Knowing where you are in the resource cycle - growing, contracting, or in equilibrium - will allow you to manage resourcing more effectively.
The Nerd Corner
Here’s an example for our mathematically minded readers:
If you have 50 employees and lose 12 employees per year on average, that’s 1 employee per month, or 2% monthly attrition.
Assuming employees stay an average of 50 months (calculated as 1 ÷ attrition rate), you’ll need to hire 1 employee per month to maintain equilibrium.
If you feel like you’re constantly treading water—hiring one person while losing another—you may be at equilibrium. Breaking through requires adjusting your hiring strategies to exceed outflow rates.
Keep in mind that, as your team grows, it may feel like your attrition rate is growing as well, but that’s not necessarily true. See the math, above. A stable attrition rate results in larger numbers of departures for a larger team. (This is a good example of how not regularly tracking people-related metrics can lead you to believe there’s a problem where there isn’t one.)
Creating an effective resourcing plan for growth
We use the above questions and analyses to help our clients not only gain resource clarity and identify challenges, but also to scenario plan proactively to avoid bottlenecks or equilibrium. We even work with our small business clients to develop hiring plans based on revenue goals, hit rates, and capacity needs, adjusting assumptions and contingencies to prepare for multiple outcomes.
Balancing resources and demand is a complex challenge—but you don’t have to tackle it alone. At Ballast, we specialize in helping small businesses use financial and operational data to plan effectively, optimize hiring, and grow sustainably.
If you think your business might be stuck in equilibrium or if you’re struggling to align resources with demand, we’d love to help. Let’s talk.
