Gross margin questions worth asking before you hire

Hiring is often framed as a growth story. For owner-managed firms it is also a fixed-cost commitment that sits on top of whatever contribution the current book of work actually produces.

Start with contribution, not revenue

Take the last six months. After direct costs — materials, subcontractors, sales commissions, freight you cannot recover — what remains to pay wages, rent, and drawings? That contribution figure, not top-line sales, is what must absorb a new salary.

Load the true employment cost

Include KiwiSaver, leave loading, and the management time you will spend supervising. Owners often quote the base wage and underestimate the rest by a quiet ten to twenty percent.

Ask what work appears if the hire succeeds

If the person is meant to free the owner for sales, write down the pipeline that must convert. If they are meant to deliver existing jobs faster, name the bottleneck they remove. Vague “capacity” is not a plan.

When the numbers say wait

Sometimes the honest answer is to raise prices, exit a weak service line, or tidy utilisation before adding payroll. That conclusion is not failure — it is avoiding a wage that the margin cannot yet carry.