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Intro to Modeled Hires Video- How do they work? Why do I need them? What is the purpose? :
Hi there! This section is where you can reference everything you need to know to build, understand, and incorporate modeled hires into your financial model.
What is a modeled hire?
A modeled hire is a single line item, or "hire", in the model that represents multiple people of the same type.
Why should I care or how do I use this?
Honestly, modeled hires are extremely useful- especially when you think about wanting a flexible and easy to maintenance financial model. Usually a modeled hire represents a key role in your business plan that you know will be essential to the operation of your business. The advantage here is that if you know there will be 30 developers on your team in the long-run but you don't know exactly when you'll be hiring each individual person, then you can use a single line item in the model to fully account for the costs of that team as they become needed. That's speaking to the flexibility, but in terms of maintenance, which would you rather look at and maintain on a monthly basis- one line item or 30?
What kinds of modeled hire are there?
There are really two versions of the modeled hire that we work with. Version 1, which is the automatic event driven hire that, for example, could say you bring on 1 developer every time you reach a new multiple of $50,000 in monthly revenue. Version 2 is a bit more manual but gives you full control to say exactly when you want to hire on / terminate people in a single position while still just being one line item to maintenance.
How do I build a Version 1 Modeled Hire: Automatic / Event Driven Hire
Description of Metrics Needed (the numbers used in the formulas correspond to the number of the metric in the list, example: [2] refers to metric "2" which is "Annual Salary" so if you don't see a metric you'll need to click "Add Metric" and make it how it's outlined below).
Cost- default
Annual Salary : Input
Taxes & Benefits : Input
Headcount: Calculation = [5]/[6]
Revenue [This Month] : Calculation = Add {Insert Any Metric / Event}
Hiring Criteria / Lever (Ex: Hire 1 Dev Every ___$ in MRR) : Input
How to Build a Version 2 Modeled Hire: Manually control hire dates and team size
Description of Metrics Needed (the numbers used in the formulas correspond to the number of the metric in the list, example: [2] refers to metric "2" which is "Annual Salary" so if you don't see a metric you'll need to click "Add Metric" and make it how it's outlined below).
Cost- default
Annual Salary : Input
Taxes & Benefits : Input
Headcount: Calculation = [5] + [6]
New Hires [This Month] : Input = "0" ONLY
Last Month's Total Hires: Past Value = [5]
How to Use: Anywhere you want to hire people you can manually override or directly input the people coming in as a positive number on the "New Hires [This Month] line or put the people leaving employment as a negative number on the "New Hires [This Month] line.
To create a manual override, reference this quick video: How to Make Manual Table Edits
Specialty Modeled Hire Build Types
How to Build Modeled Hires Based on Other Employee Headcounts
This modeled hire would be the solution you need if you want to, for example, hire 1 Manager for every X teammates in a specific department.
Description of Metrics Needed (the numbers used in the formulas correspond to the number of the metric in the list, example: [2] refers to metric "2" which is "Annual Salary" so if you don't see a metric you'll need to click "Add Metric" and make it how it's outlined below).
Cost- default
Annual Salary : Input
Taxes & Benefits : Input
Headcount: Calculation = [5]/[6]
Hires [This Month] : Calculation = Add {Insert Relevant Headcount Metric}
Hiring Criteria / Lever (Ex: Hire 1 Manager Every ___# of Salespeople) : Input
How to Build Modeled Hires Based on Cumulative Revenue if I have seasonality in my model
This modeled hire would be the solution you need if your business has irregular or "lumpy" revenue that would cause revenue in some months to be much higher than in other months. This would prevent your number of hires needed in a position from fluctuating "up" and "down" as revenue does.
Description of Metrics Needed (the numbers used in the formulas correspond to the number of the metric in the list, example: [2] refers to metric "2" which is "Annual Salary"):
Cost- default
Annual Salary : Input
Taxes & Benefits : Input
Total Hires Needed: Calculation = [5]/[8]
New Revenue [This Month] : Calculation = Add [Relevant Revenue Metrics]
Total Revenue [To-Date] : Calculation = Add [4]+[6]
Last Month's Total Revenue [To-Date]: Past Value [6]
Hiring Criteria / Lever (Ex: Hire 1 Dev Every ___$ in Cumulative MRR) : Input
How to Build Modeled Hires Based on ARR Goals rather than MRR goals
This modeled hire would be the solution if your company focuses all of its language on "ARR" targets rather than "MRR" targets or "Monthly Revenue" goals. The translation of an ARR goal to a MRR goal is just ARR divided by 12, but this video shows the extra step we can take to make the model align a little more closely with the language you're used to using.
Description of Metrics Needed (the numbers used in the formulas correspond to the number of the metric in the list, example: [2] refers to metric "2" which is "Annual Salary" so if you don't see a metric you'll need to click "Add Metric" and make it how it's outlined below).
Cost- default
Annual Salary : Input
Taxes & Benefits : Input
Total Hires Needed: Calculation = [6]/[7]
Static Value 12: Input = 12
Revenue (ARR) [This Month] : Calculation = Multiply {Relevant Revenue Metric * [5]}
Hiring Criteria / Lever (Ex: Hire 1 Dev Every ___$ in MRR) : Input
How to Convert the "Old" Modeled Hires (before the toggles) into the new, Simpler and Improved Modeled Hires?
The new modeled hires have four main benefits:
Simplicity
The salary you input is multiplied by the "headcount" value meaning the cost of the entire team you're creating is accounted for with this single line item.
The ability to properly reflect against the "headcount" at the bottom of the page
Because we have the "COGS" toggle, we can delete salaried positions from the "expense section" and place them organically into "people".
The main adjustment(s) needed for any "old" modeled hire(s) that are outlined in this video can be summed up by these five tasks:
Toggle "On" the Modeled Hires Button within the "Old" Modeled Hire (if they're on the people page)
Copy the exact "formula" being used for your old "Total Hires Needed" metric into the new "Headcount" metric that's populated once you've enabled the new toggle.
Make sure those out of date metrics like "average annual salary", "headcount correction", and the old "Total Hires Needed" metric are deleted
Make sure "Annual Salary" located directly below the "Cost" metric is converted to an "input metric" as it is by default.
If you had a modeled hire in the "expense" section before, recreate them in the new, simpler method within the "people" section and delete them from "expenses" so you don't double count the cost.
Need help doing this? If these steps are unclear or it's been a while since you gone into the platform reach out to your analyst over email or intercom and we'll be more than happy to help!