Know your ratio, and what moves it
People cost over revenue is the spine ratio. Healthy ranges vary wildly by model, service firms live near 40–60 percent, product companies lower, so the useful comparison is your own trajectory: is the ratio funding growth or consuming it? Compute it fully loaded, owner pay included, or it flatters you exactly where flattery is most expensive.
When the ratio climbs without output climbing, the budget has found its conversation. That is the point of having one.
The twelve-month people plan
On one page: every current person and their fully-loaded cost; planned hires with quarter and trigger; planned raises with quarter and amount; and the revenue line those commitments assume. Triggers beat dates: "customer support hire when tickets pass 30 a week for six weeks" self-schedules honestly, where "Q3 support hire" ships on optimism.
The plan is also the raise conversation made civilized: increases are budgeted in January, not improvised in the hallway in August.
Raises, bonuses and the sustainability test
Every raise is permanent; revenue that justified it may not be. Budget raises against sustained performance and sustained revenue, and prefer one-time bonuses for one-time wins: they reward without ratcheting the fixed base. For a company under twenty people, an annual raise pool sized as a percentage of payroll, divided deliberately, beats ad-hoc generosity every time.
Solo operators run the same test on themselves: the owner raise clears when the trailing six months carry it, not when one good quarter suggests it.
The quarterly people-money review
Fifteen minutes, four questions: is the ratio where the plan said, did any trigger fire, is anyone’s comp drifting from market in either direction, and does the revenue line still support the back half of the plan. Payroll surprises are never sudden; they are unreviewed.
Keep the plan next to the real numbers, and the review becomes reading, not reconstruction.
One page, kept where the money is
The Finance Desk holds the people plan beside the budget and the actuals, and Velora drafts the quarterly review from your own numbers. The people side of each decision, offers, reviews, records, runs in the HR Desk, so the plan and the paperwork never drift apart.
Setting pay against the market? The career-side guide to review and pay conversations shows the other side of the table.
Frequently asked questions
What percentage of revenue should payroll be?
It varies by model: service firms often run 40–60 percent, product companies lower. The actionable number is your own fully-loaded trajectory, owner pay included, and whether it is funding growth or consuming it.
How should a small company plan raises?
Budget an annual raise pool in advance, grant increases against sustained performance and revenue, and use one-time bonuses for one-time wins so the fixed base only ratchets deliberately.
What is a people budget?
A one-page, twelve-month plan: current fully-loaded costs, planned hires with triggers, planned raises with quarters, and the revenue line that must be true, reviewed quarterly in fifteen minutes.