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Step 3: Profitability -
Add Headcounts & Expenses

To answer the business question "when your business is becoming profitable", you must add 

  • add headcount cost for jobs, job groups, team roles and manager roles
  • staff-related cost as well as
  • other expenses for General & Administration (G&A), sales & marketing (S&M) and research & development (R&D)
Lean-Case Question 3

Add Headcounts

Typically, the biggest block of expenses in a company are headcount cost. In Lean-Case, you can add headcounts via the Headcount > Plan menu. Similar to adding different revenue streams, you can add also add various Headcount teams. 


Headcount Teams are the basic Lean-Case concept to add and manage different types of headcounts in your Lean-Case project, e.g. all headcounts in an Engineering Team like:

  • the Jobs for the VP of Engineering and his assistant
  • a Group of Software Developers growing over time
  • Team Roles like in Customer Support which grow with the number of customers
  • Manager Roles which have to be hired over time to manage the increasing number of Software Developers and Customer Support Roles
HCType

To add a new team, click on <+ Add Team> .  Give your Team a name, e.g. "Engineering Team" and assign the right categories, specifically the right cost type for the team - either:

  • Indirect Cost related to G&A, S&M or R&D or 
  • Direct cost – cost which are directly related to revenues, so COGS, COS or CAM.

Of course, cost for headcount teams which you flag as direct cost, will also be taken into account when unit economics are calculated. 


Add Headcount - Jobs

Let's set up the engineering team by adding a job, e.g. the CTO, who is an employee. 

  • He starts in July 2019  and 
  • gets a base salary of $5,000. 
  • Because he is an employee, the company pays benefits and taxes of 20% and 
  • he gets a salary increase of 2% per year
HCJob


Add Headcount - Groups

Then let's add a groups of contracted software developers which have a similar job and salary profiles. You add the same data as for jobs but instead of entering a start and end date you enter a hiring plan.

  • By making  the developer a contractor the Benefits and Taxes Share is automatically set to 0%.
  • Assign a base salary of $3,000.
HCGroups

To enter the hiring plan, click on the "Table" icon next to the field Hiring Plan. You find this icon throughout Lean-Case and it allows you to adjust values over time. This will launch the Lean-Case Spreadsheet Widget. You can adjust any data series - either by editing values manually, by uploading data or by creating a data series.


Let’s assume that in the first year we hire 1 new developer each month – so a total of 12 developers. Each developer is a contractor and gets a base salary of $3,000. (see video below).

Let’s save the data in the Spreadsheet widget and the Headcount Team. You can see an additional $3,000 per month and then notice that the CTO job starts in July. 

  Learn more about "Spreadsheet Widget" 


Add Headcount - Manager Role

On top, we can also add Manager Roles to automatically add a management layers - let’s say that we need a lead dev per 6 developers in the group.


HCMR


Let’s save this and let’s go to the Check page where you can filter by teams and job types and check the data for each job, for each group and each role.

HCMRRes


Add Headcount - Team Role

Team Roles are typically related to sales, account management or support functions. Similar to Groups, Team Roles have similar job and salary profiles. But other than Group Members, Team Roles are not hired at specific points in time. Hiring Team Roles depends on drivers (customers, units, sales teams, sales partners or revenues), e.g. the number of Sales teams, Sales Quotas to sign up new customers per month or simply revenues to manage.

  • Let’s add the Customer Service Team as Team Roles. 
  • Let’s e.g. hire 1 Customer Service Representative at a cost of $1,000 to manage 100k of revenues in the SaaS Revenue Stream.
HCTeamRole


Basically, this means we are spending 1% of revenues for support but at the same time we have the benefit that we keep track of how many headcounts we need.

Now let's move to the Expenses menu which again works very similar to the headcount menu and uses the cost widgets you have already used for revenue-related cost. 


Enter Expenses

Expense Groups are the Lean-Case concept to add and manage different types of general indirect  cost for Sales & Marketing (S&M,) Research & Development (R&D) and General & Administration (G&A). Each expense group can be categorized by Cost Type, Function and Location. 


To add a new Group, click on <+ Add Expenses>. Give your expense group a name and assign the expense category. 


You find again the same cost widget which we already used to add all the revenue related cost earlier by entering a irregular expense. You can create a data series the same way you can do it with the Spreadsheet widget, e.g. Let's assume that you have a startup cost which

  • starts with an initial value of $50,000 and 
  • decreases by 20% per quarter
  • starts in January 2020 and
  • ends in December 2022 
Expense

   

Actually, you can use the spreadsheet widget in this context as well if you select the switch "ShowTable".


expense spreadshett


Now, we have entered revenues, revenue related cost, headcounts and expenses. You are very close to answer business questions 3 and 4 on Profitability and Cash Flow. These answers you find in the dashboard















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