On scaling: we're more profitable at two than we ever were at seven

“So how many people have you got?”

It’s the second question anyone asks about your business, right after what you do. And there’s an assumption buried in it that everyone shares and nobody examines: that a bigger number is a better answer.

More people means you’re doing well. Fewer people means you’re either just starting out or something’s gone wrong. Growth is good, flat is worrying, smaller is a failure. That’s the water we all swim in.

I want to talk about that honestly, because we’ve been seven people and we’re two now, and we are more profitable and considerably happier than we’ve ever been.

That’s not a boast and it’s definitely not advice. It’s just a data point that doesn’t fit the story we all get told, and I’ve found that data points like that are usually worth sitting with for a while.

The growth assumption

Let’s start with where the assumption comes from, because it isn’t stupid.

The dominant story about business comes from venture capital and from listed companies, and in both of those worlds growth genuinely is the point. If you’ve taken investor money, you’ve sold a share of a much bigger future business, and you’re contractually and morally obliged to go and build it. Growth isn’t vanity there - it’s the deal you signed.

The trouble is that story leaked out and became the story about all business. Which is odd, because almost no businesses are like that. In New Zealand there were 617,330 enterprises as at February 2025, and on MBIE’s numbers 97% of businesses have fewer than 20 employees, while around 70% have no employees at all. Seven in ten. The overwhelmingly normal shape of a New Zealand business is one person, or a couple of people, doing good work.

So the model nearly all of us are measured against - and measure ourselves against - describes almost none of us.

What actually happened to us

We grew, the way you’re supposed to. More work came in than we could do, so we hired. Then we needed more work to cover the people, so we sold harder. Then that work needed doing, so we hired again.

Nobody did anything wrong. Everyone who worked with us was good and I’d work with all of them again. But somewhere in there the business quietly changed shape, and I didn’t notice it happening because each individual step was sensible.

The thing I eventually noticed was that I’d become the buffer. Every problem passed through me. Every quiet week was my problem to solve, because seven people need feeding whether the phone rings or not. And the work I was actually good at - the reason I got into this at all - had been squeezed out to the edges of the day, and then off the end of it entirely.

I remember Paul calling me and asking “How are you going? Are you happy?” and I answered “No, not really. What are we doing? Are you?” And he said “Nah, this sucks”. I love that about Paul: our conversations are easy, straightforward and honest.

We’re two now. Revenue is lower. Profit is higher. Stress is dramatically lower. And I write code again. If and when I scale again, I’m sure I’ll have a better run at it, but right now, this is the way I want to live.

The maths nobody shows you

Two bits of arithmetic explain most of this, and neither is controversial - they’re just not the numbers people put on the pitch deck.

The first is communication. Fred Brooks pointed this out in The Mythical Man-Month back in 1975: the number of relationships in a team grows as n(n-1)/2. So:

Going from two people to seven doesn’t make coordination three and a half times harder. It makes it twenty-one times harder. Every one of those channels needs maintaining - context shared, expectations aligned, the odd misunderstanding untangled. And that maintenance is somebody’s job. In a small business, that somebody is you.

The second is overhead. Agency benchmark data puts average net margin for studios under 10 people at around 19%, dropping to 13-16% at 10-30 people, and about 8% at 50+. It’s not that bigger agencies get worse at the work. It’s that every hire who isn’t billing - the manager, the coordinator, the person doing the admin that used to take you an hour on a Friday - has to be carried by the people who are.

So the pattern is: more revenue, more people, more effort, less margin. You end up working considerably harder for a smaller slice of a bigger number, and telling yourself it’s an investment in scale.

Sometimes it genuinely is. Often it’s a treadmill you built yourself and then climbed onto.

Let me be fair: the real pros of scaling

I’m not going to pretend staying small is free. There are excellent reasons to grow and I’d be doing you a disservice to skip them.

• You can take on work you simply cannot take on alone. There’s a size of job - the multi-year build, the enterprise programme - that requires a real team, and if that’s the work you want, you need the people.
• Redundancy. This is the big one. Two people is a thin operation. Someone gets sick, someone’s parent gets sick, someone burns out, and you’re immediately in trouble. Bigger teams absorb shocks.
• Capability you don’t have. No two people cover everything. A team lets you be genuinely excellent across design, engineering, strategy and delivery at the same time, instead of good at some of it and honest about the rest.
• You can build something that outlives you. A two-person consultancy is largely unsellable, because the asset walks out the door at 5pm. A real team with real process is an actual business with an actual value.
• Other people get to grow. This one matters and it’s the thing I miss most. Employing people means training them, promoting them, watching someone become properly good at this. Our industry needs that and small shops don’t do much of it.
• Some people love it. Building and leading a team is a genuine craft and deeply satisfying if it’s your craft. Plenty of people are far better at it than I ever was.

And the real cons

• You become a manager, whether or not you wanted to be one. More on this below, because for me it’s the whole story.
• Fixed costs turn every quiet month into a crisis. Payroll doesn’t care that a client pushed a project into next quarter. The moment you have a team, you must feed the machine, and that pressure works its way into what jobs you take.
• You start saying yes to bad-fit work. This is the one that corrodes things quietly. When you’re two, you can turn down a project because it’s wrong for you. At seven, with a crew to keep busy, you take it. Then you’re doing work you don’t rate, for a client you don’t click with, and everyone can feel it.
• Coordination eats the day. See the table above. Standups, one-on-ones, planning, resourcing, the conversation about the conversation.
• Margin compresses, so you carry more risk for proportionally less reward.
• The work gets further away. The thing you started the business to do ends up being done by other people while you talk about it.

The bit that’s actually personal

At seven people, I stopped programming. I managed.

I didn’t decide to. It just happened, a meeting at a time, until my week was entirely made of other people’s questions and my calendar had no gaps in it bigger than an hour. Paul Graham wrote about this in 2009 in Maker’s Schedule, Manager’s Schedule - makers need long uninterrupted blocks, managers work in one-hour slots, and when you mix the two, the manager’s schedule wins every time. It doesn’t compromise. It just quietly consumes the other one.

And I’m not passionate about management. I’m alright at it, I take it seriously, and I care a great deal about the people I’ve worked with. But it isn’t the thing that gets me out of bed. Building is. Solving the actual problem is.

There’s a well-known idea from Noam Wasserman’s research at Harvard called the founder’s dilemma: most founders end up choosing between being rich and being king - between maximising the money and keeping control of the thing. I think there’s a third option that gets discussed far less, and it’s the one I’m living. Timing is a big part of this: scale when the time of your life allows you to do so without an irreversible cost. Until then, find a way to have enough and don’t miss things you know you will regret on your deathbed.

A lunch that stuck with me

A few years back I had lunch with my mate Dan Too, who I think was running Emoji Eggplant on his own at the time.

I went in half expecting the usual conversation - when are you hiring, what’s the plan, how do you get this thing bigger. That’s the script, and most of us run it without thinking. But Dan had clearly already had that argument with himself and come out the other side. He wasn’t scaling, and it wasn’t because he couldn’t. It was a deliberate decision, and he could tell you exactly why.

What struck me was how deliberate he was about it. He talked it through the way you’d talk about any other trade-off - here’s what staying small buys me, here’s what it costs me, no defensiveness in it at all. He knew he was leaving money on the table. He was fine with that, because his kids were young, that was the season he was in, and he wasn’t going to spend it building something that would pull him away from them at exactly the moment they needed him most.

We were around five or six people then, and I was still telling myself the busy stretch was temporary. Dan had already done the maths I was just starting to look at.

He’s still an inspiration to me on this - not because he stayed small, but because he was honest with himself about what he was optimising for and then actually lived like it. That’s the rare part. Plenty of people work out what matters to them. Far fewer rearrange their life around the answer.

What we do with the space

Being two has given us back something I’d genuinely lost, and we’ve spent it on two things.

The first is our kids.

They’re growing up right now, at a speed that is genuinely alarming, and that window does not reopen. I can be at the things. I can do the school run and not spend it mentally rewriting a resourcing plan. That is not a consolation prize for a business that didn’t get big - it’s the entire point, and I’d make the same trade again tomorrow.

The second is products. Every one of the things we’ve built - Static Contact, Client Invoices, the Mangawhai Directory and now FNA Manager - exists because there was room in the week for it. At seven people, that room didn’t exist. Every hour had to be billable or spent keeping the machine running. Products need slack, and slack is the first thing scale takes off you.

Because at the end of the day, this is not really a business strategy question. It’s a question about how you want to live and how you want to spend your time, and the business is just the mechanism you use to get it. Everyone works this out eventually. It’s better to work it out on purpose.

So should you scale?

Genuinely, it depends - and not in a cop-out way. It depends on things only you know:

• What do you want your Tuesday to look like? Not your exit, not your valuation. Your ordinary Tuesday, three years from now. If the honest answer is full of meetings and you’d hate that, no revenue number fixes it.
• What’s the actual work you love? Be specific and be honest. Then ask whether growing gets you more of it or less. For me it was less, and that took years to admit.
• What are you optimising for? Money, control, freedom, impact, building something that lasts? You can have some of each, but you cannot max them all at once, and pretending otherwise is how people end up running a business that technically succeeded and that they quietly resent.
• Does the work you want require a team? Sometimes it flatly does. Then hire, and go and get properly good at leading - it’s a real craft, not a tax.
• What does ’enough’ look like? If you can’t put a number on enough, no amount will be, and you’ll scale forever chasing a feeling.

If you go through those and the answer is grow - go and grow, wholeheartedly, and don’t let anyone with a nice small business make you feel like you’ve sold out. That’s just as thoughtless as the reverse.

Wrap up

There’s no medal for headcount. Nobody is keeping score except you.

We got smaller and we got better - more profitable, more useful to our clients, and much better company at dinner. That’s not a universal law and I’d be suspicious of anyone selling it as one. Plenty of people would find our setup limiting and they’d be right to.

But if you’re running a business right now that’s growing, and there’s a small nagging voice asking whether you actually enjoy this any more - that voice is worth an afternoon of your attention. It’s usually right, and it usually gets louder.

Build the business that fits the life. Not the other way round.

And if you want to talk it through with someone who’s been up and back down that particular hill, get in touch - I’d love to hear about it.