Let&#x27;s say you have a company with 10 employees, and a revenue of 50 million. If you hired an extra web designer you could optimize your website and squeeze out an additional 1% = 500k. Worth it!<p>Times go bad, revenue drops to 10 million. You fire the non-essential designer and take the 1%=100k revenue hit. If you had fired an essential employee, your revenue would have dropped some double digit percentage, so those you have to keep around.<p>You expand&#x2F;contract the business to the point where the marginal employee costs you the same as the marginal revenue they can bring in.<p>Well that&#x27;s the theory for stable profitable companies. For startups I guess you&#x27;d have to think of the marginal <i>expected</i> future revenue.