Generally what I've found is you start off like this. You get a bunch of recruits (Max you can carry) and then as your better units start developing, you set them to the lowest part of your party so they don't appear often. After your first battle you'll lose some recruits, but some recruits will level, you set those to the bottom and then go get some more recruits. The next battle you'll lose some recruits but then you'll get some more high level troops, and your previous high level troops will go up, etc, and so forth. In my recent game I've just barely rounded out to a practically all Swadian Knight army with 45 Swadian knights and about 12 new recruits to replace the units I've lost to get there.