When to hire your first (or next) employee

The decision to hire your first employee is a large leap (usually forward), not only doubling your workforce, but also freeing you up to build the business. Hiring someone with different skills also helps build your capability.

But many businesses don’t have the immediate cash flow to cover an extra salary, and it can be a leap of faith to take on an employee and then hope sales growth follows.

But if you have you reached the point where you can’t keep up with the demands of your business, alone, it may be time to hire staff, or at least get some help. 

When your business succeeds, you’re soon going to hit your personal capacity. No matter how hard you work, or how many hours you spend on your business, there’s only so much you can do on your own. The question is – what will they do? And what sort of employee do you need? 

Reaching capacity indicators

• You’re getting more orders or more customers than you can manage, and it’s taking longer and longer to fill orders.
• Increasing customer complaints over delays.
• You’re working every weekend, and the administration tasks are overwhelming. Admin cuts into the time you have for income-generating work, but it has to be done. As well as the usual bookkeeping and customer invoicing, you might also need to spend time to order stock from suppliers, managing stock levels and complete customer-related paperwork.
• You’ve started to say ‘no’ to new work and so you’re missing new business opportunities.

Risk reduction options

If the cost of a new full-time person is too much, then part time, casual and contracting are all options that can be more cost-effective, depending on the workload and type of work.

• If you only need a certain amount of time each week, a part time employee can provide the extra help you need without committing to the cost of a full-time employee.
• If your work flow is unpredictable, you may be able to find one or two people you can call on as required to work a few hours here and there.
• If you have a specific project-oriented need, a contractor might be a better approach. You sign someone on for a specific task, agree payment and afterwards go your separate ways.

The experience level

When you’re deciding on what sort of person you want, think about their seniority. The more experience someone has, the sooner they’ll be a productive team member. The difference comes down to long term costs, and what you want the person to bring to your business. 

Calculate the total cost of employment

Employees can be a significant expense to the business so it’s important to work out their total cost of employment, so you can be sure your new employee will add to your total profit.

Employment costs may include some of the following:

• Their salary or wages
• Your contributions to insurances and any employee benefits, health insurance etc
• Equipment required for the job – computers, vehicles, uniform
• Recruitment and training
• Contribution to things they need on the job, such as a vehicle or phone

Calculate the potential

When you’re on your own, your business is all about you achieving results through your own efforts. With an employee, your business changes and it becomes all about achieving results through others.

That can be a challenge for business owners used to working solo, but without people, your business will only ever be as big as you.

Your employees can help expand your offering and bring in more revenue and more customers. Over time, you can grow to the point where you can even step away from your business for a week or two and know your team will be running it efficiently for you until you return – and that’s a great feeling. 

Use your intuition

At some stage you’ll need to take a deep breath, take the plunge and hire someone. It can be scary but it’s also one of the most worthwhile and rewarding things you will do. Employing others and helping them build a career and supporting their family is a big responsibility. But in return they will contribute to your business success and profit, allowing you to then take on the next employee.