Have you ever felt like you needed to hire another employee for your business, but are unsure if you are able to financially sustain that commitment?
Here are some simple things to consider when you are making a decision on when to hire your next employee:
1) Work out how many extra sales it will take to cover the wage of that employee.
To do this, you need to know your margin after considering the costs of delivering your products or services and the cost of new employee. Based on this what is the extra sales per week or per month required to cover their wage? It is important to know that number so that it gives you an idea of how easy or difficult it will be to cover the extra amount. We have a simple calculator we use in Biznostics that help you do this.
2) Work out if you can afford half of their wages.
Business owners often wait until they know they can cover all of a staff’s wage. If you know that your business can cover half of their wage, have faith that they will cover the other half by the extra capacity and returns they will bring to the business. Think about the positive things behind hiring that next staff. If it is going to free up some time for you to do other things you’re best at in your business, then it should be financially beneficial for you in the long run.
3) Have a buffer.
Don’t just take a new employee on and put all your spare cashflow into this employee. Consider having a buffer. A rule of thumb is to put 3 months worth of wages set aside, and this will give you three months to bring them up to speed. During these three months, you can see them through their probationary period and train them to be productive. If they do not work out within those three months, you would have the money you have initially set aside and so will not make or break your business. You would not have to worry if you have put a buffer in place.
4) Think differently about how you bring other people into your business.
This could be a simple as hiring a casual employee, a part-time, or a contractor; not necessarily a full-time staff. It is about getting that extra help that you need; extra hands, extra feet, an extra mind.
Think of how hiring your next employee can help free up some time that can enable you to focus on other parts in your business.