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How to know when it’s time to hire your first employee.

Taking the leap and hiring your first employee can be a daunting decision, but one that also signals an exciting moment in your business journey. For some small-business owners, taking on that first member of staff can feel like a risky step that brings greater responsibility, while for others it signifies a positive milestone.

Whether you’re risk averse, or bold and ambitious, there are various considerations to ensure your business is in the right place to take on the added responsibility of someone else’s paycheck. It’s important to not only consider the financial implications, but also the added responsibility it places on you as a manager. Here are some tips to help you figure out when the time is right, and what to do if you’re ready to make the leap.

Understand your cashflow

Getting a solid grasp on your predictable, reliable income is a great first step to understanding your business’ finances. After all, if you don’t first have the financial foundations in place, it’s probably unwise to take on the responsibility of a bigger wage bill. Study your cashflow both annually and on a month-by-month basis. An annual view helps you understand whether, over the course of a year, you have a big enough surplus to cover the wages of an employee. Monthly, meanwhile, will inform you of whether you have a reliable enough cashflow to pay wages. While it can be normal for a small business to have busier and slower months, when you have an employee, you cannot defer their payment as you might your own.

“If your aim was to grow and scale, hiring your first employee could be a great step towards achieving that goal.”

Think also about the broader costs associated with bringing on an employee. While the salary is clear, it’s also important to consider the tax implications, as well as extra equipment, tools or subscriptions they may need. There are also ongoing costs like worker’s insurance, superannuation, training and certifications to take into account.

Invest in professional development

Before investing in an employee, ask yourself whether you might be able to develop your own skills and knowledge to fill the vacant role. If you’ve owned your business for a long time, it can sometimes be difficult to shift away from what you have always done to meet the needs of today’s consumers. If there are skills you can develop, attending a short course in, for example, software coding, content writing or bookkeeping could be the answer to your problems. If the answer is no, or you wouldn’t have time to deal with the added responsibility, it could be time to consider hiring someone.

That’s because, as the business landscape evolves and access to technology increases, it’s important to ensure your business is adaptable to keep up with trends. For instance, is your business up to date with the latest government or industry regulations, and are you trained in how to use the latest software? Evaluate the various systems already used within your business, and identify the areas you could either upskill in, or hire for.

Know your workload and consider temporary arrangements

If you’re in the midst of a particularly busy time, it can be tempting to hire someone on the spot to get you through. However, if you look ahead and know that in a month or two you’ll have enough work for just one, it might be a good idea to consider temporary short-term freelance alternatives. No decision has to be final. Consider including a three month trial period in your employment contract so you can test the waters with new employees before making a longer-term commitment. This allows you to assess the employee, or the decision to bring someone on to help altogether, before making it final. On the other hand, if you’re regularly turning away work because you don’t have capacity, or take on extra jobs but find yourself working extra hours to complete them, it’s a good indicator that you’re ready to hire someone on a regular basis.

Outline what the job will be

While it may sound obvious, it’s important to know specifically what tasks you need assistance with. So be explicit with the job description and responsibilities. This will give you a better idea of whether you need full-time or part-time assistance, or whether a seasonal employee or contractor during the busier periods might make more sense. From assistance with bookkeeping and finance, to extra sales assistance and inventory management, distinctly outlining the role will provide you with a clear picture of who you need and when.

It’s unrealistic to expect one person to possess all the skills you’re looking for, so if you’re looking for a receptionist-bookkeeper-cleaner-account manager-marketing guru, then your search will probably be in vain. Clearly defining the role is the best way to proceed.

Set clear, achievable goals

Before taking the leap and hiring an additional employee, it’s important to understand where you see your business going in the future. Outline clear goals and vision for your business, and map out the steps that you need to take in order to reach those goals. Ask yourself, “Is hiring a new employee one of those steps?” or “will doing so help me achieve those goals?” If the answer is yes, kick start the process. However, if the answer is no, take some time to reassess your workload and skills to understand how you can achieve those goals as a one-person-band.

Know your own role in the business

At some point, many small-business owners decide they want to run the business, rather than be the business. On the other hand, others may never want to give up the high level of involvement and choose to remain the primary face of the business. Conceding responsibilities can be difficult at first.

So, to understand what your role is in your new business, take some time to look back at why you started the business in the first place. Was the plan to grow your venture, or did you have the intention of maintaining a steady, sustainable one-person shop? If your aim was to grow and scale, hiring your first employee could be a great step towards achieving that goal. Also think about how much involvement you want in the future. As a small business owner, it’s likely you will always maintain a high level of involvement in almost all aspects of the business, but it’s common for some details to fall by the wayside when you have employees overseeing particular areas.

During not only this step, but the entire process, speak to others within your small business network who have already been faced with the same decision. Find out what did and didn’t work for them, and consider them as a source of guidance in your own decision.

No matter where you are in your small-business journey, capitalising on the chance to bring on your first employee is a big decision. Running your own business is a personal and possessive notion, and it’s not easy to open it up and let someone else be responsible for it too. While it brings added responsibility and a lot to consider, hiring that first employee can signify that your business is growing.

Chris Strode, Founder, Invoice2go

This story first appeared in issue 28 of the Inside Small Business quarterly magazine