The decision to take on your first employee is an important one. While it signifies growth and new opportunity, it also comes with higher risk and more responsibility.
With this in mind, it is important to weigh up when you choose to hire your first employee. On one hand, some say you should take on support quickly in order to focus on rapid growth, while others think you should take your time so that you are fully equipped to take on the responsibility of someone else’s paycheck.
Ultimately the decision is yours. Below are some tips to give you an idea of when you might be ready to take on your first employee:
Tip #1 – Understand how your cash flows
Forecasting your income will indicate if there is space in your budget to accommodate the physical costs of an employee. Look beyond your average income and study your cashflow month by month, including any times that are traditionally slow.
You can then see where an hourly wage or salary might fit, alongside any tax implications. It is important to evaluate additional expenses such as equipment or tools that you might need to accommodate. Your new hire could also require relevant training and certifications.
Tip #2 – Ensure your profits meet your payroll
Looking at the past year, are your profits consistent? If there isn’t a profit every month, does the incoming revenue from the next month balance this out? While changes in your profit trajectory are to be expected, you need to be able to guarantee that your employee’s payments will not be affected and that month to month, you can meet the payroll regardless of your business’ profit position.
Tip #3 – Match your workload to your workforce
While a busy period requires an extra pair of hands, it is important to know whether this is temporary or long term. Create a detailed outline of the tasks you need help with to give you a better handle on whether you need full time assistance, or if a seasonal employee makes more sense. Having defined roles and responsibilities can also help you hire the right person for the job, and clearly outline what is expected.
Tip #4 – Where do you stand in the business?
It is important to know exactly how you view your own role in the business. Did you establish it with the end goal of overseeing operations, or would you like to maintain a level of on-the-ground involvement? It helps to revisit why you started , and whether it was for growth or with the intention of maintaining a one-person shop. These are important considerations to be certain on before making the decision to hire.
Tip #5 – Start with a trial run
No decision has to be final. By building a 3 month trial period into your employment contract, you can gauge whether your new hire is the right fit for the business. If you’ve hired someone previously, think about any key take-outs from the experience.
By considering these components of the hiring process, you will have a better idea of whether you are ready to take on your first employee, and if expanding your team is an area of growth that you would like your business to pursue.
Chris Strode, Founder, www.invoice.2go.com