When to Hire Your First Employee
in Small Business Growth on March 23, 2021Share with your friends or professional network
When you first decided to start your own business, you may have chosen to try to handle most things on your own and use some freelance help to fill in the gaps. You would not be alone. A lot of small businesses start as solo acts. While you’re bound to make mistakes, some of them can be more costly than others. And hiring at the wrong time is one of them. In this post, we’ll discuss when to hire your first employee.
Here are some indicators that you may be ready to hire an employee:
- Despite using freelancers, you have more work than you can do on a consistent basis, so you are turning down work. And most of us realize that turning down work means that you could lose the client, even if it’s just because they assume you are always too busy. Keeping in mind that you don’t want to run out of cash, you have to balance losing customers with the cost of the employee. According to an article by American Express, it costs six to seven times more to get a new customer than to retain a current customer.
- You can’t do all your necessary work and keep clients happy. Is your response time down because you simply can’t get to it? Or are your other duties getting neglected? You can’t be everything to everyone, including yourself. And losing clients or skipping over other important customer acquisition initiatives or daily financial activities will likely cost more than hiring the right person.
- You can increase revenue by offering expertise you don’t currently have or don’t have time to cultivate. Perhaps hiring someone will allow you to do more of what you are really good at. Perhaps someone else is really good at something you’re not. Whatever the case, if you can bring in more cash flow on a consistent basis, it’s a good bet.
- You have checked your financial forecast, and your projected revenue will be able to cover costs of an employee. Using a software such as FuelGauge can really give you insight into both historical and upcoming billing. Simply by looking at your FuelGauge Dashboard, you can see spikes in anticipated revenue a few months down the line. There’s nothing better than having real data at your fingertips to be sure you are making a sound decision.
Here are some reasons NOT to hire an employee just yet:
- You are desperate and in a pinch. Don’t have a knee jerk reaction. You may only need to get by a few weeks or months, then will have nothing for your new employee to do. Really consider whether this uptick in business is long term enough.
- You don’t have a clearly defined position for the employee. If you don’t know exactly what your employee will be responsible for and how long his or her daily duties should take, you are setting both of you up to fail. You need clear expectations, and you should carefully interview several people before deciding who is the best for the position (no matter how much you may like him or her).
- A friend or family member needs a job. Unless your friend can increase revenue with a skillset that you need in your business, don’t risk your friendship or your business. Anyone who you consider hiring should help take you to the next level, not drain you of your resources.
All told, it’s not that easy to predict when to hire your first employee. However, following these tips and investing in a software that gives you visibility into your financial forecast can greatly improve your odds of succeeding. See how FuelGauge can give you that visibility without the risk. Try it for free for 45 days with no credit card needed.