Is It Time to Hire Your First Employee?

June 25, 2013


Are you running a successful business all by yourself?  Then you’ve got your hands full, to say the least. (If we’re being honest, sometimes you’re totally overwhelmed.) And even though you’re working your butt off, you’re still missing a lot of opportunities because you just don’t have the time to pursue them.

You’ve thought about hiring help, but it seems like a stretch.  Cash is so tight.  Someday this business is going to be bigger than just you.  But when is that day?  When is the right time to hire that first person?

If this sounds familiar, you’re in good company.  It’s a rite of passage for a successful, growing business.  Let me show you what I’ve shown so many of my clients: how to make this leap from a one-man or one-woman show to a real company with a first employee.

Understand Your Predicament: the Chicken & the Egg

First let’s look at the problem.  You’re in a classic chicken & egg situation.  You can’t hire someone until you can afford their salary.  You can’t afford their salary until you can expand the business.  And you can’t expand the business until you can hire someone to help make it happen.  Oy.

Here’s how to break out of it.

Start Small

A lot of people assume the first hire will be full-time.  Actually, it’s usually better to start slow.  This not only makes it more doable financially, it allows you to vet the person before ramping up their hours.

Often you can bring someone on for a lot less money than you may have thought.  A lot of my clients have started with an assistant (or a virtual assistant) at just 5 hours/week.  At $15/hour, that’s only $300/month!  And you’d be getting 20 hours of their time to help manage the business.

Do the Math

A really common mistake I see is assuming that, since cash is so tight, they couldn’t possibly afford to hire someone.  Don’t jump to conclusions.  Take a minute and do the math and figure it out.

Budgeting can be complex, so let’s boil it down together with a simple illustration:  How many additional sales will you need to cover the person’s salary?  For example, let’s say you want to hire an assistant who will cost $2,000/month.  If you’re a consultant and each client brings $1,000, you’d need 2 extra clients per month.  If you’re a baker and each cookie brings $1 of profit, you’d need to sell an extra 2,000 cookies per month.

You may find it easier to justify making the investment in your employee’s salary when you consider that you can deduct  it as an expense to your business.

Gut Check

Now that you know what it’d take to cover the person’s salary, do a gut check.  How hard will it be to get that extra business?  Remember that you’ll have an extra pair of hands.  So you’ll have extra time to focus on marketing and bringing in business.

How quickly can you get that extra 2 clients or that extra 2,000 cookies?  Will it take one month?  Three months?  You only need enough money in the bank to cover their salary until that moment.  Because from that point on, the person’s salary is covered by the increase in business.

If the amount of new business seems like an unrealistic stretch, go back to step 2.  Is there a way to start smaller, such as fewer hours per week?

Leap of Faith

If you check your gut and feel like you can make those extra sales happen, it’s time for a leap of faith.  This is the only way to break out of the chicken and egg situation.

If you wait until conditions are ideal, you’re always going to be running a one-person business.  I’ve seen it happen so many times, and decades later the person is wondering why things never got better for them.

Put out that job posting, and bring a great person on board.

Floor It on the Marketing

Once you’ve got the new hire taking things off your plate, what do you do with the extra time?  You’ve got to double your efforts on marketing.  Focus on bringing in that extra business you need to cover the new hire’s salary.

Pretty soon, you’ll hit a new stride as a 2-person team, bringing in and serving more customers than you ever could have on your own.


about the author

This is a guest post for the FreshBooks blog. FreshBooks is the #1 accounting software in the cloud designed to make billing painless for small businesses and their teams. Today, over 10 million small businesses use FreshBooks to effortlessly send professional looking invoices, organize expenses and track their billable time.