Can I afford to hire an employee? It’s a question I received from a podcast listener. The answer is not always straightforward. I’m sharing a checklist I use to get a confident YES to the question.
LET’S TALK POULTRY.
Of course I am joking!
What I want to say is that when to hire for your small business is very much a chicken and the egg situation.
- On the one hand, you want to hire before you and your team are drowning in work, burn-out included.
- But on the other hand, you don’t want to hire before you can actually afford it.
SO CAN I AFFORD TO HIRE AN EMPLOYEE? AND IF SO, HOW DO I KNOW?
It’s a question I received from a podcast listener. And unless my audience feelers deceive me big time, she’s not the only one who wants to know.
So let’s unpack this baby.
( In case you want to know more, I also dedicated Episode 58 of the podcast on this topic. You can find it here.)
When to hire for your small business really boils down to three questions:
- Where are you now?
- Where do you want to be?
- How do you get there?
Sounds simple enough?
I guess it is on paper. In reality,... it’s a bit harder.
So… Can I Afford To Hire An Employee?
Let’s have a look at my checklist.
Checklist For Hiring A New Employee-Step 1: The Financials
To answer the big one ’Can I afford to hire an employee?’, we need to first dig into the first question: Where are you now?
For the answer, you need to know your financials. I mean REALLY know them.
I’m talking about
- your current income
- your current expenses
- your current profit margin
Indeed, you may not like the word, but we’re talking ‘budget’. And when it comes to getting a feel of what you can afford in the future, your budget is rather important.
But apart from the now, a budget looks at the next few months (your future revenue, your future expenses, and your future profit margin) based on the current situation and past experience.
NEXT you look at the cost of hiring a new employee:
- Cost of hiring
- Benefits; like a retirement fund and any perks your business offers staff (For example, in my business, people get the day off on their birthday)
- Cost of any training the new staff member will need
But, of course, a new employee is also expected to bring in extra revenue, whether that is because they can create extra income, or whether they can free up other staff to create extra income.
Once you have collected all that information and fed it back into your predicted income and your predicted expenses, you have a fairly accurate idea of whether a new hire is an option as it is.
Checklist For Hiring A New Employee-Step 2: The Business Plan
But from the question I received from my podcast listener, I had the feeling they wanted to know about the next step. How you can increase income so you will be able to afford a new employee.
So, let’s assume: You did the above financial exercise, and the answer is: current workload asks for a new employee, but your budget says No.
The obvious response is to increase income/revenue AND/OR to make the entire process more efficient so you take the pressure off the team (and thus reducing the burning need for a new team member).
And that answer lies in your business plan.
I’m not talking about a 20 page business plan. I’m not a fan of those and frankly… I don’t have, nor need one of that size.
I have a One Page Business Lifestyle Canvas. It’s a one page business plan that captures
- What I do
- How I do it
- Who I do it for
It also includes my Accountability Chart, which details the roles and responsibilities your business needs to deliver its services to the people you serve. It’s the who-does-what on the team.
Both the Lifestyle Canvas and the Accountability Chart are your road map for this vison you have for your business. And because random actions are a big no-no, both are very important in any decision making related to when to hire for your business.
It’s the key to answering ‘Where are you going?’
Checklist For Hiring A New Employee–Step 3 : Removing The Bottlenecks
On to number three. How do you get there? Your response should be multi-faceted.
1. Introduce A Marketing Strategy
Let’s talk marketing.
It is my experience that this rarely gets the attention it needs in a small business.
But here is my experience: Marketing is really important because it drives your pipeline. It is what gives consistency to any work that comes through the door. It is what provides consistent revenue. Call it the security you need to be able to confidently hire a new employee.
Work on your marketing strategy:
- Nail down your target market.
- Identify their needs, their pain points.
- With that in mind, develop a plan to reach, attract, and engage your ideal client.
Take the process seriously. A ‘kinda’-approach isn’t cutting it.
2. Track Your Sales
And of course, when you say marketing… you say sales.
What I mean by this is that it doesn’t stop with marketing.
You need some way of tracking your entire sales process, from initial contact all the way through to the close of the sale; every step of the way. When you have the system in place that tracks your sales pipeline, you gain insight into how many of the leads in your pipeline are likely to convert into sales.
This information is golden because it allows you to make informed decisions on the revenue you can expect to make in the future.
Let’s do this with an example.
Imagine you have 10 leads in your pipeline. Consistent tracking tells you 5 of those will convert into sales. This means you have a conversion rate of 50%.
That information allows you to predict revenue and budget in the longer term with a level of certainty that you weren't able to do before.
BUDGETING (Step 1) STOPS BEING A STAB IN THE DARK, making you much more confident about how sustainable a new hire would be. It’s another tick on the checklist for hiring a new employee.
BUT doing this does even more. It will also expose the bottlenecks in the sales process. When you look at every sales step individually, it will pinpoint where in the process you need to fine-tune.
3. Identify And Resolve The Bottlenecks - Systems And Processes
You knew this was going to come up at some stage, right?
Following on from our last remark about tracking sales…
Time for another example:
You’re finding that leads aren’t followed up in a timely manner. As a result, you’re missing out on sales because clients move on to the next business. But just as bad is the fact that you’re spending all this precious time emailing back and forth with your clients just to book in an initial discovery call.
Maybe it’s time to introduce a discovery call booking system where people can book a time into your calendar without actually talking to you? It means clients don’t need to wait (and you don’t risk losing the lead because of it) AND it immediately frees up your (or a staff member's) time for all the other things you need to do.
Long story short, you want to get to the point where you are improving your conversion rate. You do this by…
- Getting serious about marketing
- Tracking your conversion rate
- Getting rid of the bottlenecks in your sales process
KEEP WORKING AT THIS UNTIL YOU HAVE A VERY SLICK SALES PROCESS.
Without failing, your conversion rates WILL increase and, as a result, also your income.
These are things I've done in my business to feel confident about when to hire a new employee. But it has also helped other people I was coaching or mentoring . IT’S PRACTICAL ADVICE THAT I KNOW WORKS.
Can I Afford To Hire An Employee - The Short Version
So wrapping up today's episode and giving you a bit of a summary.
If you want to know when to hire for your small business, you
- need to deeply understand your business financials and have a clear picture of your projected revenue and your expenses.
- have a vision of who you are, where you are going, and how you want to do that.
- establish a sound marketing strategy, track your sales pipeline and create a very slick sales process.
This will give you a better understanding of your target market, your sales process, and your potential revenue.
Without failure, this will strengthen your financial projections, turning that initial ‘No’ into a confident ‘Yes’.
I hope this is a clear answer to my listeners’ question. Let me know your thoughts and questions!
Still Need Some Help?
In case you still need help with the checklist for hiring a new employee, then I encourage you to book A Scale Strategy Session with me.
You can book in a FREE 60 minute call on Sandrajulian.co/scale. (Walking the talk, here peeps!)
During this call…
- We'll identify what's possible for you in your business in the next 90 days and beyond.
- We'll uncover the number one bottleneck that could be restricting your growth and holding you back from scaling.
- And we'll develop a three-step growth plan that will get results into your business as soon as possible.
Next week I am kick starting a three-part mini-series here on the podcast that dives deep into business systems, the tools, the processes and the people.
Also…It’s WINNING time!
That is… if you’re the lucky person winning the prize draw I have running for the month of February!
THE WINNERS GET:
Four weeks of my coaching time to help you with the streamlining of your business, so that the question of can I afford to hire an employee, gets an easy YES!
Two full focus planners. If you’ve been listening to the podcast for a while, you’ll know that this planner is crucial in helping me with achieving my goals. It can do the same for you!(if you do not know what I’m talking about, check out Episode 22 of the podcast )
ALL I’M ASKING IS TO SHARE THE GOOD VIBES:
Every time you share the podcast on social media, and tag me, or tag someone in one of my social media posts, you'll get an entry. (For all of my social media handles, check the show notes).
If you leave a review on the Apple podcast, you'll get TWO entries into the prize draw. I've popped a link to the Apple podcast in the show notes as well. (Hint: you don't have to use the apple podcast player to leave a review on the Apple podcast!)