Is It Time To Hire An Employee?
Mike is running a business debt free, but he thinks it might be time to hire an employee. When does Dave think the right time to hire someone is?
QUESTION: Mike just started a web design company and wants to know when the right time to hire people is. He runs the business debt-free. What advice can Dave give?
ANSWER: I don’t know that there’s an exact amount of money you should save before you hire, but when I bring someone on board, I need to think about them. When I bring someone onto our team, their family is counting on me having my act together to make payroll. I don’t take that lightly.
You need to have some retained earnings so that a bump in the road won't make you miss payroll. Then look at your cost analysis. If an employee costs $30,000 a year, they need to make you twice that to justify their employment or they need to free you up so that you can generate more revenue. You can pay your employees a salary, but it can be a survival salary with a production quota or commission. But give yourself enough room to be flexible and have open communication with the employee so that when you get ready to make changes, they don’t freak out.