Starting a business is hard—putting together a financial plan, getting money together, finding a location, purchasing inventory, setting up management and marketing strategies, along with the dozens of other setbacks and windfalls that go into getting a company off the ground.
But do you need more people to run it? Many entrepreneurs wonder if they need additional staff to manage their businesses successfully.
This question often strikes small business owners early, especially as a company becomes more successful. A self-owned, self-run storefront can only accommodate many orders and custom requests before the owner is overwhelmed. The problem is determining how much income is needed to balance the expense of paying someone else to help out and determining if that extra set of hands will offset his or her payroll costs. Regardless of how a small business owner handles the situation, feeling consistently overwhelmed or falling behind on work indicates that it is time to find another set of hands to help out around the shop.
Do the Math
If a financial calculator is needed to come up with exact figures, then so be it—better to take the time before the hire than find mistakes later and have to fire worthwhile employees. As Inc. Magazine recommended, the best way to figure out a new employee allowance, so to speak, is to figure out costs versus expenses at the current output margin.
Considering that a new hire will not be able to produce as much at the start as later in that person’s career, plan at least two months for training and ramping-up to occur, and assume that by month three, that person will be handling an equitable amount of work as is currently being handled. Costs should always be stable; utilities and inventory usually do not fluctuate excessively, and technology allowances can be considered cumulative as long as nothing breaks. Still, based on current income, these figures will show what is left over monthly to apply to a new hire.
Costs and Benefits
Weighing the positives and negatives of a new employee can be difficult for first-time owners, but it is an essential decision. Paying a new set of hands is a dire expense in small companies, and if that person is not a good fit or decides to quit, it could pose an undue strain on a self-run organization.
On the other hand, there are a lot of benefits to bringing someone else on board, and not just in the fact that the entity can handle more work. In terms of morale, an owner with fewer mandatory tasks can focus on improving existing systems, networking with customers, and building a public image. They can delegate tasks to create a system to enhance output or improve customer service. It also means that, for once, an owner can take a day off if there is high enough confidence in the new worker.
How Output-Based Wages Can Benefit Employers
Calculating what a person should be paid can also be based on the amount of goods they create, rather than just hours worked, depending on the kind of business looking to hire. Some companies will bring on a new person with the impetus that their income will be per item or daily and that, after enough time, if the person proves to be a good fit, he or she will be given a regular paycheck. This can reduce the risk involved in the hiring process.