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 successfully manage their businesses.
This question often strikes small business owners early in the process, especially as a company becomes more successful. A self-owned, self-run storefront can only accommodate so 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 figuring if that extra set of hands will offset his or her own payroll costs. Regardless of how a small business owner chooses to handle the situation, feeling consistently overwhelmed or falling behind on work is a good indication 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 ahead 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 held stable, however – utilities and inventory usually do not fluctuate excessively, and technology allowances can be considered cumulative, so long as nothing breaks, but these figures will show based on current income 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 a decision that is essential to get right. 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 more work can be handled by the entity. In terms of morale, an owner with fewer mandatory tasks will be able to focus on improving existing systems, networking with customers and building public image. They can delegate tasks to create a system that can enhance output or create better 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.
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 on a daily basis, 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.