When to hire more workers for your small business
Hiring is not just about how but about when. With inflation at a 40-year high, workers are expecting higher salaries to keep up with the cost of living. That doesn’t mean now is a bad time to hire, but it does mean that you need to think carefully before making a decision. After all, knowing when to hire is difficult: hire too late, and you run out of capacity as your business takes off. Hire too early, and your cash flow takes an unexpected hit.
The short answer is that you should only hire if you’re turning down new business and can cover the costs of an additional employee. However, for a more in-depth look, here are four questions that can help you determine whether you are ready to hire more staff:
Can you afford a new employee?
Before hiring someone, ensure that you have enough funds to cover the additional costs, such as salary, payroll, and workers’ compensation insurance.
The best thing you can do is talk to a business accountant and review the numbers. For starters, you need to forecast your revenue in the year ahead. Look at the amount of revenue you expect to generate and compare it against the annual wages you plan to pay a new employee: do you have enough funds left over (after paying the new employee) to cover all of your other business expenses, including the salaries of your other workers, overhead, materials, etc?
Take your time and analyze the situation carefully. If the numbers don’t make sense, focus on keeping your current staff satisfied while pursuing sustainable growth.
Is your customer service slipping?
It can be very stressful to have clients breathing down your neck, calling about unfilled orders, missed deadlines, or emails and phone calls going unanswered.
If you’re experiencing a drop in product quality or customer service, you should hire additional employees. Losing customers can tarnish your business’ reputation permanently. Timing is everything here: get the extra help before customers decide to move on from your business.
Are you turning down new business?
When your revenue growth slows down or stops, it could be that you have already reached all available consumers in your market. In that case, there is nothing you can do to increase revenue growth - there are no customers left to serve.
However, more often than not, revenue growth stalls when you hit a capacity limit: it's not that you have run out of customers, it's that you've run out of manpower. As such, to meet increasing demand from customers, you should add to your headcount. New customers are hard to come by, so respond to the situation quickly before they move on and try another business.
Are you getting the most out of your employees?
When you’re stretched too thin, you have employees working on things they shouldn’t be working on. This is a sign that you need to hire more people.
For example, senior employees stuck doing low-level tasks (such as administrative paperwork) could easily delegate that work to a new employee. And while it’s common for employees to handle tasks unrelated to their roles, your tech manager should not spend most of her day on business accounting. (By the way, if you don’t want a full-time accountant, you can handle your finances with bookkeeping and expense tracking applications instead. We made some recommendations for that here).
That's why you should figure out how much your time is worth and put a dollar value on it. If you can afford to delegate some of those low-level tasks to a new employee, that will free you up to grow the business and innovate.
Is now a good time to hire?
As a small business owner, hiring a new employee is a significant investment - it can be the difference between growing your business or wasting resources and falling behind. The four questions in this article should at least help you get the timing right.
If you want more detailed advice and recommendations for your business, reach out to info@withhansa.com and tell us about yourself - we can find a solution to your problem. Schedule a free consultation so we can learn more about your business and improve our offers.
