Small Business Smarts: Know the Best Time to Hire a New Employee
What happens when your business starts to grow but there’s not enough employees to keep the operation running smoothly? That’s when you need more staff, but getting them isn’t always easy. Here’s how to bring on more help without taking on additional headaches.
Can You Really Afford A New Hire?
Should you expand your business?
Sometimes, the answer implies another question:
Can you afford to hire someone else?
This might not be as obvious as it initially seems. If your business is growing at a record pace, it seems intuitive that you have extra money. But, many businesses discover that they don’t – their cash flow is being hampered by expenses in manufacturing, shipping, or QA.
Sometimes, bringing on a new employee is more expensive than the business owner thinks it is. For example, if your business currently yields $5,000 in profits every month, you might believe that you have more than enough to hire an employee at a $50,000 a year starting salary.
After all, $5,000 a month in profit is $60,000, a full $10,000 more than the salary amount you’d give your new hire.
However, that $50,000 doesn’t include health insurance benefits, which might be mandatory, worker’s compensation and unemployment insurance premiums, and FICA tax. Those costs add up quickly and will erase that $10,000 in the first year.
However, if your business would incur a one-time cost that’s prohibitively expensive, it might be work taking out business loans for bad credit if you need them – just to get the employee up and running.
For example, let’s assume you can comfortably afford to pay the employee’s new salary, health insurance, and other benefits. However, an initial training period will temporarily increase labor costs by 20 percent. You can’t afford this amount on top of the salary and other mandatory benefits.
A business loan could make sense, simply because it’s not an ongoing cost you’ll have to bear for the life of the employee.
Can You Hire Someone On Commission?
One way businesses can reduce their labor costs is by hiring a commission only, or commission-driven, employee. When you hire a commissioned salesperson, you’re not laying out a lot of money for labor costs unless the employee produces results (drives sales) for the company.
If your customers are happy with your service or product, and your current employees aren’t already overworked, a commissioned salesperson might be perfect for your organization.
How Do You Interview Candidates?
When interviewing candidates, you should consider a few things beyond their previous experience. For starters, talent and ability is almost always more important than a specific skills set.
If an individual is capable and teachable, almost any skill can be taught to an employee. However, passion, drive, and talent are extremely difficult, if not impossible, to teach.
Work experience hints at what an employee might be good at, and education gives you an idea of background knowledge, but this can also sometimes be deceiving.
For example, an candidate might have obtained an MBA, but they might not understand the sales process. Sure, they’re a business major, but this doesn’t mean they have a full understanding of how the sales process works, how to be a great salesperson, and how to move product.
Can You Manage People?
Finally, can you manage employees? If you already have employees, the answer might be obvious. But, maybe you’re only managing 2 or 3 employees. What happens when you take on 5 or 6 or more employees? Can you manage a team?
If this is a shortcoming of yours, you might also need the assistance of an HR company or a manager.
Nathan Thompson is a business and finance consultant. He likes to write about business and money topics. Look for his posts on many finance and business blogs.