When it comes to small businesses, hiring new employees is an important step that should not be taken lightly. Growing your team can have a major impact on the success of your business, so it's essential to understand when the right time to make this move is. To help you make this decision, here are a few factors to consider:
Cash Flow: Before making any hiring decisions, it’s important to ensure that your small business has enough cash flow to support adding another employee to the team. Consider how much money you will need for salary, as well as any additional expenses associated with hiring someone such as benefits or any training that may be required.
Capacity: Take into account the current workload of your existing staff and determine if there is enough work for someone new to take on. Ask yourself if the existing team members are able to handle their existing workload or if hiring a new employee would relieve some of the pressure and allow them more time in their day. It’s also important to consider whether there are any potential projects coming up that could benefit from having an extra pair of hands on board.
Reserves: It can be very beneficial for small businesses to build up financial reserves before they hire a new employee. Having this cushion in place will give you more flexibility when it comes time to start paying salaries and other associated costs. Make sure your reserves are large enough so that you will have funds available during times of unexpected expenses or slow periods in sales.
Type of Employee: When deciding whom you should hire, determine whether you want someone as a contractor or an actual W2 employee. Depending on how much effort and commitment you require from your staff, contractors may be ideal if you don’t need someone full-time or long-term; however, W2 employees provide more security since they cannot be terminated without cause and offer access to benefits like health care coverage for both them and their families.
Ultimately, understanding when it’s best for your small business to expand its workforce is essential for success—so do your research and review all of these factors before committing!
Not sure if you should hire a new employee? If your current annual revenue is at least $1.5M then schedule a free call with us. We'll take a look at your cash flow outlook and give you our honest opinion as to whether we think you should hire a new employee. Click here to schedule a free call.