In this month’s blog we are going to look at the topic of when to decide if you need to hire an employee for your company. So this could be your first ever employee (so you no longer will be a solo-preneur) or you have a few employees, & maybe you need to hire a few more.
Regardless of whether it’s your first hire ever, or you need to add to your existing head count, you need to decide do you really need to hire?
So one easy way is to do a cost/benefit analysis-so what are the costs associated of hiring for that particular role you are thinking of, and then what are the benefits associated.
The best place to start would be to think of the position you want to possibly hire for. What does that position do on a day to day basis? Think of what department (or function) this position will be in. Will this role alleviate or take items off your plate so you can focus your time on more important things like increasing your client base.
So that takes us into the next step of what kind of value would this new employee create? Here think of different types of value creation such as increasing the number of clients, creating administration efficiency, product development, assisting with deliveries, or assisting with the delivery of client work.
Once you have figured out the type of value this new position would create, next you will think about how to create this value. For example with administration efficiency how would that create value in your business. Let’s say right now, you are the only employee in your company so you go out get the clients, create the sales presentations, proposals, market your company (example attending networking events or social media), close the sales, deliver the final product or service to your client, invoice your client and so on.
So let’s say you want to alleviate some of the administrative work you do such as creating the sales proposals or even emailing them out; invoicing your clients & following up on outstanding invoices, or doing your monthly bookkeeping. Hiring an Administrative Assistant could take those administrative tasks off your plate thus allowing you to focus on getting more sales into your business.
Or let’s say you already have a handful of employees, but each of their workloads just keeps getting bigger and bigger. Is it possible to sit down with those employees to see if hiring an additional employee would lessen that workload? Work with them to find out what those tasks are, and then you can see whether or not it makes sense to hire another full or part time employee.
The next step is to figure out what your costs are because before you go ahead and post that job and hire someone, you have to make sure you can afford to pay this person-don’t forget now there are new costs added onto your already existing costs.
Some costs to think about are:
- How much you will be paying them-i.e. salary. Will you pay them an hourly rate, annual rate, and most importantly how much will you pay them? Don’t forget by law you need to pay them whatever the minimum wage is for your province or territory
- Will they receive any type of bonus for performance or maybe commissions if it’s a sales role
- Will they receive paid vacation or whatever the minimum standard is for your province or territory
- Will they have health or dental benefits
- What are the workplace costs associated with hiring this role-for example do you now need to rent office space and if so how much will that cost. Do they need furniture like a workstation/desk, and chair. What kind of computer will they need and what type of software will they need to perform their job. Do you need to get a separate phone line or will they need a company cell phone?
- Don’t forget about your time in managing this employee right from onboarding them on day 1 to however long they stay with you
- Does their role involve travelling and if so will they be using a company car or their own personal vehicle. If it’s a company car you will need to add them to your business insurance policy, so figure out what the cost of that would be. If it’s their personal vehicle you will need to reimburse them for the kilometers driven
- Will you be providing them with any educational benefits such as training courses related to their role
- Now that you have a handful of employees what social events will you do? For example doing a Christmas office party or a Christmas lunch
Next look at your revenue coming in and expected sales to come over the next 3-6 months. Based on that plus all the costs associated with adding this new role to your company can you afford it from a financial perspective? Do you need to obtain a certain number of net new clients or somehow increase your profits in the business in order to still make a profit by hiring this new role? Here you are looking at will adding this new role leave you still making money or breaking even, or maybe even losing money.
Yes hard decisions need to be made, but it’s much better to know ahead of time if you can actually afford this new role than hire for it, and realize too late that you aren’t making enough money to pay this person on top of your current costs.
As always MKS HR wants to give you back your time because it’s so precious to you. We have created a Cost Benefit Analysis that you can download for free. This way you can sit down, figure out the benefits to hiring this new role, and the costs associated so you can decide if you are able to hire for this role!
Still have questions or would like MKS HR to help you in your hiring process? Click here to book a complimentary Discovery Call with MKS HR.