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Is It Time To Hire Your First Employee?

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There comes a time in every business owner’s timeline that the business becomes too big to handle alone. It’s time to think about hiring that first employee. This can create more problems than most people can possibly fathom. It’s a very big deal both monetarily and mentally.

What Are You Worth?

Most startup business owners don’t take a salary or at least a very small one. Most income is socked back into the business driving it to the break-even level where it’s self-supporting.

Look at your business income. How much salary could you take out of the business if you paid yourself an hourly wage? I’m not asking you to change anything about your business; I just need you to compute this number before you consider taking on the responsibility of an employee. What does this number have to do with the hiring process?

What’s The New Employee Worth?

An employee must pull their own weight or they will become a drain on the bottom line. Let’s examine a hypothetical situation. You hire a full time employee for $10.00 an hour — $400 a week. Let’s go back to the question I asked earlier — how much are you worth? Let’s assume that you find you are worth $50 per hour for all the things you do. You run the business, you do all the buying, pay all the bills, place the ads, and handle customer complaints along with anything else that has to do with the business.

Where does the employee fall into this hypothetical? If that employee can take 8 hours off your shoulders they pay for themselves. You get 32 hours of their labor for free. “How” you say? Let’s look at the numbers. When you, the business owner, perform a task there is a $50.00 an hour person doing that task. When the employee does that same task, there is a $10.00 per hour person doing the task.

The $50.00 per hour person should never be doing anything that a lesser-paid person could do. The $50.00 per hour person should be building the business, making sales calls or creating new profit centers. The $10.00 employee can stock shelves, help customers, or make deliveries.

Can’t Hire Until I Can Afford It

How much profit did you have the day you opened the doors for the first time? I’m guessing the answer was none. It took time for the business to realize a profit but you believed in your business plan and knew that eventually the business would be self-sustaining. Hiring your first employee is a lot like your first day of business. It will take some time for that employee to get up to speed. How quickly that happens is up to you. The quicker you can get that new employee to the point they are carrying their own weight the more profitable your business will be.

Some Final Thoughts

There is no question hiring a first employee is a scary proposition. The numbers have to work and the responsibilities of the new employee must be clearly defined. I suggest you keep a daily log of your activities — tasks you perform and the time expended. At the end of the day go through those and put a check mark next too all the tasks that could be done by an employee. Then compute how many hours that would free up each day for you to spend building your business. Could 12 – five minute phone calls produce a new customer? Could both of you working the floor produce more income? Would someone answering the phone help? If you keep that log and find you are missing your imaginary employee then your decision is made. If you don’t then perhaps you’re not ready yet. Either way you’ll know.

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