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When are you ready to hire your first employee?

The decision to take on your first employee is a big one. While on one hand it signifies growth and potentially increasing opportunities, it also comes with greater risk and responsibility.

There are those who will say you should take on support as quickly as possible so you can focus on growing quickly, and make sure you don’t miss out on any opportunities. Those who are more risk averse will say the only time you should take on the added responsibility of someone else’s paycheck is when you are 100 percent sure the time is right.

Ultimately, the decision is yours. Here are some tips to help you figure out when the time is right for your business:

Understand your cash flow
As a first step, it’s important to get a solid grasp on your predictable, somewhat guaranteed income moving forward. Look beyond an average, and study your cash flow month by month, including any times that are traditionally slow.

Think about the true costs of bringing on an employee. The hourly wage or salary is obvious, but what are the tax implications, and how much would you pay in social security, or equipment or tools they may need? You may also be on the hook for training or certifications.

Consistent profits
Looking across the past year, are your profits fairly consistent? Is there profit every month and if there isn’t, does revenue the next month balance that? While it can be normal for a business to have more and less profitable months, when you have an employee, you cannot defer their payment as you might your own, waiting for the busier month to come along. Taking on an employee you must be sure, month after month, that you can meet the payroll regardless.

Know your workload
If you’re in the midst of a particularly busy time, it can be tempting to hire someone on the spot to get you through those times. If, however, you look ahead and know that in a month or two you’ll just have enough work for one, you might be looking more at temporary short-term help.

If you’re regularly turning away work, or taking it on but having to work extra hours to get the job done, that can be a good indicator you’re ready for someone to help on a regular basis.

Identify what the job will be
It may sound obvious, but you should know specifically what tasks you need assistance with. Take a moment to be explicit about it and write it down. This will give you a better handle on whether you need full time or part time assistance, or whether a seasonal employee during the busier times might make more sense. Perhaps someone to handle one aspect of work, not as an employee but as a contractor, makes more sense.

Having defined roles and responsibilities, and the criteria under which these need to be completed, can also help you make sure you’re hiring the right person for the job, and that both of you know what is expected.

Knowing your own role in the business
At some point, many business owners decide they want to run the business, rather than be the business. Others may never want to give up that level of involvement and may choose to stay the one and only primary. Understand why you started the business. Was it for growth or with the intention of always maintaining a one-person shop? How much involvement do you want in the future? These are important questions you should address before making the decision to hire.

Start with a temporary arrangement
No decision has to be final. Build a 3 month trial period into your employment contract so you can test the waters with new hires before committing in a more substantial way. This gives you a chance to assess the actual employee, or bringing someone on to help altogether.

If you’ve already hired someone, are there any lessons you’ve learned along the way? Share with others in the comments. 

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