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Is It Time to Hire Your First Employee? Here’s How to Tell

Updated on January 17th, 2022
Hire Your First Employee

It’s a momentous time for any small business owner: Hiring your first employee. It’s a signal to the world that your company is growing and on its way to becoming the massive success you always knew it would be.

But amid all the excitement, there’s worry. What if you’re not ready to hire anyone yet? What if you’re making a huge mistake, and hiring that first employee is the beginning of the end for your company?

It’s a decision that shouldn’t be made lightly. There are plenty of risks involved in hiring, and hiring too soon could restrict cash flow. And if your company isn’t ready for another employee, the new hire could end up sitting around with nothing to do. Plus you’ve got to worry about managing that employee along with all the HR paperwork, legal paperwork, and financial paperwork that comes with hiring.

So is it really time to hire on a new team member?

Here are a few questions to ask yourself to see whether your company is ready for the challenges (and rewards) to hire your first employee.

1. Are You Desperate?

Although it’s tempting, the very worst time to hire someone is when you’re desperate. Desperation leads to bad decision making, and you’re far more likely to hire the wrong person if you choose the first person who walks in the door.

Hiring isn’t something that should be done at the last minute. If you haven’t spent time thoroughly considering what your new employee would be tasked with, you’re likely to end up with a team member who has no idea what they were even hired to do. This not only leads to wasted time (and money), you’ll also end up with a frustrated employee.

If you’ve been thinking about hiring someone for a while now and you’ve got a concrete (or at least semi-concrete) job description nailed down for a future employee, chances are you’ve thought it through enough to hire the right person for the job.

2. Could You Be Earning More Money?

Basic math says that you should be earning more money from your new employee than you’re paying them in order to make a profit. But many entrepreneurs don’t think this through enough before hiring someone.

Every employee should be helping the business earn more money, whether it’s by handling the day-to-day tasks so that you can focus on big picture ideas, bringing in new clients, or creating new products.

Think about all the tasks that need to be done at your company, then consider which ones will earn you money. You may be able to identify several things that you’d prefer someone else do for you, but if those things aren’t making more money for the company, you’ll end up losing money by paying someone to do them.

However, if those tasks could dramatically grow the business, hiring someone to do them could be just the thing you need to take your company to the next level.

3. Are You Turning Away Customers?

A clear sign that you need help is when you’re turning away work because you simply don’t have time to handle everything yourself. However, this doesn’t automatically mean that you should hire someone.

Take a good, hard look at your finances to see if you’d have enough revenue from the extra customers to pay another employee. While it may seem like you’re losing a lot of money by turning customers away, in reality, it may not be as much as it would cost to hire, train, and pay a new employee.

It’s also important to consider your overall goals for your company. There’s nothing wrong with turning customers away if you prefer to keep your company small to avoid the headaches of growing. But if you have dreams of growing your business into a multimillion-dollar corporation, turning away business isn’t the fastest way to get there.

4. Are Your Customers Complaining?

Another clear sign that you need help is if your customers are affected by your workload. For example, if you sell products online and you’ve received so many orders that it’s taking you weeks to get them shipped, your customers will likely get upset at the wait.

While negative reviews aren’t necessarily a good thing, they can signal to you that it’s time to scale up and hire some help. Maybe you just need someone to answer phone calls and reply to emails, and those hours you save can be put toward fulfilling orders and gaining new customers.

You may also want to simply hire temporary or part-time employees if you only need a few hours of help or could use an extra set of hands during the busy season. That way your customers are still happy, but you don’t need to worry about the hassle of hiring full-time workers to keep up with the demand.

5. Still Not Sure? Try Contract Workers

If you’re still on the fence about whether you should hire a new employee or not, you can test the waters with freelance, or contract, workers. Contract employees typically aren’t as expensive as full-time workers, since you usually don’t have to provide benefits such as health insurance, a 401(k) plan, or paid time off.

You also don’t have to make any major commitments with contract workers, so if you only need help during the busy season or for a few months after taking on a big client, you can simply hire someone for a few months until their contract is up.

Then, if after having the contract employee helping you out for a few months or a year, you decide that you could use someone like this full-time, you can offer your freelancer a full-time position with the company.

Final Thoughts

In the end, choosing whether to open up the floodgate of resumes and hire your first employee is a highly personal decision that depends on several factors. While hiring can be a major risk, it can also bring along major rewards. It’s very challenging (and sometimes impossible) for most companies to grow without additional help, so it’s a hurdle every small business owner will face at some point.

There will be mistakes (every business owner makes them) but hiring new employees can be the stepping stone your company needs to take it to the next level.

William Lipovsky

William Lipovsky

William Lipovsky owns the personal finance website First Quarter Finance. He began investing when he was 10 years old. His financial works have been published on Business Insider, Entrepreneur, Forbes, U.S. News & World Report, Yahoo Finance, and many others.

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