In the third of this step-by-step series, Is It Time To Think About Hiring, we’re going to take a look at whether or not your business is financially ready for a new employee.
1. Create A Budget
Take the above costs of hiring and add these to your annual budget. If you don’t already have an annual budget, check either out our article, How You Can Achieve Your Financial Goals, or alternatively book a call with us for help.
2. Forecast Your Revenue
Here’s the fun part! Work out how much more revenue you think you can earn with a new employee. New service, more billable hours, whatever makes most sense for your business.
Be conservative about your forecast for the first three to six months. Bear in mind that your new employee will need an initial training and induction period to familiarise them with your requirements. And you’ll need time to market and promote any new services. Remember also to factor in annual leave for your new employee.
3. Make Sure You Have Sufficient Cash Reserves
Make sure you have three months employee costs in the bank. This is important, not only for your peace of mind, but because it’s essential you allow induction time for your new employee to get up to ramp up to full capacity.
4. See Whether You Can Trim Any Expenses
Of course, there’s a cost to taking on a new employee. But this may also be an opportunity to trim other costs too. Taking on a new employee may also mean you can reduce expenses like contractors or outside services.
If you’ve put together your budget, you’ve got the cash flow to pay a salary including a three-month financial cushion, and the new revenue of the employee outweighs the additional costs, then it’s time to start writing the job description.
What If You Can’t Afford An Employee?
Once you’ve done your forecast, you may realise that you can’t afford to take on another employee right now. If that’s the case, there are other options.
Hire A Contractor
Hiring an experienced contractor will have a higher hourly cost than an employee. But you’ll save money by paying them for only for the hours they work.
Hire A Part-time Employee
There are lots of reasons why somebody would prefer to work part-time rather than full-time employee. Working around childcare or other caring commitments or scaling down before retirement for example.
Improve Your Bottom Line
Focus on your most impactful marketing activities to drive up sales and increase turnover, trim any unnecessary costs to drive up profits and build up your cash reserves to include three months employee costs in the bank.
Give it three months to improve your bottom line, and then review your financial forecast to check whether your business is financially ready for a new employee.
Next week, we’re going to look at who you should hire first.
The other articles in our step-by-step series are:
Other articles that will help you to grow your trades business include:
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