You’re maxed out. Customers are complaining about late deliverables or slow customer service. No matter how hard you work, you can’t get caught up.
Is it time to hire your next employee? It may be. Many small business owners are seeing increased demand, with 48% expecting revenue to increase in the next 12 months, according to a recent survey by Bank of America. There’s a point where the only way to handle additional work is to hire an additional employee.
But the percentage of owners projecting increased revenue is down slightly from 52% in the fall of 2016, and many are cautious about hiring too rapidly.
According to the survey, plans to hire have dipped to their lowest point in five years. Just 18 percent of small business owners are planning to hire in the year ahead, down 7 percentage points from fall 2016. Instead, respondents say they are more focused on retaining existing employees.
Against this backdrop, how do you decide if you should make that next hire? Here are some questions to ponder.
Is the surge you are seeing in business likely to continue?
Sometimes it can seem like an increase in demand will go on forever, but it turns out to be shorter-lived than expected. For instance, if you sell a product for which business-to-business customers can get a tax break, demand may be high toward the end of the year, when your clients are trying to maximize deductions. That doesn’t mean your sales patterns in December will necessarily reflect what they will be every month for the year to come. Before you hire someone to meet a sudden surge in demand, consider what may be driving the increased business and ask yourself how likely it will be to continue consistently.
Have you exhausted other ways of expanding your capacity?
Even if you can’t handle any more work yourself or with your existing team, you may not need to hire an employee to get more done. Many owners look to other means of productivity first. For instance, bringing on outsourced help from a bookkeeper, a marketing consultant or a social media freelancer can help you free up time in your schedule or your team’s, without the commitment that comes from hiring an employee.
Automation can also be a good way to extend your reach. There are many technologies that can help you get more done without hiring an additional employee. Using customer relationship management software or a marketing automation tool can often free up a lot of time spent keeping in touch with customers, after the initial period where you get up and running.
Also look into software that can help you automate routine administrative tasks that might otherwise take up time for you or an administrative assistant. For instance, a low-cost app called ScheduleOnce allows you to send a link to contacts showing your public calendar, so they can select a time you are available and book an appointment. Using an app like this can save you hours of emailing back and forth about when you and your contacts are free to talk or meet.
Are you financially prepared?
Hiring an employee is a big responsibility. That individual will be depending on you for a steady paycheck and perhaps benefits. You can’t just opt out of running payroll if money is tight.
Many owners feel more confident about adding someone to payroll if they can bank three to six months of compensation for a new hire ahead of time. That way, they know they won’t have to lay off their new employee if something unexpected occurs, like the loss of a big contract or an unexpected retraction in the economy.
If this is the first time you have added someone else to the payroll, it’s also important to consider the ancillary costs. Unlike when you hire contractors, you will need to pay the employer’s portion of taxes on their pay. And you’ll also need to hire a payroll service, which can run you in the neighborhood of $50 to $100 each time you run payroll.
Finally, you should consider your cash flow for at least the next 12 months before you make a hire. Even if you have high revenue, if it tends to wax and wane throughout the year, you may not have steady enough cash flow to pay someone else, and all of the ancillary costs of a new hire. By looking for ways to line up work that brings you steadier cash flow before making your next hire, you’ll be able to do so with confidence—or make an educated decision to put off hiring for another six months or a year.
Adding a great new member of your team can be a wonderful way to bring new energy and talent to your business, but only if you’re prepared