Is there such a thing as hiring too early? Just this past week I have had two business owners tell me their business started to grow so they hired more people and then found out they hired too early and had to scale back.
How do you know when the right time is to hire new employees? A hint – it’s not necessarily when your revenue grows or you get a couple new clients that put you over the edge.
Here are a few key questions to ask yourself:
- What does my bottom line look like? Is my business consistently profitable?
- How are my current employees being utilized?
- Can the business (and I) afford it?
Hiring new employees should be a planned, strategic move!
If you’re not currently making a consistent profit, while paying yourself a market wage, hiring an employee could put you in a hole you won’t be able to dig yourself out of. You want to review the numbers at this point to see what can be modified in the business as it is.
Do you track the utilization of your current employees? You want to consider if your employees are being “effectively” utilized as well as fully utilized. Make sure your employees are in the right role for their strengths and the well-being of the business. Make sure they’re fully utilized, and paid in accordance with that utilization and value, before hiring additional labor. Consider if employees can perform cross-functional roles if not fully utilized.
Knowing if you can afford the additional labor costs is best when planned. Here you want to look beyond the numbers to see what the overall picture is telling you. Make sure you’re forecasting and analyzing where you want to be, expected obstacles, and potential future cash outlays when playing things out. Estimate the future labor costs and start setting aside this “payroll” on a regular basis ahead of time so you can see the effect it has on your business and profits.
To discuss implementing growth strategies in your business schedule your breakthrough session here, https://quantumscalingstrategies.com/breakthrough