Taking that exciting next step: How to know when it’s time to hire your first employee – six things to consider

How to know when it’s time to hire your first employee - Invoice2go

If there’s one thing the past few months have taught us, it’s that innovation and adaptability are prevalent traits amongst Australian small business and entrepreneurs.

With the business community contending with what the ‘new normal’ might entail as we begin to emerge from some of the most challenging months in small business history, we are seeing the emergence of new businesses, new strategies and entirely new ways of working.

Many freelancers or small businesses with no employees – whether long-standing or kick-started during the pandemic – will now be strategising about how to grow over the coming weeks, months and years.

For many, that strategy might revolve around a decision to hire their first employee. However, it’s a big step; on one hand, it’s indicative of an ambitious, growing business, but it also comes with greater risk and responsibility, especially during volatile times.

If hiring a first employee is a decision you’re currently grappling with, here are some tips to help you figure out when the time is right and what to do if you’re ready to make the leap.

Get a cash flow pulse

Understanding your business’ finances is an important first step in determining whether you’re ready to bring on an additional employee. After all, if you don’t first have the financial foundations in place, it’s probably unwise to take on the responsibility of a bigger wage bill.

So, get a solid grasp on your predictable, reliable income by studying your cash flow on both an annual and month-by-month basis. An annual view helps you understand whether, over the course of a year, you have a large enough surplus to cover the wages of an employee.

Monthly, meanwhile, will inform you of whether you have a reliable enough cash flow to pay regular wages.

While you might be used to occasionally deferring your own paycheck to ensure the cash remains in the business, an employee will expect to be paid regularly, irrespective of whether it was a busy or slow month.

Try to forecast, too, how much reliable work you’ll have in the ‘new normal’.

Also, think about the broader costs associated with bringing on an employee, and whether your business is financially viable to cover them. While a salary is clear, also take into account any tax implications, extra equipment, tools or resources they might need.

Ensure you take ongoing costs such as worker’s insurance, superannuation, training and certifications into account, too, before entering into what can be a significant financial commitment. Once you’ve taken stock, if it’s a financially viable option, there are various other considerations.

Turn the spotlight on your own professional development

When work gets busy, or you’re faced with a task that is outside your area of expertise, it can be easy to share the responsibility by bringing on an additional pair of hands.

However, before investing in an employee – whether permanent or part time – ask yourself whether you might be able to reasonably and realistically develop your own skills or knowledge to fill the vacant role.

If you’ve owned your business for a long time, it can be difficult to accept that you must change something you’ve always done to meet the evolving needs of today’s consumers.

However, today more than ever, businesses must be adaptable and willing to change to provide a service that doesn’t lose relevance.

So, if there are skills you can develop, doing a short course in, for example, basic software coding, content writing or bookkeeping could be the answer to your problems.

If the skills are beyond your capacity even then, or you wouldn’t have time to deal with the added responsibility, it could be time to consider hiring someone – even if it’s just temporarily to begin.

Consider temporary arrangements

In the midst of particular busy times, it can be tempting to hire someone quickly to get the work done.

However, if you look ahead and know that in a month or two your workload will return to a level suitable for just one – which can be common for seasonal businesses, for example – it might be a good idea to consider temporary short-term alternatives, rather than permanent part- or full-time employment.

Freelancers, for instance, provide a flexible alternative. Alternatively, including a three-month trial period in your employment contract will allow you to test the waters with a new employee, before making a longer-term commitment.

If you find that you’re forced to either turn down work or work additional hours to finish a job, regularly, it’s a good indicator that you’re ready to hire someone on a regular basis.

Outline the job description and responsibilities

Once you’ve made the decision that the time is right to bring on an extra pair of hands, sit down to map out exactly what those additional tasks will be.

It can be difficult to share responsibility with something so personal as your business, but this will give you a better idea of whether you need full-time or part-time assistance, or a seasonal employee or contractor.

From extra sales assistance and marketing, to assistance with bookkeeping, finance and other administrative tasks, distinctly outlining the responsibilities of the new role will provide you with a clear picture of who you need and when.

Map out your business goals

While it’s likely you have long-term goals and ambitions for your business, when was the last time that you sat down to map out how you’re going to achieve them?

Before bringing on an employee, it’s first important to understand where you see your business going in the future, and how an employee would help you achieve those goals.

Outline clear milestones that you want to achieve, and map out the steps that you need to take in order to achieve them. Ask yourself, “Is hiring a new employee one of those steps?” or “Will doing so help me achieve those goals?”

If the answer is yes, begin the process. However, if the answer is no, take some time to reassess your workload and skills to understand how you can achieve your vision as a one-person-band – at least until you’re ready to scale.

Know your future role in the business

At some point along your business journey, you might decide that you want to run your business, rather than be your business. To understand your role, take some time to look back at why you started it in the first place.

Was the plan to grow your venture, or did you have the intention of maintaining a steady, sustainable one-person operation? If your aim was to grow and scale, hiring an employee is a great first step.

While, as a small business owner, it’s likely you will always maintain a high level of involvement in almost all aspects of the business, it’s common for some responsibilities to fall by the wayside when you have employees overseeing particular areas.

Hiring an employee can be a great way to free up time so you can focus on broader goals and longer-term strategies.

No matter where you are in your business journey, making the decision to hire your first employee is a significant one, especially today in the wake of a global pandemic.

However, by carefully planning and forecasting the upcoming months, asking yourself some crucial questions and answering them honestly and candidly, you’ll be able to assess the situation and hit the ground running, no matter what the coming months hold.

Chris Strode is the founder of Invoice2go, the mobile invoicing app that gives small businesses and contractors control over their time and business. As a small business owner from a family of tradespeople, Chris created Invoice2go out of frustration with the lack of simple invoicing options available. For more visit here.

How to know when it’s time to hire your first employee - Invoice2go