Is It Time to Hire Your First Employee?

July 12, 2017 Rieva Lesonsky

Congratulations! Your small business has gone from struggling startup to having more work than you can handle. Is it just a temporary situation — or is it time to take the leap from a one-person business to being a boss? Here are 5 questions to ask yourself to determine if you're really ready to hire your first employee.

  1. Is business steady? Every business goes through ups and downs — sometimes business is booming, and other times it slows down. However, if your business goes through cyclical extremes of feast and famine, you probably aren't ready to hire.
  2. Are there critical areas of business where you lack the necessary skills? No one is good at every aspect of running a business, and as your business grows, your weak spots may become more obvious. For example, many startups struggle with accounting, which often isn’t an entrepreneur’s strong suit. If hiring someone with the skills you lack could free you up to focus on your strengths, it's likely a good investment.
  3. Do you have sufficient cash flow? Impressive revenues don't always mean strong cash flow. When you take on the responsibility of an employee, you need to meet payroll every month without fail. Without enough cash on hand, you’ll have to take money away from other parts of the business to pay your employee. Get a good handle on cash flow before you commit to a permanent employee. Don't forget to take into account the additional costs of taxes, workers’ compensation insurance (if required in your state) and any benefits you provide your employee when figuring out how much it will actually cost to pay him or her.
  4. Is not having an employee hurting your business? Running and growing a small business requires putting in long hours, whether you're a startup or not. However, if you have so much work that you’re missing deliverables or deadlines, making mistakes in your work or forgetting important appointments with clients, you run the risk of alienating customers and destroying your business in the long run.
  5. Is there an opportunity you can't jump on without additional help? Maybe you have an opportunity to land a really big client, expand into new territory or add a new product or service — but there's no way you can do it alone.  Don’t let your big break go by. Hiring an employee can help you expand your horizons and take your business to the next level.
  6. Are you ready to be a manager? Hiring employees requires a whole new approach on your part compared to working solo. You’ll need to motivate, discipline and lead someone else in addition to yourself. If you've never been in a management role before, make sure you're up to the challenge.

Hiring your first employee is a big step — and reason to celebrate. Your small business is on its way to the big time.

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