How Do I Know if I Can Afford to Hire?
By: Sabrina Starling, PhD, PCC, BCC
“I’m working 60+ hours per week, and my team is busy, too. I want to hire, but the cash flow is tight. How do I determine if I can afford to hire?”
This is a common question, and it’s a good one. It’s wise to consider if you can afford to hire before you add to your payroll.
Let’s start with the opportunities that hiring creates. Most small business owners work extra hours because they are bogged down doing $10, $50, and $100 per hour tasks in their businesses. In my experience, when business growth stagnates, the owner needs to free up time to do the $10,000-an-hour activities that grow the business. These activities include business development, putting systems in place, and innovating.
Are you curious about what a $10,000-an-hour activity is? You can download my chart of $10,000-an-hour activities at www.tapthepotential.com/10k. This chart distinguishes $10, $100, $1000, and $ 10,000-an-hour activities and is an excellent tool for determining what to delegate.
How much time would be freed up for you when you delegate more $10, $50, and $100/hour work? What could you do with that freed-up time that increases the business’s revenue?
Another consideration is how much of your current team members’ time is being consumed with $10 and $50/hour tasks. What $100 and $1000 an-hour activities could they do if their time was freed?
Next, determine how much you can afford to pay. Here is a resource to determine competitive wages and salary: https://www.bls.gov/oes/home.htm
Consider the impact on your monthly payroll when you add a new team member. Be sure to take into account the fully burdened impact by including payroll taxes and benefits in your calculation.
What can you reduce or eliminate if your cash flow is tight with adding another person to the payroll? The first place to reduce expenses is underperforming team members on your team. They can cost you more than you realize due to mistakes and re-work, as well as the potential lost revenue you miss out on because they damage your reputation. You may be holding on to them to get some of the work done. It’s not worth it, though, when you consider that you can replace them with A-Players.
A-Players can be 900-1200% more productive than warm bodies. It’s possible to replace several underperforming team members with one A-Player. This will reduce your payroll and allow you to pay the A-Player team member competitively. In my book, How to Hire the Best, I detail the strategies for attracting and hiring A-players.
I recommend hiring at the lower levels of the role chart and hiring part-time employees or independent contractors. This reduces your risk and allows you to build your “hiring muscle” over time. It also creates opportunities for advancement within your company as you delegate lower-value activities from existing A-Player team members to newer team members. Your A-Players can move up, produce more value for you, and take more off your plate so that you can focus on $10,000-an-hour activities that grow the business.
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Sabrina Starling, PhD, PCC, BCC, The Business Psychologist, is the international bestselling author of How to Hire the Best and The 4 Week Vacation®. Founder of www.tapthepotential.com and host of the top-ranking Profit by Design podcast, she and her team coach entrepreneurs to take their lives back from their businesses. They are on a mission to send 10,000 entrepreneurs on a 4 Week Vacation® in 10 years.