Do your homework before first hire
Q: I’ve been running my business by myself since I started it a few years ago. I could sure use some help, but I’m not sure I can afford to hire an employee. How do I figure that out?
A: First determine what type of employee would be the most beneficial. Do you need someone to help with the administrative tasks, someone to generate more sales, or someone to give you a hand with the work you do? Would you need someone to work full time, or would part-time help make enough of a difference? Create a job description by writing down all the duties you’d want your new employee to handle.
Once you’ve figured out the type of employee you’d need and for how many hours, you can estimate how much you’d have to pay that person. Websites such as Salary.com or Payscale.com can give you an idea of the going rates for various positions. Don’t forget to factor in taxes and benefits.
When you have a good idea of the salary you’d need to pay, you can evaluate your ability to afford it. Start by looking at how much money you’ve been making in the past months. Pay particular attention to cash flow.
When you only have to worry about paying yourself, you might be able to manage for a month or two if cash is tight, but that won’t work when you have to cut a regular paycheck for an employee.
Then you should project what hiring an employee would mean in terms of additional revenue. Even though your purpose in wanting to hire someone is to take some of the burden off of you, extra help also should enable your business to make more money.
If your business has a physical location, determine whether your workspace would be able to accommodate another person. If not, you’ll need to look into what it would cost to move.
Also make a list of any additional furniture, equipment, supplies and services your employee would need and determine whether you have the resources to provide them.
USA Today columnist and small-business expert Rhonda Abrams has published a “Hire Your First Employee” guide that you can download for free at http://hire.intuit. com. It provides advice on determining the type of employee you need and how much you can afford to pay.
Abrams recommends that once you have made the decision to hire, be sure to have enough money saved to pay salaries and taxes for at least three months. That way, you’ll have a cushion if you do encounter a cash flow problem.