When Should You Hire Your First Employee?

By Thursday Bram

For small businesses interested in hiring employees, there are two opposing temptations: First, you may want to put off hiring your first employee as long as possible to limit your payroll expenses. Second, you may want to get an employee into the office as soon as possible to help you grow your business. Balancing between these two considerations is crucial, especially when you’ll be bringing in the first employee your business will have.

The Financial Aspect

A good general rule to decide if you’re financially ready to hire an employee is to consider whether you can afford to pay that employee’s salary for the year — without digging into the money you, as the owner, need to take home. Are you going to be able to pay your employee even if there’s a slow time in your business? Considering that there are so many ways to bring in temporary or contract employees to cover gaps, without making that sort of financial commitment, it’s not unreasonable to wait until you can be sure that paying an employee won’t be a problem.

Once the money is in line, though, the temptation to wait a little longer may still be present. If an employee is necessary for you to continue to grow your business — and your business is in a good financial position for bringing in an employee — waiting can actually hurt you. You may wind up limping along, trying to continue your company’s growth without the human resources that are really necessary.

The Timing Aspect

There are times that are certainly better than others for bringing in a new employee. After even a short time in business, you’ll likely notice cycles in your business. They can be big cycles — maybe the time around the holidays tends to be slow for you — or small ones — you just can’t seem to land new customers on Mondays — but they are present. Taking a look at the those cycles can help you decide when the best time to hire an employee may be.

While a slow time may seem less than ideal or hiring a new employee from the cash flow point of view, it is worth remembering that you may have more time for training a new employee and bringing him up to speed if you choose a slower point in your business cycle. This, too, can be a question of balance: you may want to shoot for the end of a cycle if your business goes through longer cycles, rather than the beginning.

There’s no hard and fast rules about hiring your first employee, of course. Every business is different and what works for one company may not work for another. The more understanding you have of your business’ financial situation and what sort of cycles your business goes through, the better positioned you will be to make decisions about bringing in your first employee.

Image by Flickr user Quinn Dombrowski (Creative Commons)

This entry was posted on Thursday, December 16th, 2010 at 8:00 am and is filed under Workforce. You can follow any responses to this entry through the RSS 2.0 feed.


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