It’s amazing to look back at the success of your business and see that it has grown so much, but as it grows, so does the workload you need to take on alone. At times like these, it can be tempting to hire more employees quickly, but this may not be the best idea. It’s important to make sure that your business has enough money and resources to support additional employees before you begin the hiring process in order to avoid costly mistakes and setbacks for your business down the road. Read on for some tips about how to calculate the financial funds you need before bringing on new employees.
The Issue Of Scaling
It’s said that only one out of a hundred startups make it past the first year. And while those odds might not seem so daunting, they can be a scary statistic for an entrepreneur who knows they have a product or service with a sustainable market and demand. Now more than ever, scaling is key for any successful business. With revenue increasing, there will come a time when you need more employees on board. This means more expenses, which has the potential to put some entrepreneurs off hiring new staff members if they aren’t sure about what that entails in terms of financial funding.
Calculating Your Costs
Take your gross sales and subtract your production costs, then divide that number by the number of hours you need additional help per week. This is how much it will cost you per hour to have someone on board. Multiply that number by 40, and this is how much it will cost you per month for salary and benefits. Depending on what resources or tools you’re already using in your business, you might also have to factor equipment rental costs or other variable expenses into this equation.
Start From The Bottom Up
Every successful business requires staffing and human resources in order to be running smoothly. The person that you’re looking for should fit into your team well, be capable of handling the tasks being delegated, and have a good work ethic. These are just a few aspects that are important when hiring new employees. When making a hiring decision, it’s important to take into account your budget and financial stability as well. Calculating what funds you need for more staff will help ensure that your business doesn’t take on more expenses than it can sustain at one time.
Sales Costs
As with any business, as your company grows and becomes more successful, you will need to allocate more financial resources towards other aspects of your company such as marketing or new equipment. But before investing in these things, it’s important to get a better handle on your overall financial health so that you don’t end up hurting your company later on by overspending. Once you know what your expenses are now and what they’re likely going to be in the future, then you can invest accordingly without overextending yourself.
Fortunately, there are lots of ways you can figure out how much money is necessary for hiring more employees. Some companies track this information using a simple mathematical formula an expansion rate to determine how much they need annually when they start adding employees at a certain pace.
Customer Support Costs
A lot of business owners struggle with making the jump from needing one or two employees to needing a larger staff. They may not know where they’ll find great talent, how much an employee costs, and how much customer support will cost them each month. It’s important for you to calculate this in advance so that when you get more customers you don’t feel overworked and can build your business to sustain a higher headcount.
#1 – Get clear on why you need more employees. Is it because there is no room for growth as an individual or do you need a buffer between bursting at the seams with work?
#2 – Figure out what hours are available in your day.
Marketing Costs
At first, a lot of marketing can be done via social media and other outlets. For bigger companies, this won’t really work as they will require something like a PR team which costs money. Marketing takes quite a bit of time and effort, which is why it’s necessary to calculate how much you need for staff before hiring new people. Make sure that your company has enough financial funds for someone’s salary and then factor in if their salary will fluctuate (and if so, how much) or if they’re an intern and whether or not their internship ends at some point. It all comes down to the person’s experience level, goals (whether they have them), and any additional factors you might consider before beginning a business partnership with them.
Content Costs
When your business is thriving and you need more employees, you may find that it’s difficult to calculate how much financial backing you’ll need. In a best-case scenario, you can use an Excel spreadsheet that helps break down your cash flow. It’s important to be realistic about what your company needs as it grows, so don’t forget to budget for things like advertising or hiring staff. When calculating the funds you’ll need for increased staffing, consider some of these factors:
-The number of new employees (or positions) needed
-Whether there are prerequisites for those new employees
-The wages of each position
-Taxes on wages and potential benefits
Additional Expenses
Once you’ve identified what kind of staff you’ll need, go back and look at the last month’s expenses and evaluate how much more it would cost to support your business with a larger team. Start by looking at labor-related expenses such as additional paychecks (payscale difference) and payroll taxes. Then, consider additional general operating costs like space for employees, supply ordering or inventory control costs, equipment purchases, travel, and time for onboarding. Consider these new projected costs for about six months or so just to ensure that you’re planning appropriately for all of the increased expenses involved with hiring more staff.
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