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When Should I Hire? 4 ways to tell you’re ready financially

October 18, 2022

Cash Flow

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You hear about it all the time; your business besties are telling you that you shouldn’t be doing it all on your own, but you keep asking yourself “When should I hire? How do I know I’m ready?” This post will walk you through 4 steps to make sure your finances are ready to hire whether it’s a contractor or an employee.

When should I hire – Pre-work: Know what you’re outsourcing

I know, it seems obvious but I’m going to put it out there anyway because if you are trying to decide if it’s the right time to hire but you aren’t sure what tasks you even need to outsource…

First – go read 11 things to Never Outsource

Then – go read What you should outsource first: The 5-step process to help

Now, have you read them? Like, really read them and done all the steps? Are you still asking yourself “when should I hire?” Great!

Okay good. Now you’ve done your prework and you know what you’re outsourcing. Believe me, the reason so many hires go south is failure to address this pre-work. It WILL make or break you. Just sayin’.

When should I hire – Step 1: Know your budget

I know you probably want a magic number here but to give you one would be wrong. There IS no magic number because it all depends on your business, your goals, and what you’re hiring for. Hiring can be scary to even the fact that you are thinking and asking yourself “when should I hire?” is great!

I’ll give you an example. I hired my first bookkeeping assistant when I was still at my day job 32 hours a week, maxed out on time but earning less than $3k a month in my business. Some people would say that’s crazy. Hiring her freed up my time to market, finish my website, attend to the higher needs of my clients to make sure they were super satisfied, and I doubled my revenue in just 4 months. 

Could I have done that without hiring? Probably not because I had ZERO time to focus on any of the tasks that it took to grow my business. Hiring someone allowed me to make more money because I wasn’t in the day-to-day as much as in the CEO role.

I also know people who are making 5-figure months who haven’t hired anyone because they just don’t feel the need. You see why the question “when should I hire?” is not simply a number thing?

The reason your budget is important is that I don’t want you to OVERPAY for something that is not directly impacting your ability to reach your goals.

Now if you don’t HAVE a business budget, then this is the time to start! In fact, I have created a supremely easy-to-use Business Budget template that will have your budget whipped out in no time! It does all the calculations for you AND it uses Profit First (which if you haven’t read you totally should it’s GOLD!) You can even snag it for $50 off it’s normal price!

hands holding money with the words new product launch - the profitable business budget and the words shop now in the context of when should I hire?

So how do you know what is the right amount? It depends on what else is in your budget. If you run super lean and have some extra money to play with while still keeping your operating costs under 40% then use that as an initial guide.

When should I hire – Step 2: Act as if

One of the frequent things I hear from folks is that they are nervous to add staff because they are worried about cash flow drying up. They don’t want to bring someone on and then have to let them go because business takes a turn. This is probably the biggest reason people wonder “When should I hire?”

My advice? Act as if you have already hired someone for 2-3 months. That means setting aside their salary amount from your budget just as if you had paid someone (putting it in savings is perfect).

Why does this help? One, it gets you used to seeing what your budget looks like without that money. Two, it provides a buffer now of pay for that person so that IF you have a bad month, you’re still golden on paying them their due.

Remember, one bad month or two isn’t the end. You have to make multiple wrong decisions or fail to take multiple actions in a row in order for your business to actually fail. Like you have to IGNORE a whole heck of a lot of signs flat out for that to happen – and you wouldn’t do that – you would act at the first sign of trouble. So, stop stressing, and act as if for a few months to build up a safety net.

When should I hire – Step 3: Get SOPs and processes in place

Step 2 is actually a great time to be working on step 3. Because you should NOT hire before you have some kind of SOP (standard operating procedures) and processes in place so that the person you hire will have some kind of idea what the heck they’re doing! I know you’re thinking, “Sarah, this has nothing to do with when should I hire?” But bear with me.

I promise you will not believe how little you realize you’ve hacked together until you go to write an SOP. My favorite tools for this? Tango and Loom.

Tango is a Chrome extension that you can use (For free) that will screen grab and actually make an SOP for you that you can then edit a bit and go! It saves hours and hours of time and will help so much!

Loom is great for walking people through the SOP process in more of a “live” fashion

Since some folks do better with written and some with video instructions my ultimate recommendation is to do both.

Next up you need some kind of system for task delegation, review, and monitoring. Whether you use Notion, Asana, Monday, or Clickup you need something that will streamline where your hire can find their tasks, mark them completed, communicate to you any questions, etc. Plus, you want to build checkpoints on the processes as well.

Now if that sounds supremely overwhelming, I have recommendations! (As always!)

If you have no idea what system you need: you want Ariana Rodriguez

If you want Clickup/Dubsado wizardry: you need Leann Forbes

Getting this in place does take some time and that’s why using the 2-3 months you’re saving up some salary buffer is an ideal time while you are still doing the work to get all your processes documented and systems in place.

When should I hire – Step 4: Create your perfect hire criteria

Now, just like anything else, I want you to approach this thoughtfully and in advance. Don’t just throw out a task-based job description without knowing the type of person who would be a great fit for your company. Because we’ve now gotten past “when should I hire” and we’ve gotten closer to “who should I hire” plus you need to have this part nailed down before you start the hiring process.

Take some time to answer these questions:

  • What kind of person do I work well with?
  • What kind of person has always irritated me to work with?
  • What are key work habits that this individual must have to be successful in my company?
  • Does the person need experience or am I willing to train them?
  • Are there any things that are 100% dealbreakers for me? Political, personal, behavioral?

Really the world is your oyster, and no one is going to read this. If you know you won’t get along well with someone with opposing worldviews, don’t hire someone who has them. Or if they hold fundamental views that are different from the values of your company – it’s not about right or wrong – it’s about whether they are a good fit.

Once you have really thought about your perfect fit criteria you can use that as a jumping-off point for your interview questions. This way you know that you are asking questions that help identify whether people are the perfect fit or not.

I bet you had no idea this was going to be the route we would go when you first googled “when should I hire” but I promise you will be glad you did!

When should I hire – Go forth!

It’s time! You’ve figured out your budget, saved, gotten your SOP and processes together, and defined your perfect fit hire. No more wondering, “When should I hire?” Now you can get on to the business of hiring with confidence knowing that you have thoughtfully approached both the operational and the financial components of the hiring process.

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how to know what to budget for

The comprehensive guide of budget categories you should consider when creating your budget as an online service provider

Hey, I’m Sarah, Your New CFO.

I help take the confusion out of finance . 

I've spent more than 15 years working in both the corporate and small business sector helping businesses both large and small find creative and new ways to save money while increasing value and profits. 
And nothing gets me more excited than helping small business owners create more profitable businesses.
Why? Because I know exactly what that means for you. It means more time to call your own, more trips, more time with your kids, less time worrying about money. 
I founded Leo & Vern in honor of my grandpa, my favorite person ever, who used his knowledge as an accountant to leave a legacy behind for our family. So to me, carrying on his legacy of helping others create their own legacy? Priceless.

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