One of the most expensive things you can do when growing your business is hiring the wrong person or hiring at the wrong time.
If you brought someone in and you're upset with how they performed, you might want to ask yourself what went wrong during the hiring process.
Having a great team just doesn’t happen by accident.
- Here are things you need to consider when it comes to labor costs and hiring a team:
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- Have six months in the reserves, if possible.
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Try to have at least six months of what the person's costs are going to be in reserves before you hire that person. You don't want to be stressed about how you're going to pay for them because you're not completely sure that sales are going to be there.
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- Allocate 30% to operating expenses.
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If you're in $0 to $250,000 in real revenue, allocate 30% of that to your operating budget, and 50% is dedicated to you as the business owner because you're doing most of the work at that point. If you're used to spending 60% of your revenue on operating expenses, do immediately drop that to 30%. Walk it out percentage-by-percentage. It's going to take a while but little shifts really matter.
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- Hire as slowly as possible but start as early as you can.
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One way to do this is by having pre-hire projects so you can test how this is going to work. Start with a contract relationship. It's real, it's legit, it’s legally a “contract” way of starting the relationship. But you can't go with a contractor forever if you're growing. From there, you could move them into part-time and then full-time employment. As a rule of thumb, for every $150,000 in revenue, the business could likely support a full-time equivalent. That could also mean two or three part-time people.
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- Surround yourself with people and advisors.
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Make sure you're working with people that feel the same way. They should be dialed into your mission and manage their expectations as a business owner.
If you want to learn more about building your team and scaling your business, check out 014: Counting The Labor Costs Of Acquiring More Sales
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