Hiring your first employee is one of the scariest times for a business owner. It shows your company is growing and, for many entrepreneurs, legitimizes your fledgling startup. But you might regret your decision if you add someone to the payroll before you’re ready. So, how do you know when to hire your first employee?
I will let you in on an embarrassing (not-so-little) secret. When I hired my first employee, I wasn’t ready. I didn’t even interview her. I hired and fired my very first employee on the same day. It was bad—really bad.
Firing your first employee on the same day you hire them is just one of the bad things that can happen if you’re not ready. You can also run out of work for them to do. Or, you may run out of cash.
Hiring your first employee can slow your business growth if you're not ready. Here’s how to know if you are—and how to get started when the time comes.
4 signs it’s time to hire your first employee
Hire too soon, and you could be sabotaging business growth. Wait too long to hire, and you could be sabotaging business growth. What’s an entrepreneur to do? Do your research, weigh your options, and look out for the following four signs it’s time to hire your first employee.
Sign #1: You can’t do it all on your own
You’re the CEO, accountant, customer service department, product developer, and marketing manager. It makes the days fly by and keeps things interesting, that’s for sure.
But at some point, you realize you can’t do it alone. You’re getting burnt out. Customers are angry that you take too long to respond. Things are getting sloppy because you’re spread too thin. You don’t have the right experience, education, or skill set to do XYZ. You haven’t slept more than four hours a night in weeks. And don’t get me started on the last time you had a day off from work.
One day, you realize that your business is giving you an ultimatum. You can either hire an employee or turn away customers. Which do you choose?
You’ll know that you can’t do it all on your own if you:
- Can’t handle your customer count
- Are forced to turn down work
- Need someone with a specific skill set
When you hit your limit, you may consider hiring your first employee. Doing so can help increase customer satisfaction and retention, let you take on more customers, improve certain business operations or processes, and boost innovation.
Sign #2: You plan to carry out a thorough interview process
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Sure, you’re busy (that’s why you’re considering hiring, right?). But in my experience, you’re never too busy to conduct a thorough interview. It’s what I failed to do when I hired my first employee in the very early days of my second startup company.
My business partner and I had our hands full, and our business was operating six days a week. We couldn’t do it all alone, so it was beyond time to hire our first employee.
But I went about it the wrong way.
I called the local trade school and asked them to send over a senior to do clerical work for us, but I didn’t interview her. She had trouble with each task I asked her to do, made mistakes, and groaned “ooooohhh” every time.
The mistakes were costing us time and money. Six hours later, I had to fire her.
She refused to leave, locked herself in the bathroom for 90 minutes, and screamed. Eventually, someone convinced her to go home. I felt like scum. I’ve done many dumb things in my decades in business, but hiring someone without interviewing the person first ranks right up there as one of the dumbest!
If you still plan on skipping the formal interview process, please hear my plea: Don’t skip it! Learn from my mistakes and ensure the candidate is the right person for the job.
Take the time to recruit and interview candidates properly—it’ll save you time, money, and an unpleasant experience for all parties involved.
Hiring the wrong employee can stunt business growth, especially if they make many mistakes or are rude to customers. And at some point, you may need to:
- Terminate employment
- Start the recruiting and interviewing process all over again
- Onboard and train someone new
Sign #3: You can afford an employee
Your business is growing. You desperately need an employee in the office. You’re ready to devote the time it takes to hire them. But there’s another question niggling at your brain.
Can you afford an employee?
For many employers, employees on payroll is the biggest business expense. And if you’re trying to plan out your budget, you need to look beyond salary.
In addition to salary, consider extra costs like payroll taxes, workers’ compensation insurance, benefits, and miscellaneous expenses, like uniform care and coffee. So, how much does an employee cost? These added expenses can cost an extra 32% above an employee’s wages. So if you offer a $40,000 salary, your total expense could be more than $52,000!
Sign #4: The employee will bring in more money
Employees are expensive. But if you hire the right person at the right time and for the right position, they can generate more money for your business.
The new employee can bring in more money by:
- Bringing in new customers
- Retaining more customers
- Improving your products or services
- Marketing your business
The ultimate goal of hiring your first employee (and each employee after that) is to grow your business. To do that, the employee needs to directly increase revenue, improve processes, increase brand awareness, etc. Consider the employee’s role and how they can—directly or indirectly—bring in more money for your business.
