How to Know When You're Ready to Hire

Q: How do you know when you can--or need to--take on additional staff?

A: For many entrepreneurs--especially those who bootstrapped their business to sustainability--the decision to hire help is a hard one. There's the prospect of ceding some control of your baby to an employee; there are the costs involved (not to mention the paperwork); and there's always the fear that, should you hire the wrong person, you will do more harm to your business than good. If these concerns sound familiar, you need to change your mindset right now and start thinking of employees as revenue generators, not as costs.

Here's what I mean: Let's say you're the best salesperson in your company, but you find yourself bogged down by day-to-day operational tasks. In this case you may need an office manager or bookkeeper to free up your time so you can bring in more sales--a hire that will boost your company's revenue potential.

Conversely, you may love developing and tweaking your product but hate the work of drumming up new customers. In this case hiring someone to handle marketing and sales will take the burden off you and allow you to focus on the unique ideas you bring to your company, increasing its chances for success.

Recently I went through this process with a small chiropractor's office. The owners couldn't see how they could grow their business beyond the 5 percent annual revenue gain they were maintaining. Fortunately I was able to show them a path to the kind of revenue and lifestyle they were dreaming of--and yes, adding staff to handle the office and medical billing was a large chunk of the answer.

To get there I worked with the practice to compile a 12-month revenue projection; from that we realized there would be enough money after expenses to hire one full-time person to help manage the office. I also advised the client to investigate what other businesses in the area looked like in terms of staffing. Generally, industry standards can paint a good picture of roughly how big a staff is necessary to handle, say, a certain square footage of retail or office space, or a set number of customers/clients. Many trade associations compile these types of figures, and you can even deduce how much revenue an employee is worth based on public companies' quarterly reports.

If you're still not sure whether you want (or can afford) to hire someone, you can always "rent before you buy"--that is, bring in someone on a temporary contract basis and, a few months later, determine if you should offer that person a full-time job. By then he or she should know your business, you'll know whether or not your personalities mesh and you'll be able to tell how much extra revenue the hire could bring in.