Below, you will find an unedited excerpt from my new book about building Internet-based businesses, Online Business from Scratch. To receive updates about the book, visit www.fromscratchbook.com.
You might think that you don’t have enough work to keep an employee or contractor busy or that you can’t afford to bring on a team member right now. Many entrepreneurs that have never hired before have these two hang-ups and it stops them from ever building a team. You probably can’t afford to hire anyone and you probably can’t keep an employee busy when you are first getting started, but this will change overtime as your business grows. You will eventually be able to keep a team member busy and have plenty of revenue to pay their salary, the key is to know when you’ve hit that point and should make your first hire.
The rule of thumb that I use is that you should hire someone when you have three months of their salary in the bank and you can fill up at least half of their work load. If you are considering bringing on a full-time employee that will cost $4,000 per month in salary, benefits and payroll taxes, try to have at least $12,000 in your bank account so that you know for sure you can take care of their first several paychecks. This financial buffer will give your new employee some time to create financial impact in your business so that their work covers their salary and then some. If you have made a good hire, your employees will pay for themselves several times over and you won’t have to worry about how to pay them. The combination of your freed-up time and the value they create in your business should be able to cover their salary after a few months.
If you are worried about whether or not you can keep a new team member busy, make the hire when you can fill up at least 50% of their time. If you have 20 hours per week for a new full-time employee to do, you can safely make the hire because their responsibilities and work load will grow over time as your business grows. Small employers also often tend to underestimate how much time specific tasks take because they have been doing said tasks themselves for years and have the process down cold. A relatively new employee will take longer to do the same task that you have been doing because they haven’t been doing it for years like you have.
If you’re not sure how many hours you can give an employee, give them a range of hours per week of work you think you’ll have for them. When I hired my first part-time employee, I had no idea how long it would take her to do the work I was delegating to her. I thought it would take 20 hours per week for her to do the job, so I told her I could give her 15-25 hours per week of work and told her that number would probably grow over time as the business grows. You can also start off an employee as part-time and tell them the opportunity can grow into a full-time job over the course of several months.