3 secrets to hiring your first employee

Once your online business is growing and you’re making a profit, it’s tempting to hire someone to ease your burden. 

Be careful. 

When you hire a full-time employee, you’re now responsible for them. You have to pay them every week… no matter what. 

It’s a big commitment, and timing is crucial. 

Making your first hire at the right time can supercharge your business. You’ll free up your time to do more of what really drives your business forward.

Making your first hire at the wrong time will backfire. Instead of easing your burden… it’ll put extra stress on your shoulders, and extra risk on your business.

So how do you know when you’re ready to make a full-time hire?


First, exhaust your alternatives

Before you consider hiring a full-time employee… outsource all you can. 

Find experts who can take care of specific things for you. 

Most businesses can meet 90% of their needs this way. 

Most small businesses need little bits of lots of different types of work. Graphic design… accounting… legal… marketing. You probably need all this. But you probably only need a couple hours a week at most of each one. So instead of hiring a full-time employee, you’re much better off hiring for one-off projects, or finding a service provider and becoming their client. 

As long as you choose well, you’ll get to work with true experts in their subject areas. Working with true experts is great! You don’t have to train them like you do with an employee. Instead, they’ll tell you what’s best. Absorb their knowledge and experience and apply it to other areas of your business. 

These days, it’s easy to find help online. But in my experience, it’s best to hire someone you know. “Know” can mean different things. Maybe your respected friend recommends them. Maybe they live in your town. Maybe they’ve got a solid reputation in your industry. Maybe you’ve read their newsletter and you have a good idea of who they are as a person. 

Try to make sure you know them on at least some level, though. Hiring a stranger off the internet tends to lead to disappointment – even if they have a slick website and impressive testimonials. 

Also… keep in mind you can automate a lot these days. Many cloud-based services can perform basic tasks better than a person can. Online calendar service Calendly, for example, does a lot of what a virtual assistant can do.

Second, use realistic assumptions about the cost

You decide to hire someone and pay them a $50,000 salary.

But that doesn’t include health insurance, or payroll taxes (you’re responsible for half – around 8% of their salary), or other benefits.

My rule of thumb is to take their salary and multiply it by 1.3. The number you get is roughly the actual financial burden they’ll be on your business.

A $50,000 salaried employee will cost you around $65,000 a year.


Third, make them pay for themselves

This is key: 

All else equal, try to hire a person who will ADD revenue to your business.

That might be a marketer… a copywriter… a salesman… a veteran with lots of connections in your industry. 

Hiring someone who’ll add revenue is an investment in the growth of your business. You can pay these types of hires more, because their net cost to your business is lower.

A good rule is to keep their net cost to less than half of your recurring revenue.

“Net cost” is the amount you pay them, minus the revenue they’ll bring in.

So if you’re paying them $65,000 (including the 30% cushion discussed in #2), and expect them to bring in $40,000, their net cost is $25,000.

If your recurring revenue before hiring them is $50,000, you’re likely in a decent position to hire them. 

I emphasize “recurring” revenue. You must be reasonably sure this revenue will keep coming in month after month, year after year. If you’re not, exclude it from this calculation.

All else equal, delay hiring people who won’t make you money directly. A graphic designer or an accountant or a proof-reader might be nice to have on your team. But they won’t bring in new revenue. You probably don’t need them on your payroll. It’s cheaper, easier, and less risky to simply hire an expert and become their client.


There’s one big exception to everything I’ve said

As your business grows, you’ll eventually reach a point where you can’t move forward unless you hire someone. Where your time is sucked up by required tasks that aren’t as important as what you should be doing: driving your business forward. 

That’s the true test. If you can’t grow anymore without hiring… you’re ready to hire!

But be sure to apply the secrets above.