You're working late (again), juggling too many hats, and wondering: "Should I hire someone?"
It’s a question every growing business owner faces. Sure, hiring can feel risky. What if you can't afford it? What if you hire the wrong person?
But it can also be rewarding. Hiring the right person at the right time can unlock freedom for you to focus on what you do best and allow you to build a business that can thrive without you doing everything.
At Patrick Accounting, we’ve guided hundreds of small business owners through this decision. Here's how to know when it’s time, and how to do it right.
Key Signs You're Actually Ready to Hire
Making the decision to hire isn’t just a matter of being busy. It’s about recognizing when your business has reached a point where adding the right person will unlock growth, not just ease your workload.
Here are the key indicators that suggest you're primed for strategic growth:
1. Consistent Revenue
You've maintained reliable revenue for 3-6 months that can support the additional overhead and cover the full cost for a new hire (salary + taxes + benefits) for at least 2-3 months without stress.
2. Overflowing Workload
You're regularly turning down projects or opportunities because you simply don't have the capacity. This is a clear sign that you're currently leaving revenue on the table.
3. Time-Skill Mismatch
You’re spending hours on low-value tasks that could be delegated, or you're struggling with tasks outside your expertise.
4. Growth Opportunity
You have a clear plan for how this hire will help grow the business, not just maintain what you're already doing. The best hires are investments in your future, not just solutions to current problems.
Hiring Tip: Wanting help and needing help are different things. Make sure you're in the "need" category before moving forward.
How to Make Smart Hiring Decisions: A Proven Framework
Knowing you need to hire is different from knowing how to hire wisely. Here's a proven framework for making hiring decisions that set your business up for success.
Step 1: Define the Role Clearly
Most hiring mistakes start with unclear expectations. Before you post any job listing:
- Write a detailed job description that focuses on outcomes, not just tasks
- Identify the 3-5 most critical skills needed for success
- Determine whether this is a revenue-generating role or a support role
Step 2: Plan for Three "What If" Scenarios
Smart business owners plan for multiple outcomes. Develop three scenarios:
- Best Case: The hire works out perfectly and generates more revenue than expected.
- Realistic Case: The hire works out well but takes the expected 3-6 months to break even.
- Worst Case: The hire doesn't work out and needs to be replaced within 6 months.
Run the numbers for each scenario. If you can't afford the worst-case scenario, it's not the right time.
Step 3: Use the "Traffic Light" Decision System
Green Light (Hire Now):
- You have 6+ months of their total cost saved
- You're turning down revenue because of capacity
- You have clear metrics for measuring their success
Yellow Light (Wait and Prepare):
- You want help but aren't losing revenue yet
- You have 3-6 months of costs saved
- You haven't set up proper hiring systems yet
Red Light (Not Ready):
- You have less than 3 months of costs saved
- You're hiring to solve a problem that might be temporary
- You're making emotional rather than strategic decisions
Step 4: Hire for Fit, Not Just Skills
Skills can be taught; attitude and culture fit cannot. When you're interviewing:
- Ask behavioral questions about past experiences
- Have them meet multiple team members
- Check references thoroughly
The True Cost of Hiring (What Most Business Owners Miss)
Most business owners think about hiring in terms of salary alone. But the reality is that an employee's true cost is typically 125%-150% of their base salary when you factor in all the associated expenses.
Consider Costs Beyond Salary
- Payroll taxes and benefits: Social Security, Medicare, unemployment, workers' comp
- Equipment and software: computer, phone, licenses, training
- Productivity timeline: It typically takes 2-6 months for a new hire to become fully productive
Use the 2-3 Month Financial Buffer Rule
Before hiring, you should have enough cash flow to cover the new employee's total cost for at least 2-3 months. This buffer protects you during the onboarding period and gives the new hire time to start contributing meaningfully to your revenue.
Example: If you're hiring someone at $50,000/year ($4,167/month), you should have at least $12,500-$18,750 in cash flow to cover their position for the first few months.
Calculate ROI: When Will This Pay Off?
Ask yourself these critical questions:
- How much additional revenue will this person generate or help you capture?
- How much time will they free up for you to focus on higher-value activities?
- What's the cost of NOT hiring (lost opportunities, your own burnout, etc.)?
A successful hire should pay for themselves within 6-12 months through increased revenue, improved efficiency, or allowing you to take on more profitable work.
Employee vs. Contractor vs. Outsource: Which is Right for Your Business?
Not every staffing need requires a full-time employee. Understanding your options can save you money and give you more flexibility as you grow.
Full-Time Employee (FTE)
Best for:
- Ongoing, consistent work (30+ hours/week)
- Tasks that require deep knowledge of your business
- Roles where you need someone available during specific hours
- Long-term positions essential to your operations
Consider the commitment: Full-time employees come with the most legal requirements and long-term financial obligations, but they also offer the most integration into your business culture and operations.
Independent Contractor
Best for:
- Project-based work with clear deliverables
- Specialized expertise you need occasionally
- Tasks that can be done remotely and independently
- When you need skills but not full-time availability
Important note: The IRS has strict rules about who can be classified as a contractor. Misclassification can result in significant penalties and back taxes.
Outsourcing to a Service Provider
Best for:
- Functions outside your core business (like accounting or IT)
- Tasks requiring specialized expertise and tools
- When you want predictable costs without employment overhead
- Areas where you need immediate expertise without training time
Example: Many successful businesses outsource their accounting, payroll, and bookkeeping to firms like ours rather than hiring in-house. This gives them expert-level service without the overhead of benefits, training, and management.
Hybrid Approaches
Consider starting with contractors or part-time employees and transitioning to full-time as your needs become clearer. This allows you to test the waters without making a major commitment upfront.
Avoid These Costly Hiring Mistakes
We've seen businesses make costly mistakes by hiring at the wrong time or in the wrong way. Here are the most common problems to avoid:
1. Hiring Too Early
Hiring based on projected growth that doesn't materialize can leave you struggling to make payroll.
2. Waiting Too Long
Delaying hiring until you're completely overwhelmed means you can't effectively train or manage new employees. We’ve seen business owners turn down profitable projects for months because they "couldn't handle any more work," often losing more revenue than the cost of hiring.
3. Compliance Nightmares
Misclassifying workers or failing to set up proper payroll systems can result in hefty penalties from the IRS and state agencies.
4. Hiring the Wrong Fit
Hiring someone because they're available, not because they're right for your needs, leads to high turnover and company culture problems.
Essential Systems to Set Up Before You Hire
Successful hiring means finding the right person, but it also means you have the right systems in place to support them from day one.
HR Paperwork and Legal Requirements
- Federal forms (I-9, W-4, EIN registration)
- State requirements (varies by location, but includes state unemployment insurance registration, workers' comp insurance, employment postings)
We strongly recommend working with a payroll provider (like our sister company Whirks) to ensure compliance. The cost of getting it wrong far exceeds the cost of professional help.
Employee Handbook and Policies
Even with your first hire, you need clear and established policies for work hours, attendance expectations, vacation, leave, communication, performance expectations, and disciplinary procedures. Don't wait until you have problems to create policies.
Performance Expectations
Develop Key Result Areas (KRAs) for each position. These should clearly define:
- What success looks like in this role
- Specific, measurable goals
- How performance will be evaluated
- Timeline for reaching full productivity
Payroll and Time Tracking
This is not a DIY area. Payroll mistakes can result in significant penalties and legal issues. Invest in professional payroll services from the start.
Onboarding: Make Your New Hire Successful from Day One
Setting your new employee up for success requires intentional onboarding and clear communication.
Preboarding and Onboarding Best Practices
- Complete all paperwork and provide the necessary equipment
- Show them your systems and processes
- Introduce them to the team and company values
- Review their KRAs and expectations
- Assign a mentor or point person
The 30-60-90 Day Check-In System
- 30 days: Are they settling in? What support do they need?
- 60 days: Are they meeting initial expectations?
- 90 days: Full performance review and decision point. Are they a long-term fit?
Ready to Hire with Confidence?
Hiring employees is one of the most significant decisions you'll make as a business owner. When done right, it's an investment that pays dividends in growth, efficiency, and peace of mind. When done wrong, it can create financial stress and operational headaches.
You have to be honest about where your business stands today and where you want it to go. Don't hire out of desperation or fear. Instead, hire with a plan and the right systems in place.
You don't have to navigate this alone. From setting up payroll systems to ensuring legal compliance, having the right partners can make the difference between a hiring success story and a cautionary tale.
Need help setting it all up? At Patrick Accounting, we work closely with our sister company Whirks to help small businesses handle payroll, HR, and compliance issues correctly from day one. Let's make sure your next hire starts strong.
