As a trusted adviser to our clients, we routinely have a seat at the table during the hiring debate. Business owners will want to weigh a handful of factors when considering the timing of their next hire (eg: what to pay, to whom the new employee will report, how he or she will be trained, etc.). But at the top of the list should be quantifying what your firm can afford and when.
Forecast your ability to pay
Understanding whether your company can afford that next hire has emerged from our experinece as one of the most important elements of the decision on when to hire an employee. To determine when your firm will be able to absorb the overhead of another employee, you should ideally budget for it in advance. However, if you don't have a budget and don't have time to build one, you should at least forecast your firm’s cash needs over a long enough time period to test your organization's capacity to pay for the new employee.
Include the incremental benefit your new employee will bring (eg: new revenue or enhanced throughput) in your projections so you can determine when your new employee’s activities will cover his or her cost. Be sure to consider both upside and downside scenarios in your projections.
Sound financial projections help keep emotions in check when making investment decisions, whether it’s a key hire or a new technology.
help with Projections
If you could use a hand with projections, here's a step-by-step how to project cash flow.
Still want help?
Driven Insights serves as outsourced finance department for small businesses, taking over the day-to-day finance function and delivering insightful reporting. We help client owners make informed investment decisions - like hiring - on a regular basis. If you would like to cost effectively inform your business decisions so you don't need to depend solely on gut instinct, let's talk: email@example.com, 888-631-1124.