02.12.20163 min read

Take-home Pay vs. Payroll in Stage 2

For the stage two, new employer, the question of whether to add another employee is almost as tough as it is for the solopreneur. When you’ve got two or three people in the business and sales are typically between $100,000 and $300,000 per year, you can’t afford a hiring mistake. But they’re so easy to make.

Here are five suggestions to keep you on track:

  1. Do the ICE and High/Med/Low exercises to determine your strengths and weaknesses. I explained how to do this in my last post on February 4.
  2. Make sure you need and can afford a full-time employee. Would project, seasonal, or part-time work alleviate the burden?
  3. Will the employee quickly contribute in a way that increases your revenue per employee? In a small shop with two or three people, everyone must pull their weight. You have to continuously increase the revenue per employee. Upon initially hiring this person, your rev/EE will go down. How fast will it come back up with this new hire? How long are you willing to wait for it to get back to where you were before making the hire?
  4. Clarify the role you are hiring. Write out the three most important responsibilities of the role you’ve chosen to hire for. What does success look like with these three responsibilities? What are the goals? How will you and the employee know the employee is contributing effectively. Get crystal clear on the role and responsibilities before looking for a candidate. If you don’t get specific about this, you’re setting yourself—and the new employee—up for failure.
  5. Does the new employee fit? Once you’ve identified the candidate, will he or she fit in with you and the team seamlessly? It doesn’t matter how smart they are; if the person isn’t a fit, do not make the lethal mistake of hiring the person.

It’s tough to part with some of your take-home pay at any stage of small business success. But in stage two, it’s extra painful because the business isn’t humming along yet. Follow these suggestions to reduce the risk of wasting a bunch of money on a bad hire.

SBS Idea of the Day: Does every employee in your company, including you, have a clear role and responsibilities? If not, get clarity. Fast. Call out the three most important responsibilities of each role and then constantly refine them to make sure you know what success looks like in each role.

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