Articles by Day: April 8, 2014
Hey Go Media Faithful! Here’s another excerpt from my book, Drawn to Business, about the number one myth I’ve found in the hiring process. For more of my insights and actual tools to help you start your own million dollar company, pick up the book as well as its supplemental materials, now available on the Arsenal.
When to Hire Employees
Simply put, your staff IS your company. And your relative success or failure is frequently a result of the quality of your people. If you think you can hire mediocre people and train them to be great, well, think again. Particularly when you’re small and getting started, the impact of your staff is amplified. A very small business is really more about its people and less about its systems. You need to make sure you’re finding and hiring the very best employees.
Here’s What I Had To Overcome
The Myth: more employees equals more profits.
I had this idea stuck in my head for most of my life; the more employees I have, the more money I make. Even before I was seeing any real return on the hours I was working in my business, I was anxiously trying to hire on employees. The thought was that an employee was like a little engine, churning out profits. The more little engines you have running, the more profit is pouring out onto your company floor. Well, this is a fun idea, but what if your engines produce $1 per hour in profits and what if your engines require $2 worth of gas each hour to run? Now your little money engines aren’t churning out profits, they’re burning money at a rate of $1/hour.
It’s important to blow up the myth in your head that staff will somehow magically make you money. Having an employee is not inherently good or bad for your company’s profits. They may make you lots of money, or they may cost you lots of money. The only real guarantee is that you have to pay them either way. So, before you run out and start expanding your staff…
Get out your calculators
Do the Math: hire what you can afford. Don’t be tempted by that high-priced gun. When Go Media first got started, we wanted to hire the very best employees, so we did. We paid them what they asked for. Unfortunately, we couldn’t afford the quality of employees that we hired. We never did the math. We assumed that because they were good designers, somehow their value added to what our firm would produce: the extra income necessary to pay their salary. We had a problem. We weren’t charging our customers enough hourly to cover the employee’s hourly wage. After six months, we were broke and forced to lay off our newfangled employee.
So when DO you hire?
When do you hire? A good rule of thumb for hiring is when you have enough money coming in that you can afford to pay that new employee EVEN IF THAT NEW EMPLOYEE DOES NOT CONTRIBUTE ONE PENNY TO YOUR INCOME. If you have any doubt whatsoever about your ability to afford a new employee, you probably shouldn’t be hiring them.
Before you start to scale up your business you need to ask:
- “Is this system humming? Am I dialed in? Are we churning out rock-solid profits every month?” Or, are you hoping to fix your system by bringing in more people? Are you bringing on people hoping THEY will be the ones who start bringing in the money? If this is your perspective, then you shouldn’t be hiring.
- Another question you can ask yourself when considering whether or not to hire someone is: “Is there historical precedence for their job?” In other words, are you getting regular requests for the job they’re going to do? If there isn’t a proven track record of demand, then I would look to an alternate option to hiring a new employee. Build the demand first, line up the work, and THEN hire a new employee.
All in all what I’ve found is that more employees do not necessarily mean more profits. Employees are a liability. Whether you’re busy or not, you need to pay them. Wait to hire more employees until the evidence and need is overwhelming.
How about you? What have you found to be the biggest myth in your hiring process? What hurdles have you faced? Join the conversation in the comments below!
For more hiring tips, including Supplemental Materials like “How to Hire the Rockstar Staff of Your Dreams,” head over to the Arsenal, where you can pick up all of our bonus content!