Hiring new employees is an inevitable part of business as your company begins to grow. After all, it’s impossible to guide a company through a big growth phase relying on just a small team.
When you bring new people into your business, it gives you access to new ideas, experiences, and skills that can lead to huge improvements in your everyday operations.
However, there is always a right time to hire new people and, to figure out when this right time is for you, there are a lot of financial considerations you need to think about first.
Here are some financial factors to consider before making your next hire.
Can you afford to hire someone new?
Although you may need to hire someone, your finances could ultimately be the thing that holds you back.
Before committing to the recruitment process, you need to go through your financial statements with your CFO and decide whether you have the funds to bring someone new into your business.
This will involve looking at your:
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Cash flow forecasts
Your cash flow forecast is a forward look at how you expect your business to perform financially in the future.
This financial statement will show how much profit your business is expected to make in the future and can inform decisions that you’re making in the present.
For example, if you expect to be making a loss over the next few years, it may cause you to be more hesitant about hiring someone new now.
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Profit/loss accounts
Smaller businesses are not always flush with cash, which can make it hard to have the funds available to invest in a new staff member.
Looking at your profit/loss accounts, you can see how much profit you’re making and whether you have money to spare on your next hire.
How much money will it take to recruit and onboard a new employee?
Hiring someone new is a big expense that a business needs to take on, both in terms of money, time and resources.
Not only will you have to spend the time and money to recruit someone new, provide all the tools they need to do their job, and onboard them, but you then have to pay them their salary.
Be realistic and create a budget of how much you expect to spend on this new hire, then decide whether this is a wise investment based on what your company needs and your current financial situation.
If you don’t have the money, other options can include hiring someone for temporary work or just on a part-time basis, which is a way you cut down on the expense of recruiting.
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