7. Can You REALLY Afford to Hire? Take The Payroll Challenge to Find Out!
Have you been wondering whether or not you can actually AFFORD to hire an employee?
This common concern can lead to sweaty palms, a racing heart, and sleepless nights. And it often holds business owners back from hiring the help they need and deserve.
When we don’t hire the help we need at the right time, we leave revenue on the table, overwork ourselves, and we may even grow resentful toward our own business.
But it doesn’t have to be this way.
Because when you know how to financially prepare for hiring, everything else gets easier!
In this episode of The Impact Ripple, I share 3 key actions that will help you feel more comfortable and confident hiring your first employee – even if you don’t feel that way right now.
You’ll walk away with actionable steps that you can implement today. Because what good is it to just talk about the costs of hiring? You need real strategies that you can do something with!
By the end of our time together, you’ll have a better understanding of your current financial situation, how to know when you’re ready to hire financially, and what you can afford.
In this episode, you’ll learn:
How to know when you’re financially ready to hire
Actionable steps you can take today to prepare for hiring
The Payroll Challenge – to give you an extra boost of confidence + security!
Mentioned in This Episode:
Christine Walsh (my incredible financial coach)
Keina Newell (my dear friend and amazing financial coach)
Transcription for Episode 7 - Can You REALLY Afford to Hire? Take The Payroll Challenge to Find Out!
Ashley Cox 0:04
Welcome to episode seven of the impact report podcast. The go to source for hiring and leadership needs simple, doable and fun for visionary female business owners. I'm your host, Ashley Cox, author, certified HR expert and founder of sprout HR. And I believe you don't have to change who you are to be a great leader because you already are one Join me as we kiss uncertainty and overwhelm goodbye and say hello to the tools and support you need to grow a profitable, sustainable, impactful team with more confidence and ease.
Ashley Cox 0:43
On today's episode, we're talking about one of the more nerve wracking topics when it comes to hiring, whether or not you can really afford to hire an employee, I've got some great advice for you today, along with a super easy challenge to help you out so that you can stop losing sleep and start hiring the help you need.
Ashley Cox 1:07
If you've been thinking about hiring an employee in your small business, you're likely experiencing some anxious feelings, maybe some fear, a little doubt. And you've definitely thought, can I afford to hire an employee? If you're screaming? Yes, that's me. You are in the right place today, my friend. You're not alone in having any of these feelings or this question. And I myself have faced similar fears, and doubts and questions when hiring for my own small business. And I've worked with many, many other small business owners who have as well. So the primary message today is that you are not alone.
Ashley Cox 1:51
As I mentioned in episode four, where we talked about overcoming the overwhelm of hiring, the key to overcoming these and most fears that we have is to bring light to what's in the darkness so that you can take the right steps forward at the right time, with a whole lot more confidence. And that's exactly what we're going to do today in our episode. So we're going to discuss three key actions to take when hiring to ensure that you truly can afford the help that you need and deserve, including that fun and easy challenge that I mentioned that you are not going to want to miss. And by the end of our conversation today, you'll have a much better understanding of your current financial situation, how to know when you are ready to hire financially, and what you can afford. Now that's a pretty tall order. So let's get started.
Ashley Cox 2:44
Number one, review your finances. The first and most important place to begin when deciding whether or not you can afford to hire employees is to review your current finances. And this includes your income versus your expenses. Or if you are using a bookkeeping tool. This is your profit and loss statement. You don't start hiring employees when you hit a certain annual income range or when you are in business for X number of years. I wish there was a simple formula that I could give you but every business is different, so it's best to look at your individual business. Now, experts do recommend that your business expenses should not exceed about 30% of your gross income, which includes your employee payroll. This may vary though, depending on whether you have a brick and mortar business, a product based business or you are a service provider, but it's a good place to start.
Ashley Cox 3:48
If your expenses are stretching your business to the max, then it might not be the best time to hire. Consider first meeting with your accountant or CPA and looking for ways to either increase your income or reduce your expenses first. This will help you do a couple of very important things. Number one, ensure that your business is profitable and sustainable, and that it remains that way even after you hire a team. Number two, it makes sure that you as the owner are able to continue paying yourself because we can't be sacrificing your pay to bring on employees. And number three, when you do bring on employees it's a value add to your business, not a further stressor on your money, your resources or your sanity which could ultimately lead to the need for you to lay off team members and that is not fun. So we want to avoid that as much as possible. By reviewing your finances and keeping your expenses in check. You'll be well on your way to knowing when you can hire an employee in your business.
Ashley Cox 4:58
Next number too, we want to start small. I see business owners get in over their heads when hiring because they're not ready to support the level of staff that they take on whether they're hiring contractors or employees. But what I typically see more frequently are business owners who put off hiring for so long that their business is struggling to grow, or sometimes even just stay afloat, because the need for employees is so great. Having worked in large companies like Kroger and J Crew, for the first 10 years of my career, I can tell you that this can all be avoided through a little bit of strategic planning. Big companies do not hire without a plan. They don't come at it haphazardly. And they definitely don't wait until they're in desperate need. There's a careful balance of hiring before you quite feel like you're ready in anticipation of the growth that is to come. But also not just jumping straight off the cliff without a safety net. And we're going to talk a little bit more about aligning your people plan with your business plan in a future episode. So stay tuned for that, that's going to be a really, really important and powerful conversation.
Ashley Cox 6:21
Now, the good news is that you don't have to hire a full time employee on a six figure salary right out of the gate. That's close, right? If that was the case, no small business ever would hire employees, it's best to start small and grow your team as your business grows. And this is exactly what I did. So speaking from personal experience, I started with a couple of contractors initially, then I hired my first part time employee working 10 hours a week. That's it. And she grew into a full time position with sprout HR. We've not only been able to sustain the business, but grow it by leaps and bounds over the past few years with a lot of intention, a lot of purpose, without overworking ourselves without burning out. And it's been really fun, it's been full of ease. And that's exactly what I want for my business. What you want for your business, maybe the same, may be different. But the good news is, is that we get to grow our businesses in a way that feels really good for us really aligned with our values and what we want out of life. So when you start small, and you focus on growing your team, alongside growing your business, you'll see long term success both financially as well as with the people that you employ.
Ashley Cox 7:45
Okay, so this last number three is the fun and easy challenge that I mentioned at the beginning of the show. So number three, take the payroll challenge. Sounds fun, right? While some people enjoy the thrill of jumping off the cliff and building the plane on the way down, others not so much. There's absolutely nothing wrong with being cautious. As an HR Pro, I'm trained to consider and prepare for worst case scenarios to help you protect your business. So I fully appreciate, understand being cautious. Just don't let it stifle your growth, or what's possible for you. And that's a lesson I continuously have to teach myself and learn and remember, so if you need reminders, it's okay. I feel Yeah, I'm right there with you. If you need a little bit of a safety net, before taking the leap, I created this payroll challenge to help you out. This method will help you to prove to yourself that you are ready to take on the expense of hiring an employee. We've got this no risk upfront. How about a win-win, right?
Ashley Cox 9:03
So here's how to take the challenge. And I know I'm going to be talking through this. So if you are somebody that likes to look at words, and have all of the details written out, I'm gonna put the link for our payroll challenge in the show notes so that you can go and actually see this all written down. So don't worry about furiously taking notes, you can just pop over to Instagram, we'll have that linked for you in our show notes. And you can see the whole challenge there.
Ashley Cox 9:31
So three easy steps. Number one, set up a bank account for employee payroll, or set up a virtual envelope to save money within a budgeting tool like you need a budget number to determine how much you think you're going to be able to pay in wages every other week. And here's a couple of notes for you. Number one, be sure that you add cushion to your total employee costs to cover things like taxes and unemployment insurance etc. A good starting point a good average is 1.25 times your employees wage. So let me give you a math example here. Okay? This means that if you hire an employee making $25 an hour, if you multiply that by 1.25, the actual cost to your business for that employee is roughly $31.25 an hour. This means if you want to hire a part time employee for 10 hours a week, at $25 an hour with a real cost to your business are $31.25 an hour, then your payroll burden will be about $625 Every other week. That's the amount that you're going to now transfer in step number three to your new payroll account every other week as if you're quote unquote, running payroll for the next three months.
Ashley Cox 10:58
At the end of three months, I want you to ask yourself, these three super simple questions. And again, these are in the post that we're going to link to in our show notes. Question number one, did I have to skip any payments due to cashflow issues? In other words, was I not able to, quote make payroll every other week, as I set out to do? Number two? Did I have to dip into the payroll account to cover expenses? In other words, did I have to steal from my payroll account in order to pay for other stuff? And number three, was I able to continue paying myself? My regular wages? So if the answer to those questions, were no, no. And yes, no, I didn't skip any payments due to cashflow. No, I didn't have to dip into the payroll account to cover expenses. Yes, I was able to continue paying myself my regular wages, then guess what, you are financially ready to hire your first employee with confidence.
Ashley Cox 12:02
And here is a fun bonus tip for you. This one's really important. So listen up. When you hire your first employee, I want you to pay their wages from the normal income that's flowing into your business, since you already know that you can afford it. This means that you can then keep the money that you've been saving over the past three months as a safety net to ensure that you can always cover payroll even during slow times.
Ashley Cox 12:35
Now, if you had a different response to any of those questions, that's a good indication that it's time to assess the overall financial well being of your business, as well as your goals for hiring. It doesn't mean No, necessarily it may be no right now, no, let me get a few things in order. First, let me try some some different strategies with my current financial situation. Let me bring in some more income. Let me get some expenses off my plate. There's so many things that you can do from this point.
Ashley Cox 13:08
And since everyone's financial situations are different, and I am not a money expert, I highly recommend you reach out to your CPA or your accountant or a financial coach like my incredible coach Christine Walsh, or my very dear friend Kena Newell, who can help you assess your finances and create a plan to help you reach your goals. And I'll be sure to drop both of their details in the show notes for you in case you want to reach out to either one of them. They have both been incredible mentors, advisors and encouragers in my own personal journey, so I trust them implicitly. Again, you can find all of these great details on the payroll challenge, add the link in our show notes so that you can follow along step by step this is such a great way to give yourself just a sigh of relief, right that. Okay, I can afford this. And I don't have to be as nervous. You've got your safety net, use it.
Ashley Cox 14:13
Now we're at the end of today's episode, which means it's time once again for our final segment, imagine the impact, where we get to envision what it could look like for you to take action today. Hiring and paying employees doesn't have to be scary or overwhelming. I hope that today's episode showed you how exciting and how possible it really can be for you. You need people to do the right work in your business to help you create the impact that you want to have in this world. And people want to do meaningful work and be part of something bigger than themselves. When we hire with intention, and we get really clear on what we need our team members to do, we can show them how the work They do will positively impact the business. And it becomes a win for everyone. And the good news is, it's much more affordable than you might have been thinking. Imagine the impact of hiring and paying employees fair, equitable and sustainable wages could have on your business, on your employees, on your community, and in the world.
Ashley Cox 15:26
So I want to know, will you be taking the payroll challenge? I'd love to hear about it. So take a screenshot of today's episode on your phone, share it on Instagram stories, and let us know I'm taking the payroll challenge. And don't forget to tag us at Sprout hr.co so that we can cheer you on along the way. Thanks again for joining me on this episode of the impact rebel podcast. It's absolutely my honor and privilege to be here with and for you and your leadership journey.