Hiring an employee isn’t always the answer to business overwhelm

For all my yapping about profit, cash flow, and small business finance, I still do a lot of tax work. Business tax, personal tax, catch-up accounting, the works. So, you could definitely say this is a busy time of year for me. But, in a way, I’m lucky. I know tax season is coming and I get to plan for my busy season. I have time to get all my ducks in a row beforehand and brace myself. Most businesses aren’t as lucky (sorry 😓). They don’t grow in predictable cycles like that. You won’t flip a switch on a new marketing strategy and see slow, steady, and predictable growth that can be precisely planned around. Businesses will frequently grow slowly but quietly until you’re overwhelmed (aka, boiling the frog) or you’ll hit a streak of good luck all at once (aka, when it rains, it pours). And, both scenarios leave you scrambling to keep up.

Those situations usually lead to either extended overwhelm (eg, 60hr weeks as you try to keep up with the work), analysis paralysis (eg, not knowing what the hell you’re supposed to do next), or rash decisions (eg, hiring a billable employee because that seems right). But, every business’s needs, growth, and roadblocks are unique. Hiring an employee isn’t always the right answer to business growth and overwhelm. Instead of quickly hiring and onboarding another employee that can do billable client work, take a step back and survey your business. Look for what reallyyy needs to be dealt with to handle the influx of work and what works best with your individual business goals. Then, implement that instead of jumping for another employee.

Finding bottle necks and core problems:

Business growth and overwhelm aren’t all created equal. Depending on your business and what stage of growth you’re in, there could be all sorts of issues, and hiring an employee doesn’t fix all of them (hell, it doesn’t fix most of them). Think back on your last month and all the tasks you (and your employees) did. Where was the most time spent, capacity used, and projects slowed down? We like to assume all our time was spent on client work and we just don’t have the sheer workforce to get it all done, but that’s rarely the case. For example, I spend a tonnn of time on admin. Sending contracts/esigns/invoices, setting up client portals, following up on outstanding documents, processing returns, etc. Those aren’t exactly heavy lifting tasks. I don’t need to hire another accountant to handle them. I need better systems and software to streamline my processes. (And, maybeee I need an admin.)

Check in with your goals :

Big businesses and startups have convinced a lot of entrepreneurs that they always need to be growing. But, that isn’t really true. You can stay a solo consultant, keep your employee headcount to 25, or whatever else works for you, your business, and your goals. Before diving into the math and figuring out if hiring is realistic, do you even want another employee? Or, are you hiring because that’s the seemingly obvious next step? Depending on your business and personal goals, there are other ways to handle business growth and overwhelm.

Know the true cost of an employee:

Employees cost a lot more than just their salary. At a minimum, you’ll also have to pay employer taxes (roughly 8% for salaries under $140,000), insurance, benefits, additional software seats, training, and hiring costs. You might also need new desks/computers (or a work-from-home stipend), larger office space, managers (depending on how many employees you have and are hiring). Then, there’s the nonmonetary costs of getting them up to speed and working at full capacity (which isn’t actually 40hrs of client work a week. Don’t assume that’s what a new employee is worth. But that’s a conversation for another day). Do the math on the total cost of a new employee and make sure your bottom line (and cash flow) can handle it.

Alternatives to hiring:

Depending on what’s causing your growth and overwhelm, there’s plenty of ways to deal with it that don’t involve hiring and may even have a better return on investment than hiring. Consider these before you start looking for new employees or contractors.

Raising prices: ‘You should raise your prices’ is one of the most common bits of internet business advice. But, there is some truth to it. If you’re overwhelmed with client work and closing every single deal, your prices may not be high enough. You should be getting someee pushback on your prices and proposals. How much pushback is up to you. But, if you hear complaints less than 10% of the time, your pricing is probably too low. On the other hand, if you hear complaints more than 50% of the time, your prices may be too high, the value you provide isn’t obvious enough, or you may be attracting the wrong potential clients.

Start a waitlist: Waitlists aren’t for everyone. But, they work for in-demand consultants and small boutique agencies with strong reputations. If your prices are already higher than your peers and you’re still easily closing deals, consider adding a waitlist instead of outright turning down new work. Waitlists can also help you avoid peaks and valleys in your workload which are dangerous for cash flow.

Firing bad clients: Overwhelm isn’t always caused by an abundance of good client work. Sometimes, it’s caused by too much bad client work and stress on your plate. And, bringing on new employees won’t fix that problem. The extra stress and low margins will still be there. Rank your client list, check your project profitability, then prune some of the more stressful and low-profit clients.

Fixing bottlenecks and bad processes: Bottlenecks and bad processes slow down client work. And, the slower you get projects done, the more they start piling up. In these situations, you might not need more employee capacity, but better overall efficiency. Ask your employees what’s holding them back from getting work done (in a helpful leader way and not an overbearing boss way). Better project management, easier client communication, or just empowering them to make decisions that’re usually made by you (or another manager) can speed up how quickly work gets out the door.

Action Item:

Spend some time thinking about your bottlenecks. Where are you wasting time? How can you improve that?