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Should you hire more employees? 5 things to consider first


Your business’s future looks bright, and the cash is starting to roll in. Maybe it’s time to hire some new employees?

Hold on a minute. Like that Ferrari you have your eye on, just because you want new employees doesn’t mean you need or can afford them.

It’s a decision that shouldn’t be taken lightly. Take the time to be cautious and strategic, and ask yourself these questions to know when to hire.

Who knows? Maybe profits will increase enough to buy that Ferrari after all.

1. Can I afford it?

First, take a hard look at the realities of your business to understand when to hire. What drives revenue? Determine the leading indicators, those predictable factors that can forecast where your business is headed. Analyze these to see if you can justify additional help.

For example, if your business is tied to sales, look at numbers of proposals and bids. If these are higher, chances are you’ll be able to afford additional sales staff.

2. Is it the right time?

The key to success is matching hiring to the time when new employees can begin to generate revenue. In many cases, it takes eight to 10 weeks to hire someone. How quickly can you put new people to work?

  • Hiring too early – If the work is not quite ready, new employees sit on their hands. The upside is that you can use the time to train them.
  • Hiring too late – If you hire after you’ve made promises to clients or customers, you may not have enough time to get your new employees up to speed. Therefore, you may not be able to fulfill your promises, which can cause you to lose business. Also, if you’re desperate, you may end up hiring someone who doesn’t mesh with your company’s core values.

Examine the utilization rates of your current employees – the percentage of their time that is billable versus gross profit.

  • If employees are overworked, for example, working overtime or not taking vacations, they’re at risk of burning out. Examine hiring new employees or making your processes more efficient.
  • If employees seem to be busy, but gross profit is too low, they may be inefficient, billing incorrectly or improperly trained. You may want to invest in training or improve your processes instead.
  • If your employees are busy, productive and gross profit is within target, it may be a good time to hire.

3. Do I understand the hidden costs?

Recruiting is one of the biggest expenses a company has – and one of most overlooked. Besides the obvious costs of salary, benefits and office space, a lot of hidden ones are lurking.

  • Each job candidate brought into the office is usually interviewed by at least three people, often your top performers or members of the team you’re hiring for – which is already stretched to do its work. Therefore, you’re losing production time of some of your most valuable people during this process.
  • The new hire will likely be trained by one of the best employees you have, meaning that individual will spend valuable time away from his or her core job.
  • People want more money when they change jobs, so you may have to pay new employees more than existing ones.
  • New workers take a while to get to full functionality. You’ll still have to pay them their full salary while they get the hang of things.

4. Should I hire or promote?

Businesses generally have two types of employees:

  • Billable – Who directly generate revenue (engineers, service people, architects)
  • Overhead – Who handle general business functions (accounting, human resources, leadership)

You’ll want to hire as many billable employees as you can keep busy at your target gross profit percentage. Overhead team members are essential to your business and valuable members of your team but remember, they don’t directly bring in revenue.

Take a close look at existing staff to determine if you need to look outside your company to get the work done.

Benefits of promoting from within include:

  • Lower hiring costs, including advertising and interview time
  • Less time to train for the position
  • Opportunity to provide advancement opportunities for staff, possibly increasing loyalty and retention
  • Familiarity with work ethic and a match with company culture

5. What would Spiderman do?

There are two types of input for making a decision: data and Spidey sense. Sometimes it’s better to go with your gut.

One school of thought says that if you find someone who is an absolute perfect fit for your core values and beliefs, especially if the person can generate income, hire him or her. Hiring the right people is even more important than timing. If they’re rock stars, you’ll find ways to make them billable.

Turnover is one of the highest costs in business, so if you recruit for core values, beliefs and skills, you may be saving money down the line.

Want more info about hiring a dream team? Download our free e-book, Building a better team: How to attract, recruit and hire top talent, now.