5 Tips on How to Have a Winning Hiring Strategy
🕐 Read Time 5 Minutes
Employees are the backbone of any business—they’re the driving force behind a business’ operations and long-term success. They’re trusted individuals who are skilled, creative, and dedicated, enabling a business to forge ahead, innovate, and grow.
As a small business owner, you know that the hiring process—knowing how, when, and who to hire—is a critical part of your business. Building the right workforce, at the right time, can strengthen the productivity and performance of your business, and ultimately help you to achieve your vision and goals.
1. Understand Employee Overhead Costs and Their True Cost
Hiring goes beyond just offering a salary—it involves a variety of costs that can significantly impact your business’ finances. Knowing the true cost of an employee allows you to budget accordingly, avoid unexpected expenses, and maintain the financial health of your business.
The most obvious expense you have for an employee is their salary or hourly wage. But you also have to account for any benefits you offer, such as health / dental insurance, vision plans, and retirement plans, which can add to the cost of total compensation. Any paid time off you offer—vacation days, sick leave, holidays—directly contributes to labor costs as well.
Don’t overlook payroll taxes: your share of Social Security and Medicare taxes (FICA) as well as federal and state unemployment taxes. All these recurring, direct costs can quickly add up and affect your bottom line.
Beyond salary and benefits, it’s essential to account for the indirect costs associated with an employee as well. These overhead costs include any expenses you pay outside of direct labor costs.
Do you have to provide any technology or equipment, such as uniforms, phones or laptops, for your employees to do their job? Do you have commercial space that you need to maintain for your employees? (Add the utility costs, taxes, and any other expenses that come with that space.) Do you offer continuing education or training and development programs to keep your employees’ skills up-to-date to enable them to grow and improve?
Don’t forget about your hiring costs—job postings, any agency fees, and the time you spend on interviews and onboarding (your time is money!).
Factor in all the direct and indirect costs to know the true cost of an employee. By understanding this cost, you can have a budget and financial plan in place to help ensure that your small business can sustain its workforce and expand.
2. Know When You’re Ready to Hire
Like many things in life, timing is key to hiring: knowing when it’s the right time to hire helps you to maintain operational efficiency without straining your finances. So how do you determine your readiness to expand your team?
Workload: Identify any bottlenecks or inefficiencies, which can indicate the need for additional help. Is your current staff overworked? It might be time to add to your workforce. Make sure to regularly review the workload and productivity of your employees so you can determine if and when additional resources are needed.
Financial Readiness: Review your business’ finances–can you afford a new hire? Examine your cash flow, profit margins, and projected revenue and expenses. Make sure your business is financially stable and healthy enough to support an additional employee.
Strategic Growth: Align your hiring decisions with your long-term business goals. Does adding a new team member support your growth strategy and help you achieve your objectives? Strategic hiring helps ensure that each new employee contributes to your business’ vision and future success.
3. Plan Your Hiring Strategy
Deciding what type of employee to hire involves understanding your existing team’s strengths and weaknesses. This is where the Zone of Genius concept comes into play: aligning tasks with an individual’s unique strengths and passions can help your business flow more smoothly (and help you make more money!).
Understand each current employee’s Zone of Genius—what they excel at and enjoy doing. If you offload the tasks outside these zones, you can improve each employee’s efficiency and job satisfaction. By hiring an individual whose strengths fill these gaps, you can help ensure that all tasks are handled by those best suited to them and enhance the overall productivity of your business.
How do you decide between hiring an individual as a contractor or as a W-2 employee? Choosing between the two depends on your business needs and plans, as each has its pros and cons:
Contractors: Contractors offer flexibility and lower total costs, since you’re not responsible for benefits or long-term commitments. Contractors can be hired for specific projects or short-term needs. However, they may lack a deep understanding of the culture of your business, which can impact longer-term projects and cohesion. They may also charge higher hourly rates compared to salaried employees.
W-2 Employees: W-2 employees offer greater alignment with your business’ and team’s culture. They’re a long-term investment and provide stability and continuity for your business. However, W-2s come with higher total costs, and the long-term commitment you make to a W-2 employee requires careful financial planning and consideration of your business’ future needs.
4. Prepare for Your New Hire
Start saving for your new hire like you’re paying someone now.
That’s right: preparing financially is key to ensuring you can afford a new hire without disrupting your cash flow and business. Start setting aside the funds now as if you’re already paying their salary, so you can gauge affordability and build a financial cushion.
Create a detailed budget that includes all the costs associated with the new hire, and put these funds to the side; this will not only help you assess your financial readiness but also prevent any unexpected financial strain. Ensure that your business has the resources to pay for a new hire—regularly review your cash flow projections, and maintain a buffer to cover unforeseen expenses.
5. Manage Your Initial Investment: Time and Money
Bringing on a new hire is an investment of your time and money. Training them and tracking their performance is crucial to making sure they become a productive member of your team sooner rather than later.
Assign them a mentor to provide guidance, support, and help to get them up to speed more quickly. Welcome feedback and conduct regular check-ins to not only monitor their progress, but also address any challenges they have with additional support or training.
Be patient and set realistic expectations—new hires can potentially slow down your business’ operations as they learn the ropes, and it’s important to remember that they need time to adapt to their new role. Offering a supportive environment is the foundation for helping your new employees succeed.
Position Your Business for Growth and Success
By understanding costs, assessing your readiness, and effectively managing the onboarding process, you can make sure your new hires support the success of your business. Careful planning and budgeting can help you build a team that enables your business to continue to grow and thrive in the long term.
At Financial Fitness Coaching, we can help you navigate the hiring process with confidence. We’ll help you develop successful strategies to ensure your business has the financial health and stamina to support your growing team.
