Hire Smart and Fire Fast: Financially Secure Hiring Tips for your business
Before I go into how to hire well, please do not beat yourself up about hiring mistakes. Hiring is HARD. People management is HARD. Even if you do everything right, you can still hire the wrong person. People are unpredictable, and you can only prepare so much. So now, on to how to not mess this up financially.
People are the #1 cost in 90% of businesses. Do not discount the value of hiring well vs. hiring fast because you feel like that one particular thing needs to get off your plate or your team needs this particular expert to do the thing that needs to be done.
The two key things you need to know before you consider hiring are:
What does success look like in the role you’re hiring for?
How long will it take to onboard this role so that they are at full capacity?
All roles in a business should drive revenue either directly (i.e., Sales & Marketing) or indirectly (virtual assistants and CFOs). Indirectly is a little more complicated but think about it this way – time drives revenue in all businesses. Either you are spending time creating marketing campaigns, networking at conferences, or on the phone talking to customers. The back-end support allows those doing the selling & current customer support (retaining revenue drivers). There’s a direct ROI on time saved, so the skilled sales & marketing team can generate revenue.
What about preparing financially?
I recommend that you have enough cash reserved to get your new hire to full capacity so that when you run out of those reserves, they are paying for themselves.
This means that if it takes 6 months to onboard a new SDR, then you need to have 6 months of cash in the bank (base salary, benefits, bonuses, etc.) for that new hire before you hire.
All roles are different. A virtual assistant can start on tasks and give you time within a few days; a VP of sales shouldn’t need much training if they are as good as they say. It really just depends. But ensure you’ve planned ahead for that training period and are prepared.
This also depends a lot on your risk tolerance.
At a minimum, please have 2 months of cash and a direct line of sight to when they will be up to speed. This goes for both 1099 and W2 hires.
FIRE FAST!
Okay, so you’ve saved, hired, and have a new teammate! Yay! But. They’re not working out. Boo. It’s unfortunate when this happens and painful for you and them. But… Please fire them quickly, for their sake and yours.
There are 3 hidden costs to not firing an employee
Cost of distractions for the team working with them, picking up their work, or them not doing work in the first place
Cost of the stress it induces
Cost to replace them grows the longer you keep them around
According to the US Department of labor, “it could cost up to $11,000 in direct training expenses and lost productivity to replace an experienced employee earning an annual salary of $33,000”*
Stress is expensive!
That $11K of replacing an employee doesn’t include the cost of the time they may have distracted other team members, other team members had to complete their work, and their risk to your business should they be untrustworthy.
Stress costs you money.
Think about a scenario where you've just had a VERY bad day, and can’t get anything done. If your time is worth $100/ hr (makeup whatever hourly rate makes sense to you), you’ve lost at least $800 of a workday ($100 x 8). Now think about the last time you worked with someone who was just awful to work with and kept you from getting your work done. If you own the business and you’re letting people like that come in, you are spending money stressing other people out. Just fire them if they’re not working. It truly is better for everyone and saves a lot of money.
Here’s an example:
You’re paying someone $5,000 / month
You’ve lost 2 days of productive work because you’re stressed or distracted trying to make up for that hire not doing the right kind of work. 2 lost days of productivity = $100/ hr (assumed hourly rate for you) x 8 hrs = $800 / Day = $1600
Your Team has lost 5 days of productivity combined due to distractions or having to make up for that person's lack of work. 5 Lost days of productivity = $800/day x 5 = $4,000
That hire should have contributed to at least $6K of additional revenue, but you kept them for too long so now you’ve lost 2 months of that potential revenue. Missing $6K / month x 2 months of not firing = $12K of lost revenue
In total, not firing someone who isn’t working out for an extra 2 months it cost your business: $27,600 that won't show up on your profit & loss ($10,000 Salary + $1,600 + $4,000 + $12,000 = $27,600)
Hiring is challenging, like I said in the beginning - give yourself grace to fail at it AND protect your business financially from those failures.
Hire smart and slow and be quick to fire.
