When Not to Hire Employees for Your Startup

hiring employees
Image by Stuart Miles

Many successful entrepreneurs reach the point where their business has grown beyond their ability to fulfill work on their own. Any entrepreneur should be proud that their business is growing. They may need to hire new employees to help them manage their workload. However, they need to have a clear plan of action before hiring staff and be realistic about your demand for new employees.

Many entrepreneurs feel they need to hire new employees to ensure their business continues to thrive. Expanding your workforce can be a great way to grow your business, but you might need to be careful making that decision. You will need to commit to a number of long-term costs when you hire a new employee, including:

  • Salaries
  • Payroll taxes
  • Health insurance and other benefits
  • Training
  • Workman’s comp

You can’t afford to be unrealistic about future business expectations when deciding whether or not to hire new employees. You may want to believe that your business is growing faster than it is. The sudden growth in business you are experiencing could be due to a seasonal abnormality or a recent event.

Make sure you don’t commit to hiring new employees until you know whether or not the growth you are experiencing is going to be sustainable. You don’t want to be obligated to pay thousands of dollars a month for employees that you are going to have to let go when your business slows down again.

Bear in mind that downsizing employees will probably also give people the wrong message about your business. They may think that your company is struggling to tread water when you need to cut employees. This is particularly true for new businesses. Future investors and creditors may believe that you don’t know how to plan your growth properly. Even your customers might be concerned if they hear that you have downsized your employees. They could jump to the conclusion that your business is cutting corners or is losing revenue because previous customers have stopped buying from you for some reason.

You will also need to consider things from your employees’ point of view. Employees will be resentful of you if you let them go shortly after you’ve hired them. You will probably never get those same workers back and you can’t count on them not to spread negative rumors about your company.

Don’t hire new employees if you are convinced that your business is undergoing sustainable, predictable growth. You may still need help from other people to achieve your growth projections.

Consider outsourcing your work to independent contractors who have a proven track record for delivering quality services. I have worked extensively with a social media company in my home town. They are a very busy business with a considerable amount of work on their plate at any given time. They work with contractors all over the world who have helped them achieve sustainable growth.

There are a variety of benefits to outsourcing your work:

  • You don’t have to pay benefits.
  • You only pay for results. You would have to pay a fixed wage or salary to employees regardless of what they do.
  • You don’t need to commit to providing a set amount of work. A freelancer is there whenever you need them.

Growing any business can be tricky. One of the biggest challenges many businesses experience is determining whether or not they are ready to hire new employees. Make sure you are realistic about how fast your business is growing before you commit anyone to work with you.

About the Author: Kalen Smith writes on business development topics for Blue Sky Formations.