Many business owners, including those in ecommerce, often ask themselves, “Can I afford to hire someone?” It’s a challenging question, especially in the cash flow and inventory-driven ecommerce industry, where seasonal fluctuations can create a balancing act. This can lead to operating in debt and irregular paydays. However, the Profit First methodology provides solid information to confidently address this question and make informed decisions.
If you find that you are asking yourself this question, and you’re ready to turn certain responsibilities over to a team member so you can focus more on continued growth, then you need to start with the basics—Profit First basics. Once you have the Profit First system in place, you can begin to answer your burning question about hiring some help. Implementing Profit First will help you be more efficient in your operations, and you may have to become more innovative in your planning, but it will help as you consider hiring new workers.
For our purposes here, we will assume you have gone through the 4 basic steps of Profit First—you’ve created your designated bank accounts, you’ve developed that new habit of moving funds from one account to the other in a prescribed sequence, you have removed the temptation of having accounts that are too accessible, and you’ve developed a rhythm for optimizing the amount of time you spend managing you funds.
Now on to that burning question, “Can I support a new hire?” To start that ball rolling, you need to determine what the monthly cost would be to bring on a new person. You’ll want to create a new bank account for payroll. Then, beginning with your next payout, designate an amount to transfer to your payroll account, and do that with each payout for the next three months. If you can comfortably do that without fail, you can be confident that your business can support a new hire.
While this may seem a little complicated or too drawn out, there are several reasons for taking these steps. It will give you time to decide if you really need a new worker and what exactly will you have them do. You can take this time to create the perfect job description so the job will be well-defined once you begin your search. This time will also allow you to build up the payroll account to help mitigate the training costs during their initial training period, providing a cushion to help with costs until the new hire is up to speed in their new role. You’ll be growing your business organically.
A critical aspect of the Profit First strategy is to grow your business in a way that is sustainable for the long term, rather than making spontaneous changes that typically end in more debt. Following this method, you will soon go from taking your profit last to taking Profit First!
Check out my new book, Profit First for Ecommerce Sellers for a more in-depth look at the Profit First method, customized specifically for eCommerce sellers. It’s available on Amazon.com and where ever books are sold.