When Should Your Small Business Hire More Employees?

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Growth is the most important and exciting part of small business life. At the same time, growth phase poses a very challenging question “When is the right time to hire more employees?”. We can help you with the complicated decision of when to hire an additional employee or additional employees for your business. 

What Should I Consider in Making the Decision to Hire?

There are a number of complex factors to consider when making the difficult decision of whether or not to add a new employee or employees to your small business or family business. These include:

Turning Away New Business

Forced to turn down new work or new clients because you don’t have the personnel to take care of them? If so, that might be the easiest “no brainer” in the decision-making process. Secondly, are you so busy with the current workload that you can’t look for new business? In this situation, you may be poised to expand but need to shift some of the work to a new employee so that you can devote more time to marketing.

Expectation that your business will continue to grow in the future is also a good indicator. Although sometimes it’s hard to predict, but you don’t want to make a hire and then later find out you really didn’t need him or her. As small business accounting experts, we can help you with this difficult analysis.

Paying Overtime

Sometimes as a small business owner you are you forced to pay your current employees overtime, or worse yet overworking your current employees without extra pay. You don’t want to pay time-and-a-half for overtime, but you don’t want to have overworked, disgruntled employees in your small business either.

Suffering Deliverable Quality

One of the most important part of business if not the important part. Quality of work should not suffer. Period. If the quality of your work suffering due to labor shortage, then this is a “no brainer”. It sounds like you are ready to expand your small business.

Lack of Skills

Lack of skills is one of the important that can stop the growth of your small business. Does your current group of employees lack a certain skill or skills that would be helpful to the business.? For example, have you grown to the point where you need a full-time IT person? If so, you can fill in your company-wide skills deficit with the new hire.

Short-Term Cash Flow Issue

Hiring can lead to short-term cash flow issue if you are a small business. Can your small business afford to take a short-term financial hit? Hiring a new employee may result in a short-term cash-flow problem for your small business. Hiring a new employee is about more than just adding another employee to the payroll. For example, there may be costs associated with the recruiting process, costs that might not immediately come to mind. Depending on the line of business you are in, you may need to buy new equipment – anything from a computer to a pickup truck. Will he or she need a new desk? As small business experts, we can do the math for you and help you make this difficult decision.

Decision Time

When you carefully consider all these factors it may be clear that now is the time to expand. We will be talking about the best way to navigate through the hiring process in a future blog, but for now, keep these additional suggestions in mind. Do you have an employee already on board that is ready (and probably eager) to move up? It may be best to consider promoting him or her and making the new hire at the lower level. This is simply Employee Relations 101. Second, if this is a family business and you are hiring outside the family – perhaps for the first time – you need to be particularly careful to think about what the new hire will do to your family business’s chemistry. Finding the right fit is essential.

Are There Any Alternatives to a hiring?

Sometimes hiring a new permanent, full-time employee is not the best idea. Here are some alternatives:

Seasonal or Temporary Hire

This is a particularly good option where your workload is seasonal; for example, during the summer for a landscaping company, or around Christmas for a retailer. Knowing that his or her position is only temporary at the outset will assure that there are no hard feelings when the employment comes to an end.


Outsourcing some of the work to a private contractor or freelancer. This can be a great alternative, but there is one complication here that we can help you with as tax and accounting experts: the person you consider a freelancer may be considered an employee by the Internal Revenue Service. The rules are complicated and the financial implications can be significant, but we can help you through them.


 Finally, perhaps you are happy with the current size of your business. Perhaps it is a family business and your family is all happily employed. Sometimes the decision to not expand is the correct one.


As you can see, the decision to hire a new employee for your small business or family business can be complicated; we are here to help. Please contact us by email or phone. 

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