For a founder working alone, income and expenses are mostly the same thing: money comes in, money goes out, and whatever is left is yours. The first hire changes that, because an employee is paid on a schedule whether or not sales arrive that week.
The cost is more than the wage. There are payroll taxes, insurance, pension contributions in many countries, equipment, and the founder's own time for training and management. The exact rules depend on where the business is, so owners often ask an accountant what the full cost will be before they make an offer.
What the hire is for
The best case for a first hire is a task that holds the business back: a job the founder is poor at or has no time for, such as bookkeeping or customer service, or routine work that would free the founder to bring in more money.
A common mistake is hiring to feel busier or less alone. A useful test is to ask what the hire will do in the first ninety days, and how the business will know whether it has worked.
Managing the risk
Many small firms start with part-time or fixed-term arrangements, or work with freelancers, before taking on a permanent employee. These options often cost more per hour but are easier to reverse. Whatever the choice, keeping several months of running costs in reserve gives the business room if sales dip.
Key takeaways
- An employee costs more than their wage, and is paid whether or not sales arrive.
- Hire for a specific job that is holding the business back.
- Part-time, fixed-term or freelance work is easier to reverse than a permanent post.