Before hiring your first employee, deposit their intended salary into a separate account for one to three months. If your business runs fine without that money and you don't need it personally, you're ready. The account becomes a payroll buffer for slow months or emergencies.
Okay, let's go over how to figure out if you are ready to hire someone. This is a really, really exciting time for business owners, whether you are just starting at the beginning and you're hiring your first person, or you have a huge company of 500 people and you're trying to decide if you wanna hire for a specific team or maybe hire out someone to replace you. And so you can step away from your business more. This is something that is really exciting for a lot of people. And their next question is, well, how do I figure out how to pay someone? The answer is you want to act as though you're paying them for 1 to 3 months. So what I tell people when they're like, for example, I'm ready to hire my first person, it makes me really nervous. I don't know if I can do this. I don't wanna jump the gun. How do I know if I'm ready? I will say for the next 1 to 3 months, Take the money and pretend that you paid someone. So whether that's take, you know, $2,000 a month and just put it into a bank account, that's perfectly fine. If you're doing that work and you wanna take the 2 grand and pay it to yourself, that's fine. As long as you know in your head, like, okay, I'm getting this 2 grand, but normally I wouldn't get this. Once I hire someone, I don't get it. And honestly, for that reason, normally what I would prefer is to have people just put it into a bank account. So create a payroll bank account. And again, every month take that $2,000 or however much you're gonna pay that person, shove it into that bank account. And what this does is a couple things. One, you are gonna learn really quickly if you can run your business without that extra $2,000. If you are not able to take home enough and you're like, well, I normally make more money, now I can't make that money, and that's freaking you out and you don't have enough to pay your home bills, okay, well, you're not ready to hire someone because you're not making enough to support yourself. and also pay them. If on the other hand, you are able to take that and shove it aside and you're like, oh yeah, I'm living in fat city, I haven't even needed to take that much outta my business, then you're good to go. You're ready to hire that person. Get on it, put the ad out, go for it. The other thing this, that this does is it builds up a buffer. So let's say that you go to hire someone and for whatever reason, the next month you have no sales, like you have no money coming in and you're like, oh crap, I just hired someone and I can't even pay them. Actually, you can. You know why? You spent the one— the last 1 to 3 months building up a buffer in this bank account so that you can pay that person. So again, let's say that, you know, that you do this June, July, August, and you hire someone in September. June, July, August, you're putting $2,000 a month away. So by September, you have $6,000 in that account already. So when the end of September comes, if you haven't made a single cent, You can take 2 grand out. And let's say that the next month maybe you only make a little bit of money, but not enough. Again, you still have 4 grand in that amount in that account. You can take 2 grand out again. By the third month, if you're not making money, then something is going on. Maybe you need to look at the person you hired. Maybe you need to look at, you know, your marketing tactics, whatever changed. Something changed. Obviously you need to fix that. So it— but it gives you a buffer to have 1 to 3 months just Saved up. Now let's say that the worst case doesn't happen and you make a ton of money. Let's say June, July, August, you save this up and then in September you do great and you definitely have enough to pay that person. Great. Keep going. You still have this buffer and you can go September, October, November, maybe December. If by then you haven't had an issue, you can give them a little bit of bonus and they'll be really happy. You can give them, you know, maybe a $1,000 bonus and take the other $5,000 to yourself. They're happy you gave them a bonus. You're happy that you got to take an extra $5,000 and give it to yourself. Or maybe you'll just keep the buffer there and for a full year you'll just again have that there. So if anything happens like a COVID situation or wherever where kind of the, the floor just drops out from underneath you, you're taken care of. So go ahead and when you're trying to figure out if you're ready to hire that next person, or maybe again if you're a big company, but it's like a big hire, that you're worried about, just make an account, set the money aside 1 to 3 months. Honestly, 3 months is great 'cause it builds a big buffer, but some people aren't like, they need someone now. So a month is a good amount of time and it builds at least a month buffer. Put that money aside and then you should be good to go and you'll know pretty quickly if you're ready to hire that person or not.
