New Employee: Expense or Profit Center?

Dec 14, 2017, Written by Sue Miley

 

When I used to work for a pretty big company it was frequent that the owner would come in to the accounting and finance department and somehow fit into the conversation that we were just overhead.  As the Controller, I felt defensive for my team who all worked really hard.  And as an employee who had personally saved the company millions, I completely disagreed.

Is Adding A New Employee Worth It?

Adding employees is a big cost for any company and I know is particularly hard for small business owners.  If we are honest, we are like the guy I previously worked for and just see the expense.  But, there is another side to the story.  Usually, we need to add the employee for one of several reasons:

  • We can’t grow without help.  At some point growth becomes stagnant when your current team is full and then quality starts to be compromised.
  • We need a specific expertise in the business that no one has currently.  We need someone with finance expertise or marketing expertise….or rocket science….who knows!
  • Our current team will burnout if we don’t hire someone.
  • We will burnout if we don’t hire someone.

These are real factors that I see in businesses every day.  But, because we are worried about the added cost, we wait a little longer and a little longer.  We think at some point we will grow just enough to cover the new position.  Unfortunately, as time goes on we get used to having the added revenue and we still don’t want to spend the money.

I want to challenge you though to think about new positions in a different way.  Think about all the ways that the new position can add to the bottom line and pay for themselves.  Or in some cases actually become a profit center.

  • A new person in accounting can help get invoices out faster and ensure that all the revenue is collected in a timely manner improving cash flow and reducing bad debt.
  • A marketing person can develop campaigns that will bring more customer leads or that will increase online sales.
  • A technician can handle more preventative maintenance calls and/or speed up your service increasing customer loyalty.

The Benefits of Adding a New Employee

Just about every position in some way will improve things and provide opportunity for increased profits.  The biggest benefit when we are really small is that a new person will free up the owner to work on the things that will grow the business.

As the owner, you are still the main source of vision and strategy.  You are usually the main business development or sales generator in the company too.  If you don’t have time to work “ON” the business, again you will hit a ceiling and not be able to continue growing.

Besides the fact that you would be stagnating at a really painful place for you …. wearing too many hats.

Before you postpone hiring that important next position, really think about how you can turn it in to a profit center, rather than just an expense.

Will it free up your time to go get new business?

Will it provide a skill set that will bring new services to your clients?

Will it improve your operational efficiency so you can actual do the work if you get new customers?

Can they actually save you money with better estimates, faster production, or creative ideas?

As you begin the new year, think about how different things could be if you had additional help!

Reader Interactions

Comments

  1. AvatarCarl Boertjens says

    Other options exist to adding additional head count. Repeatable administrative functions, like Payroll, can be outsourced to 3rd party support organizations which use economies of scale to reduce the overall cost. A good value analysis should include all options and end in a decision that provides long-term value for the organization.

    • AvatarSue Miley says

      You are right Carl. I suggested outsourcing to another person who commented. Sometimes that is easier than trying to find someone part-time with the right skills to start!

  2. AvatarShane says

    Great article & very timely! I’ve struggled for at least 2 years wanting/needing to hire help (1st employee). I am sure it will help immediately but keep looking at as expense rather than an opportunity generating cost.
    Probably will try 10-15 hrs/wk in the beginning if I can finally make the plunge.
    Any more articles on this as I’m not sure what the process is of hiring part-time?

    • AvatarSue Miley says

      Hi Shane, The best way to hire part-time for a position that will likely one day be full time is to outsource the help you need. Sometimes it is hard to find the person who can do part-time or full-time…meaning that most part-time people can’t usually work full-time, and most people who can work full-time need to work full time. They can’t afford part-time. I think we have some articles on outsourcing. I will look for them and send your way!

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Sue Miley

Sue Miley MBA, MA, LPC helps small business owners build successful businesses on a foundation of Christian values. After 20 years in business, and 10 years as a Christian counselor, Sue uses a combination of faith, business and psychology to help clients in business and in life.