How do I Know if I can Afford an Employee?
Welcome back! Last week we talked about figuring out when you have an employee vs. an independent contractor. This week we’re talking about when you will know if you can afford to hire an employee.
But first, I need to be transparent and let you know that some links are affiliate links which means if you buy, I may receive a small commission from the sale. This does not cost you anything.
KNOWING WHEN IT’S TIME TO HIRE
“If you can’t fund a separate bank account, you can’t afford to hire anyone.”
You may have heard this before, but if you’re feeling like you need to hire someone to help out, you probably should have done it already. Hopefully you are finding this article before you get to that point, because there are some steps you will want to take beforehand to make sure you can afford that employee. When you start a business, you should have a vision of where you’d like to end up. And if your vision includes...
Profit First Basics
So you’ve read or maybe listened to Profit First, by Mike Michalowicz. Or you’ve heard about it, but you aren’t much of a reader and you’re looking for the cliff notes version.
The premise
The main idea is to take your profit first, instead of waiting until year end when you file taxes and your accountant tells you what your profit was. You basically budget your profit into your business and work backwards from there. Profit First is essentially the envelope method of budgeting, but for business, and using bank accounts instead of envelopes—because you can’t run a business with cash this day in age.
The 5 envelopes (bank accounts)
You will start by opening 5 bank accounts for your business:
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Profit - this is where you will transfer and keep your profit
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Owner’s Pay - this is where you will transfer the money you pay yourself
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Taxes - you guessed it, this is where you’ll transfer the money for the tax man.
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Operating Expenses (Opex)...