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Calculate the risks/rewards of hiring: 5 ways

Jared Bilski
by Jared Bilski
September 15, 2009
  • Strategy
2 minute read
  • SHARE ON

There are many talented candidates out there right now, but how can you be sure your firm can afford to add staff ?

Here are five key stats to review for a clearer picture of whether or not hiring plans are financially feasible:

Future sales: Get a ballpark figure. Before any hiring takes place, it’s good to have a reasonable idea of what future business looks like. Get your customers to forecast their future purchasing plans — the further out you can get them to look, the clearer you’ll be about future business needs.

Key positions: Identify where to bulk up. After determining your future forecast for sales, hone in on what positions will likely be stretched thin.

Added revenues: Estimate what they can do. The best way to find out if bringing new staffers aboard is a worthwhile decision: projecting — in dollars and cents — what they can bring to the table. If the employees you’re bringing on are responsible for new products, take a shot at calculating how many products can be created within a certain time frame.
Best bet: Use units-per-hour to gauge contributions. For example, if an employee is responsible for five units within a one-hour time span, and each unit sells for $40, then that employee can bring in around $52,000 in revenue annually.

Expenses: What will they cost you? Tally up all the associated variable and direct costs that come with bringing on new employees. Take into consideration everything from salaries, recruiting, training and benefits, to what equipment you’ll need to purchase equipment (PCs, phones, etc.).

Profits: Will your cash flow support additional staff? Will the employees you add return a profit? Only time will tell. However, you can crunch the numbers to see if the investment works out on paper. Take the above example of the worker who can generate $52,000 a year in revenue for the company. If it costs $45,000 annually to employ this person, the numbers justify the move.

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