As your business grows, you’re no doubt tired of being the CEO, bookkeeper, salesperson, IT department, customer service team, and the only person who has to remember to order more toilet paper. This is usually the point when you start thinking, “I need to hire someone.” Sometimes the answer is absolutely yes – it is time to grow! Before you hire, expand, buy equipment or make a big investment, your numbers should get a vote.
Cash Flow
At Mod Ledger, we start with reviewing your cash flow. Not just, “Is there money in the bank today?”. We also look at when money comes in, when it goes out, and what happens in between. You might be profitable and still not have the cash available to comfortably add payroll or another monthly expense. These are very real growing pains many business owners feel and they can be challenging to navigate.
Real Costs
Next, we look at the real cost of the decision. A new employee costs more than their wage (employer taxes). A bigger space costs more than the rent (increased utilities & furniture). That exciting new investment? It probably has a few expenses hiding behind it saying, “Surprise! We’re coming too!”.
Risk
Then there is risk. What happens if revenue has a slow month? If the new hire takes longer to get up to speed? If the investment does not start paying for itself right away? You don’t need a crystal ball. You just need enough financial breathing room that one slow month doesn’t send everyone into panic mode.
Problem Solved?
Finally, ask yourself whether the investment actually fixes the problem. Will hiring free you up to generate more revenue? Will expanding create opportunities you can realistically support? Will that shiny new thing make the business more profitable, efficient, or sustainable?
Professional Advice
If you’re in this decision making phase of growth, I suggest that you run your numbers three ways: what you expect to happen, what happens if things go really well, and what happens if they…don’t. If your business can 1 / 2 handle the “well, that didn’t go according to plan” version, you are making the decision from a much stronger position. Growth shouldn’t just make your business bigger. It should make your business better. Knowing your numbers helps you figure out whether you are truly ready for the next step, or whether you just really, really need a day off.
PS-You deserve a day off!
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