Hire the second guy when the first one can run a job alone

Quick answer: Hire your second employee when three things are true. You're booked out eight weeks or more at a price you're happy with. Your first employee can finish a job alone without a call to you. And you've got three months of the new guy's total cost sitting in the bank. Miss any one and wait.

Busy is not a signal

Every self-employed man is busy. Busy is the job. If "I'm slammed" were the test, you'd hire in your first month and go broke by the fourth.

The better question: what are you turning away, and at what price? If you're declining work you'd gladly take at your normal rate, you have a capacity problem. If you're losing bids or discounting to fill the calendar, you have a pricing problem, and a second payroll will make it worse. If you're working seventy hours and still not clearing what you want, read your seventy-hour week is a pricing problem first. Raising your rate ten percent costs nothing and might solve it.

Once you've fixed the price and you're still turning work away, keep reading.

Test one: can number one run a job without you?

The first helper is a pair of hands. You're on site, you point, he does. That works, and it's a different animal from the second hire. If you haven't settled whether that first person should be on payroll at all, your first helper is probably an employee, not a 1099 guy covers it.

The second hire changes the shape of the business, because now two things happen at once. Either the two of them work together while you quote, or one of them works alone while you're somewhere else. In both cases, somebody besides you has to be trusted.

So run a real test. Send your first guy to a small job by himself. A one-day job with a customer who's easy to deal with. Then watch what happens.

• Did he finish it, cleaned up, with the right materials on the truck?
• Did the customer call you with a problem, or with a compliment?
• Did he phone you eleven times, or once?

If he can't hold a job alone, a second employee won't fix that. You'll just have two people who need you standing next to them, and you'll still be the bottleneck with a bigger payroll. Train number one first. It's cheaper.

Test two: the real cost

Most men price a hire at the hourly wage. That number is about two-thirds of the truth.

Here's an example only. Your numbers will differ by trade, state and carrier. Say you hire a helper at $26 an hour, paid for 2,000 hours a year.

• Wages: $52,000
• Employer share of Social Security and Medicare (7.65%): about $3,980
• Workers' comp, at an example rate of 8% of payroll: about $4,160
• State and federal unemployment taxes, example: about $1,000
• Tools, phone, a share of the truck and fuel, example: about $4,000

Total: roughly $65,000. For a $26 an hour guy.

Workers' comp rates swing wildly by trade. A roofer and an HVAC tech pay very different percentages. Call your insurance agent before you offer anybody a dollar. Ask for the actual quote with the new payroll on it.

Now the part that stings. Nobody bills 2,000 hours. Drive time, shop time, rained-out days, a Tuesday when the supplier didn't deliver. Say he bills 1,500. Your real cost is about $43 per billable hour.

If you bill labor at $85 an hour (again, an example), he covers his full cost at about 766 billable hours. That's roughly 15 hours a week. Everything beyond that is yours. That's a hire worth making. If your labor rate is $55, the math gets a lot tighter, and you should know that before you post the job, not after.

Test three: the cash

Customers pay you in 30 to 45 days, if you're lucky and chase them. Your employee gets paid every week or every two weeks, starting day one. The gap between those is where good businesses die.

Take the example cost above, $65,000 a year. A month is about $5,400. Three months is about $16,300. That's what should be sitting in the account, separate from your tax money and your own paycheck, before you hire. It isn't a bet that the work dries up. It's the cushion that lets you sleep when a big customer pays late.

If you don't have it, you have two honest choices. Wait, or line up a part-time or seasonal helper in the meantime. Don't fund payroll with a credit card. That's how a growth move becomes a rescue mission.

And while you're at it, remember you now owe payroll taxes on a schedule, and the money isn't yours. Keep it walled off the same way you do for quarterly taxes. Same rule, bigger number.

Test four: what happens to your week

You hire to get time back. But the first thing the second hire takes is more of your time. You'll be quoting, scheduling, buying materials, checking work and answering the phone at 6 p.m. because somebody can't find the key to the lockbox.

Ask yourself plainly: which part of the business am I going to stop doing? Be specific. If the answer is "none of it, I'll just add this," you're building yourself a worse job with a bigger risk.

A workable split looks like this. The two employees do the work. You sell, quote, order and check. You spend maybe one day a week on a tool belt and the rest running the company. If that picture makes your stomach turn, good to know now. Some men are happiest as the best hand on a two-man crew and never grow past it. Nothing wrong with that. A tight one-man or two-man shop that nets well beats a nine-truck operation that nets nothing.

What a smart first step looks like

Don't announce a hire. Test the need.

1. Use a sub for overflow for a month or two. If you keep needing him, that's your answer.
2. Offer the new hire a trial period with a clear start date and a written 60 to 90 day review. Tell him what the review covers.
3. Write down the job. What he does, what he doesn't touch, who he calls, and what time he shows up. Not a handbook. One page.
4. Pick the person for how he treats a customer's kitchen. Skill can be taught. Showing up on time and leaving the place cleaner than he found it is mostly character.

You'll also owe him straight dealing. Pay on time, every time, even when a customer is 45 days late on you. A man who has to ask twice for his check is already looking at other trucks.

The call

The man who hires too early usually does it because he's tired. The man who hires too late usually does it because he's scared of the payroll. Neither is deciding on facts.

Run the four tests. Price right, number one trusted, three months in the bank, a plan for your own week. If all four check out, make the call that Friday. If three do, go fix the fourth and hire in six weeks.

The work will still be there. Good men are harder to find.