Many small business owners are hesitant to build a team because they aren’t sure they can afford it. They worry that if they hire help, they won’t be able to pay their employee (s) in the future and they are afraid. They worry about failure and embarrassment if they were to take the next step and they begin to believe that they can’t afford a team.
Is fear holding you back from affording a team?
Fear is the number one culprit lurking in the background just waiting to be challenged. The truth? Many don’t challenge that fear because they are afraid they won’t be able to afford a team. Here at The Abundance Group, we know that affording a team is far more reasonable than people believe. It all starts with Building a Team which (spoiler alert) is not as difficult or terrifying as one may think. So let’s dive in to see how you can afford a team.
What could a team mean for you?
For starters, let’s think about what building a team would do for you! Having a team would increase your reach, allow you to say “yes” to more while taking time off (and getting paid), delegate your piling to-do list, and increase your revenue. It would reduce your risk of burnout, give you more reasonable work hours, and provide ample opportunities to improve your SOPs (two heads are better than one right?!). This approach is for hiring people who deliver or help deliver your services. Although it often also applies to people we hire to help run our business or do marketing activities for us as well. The logical way to think about this is to break it into 2 pieces:
- Paying them during their training period, and
- Paying them on an ongoing basis.
Brace yourself, we are about to talk about money. A topic that makes many feel uncomfortable but a conversation you need to have if you are looking to afford a team. So here we go…
Costs to Train
Paying an employee during the training period (when they aren’t doing any/much work that’s creating value in your business just yet) simply comes down to estimating the number of hours it will take to train them. Either you teach them, or send them working through a training program you have already set up. You will also need to add the number of hours they’ll be doing ‘hands-on’ training while working with you. After all, they aren’t going to understand your SOPs without your guidance and modeling at first!
Breaking It Down: Affording Team Training
Let’s look at a real life example. Say you hire someone that will need to complete 15 hours of self-study training. This might be a training program you’ve created such as: a series of onboarding videos, documents to review SOPs, and FAQ. Then lets say they need to complete 25 hours of hands-on learning. This might be a series of meetings that you go through processes together and/or working together out in the field at an event where they can learn how you operate and what you expect. If we look at the time commitment, that totals 40 hours; usually the scope a single week unless the position is part-time (which for many young businesses is common and more affordable at first).
Now let’s add in their income. You’ve negotiated a $20 an hour rate. This means that if they are working 40 hours at $20 an hour, you will need $800 to train them. Looking to add two team members? Simply double to number for a new total of $1600.
Now let’s look at the numbers even further. If you have hired someone to work full time, you will need $800 a week or $3,200 a month. If you are hiring someone part-time at 20 hours a week, you will need $1,600 a month. Making sense?
Once you have an estimate of the total number of training hours, you simply multiply that number by their hourly pay rate. That’s the amount of money you need to have in the bank (or access to) to pay them during their training period. Not so scary, right? You can afford this! Now onto the part that frightens people…paying them on an ongoing basis. Remember when I said it isn’t as scary as you think…deep breath!
Affording Ongoing Costs
To ensure you can pay an employee on an ongoing basis is handled by how you structure your payment plan from your clients. Most creative entrepreneurs have a structure that includes a ‘deposit’ followed by either a ‘final’ payment or a couple payments during the time they work with the client. Well, the deposit is intended to cover your costs while providing services to your client. So all you need to do is ensure that the deposit is larger than the amount of money you will need to pay your team members to provide the services and put that money aside.
Putting that money aside is crucial! We encourage you to do this by setting up a separate bank account so that that money can ONLY be used to pay your team members. After all, if you don’t tell your money where to go, it decides for itself. Now is the time to get bossy…after all, you ARE the boss! Tell that money where it is going and stick with it! If you have the discipline to do this, you will always have the money you need to pay your team members. Easy enough, right?!
Breaking It Down: Affording an Ongoing Team
Let’s look at a real life example. So you’ve trained your new employee and they are ready to get to work. You know that they will work 40 hours a week at $20 an hour which totals $800 a week. This means that if you require a deposit for a service, it should be more than that so that you are prepared to pay your employee. You will want to be sure that it isn’t even or less than what you owe them because you have more than just your employee as an expense. By setting this money aside in a separate account, it will always go to your employees and not accidentally to other costs accrued as a business owner.
As time progresses, your rates for services can raise as you begin to double and even triple book dates. This will increase your revenue, allow you to continue paying employees, and even give you time off!! Exciting right? You can afford this if you are diligent about this model!
Want to know more about affording a team?
Here at The Abundance Group, we lead a 12 week live coaching called Building Your Team Intensive. In our intensive, we cover this model in great detail and guide you through the formula we use that is tried and true. You don’t have to be a numbers nerd to be successful, you just need to plan, be diligent, and have control over your finances.
If you are looking for next steps to really support this next venture and aren’t ready to dive into a 12 week intensive just yet, check out our FREE Ultimate Guide to Building an Unstoppable Team! Need even more? Send us an email and ask us about our Hiring Guide!