Why did the Turkey join the band?
Because he had drumsticks.
Hiring Your First Employee
A ton of math can go into if you can hire your first employee. And a lot of it is made up. The goal of hiring an employee is that they can make money for you and you have to do less.
That rarely works as smoothly as you anticipate. Some of that is how good are your processes, what is the difficulty of the business, and can you get them enough work so you can justify the spend.
We could look at it from multiple angles and I will cover more details in the future. But for this post I want to point out a few things.
Make sure you realize you have to pay federal taxes. That is an additional 7.65% of their salary. If they make $100k a year that adds up quickly and is an additional $7,650 annually.
You have to pay for a payroll software, you can avoid this but I don’t know anyone who pays and files payroll by hand.
You have to make payroll every month. If you miss this your employees will quit. It’s very simple, but hard when you aren’t sure where the next job will come from or if you are relying on ads converting.
Employees can change your business and many will be better than the owner at many things. But because of the extra costs and risk I always recommend you keep 2-3 months of payroll in the bank at all times.
TODAY’S ACCOUNTING TIP
Gross Profit Margin
Profit margin is a simple calculation. It is (Revenue-Cost of Goods Sold)/Revenue*100. This is a simple formula but shows how profitable each product is. For example if your profit margin was $1 to make $1 mil you would have to sell 1 million products. One the other hand if your profit margin is $100 you would only have to sell 10,000 products. It is important to realize the vast difference a good profit margin can make. Help us keep sharing real stories
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