Your first hire: when to do it, and what it really costs

There are two ways people in the trades hire their first person, and only one of them works.

The first way is hope. You're tired. You turn down work most weeks. You think: if I had a second set of hands, I could take all of it. So you hire somebody. Now you have payroll. Now you need more work, so you take jobs you'd have turned down, at prices you'd have refused. That cost shows up every Friday whether the phone rings or not.

The second way is demand. You already have more work sold than you can deliver. The jobs exist. The deposits are in. You are hiring to serve work that is already there.

One of those grows the business. The other one traps you.

The test before the hire

Before you hire anybody, answer this honestly: am I turning down work, or am I turning down work I would actually want at a price that works?

They are not the same. Most people who feel overloaded are not short of hands. They are short of price. If you are full at a rate that leaves nothing, a second person does not fix it — it doubles it. You will be twice as busy earning the same nothing, with somebody else's livelihood attached.

Raise the price first. If you are still turning away good work at the higher number, with a backlog you could hand to somebody on Monday, now the hire makes sense. Now you are hiring from demand.

The sequence matters: price, then capacity. Done the other way around, the hire forces you to keep the old price forever.

What a person actually costs

The wage is not the cost. This catches almost everybody.

Say you agree on $25 an hour. At forty hours that looks like $1,000 a week, and that is the number that goes in your head. It is not the number that leaves your account.

Work it through. On top of the $1,000 wage there is your share of payroll taxes, which is a shade over 7.65% — call it $77. There is workers' compensation, which in the trades is not a small line and varies enormously by trade and state; at a rate of $8 per $100 of payroll that is another $80 a week. Add unemployment insurance, say $15. If you supply a phone or tools, add that too.

So the $1,000 is really about $1,172 a week before anybody has driven anywhere.

Now the part nobody budgets: they will not be billable for all forty hours. Nobody is. There is drive time, loading, the supply house, cleanup, the morning they are waiting on you. Plan on forty and you will likely get thirty.

That $1,172 spread over thirty billable hours is $39 an hour, not $25. You shook on $25. The real number is $39. If your price was built assuming $25, every hour that person works quietly costs you the difference.

Work out that true hourly cost before you hire, not after. Then make sure your price covers it with margin on top. If your price only works when the new person is perfectly efficient from day one, your price does not work.

The 1099 question, answered plainly

Someone will tell you to pay the person as a 1099 contractor instead of an employee. It sounds simpler and cheaper. On a first hire it is usually wrong, and it is the kind of wrong that gets expensive years later.

The label is not yours to choose. What decides it is the relationship, and the test is roughly this: who controls how the work gets done? If you set their hours, tell them where to be, direct the method, supply the tools and the truck, and they work only for you — that is an employee, whatever the paperwork says.

A genuine subcontractor runs their own business. They carry their own insurance, decide their own methods, bring their own tools, work for other people, and invoice you for an outcome rather than clocking your hours.

If you get it wrong, the bill is not just the taxes you did not pay. It is penalties, interest, and potentially a workers' comp claim from somebody your policy does not cover — which is the scenario that ends businesses. Decide this with your accountant before the first check, not after the first audit. It is a cheap conversation and an expensive mistake.

You cannot hand over what only exists in your head

Here is the failure that surprises people most. The hire is not the hard part. The handing-over is.

You have been doing every job yourself for years. Every decision — which fitting, which order, how you talk to a customer who is upset, what "finished" looks like — lives in your head as instinct. None of it is written down anywhere, because it never needed to be.

So the new person does it differently. You correct them. They do the next one differently again. You start checking everything, then redoing things after hours, and within a month you are working more than you were before you hired anybody.

That isn't a bad hire. That's a business that only exists in your head.

Fix it the same way you would run a job: write down the sequence. Not a manual — a list. How a job gets opened. What goes in the truck. What gets photographed, and when. What gets confirmed with the customer before you start. What "done" means before you leave a site.

Write it as you do the next few jobs, while you are doing them. Each one takes five minutes. Then hand the list over with the work, and when they do it wrong, fix the list rather than the person. Nine times out of ten the list was missing a line.

Hire for character

The last thing, and the one experienced owners say first.

You can teach somebody to run conduit. You cannot teach them to show up at seven. You cannot teach them to tell you about the mistake instead of hiding it, or to be decent to a customer standing in her own wrecked kitchen.

So hire for the one you can't teach. A reliable, honest, teachable person with half the experience will out-earn a talented one who cannot be relied on — because every hour you spend managing someone is an hour you did not get back from hiring them.

Go slow here. The wrong first hire costs more than the empty seat did.

What to do before you hire

Four things, in this order, and none of them involve posting an ad.

One: check that you are short of hands and not short of price. Raise your number. If the work still comes and you still cannot deliver it, continue.

Two: work out the real hourly cost, the way it is worked out above — wage, plus taxes, plus comp, plus insurance, divided by the hours you will actually bill, not the hours you will pay for. Write that figure down. It belongs in every quote you make from here on.

Three: settle employee versus contractor with your accountant, before the first check. One conversation, and it closes the most expensive mistake on this page.

Four: write the list. On the next three jobs, write down the sequence as you do it — what goes in the truck, what gets photographed, what gets confirmed with the customer, what "done" means. Fifteen minutes total. That list is what you will actually be handing over, and if it does not exist you are not hiring help, you are hiring a second person to interrupt you.