Hiring your next employee: how to know you can afford it

Hiring your first, or next, employee is one of the biggest decisions you’ll make in a small business.

For many Australian tradies and service businesses, it’s also one of the most stressful.

Not because they don’t have enough work, but because they’re not sure what happens to the numbers once someone else is on the payroll.

If you’ve ever thought “I think we can afford it… but I’m not 100% sure”, this one’s for you.

The most common hiring mistake

Most businesses don’t hire based on numbers. They hire based on pressure.

• You’re booked out weeks ahead

• You’re turning down work

• You’re working nights and weekends

• You’re exhausted

So you hire, hoping the extra capacity will “sort itself out”.

Sometimes it does. Often, it quietly creates cash-flow stress.

What hiring really costs (beyond wages)

The hourly rate is only part of the picture.

Before you hire, you need visibility on:

• Superannuation

• PAYG withholding

• Workers compensation

• Leave entitlements

• Payroll software and admin time

• Training and reduced productivity at the start

This is where many businesses get caught.The cash drain shows up after the excitement wears off.

The question you should ask first

Instead of “Can I afford to pay them?”, ask:

“Does my business generate enough margin to carry this role, even in a quiet month?”

That means understanding:

• Your true break-even point

• Your average gross margin

• How much revenue the new employee actually needs to generate

• How long you can carry them before they’re fully productive

If you can’t answer those, you’re guessing.

Signs you might be ready to hire

Hiring makes sense when:

• Work demand is consistent (not just a busy few weeks)

• Pricing covers labour properly (including on-costs)

• You have cash buffers for slower periods

• Payroll and BAS are already under control

• You’re clear on what the new employee will free you up to do

If hiring just adds cost without changing how the business runs, it won’t fix the problem.

What to do before you hire

Here’s what we recommend getting clear on first:

1. Know your break-even, with and without the new employee

2. Stress-test cash flow for slower months

3. Check payroll systems (super, STP, PAYG) are set up properly

4. Price work correctly so labour is profitable, not just busy

5. Plan the transition period where productivity is lower

Hiring should reduce pressure, not move it somewhere else.

Where AccNav helps

At AccNav, we help business owners answer hiring questions before they become expensive lessons.

That means:

• Running the numbers properly

• Understanding the real cost of staff

• Seeing whether growth actually improves cash flow

• Helping you hire with confidence, not hope

Hiring staff is a growth decision.And growth should be planned, not guessed.

The bottom line

If you’re flat out, exhausted, and considering hiring, that’s a good sign.It means the business has demand.

But demand alone doesn’t pay wages.

Clarity does.

Before you add someone to the team, make sure your numbers can carry them, not just today, but when things slow down.

That’s how businesses grow without breaking.

Join our Small Business Foundations Course and master running your business today.