This article was contributed by Ernest Cheng. Ernest Cheng is a San Francisco-based marketing professional who focuses on technologies that drive performance. He is currently the Head of Marketing at ClickTime, an award-winning time tracking platform for nonprofits, billable professionals, and growing businesses in over 65 countries.
Any small business owner will tell you it’s a constant hustle. Whether your focus is securing new customers, marketing products and services, or fine-tuning internal operations, the demands never cease. It often takes a talented, dedicated team strategically applying their skills daily to optimize each business area. And as your small business grows, it should come as no surprise that your team will likely need to grow with it.
But how can you add headcount while ensuring you still remain profitable? It’s a delicate balance, but the answer lies in shrewd workforce management. When your workforce requirements are purposefully aligned with the needs of your business, you can execute projects more efficiently and quickly increase productivity on your team. That being said, timing is everything. Below are five common signs that your small business might be ready to expand:
1. When Employees Are Over Their Capacity Limits
Capacity planning is the process businesses use to determine how much work they can take on, considering their total number of employees and time constraints. This calculation is important to companies of all sizes because it’s critical to balance customer demand with available company resources.
To determine your capacity, calculate how many workable hours your workforce actually has to deploy. If you have ten workers who each work 40 hours per week, you’ll have about 1,600 hours per month to work with. Don’t forget to make allowances for sick/vacation time. Determine which projects are the most important to the health of your business and ensure your top performers spend their time there.
Remember to perform this calculation before you take on new projects. If you don’t, the risks to your business are significant. It’s essential you have the right number of resources with the right availability to complete the work properly.
When that balance becomes upset, the first symptom you’ll notice is a sharp decline in productivity. Signs to look for include missed deadlines, quality deterioration, and stressed employees. If you see these signs, check in with your team and reexamine your project load. Moreover, if this becomes a pattern, it could be a solid indication that it’s time to add headcount.
2. When You’re Turning Down New Opportunities Consistently
If market research indicates that your industry is poised for growth, you’ll want to ride that wave. You don’t have to accept every new request that knocks on your door, but if you find yourself repeatedly turning away fruitful opportunities, it won’t be long until you’re cast in the shadow of your competition.
As discussed, if you’ve properly planned your workforce capacity, you’ll understand exactly which resources you have available to dedicate to new customers. But be mindful. If the unallocated hours on your team don’t line up with the project completion timeframe, you may need to add headcount.
If so, decide what that should look like. You may not necessarily need new full-time employees if new projects can be done by freelancers, consultants, or even seasonal employees. Even once your workforce has been optimized, be selective about which new projects you choose to take on based on their forecasted profitability.
3. Top Performers Are Doing Low-Value Work
When your top talent is spending their time doing work that associates should complete, it’s a good indication that something is amiss. This may include manual data entry or other forms of busy work. In other words, you don’t want to pay your retail manager her standard hourly rate to respond to administrative requests. This also applies to salaried workers.
To break down what this means, say a salaried retail manager makes $3,000 per pay period and works 80 hours during that time; the cost of his salaried hour would be $38. If his associate’s salaried hour is two-thirds of his own, say around $25 per hour, you need to ensure that higher-level ability is matched to more complex tasks. If it turns out that the skill sets on the team are not being properly utilized, it could be time to fill in those gaps with extra headcount at the appropriate level.
The reality is anyone can fall into this trap when delegating to the proper staffer feels like more work – ‘it’s just easier if I do it myself,’ especially if you know that your assistant is already running behind. However, it behooves every small business to ensure those with higher-level job titles aren’t self-allocating hours to complete administrative requests.
4. When Customer Service Is Slipping
Excellent customer service is critical to keeping your business growing and directly leads to future opportunities. More and more clients are using their customer experience to differentiate between brands. Every encounter the client has with your team will be reflected in their rate of satisfaction. On a whim, a customer can walk away from a perceived negative interaction with your business and leave a scathing review online. When concerns and problems aren’t resolved quickly and professionally, it reflects poorly on your business and may lead to customer churn.
If you see an uptick in negative reviews, fewer referrals, and increased customer frustration, check in with your team about their customer service responsibilities. You may find that they are stretched too thin to return those phone calls. If so, decide whether you employ enough staff to meet your customer service goals. Or, perhaps you should consider adding a POS system to manage your inventory, customers, and marketing all in one place. High quality business technology can enable staff to focus on higher value tasks over mundane clerical work. When you leave customer service as a lower priority, it won’t be worth the price you’ll pay in losing repeat business.
5. When Overtime Pay Is Draining Profits
Your margins ultimately indicate how profitable, sustainable, and stable your business is. There is no more important metric. But increased overtime expenditures will most certainly bring them down.
Depending on the size of your workforce, you may be forced to pay costly overtime rates because your staff is stretched too thin to complete all the work over the standard 40-hour week. In contrast, your competitors may employ a larger workforce, enabling them to strategically spread working hours evenly to stay under the federal overtime cap.
Once you crunch the numbers, you may discover that paying for overtime is more expensive than hiring additional employees or bringing in freelancers or contractors. But hiring new employees isn’t cheap either, especially in the short term. Typically, it means time spent interviewing, onboarding, and mentoring. You may discover in the long run that your top performers wind up contributing less due to time constraints, leading to reduced project quality.
Hire with Confidence
Hiring additional staff is never an easy decision. Take time to consider carefully the workload coming in, the skills you have on your current team, and your overall business objectives. Adding headcount should bring direct value to your team that justifies the added cost. But if your business is experiencing the signs above, it may just be time to start hiring.