Art of Accounting: How to know when it is time to hire someone

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Perhaps the most important staffing decision is to know when to hire your first employee. I believe this decision needs to be guided by your goals.

If you want to build a business, then it is important to hire someone early on so you could start. If you want to make a living and go where the wind blows, then it is likely you would wait until you had more work than you could handle by yourself. Hiring your first employee is harrowing and scary and needs a bold decision.

If you are in a partnership, then two people make the decision, and I know that is much easier than if you are a sole practitioner. Hiring anyone will make your costs jump, so you have to not only have work for them, but you need to cover the new expense.

There are three types of staff you can hire—an accountant, paraprofessional and administrative person. My suggestion is to hire someone if you have enough work to keep them busy half their time. This will relieve you of about a quarter to a third of your workload since they would not be as effective as you when they first start. After a couple of months they should be able to work as effectively as you were and you will have been relieved of half your work, plus the new work you will assign to them as new business is generated.

The costs will be eventually offset somewhat since your position will be elevated in the eyes of your clients and you can increase fees by mentioning that you now have another mouth to feed. It is human nature for a client to feel that since whatever they pay you goes directly into your pocket (while ignoring your office and professional overhead) it should be as low as they can get it to be. However, once an employee is on board the client will understand that you have overhead and your relationship will change—to your benefit. This won’t occur immediately but will evolve as you request fee increases and adjustments.

Another benefit of hiring that first employee is the need to systematize your processes, be more organized, and you will have more time to spend meeting, consulting and thinking about doing more for your clients, and marketing and asking for referrals. You will also now have a business instead of a one-person practice.

Edward Mendlowitz, CPA, is partner at WithumSmith+Brown, PC, CPAs. He is on the Accounting Today Top 100 Influential People List. He is the author of 24 books, including “How to Review Tax Returns,” co-written with Andrew D. Mendlowitz, and “Managing Your Tax Season, Third Edition.” Ed also writes a twice-a-week blog addressing issues that clients have at www.partners-network.com. Art of Accounting is a continuing series where Ed shares autobiographical experiences with tips that he hopes can be adopted by his colleagues. Ed welcomes practice management questions and can be reached at (732) 964-9329 or emendlowitz@withum.com.

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