I was surfing the internet today and noticed someone asking "When is it time to hire help" and this is something I've been spent a lot time with over the last two decades; in three or four different industries, so I thought it might be nice to talk about it.
The super simple answer to this is that if you're asking about hiring a new employee, then it's probably time to hire a new employee. There are only a few reasons that people typically start to think about hiring an employee: 1. Ownership burnout
2. Wanting to extend store hours
3. Understanding that customer service is suffering If you're experiencing any of those three things, than it's time to hire a new employee, and the "When" is right now. The first two things on that list are very concrete things. As an owner you have a complete understanding of your burnout, and if you're feeling burnout then you need to take the break it takes to help with that burnout. In most cases this means hiring, promoting, and training, new staff. If you, as an owner, want to move into a more hands-off role, or work hours, you'll need trusted, empowered, employees to fill the gap. If you want to extend store hours, being open more time during the week, you need more bodies for that. When Total Escape Games opened as a one person shop, it was open 11 AM to 7 PM, six days a week, or 48 hours each week. Today, the store is open 73 hours a week, and where in ye olden days of 12 years ago it was staffed by one person every shift except Friday night, now it is never staffed by one person. This was all part of a natural evolution that went from 'owner works alone' to 'one employee working one shift', to 'two employees' and so on and so forth. Total labor hours have followed a similar progression: 48 hours open = 52 labor hours (literally only doubled up on Friday night for FNM) 73 hours open = 78 labor hours (still only doubled up on Friday night for FNM) 73 hours open = 165 labor hours (double and triple staffed at all times) This has just happened naturally over the course of the last decade as the business grew, but the signs were there that helped us make those decisions. When customers had to wait on the sales floor because everyone was busy at the counter, we needed more help. This could have multiple causes, but for us a major one was the business being generated at the Magic singles counter, especially during Commander night. If one person was ringing up customers at the till, and a second person was pulling singles from the card catalogs, then people in the board game or miniatures sections might be stuck waiting without help. This means you need more help. Another way to look at this issue is from a numbers perspective. I want to talk about labor costs, and just so we all are using the same definitions we will start be defining labor costs. Labor costs are the percentage of gross sales that are spent on labor. This includes your wages as an owner, all staff wages, and all the ancillary stuff that goes into the labor pot; this means the share of payroll taxes that the business pays, as well as benefits like the company paid portion of health insurance). Labor cost DOES NOT equal Wages x Hours This is a gross oversimplification that leaves off a lot of the real cost. So, with that full understanding of labor costs, you can now check your labor costs. Here are some generic thoughts. 16% - Probably unhealthy, we'll talk about this later. 18% - My personal company goal. 20% - A standard retail goal. 22% - A little bloated, but probably okay. 24% - Something is terribly wrong. (These are generic thoughts that can change a point or two based on local economies, at least some people will tell you that, but I don't typically agree with those people.) We're going to first start with that 18%, which is the company goal I hold onto. Colorado has a higher minimum wage, very few of our employees make only that minimum wage, and the expectation is greatness, not mediocrity. A higher wage, and higher expectations, allows us to be fair with staff and still meet goals that allow for business growth. At 20% you're doing what retailers are expected to do. There is no shame in that. At 22% I become worried about inefficiencies; these can be labor inefficiencies, where the people on the staff aren't accomplishing their tasks in a timely manner, so labor costs are rising because they are not doing things quickly enough, or these can be a failure in sales. If you're paying people for their labor, their job title probably includes 'selling things', so they need the training and tools to succeed doing that. At 24% something is terribly wrong. Frankly, most of the time at 24% I think all of the blame is on ownership. If you've allowed staff to become overly bloated or overly lazy, or hired and trained in such a way that they're not accomplishing tasks and making sales, that is on leadership. There is a concept that I like to refer to as 'failing faster', and I think it's an important labor concept, but that's an entire blog of its own. So let's talk about 16%, which is another danger spot in my mind. If we've reached a 16% labor cost I believe one of two things is taking place: The staff is working so efficiently that they are the best human beings ever. The staff is working so quickly they've been forced into the role of 'order takers' and aren't getting to spend time with customers and make sales. In both cases, the labor costs are rising, and we're going to count on our staff to help us decide how (without telling them that's what they're doing). We're going to talk hypothetically here for a moment, and use round numbers because it's easier. Store A is doing $20,000 in sales and pays $4,000 in labor. It's been doing this just in a normal month for a year now, but over the course of six month this store goes: $21,000 in sales, $4,000 in labor. (We're at 19%.) $25,000 in sales, $4,000 in labor. (We're at 16%.) $23,000 in sales, $4,000 in labor. (We're at 17.4%.) $31,000 in sales, $4,000 in labor. (We're at 12.9%.) $24,000 in sales, $4,000 in labor. (We're at 16.7%.) $20,000 in sales, $4,000 in labor. (We're at 20%.) Over the course of six months we've done $144,000 in sales on $24,000 in labor costs, for a 16.7% labor cost, but we also have some weird outliers. Why did we suddenly do so much more in sales in that one month? A Magic release where we sold 64 sealed boxes is remarkably low labor, and probably has less effect on our staff than some other things, but ultimately, if I see labor costs this low it's time to talk to staff. Are they feeling like they're behind? Is it harder to accomplish tasks because of how busy they are at the till or helping customers? Do they feel like they miss customers sometimes because they're so busy doing something else? Frankly, I'm doing a mental-health wellness check with them. If they feel overworked, I probably need to hire. Giving the Thursday night employees a third body to help them meet demand will raise labor costs, but it will also improve the mental health and well-being of the staff working, who will be able to better accomplish their tasks. If every member of the staff says "No, it's been busy, but we're good. I never felt overwhelmed or overworked," Then give them a raise, they're clearly rockstars. Frankly I think if you're asking 'When is it time to hire more employees'... Then it's time. In Part 2 we'll talk about "Why" we hire the people we do, and what we're looking for in new staffers.