Making finance-friendly hiring decisions involves more than just assessing whether you have enough specialists to handle your current workload. It’s about strategically creating a plan you can afford.
Expanding your team is essential for your interior design business’s growth, but ensuring you have sufficient funds to support this move should be a priority. If you’re considering adding a new team member but are unsure if the time is right, this article is for you.
We’ll help you assess whether your business is ready to scale up from an accounting and bookkeeping perspective.
Understanding the Growth Phase
Recognizing the growth phase of your interior design business is crucial for making informed hiring decisions. Growth can often feel chaotic when you’re busy with clients and projects. It’s not uncommon for business owners to imagine that bringing employees on to help handle the work will calm the chaos.
Some Interior Designers may jump to hire without carefully considering the cost of such an investment. However, taking a more mindful approach can help determine if your interior design business is financially ready for team expansion. The key is to assess two things: how critical the new hire is to your operations and whether your finances can support this addition in the long run.
Our team at AccountSolve uses the Profit First method to evaluate whether a business is financially equipped for new hires. Here’s a breakdown of how it works.
Utilizing the Profit First Method
So, how can you determine whether you can afford team expansion? The answer is simple: use Profit First. Mike Michalowicz’s method involves using multiple business checking accounts to allocate percentages of your business’s cash deposits. Essentially, open a designated bank account and start setting money aside. All that is left is to follow one rule:
If you don’t have enough money in that account to hire someone, you can’t afford it.
How to start with The Profit First? Simply follow this straightforward 3-step process:
Step 1. Open a Separate Account: Create a new bank account designated for team member growth. This account will help you manage funds specifically for hiring your team, you should have separate accounts for profitability and regular, current expenses.
Step 2. Allocate Funds Regularly: Each month, transfer a predetermined percentage of your revenue into this account.
Step 3. Assess Your Financial Cushion: If the balance in this account is sufficient to cover the cost of a new hire, you’re in a good position. If not, you may need to reconsider your hiring plans. You can learn more about how the Profit First method works here.
If you find yourself in a position where you must hire despite insufficient funds in your profit account, it signals a deeper issue such as overspending or inadequate pricing strategies. We advise addressing these underlying problems before proceeding with additional hires.
But What If You’re Between a Rock and a Hard Place?
As noted earlier, having to hire without a financial cushion suggests underlying problems. It could mean you’re either overspending or not charging enough. To reduce risks, review your spending and pricing strategies by asking these questions:
Are You Spending Too Much? To determine this, take the time to review your expenses with your accounting team to identify areas where you might be overextending.
Are Your Prices Too Low? This involves analyzing your pricing structure to ensure it reflects the value you’re providing and covers your costs effectively.
The bottom line is that adding a new team member can be a crucial step toward growth, but it requires careful financial planning. By implementing the Profit First method and addressing any underlying issues, you can ensure your business is truly prepared for this expansion. Better to be safe than sorry, right? If you’re still not sure, learn more about why profit first is a beneficial system for interior designers here.
At AccountSolve, we specialize in helping small interior design businesses manage their finances effectively. Need support in improving financial management and navigating your growth with confidence? Consider scheduling a call to learn more.
