My dad could fix anything.
And when I turned seven, I became his helper.
When he had to fix the dryer again or change the brakes on our van, I had the important job of holding the flashlight.
I loved working with my dad. I was helping ‘fix’ something.
But after 4 mins into the first job, I realized I was just a set of hands.
And the recipient of my dad’s frustration.
When the flashlight slipped, and the screw head disappeared into the darkness, my dad gave me an earful.
Although I was borderline useless at that age, I did reduce the time it would take my dad to repair something.
When he asked for my help, he knew I’d end up crying and him frustrated, but it would save him from fumbling in the dark.
He knew the cost and benefit of my help.
With many contractors, the costs and benefits of getting help are often misunderstood.
Not all hires are equal (which we all know), but more importantly, the true cost of different hires significantly varies.
Hiring AND Training
The cost calculation to hire someone should include the time and
investment to train the hire.
Many owners, new and seasoned, underestimate the investment in training.
We expect that a new hire will clear our plate immediately, whether we’re hiring to take on more jobs or reduce our admin time.
But the reality looks different.
You or the new hire’s supervisors will actually get busier managing the new hire before your workload decreases.
There is plenty of research to show that the more time we spend upfront training, the better the return on the back end.
And even the most skilled workers need time to learn about your expectations and systems in your business.
So, we have two options when it comes to the upfront investment:
- We build that investment (time and cash) into our hiring plan and cultivate a self-sufficient team member.
- Or refuse to invest, throwing them in the deep end, and then act surprised when they keep making mistakes and quit after a few weeks.
Ultimately, there is no way to avoid the training investment for a new hire.
But there is a bigger perspective to consider, which gives you control over the mid to long-term success of your new hire.
Note: Before you hire anyone, make sure you’re tracking the right metrics to ensure that you and your business can support the hire.
I get that you want to keep costs low when hiring.
Based on the quick math in your head, it seems like the best option.
This is exactly what I did in my first business.
I hired the cheapest option to save money.
I was prepared to train, but I wasn’t prepared to see my profit shrink as much as it did.
Let’s run the numbers – say you feel like you can only hire an apprentice.
You pay them $25/hr.
They’ll be working with you or one of your Jman, and you’re hoping to increase the number of completed jobs from 10 to 15 per month.
Each job generates $1,850 with a gross margin of about 60%.
So the 10 jobs’, before the apprentice, total GM (gross margin) is $11,175 (Option 1).
You think the new team can complete 15 jobs per month (Option 3).
But what you don’t anticipate is that the GM’s drops by 4% due to the investment in training.
Worse, if the new hire needs a lot of attention, and you only get an extra 4 jobs per month, the GM drops by 6.5% (Option 2).
The apprentice would need to be at least 70% as efficient as the Jman to get back to the same GM as when you only had the Jman (Option 4).
I get that with 15 more jobs, you’re making more revenue and profit, but as a percentage, you are making less profit.
If you skipped the cheap hire and went straight to hiring another Jman, you would make more money.
I know that 3 – 6% on the GM doesn’t seem like much, but the whole reason you went with the cheaper hire was TO SAVE MONEY.
By hiring a more seasoned employee, you will pay more per hour, but you’ll generate more revenue and profit as well as regain more of your time.
I acknowledge that this is a simple example with straightforward assumptions, but I’ve seen this scenario play out like this many times in real life.
I also get that business growth is never linear, but if we get hyper-fixated on the fact that we can’t afford the $43/hr employee and don’t plan for it, we’ll end up with endlessly undertrained employees and strangled profit margins.
As a rule of thumb, the smaller the contracting business, the less room it has to invest in training new hires.
If the workload is there, don’t think you can’t afford that ideal hire.
