How to create a hiring budget


You’re swamped. Too much to do and not enough time. You’ve had a “we’re hiring” ad up on Instagram for months, but nobody you’ve interviewed is the right fit. They aren’t qualified, they were immature, or they were too rough around the edges.


Where are all the good technicians? Why does there seem to be a total drought of good, experienced installers and builders?


It’s true, experience is harder and harder to find these days. That’s why I’ve written an article talking about why you shouldn’t demand experience. However, if you’re looking for experience to manage your shop, so that you can take a step back for some reason, and your whole team is new and unable to take over more responsibilities, then you may need to find someone with experience to run the shop.


Experience is rare, so experience is expensive. A quality employee likely knows what they’re bringing to the table, and might scare you away initially with their price. This is why I work with shops to create more financial resources through profitability and efficiency. The best approach for your experienced hire process is to go in with your eyes wide open, but avoid going in with a blank check. Establish a budget. Here are the steps:


1. Know your needs


What is the exact set of expensive skills you need to hire? Do not look for anything more than that. Do not let yourself get distracted by prestigious names or a long tenure. The only thing you should be looking for is someone who possesses the skills and the desire to accomplish what you need them to accomplish.


2. Know your books


For purposes of this article, let’s assume you’re paying an annual salary. What is your current rolling 12-month net profit? What is your projected growth? What additional costs will you be required to take on as a result of this new hire? Perhaps new systems, a new training tool, or something else?


3. Know your team


How will your team respond to this new hire? You’re bringing someone in to manage your existing team. Generally speaking, that is one of the hardest roles to assume in a new company. You’re the new guy, but you’re also in charge of the team. Is your team humble enough to both listen and teach? Are they comfortable not to feel threatened or insecure? You will need to find someone who is equally as humble, who can come in to teach and learn, and who will be humble instead of threatened and insecure.


4. Know your new hire’s value over time


What do you expect this person to be able to accomplish? Are they going to save costs, generate efficiency, boost sales, handle a backlog and take up a new surge of work? I want you to have a very clear idea of exactly how this person is going to create value for your shop. In addition, you need to know how long it is going to take them to create that value. This step is very important. Without understanding the exact monetary value you expect this person to generate, you cannot create a budget.


5. Create your budget


You know what you’re hiring for, you know your books, you know the kind of person your team will welcome and work well with. You know what value they are going to bring to your shop. With all of these ingredients, you can come to a final product; the price you’re willing to pay.


Use whatever resources you have to figure out what people in similar positions are making in your area. Online, there’s Glassdoor.com and forums. There’s tool truck dealers, service providers, and your techs who may have friends in those positions.


Once you have a ballpark, compare it to the value you believe that person can create. Is it worth paying them a certain amount of money each year? Do you expect them to produce more than that? How much more? Consider the time commitment your team will have to put in to get them up to speed. Think about the new hire’s potential three years from now, along with any pay hikes you intend to give them. Think about benefits – health and dental, retirement savings and matching. All of those go on top of the salary, but generally don’t change too much along with the salary, unless you expect someone to use all of their retirement matching.


Now the big question – can you afford to invest in creating an environment for this person to succeed in? Do they have the necessary training and resources available to be successful? The days of hiring someone and throwing them into the deep end are over. You want to keep people around instead of having them leave after three months? Stop throwing them in the deep end.


The last question is simple. After all of these additional costs that come with hiring someone, you will have arrived at a number. Does that number fit within free cash that you have available to spend each month? If yes, is that number lower than the value you expect this new person to provide?


If yes, set off down the path to hiring.


In conclusion

Without a clear, calculated budget, you will not be able to hire the person who is really going to take your shop to the next level. As I’ve just described, it’s a quick process. Take the time to think it through.


Driven Performance Advisors

Driven Performance Advisors helps shop owners and specialty parts companies increase efficiency and improve profitability to grow to $5M in sales. Schedule a consultation at drivenperformanceadvisors.com. Subscribe to DPA Weekly at drivenperformanceadvisors.com/dpaweekly.

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