business plan to hire more staff

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Celarity Blog • Updated Apr 21, 2023

Build Your Case: Increasing Headcount on Your Team

How can you justify and build a business case for additional staff ? This question is easily one of the most frustrating things for hiring managers. You feel your team is understaffed and overworked. Even worse, you’re starting to worry about employee morale and the quality of work being pushed out the door.

So, what are some of the reasons it’s so hard to advocate for more staff? And more importantly, how can you overcome the common objections raised by the decision-makers when it comes to hiring more employees?

Why it’s so tough to convince decision-makers:

• Costs – People are a large expense for companies. Eliminating employees increases equity for owners and decreases costs associated with benefits, salaries, equipment, training, etc.
• Productivity – Companies sometimes downsize to increase productivity. Counterintuitive? Maybe. But, some companies think they can increase individual worker output while keeping production constant.  A company might also downsize to increase productivity by replacing workers with technology.
• Value – Downsizing generally signals restructuring or change. If shareholders/investors think these changes will increase profitability, it will increase the value of company stock. This can result in more investors coming on board or current investors increasing their contributions. In either case, downsizing can increase the company’s perceived value.
• Failed Evaluation – Some managers fail to critically evaluate their needs and the type of help required.
• Outsourcing – Some companies overextend the number/types of services they offer which leads to the elimination of products/services or outsourcing certain activities. In turn, this often leads to a decrease in employees.

How To Build Your Case for Additional Staff:

Follow the steps in this guide to help you build a solid business case to justify an increase in headcount for your team.

Step 1: Identify your needs

Identify your needs by asking yourself some simple questions:

• Do you need help during specific times of the year?
• Are you seeing a higher volume of work right now? Do you expect that volume of work to continue?
• Do you have specific gaps on your team? Do the gaps frequently change?
• Is your business growing?
• Do your team members seem more emotional and/or sensitive than usual?
• Is the quality of work on your team decreasing?
• Are you experiencing a higher turnover than normal?
• Are employees working early mornings, evenings, on weekends and missing family or social engagements to work?

If you answer yes to any of these questions, it’s time to identify the type of help you need…

Step 2: Be specific about what you’ll be asking for in a new hire

Not being specific with your requests is a critical mistake to avoid! When you’re asking for an increase in staff, focus on:

• Skills/knowledge
• Industry experience
• Specific backgrounds
• Personalities

In addition, think about how many employees you need to hire and what kind (full-time, part-time, temporary, freelance, etc.). No need to start from scratch – check out these job description templates that include responsibilities, key role metrics, competitive salary information, and more!

Step 3: Collect the right data

You’ll want to collect the data that will help you frame your argument for why you need more staff, exactly how many new employees, what kind , and why.

Use real-life scenarios to illustrate the negative impact of being understaffed and how an increase in headcount can help your team meet its goals. The best data you can collect on your own to help you make your case include things that will show:

• Impact on company goals
• Indisputable facts that highlight a need for action
• How the business has been/will be negatively impacted by not hiring

Examples of data you can collect to showcase trends (some may currently be tracked by your team, and some may not):

• An increase in the number of projects being assigned to the team but with the same number of resources (or less) assigned to complete the tasks
• Working hours of current staff, which show everyone is consistently working extended hours. You can use data like this to calculate a specific deficit in your needs. For example, 6 months of tracking shows a 2-head deficit relative to capacity (ask salaried employees to track their hours in a spreadsheet)
• An overall decrease in employee satisfaction, work quality, and customer service

If you don’t already have a Headcount Planning Strategy, consider creating one, so you can show how you can maximize efficiency and help justify your need for hiring when necessary.

Step 4: Show your current state and the consequences of not hiring

There can be serious consequences for not hiring if the customers, team, and business are suffering. This phenomenon is often referred to as the opportunity cost, which represents the lost benefits that would have been achieved if the new hire had been made.

Point out some of these consequences to the decision-makers:

• Increased attrition/turnover
• Decrease in qualified marketing and sales leads
• Decrease in sales revenue
• Missed growth opportunities
• Competitive disadvantages
• Delayed projects and initiatives
• Other enormous impacts on the overall goals of the company

Step 5: Exhibit the positive impacts of hiring (for the customers, employees, and business)

Compare the current state to the future desired state. Focus on the impact. When you outline your plan, include how these things positively impact customers, employees, and business. For example:

• Improved marketing efforts can positively impact the customer experience from a consumer perspective
• Time to pursue career development opportunities can positively impact the morale and stability of a team
• Generating higher-quality leads can positively impact big company goals, such as increasing sales revenue

Step 6: Know when and where to discuss this topic with decision-makers

When and where you should bring up adding more headcount to your team is crucial and wildly depends on your company and situation. So, follow these tips:

• Pay attention to timing. It’s best to plead your case when your company has the money, when you can identify where to save alternative dollars and spend, or when your team recently had huge accomplishments
• Ask yourself if it’s best to broach this topic during budget planning at the beginning or the end of the fiscal year; be smart about it and base it on your company structure
• Always schedule an in-person, one-on-one meeting with the decision-makers; avoid getting ignored or shot down by email or phone

Step 7: Consider alternatives to full-time employees

If executives are hesitant to add full-time employees, you can explore other options, such as freelancers or contractors . The key is to show how these temporary workers can fill skill gaps, provide flexible staffing solutions, and allow for a trial period before committing to a full-time employee. This is also a great opportunity to show the need for more full-time staff in the future.

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How To Build A Business Case To Hire More Staff

When you're managing a team and you know it's time to hire more staff, it can be hard to get the green light. For a start, you have to check if the company budget will let you and you will have to get the 'go-ahead' from senior management. If you're in urgent need of more staff and your senior management is resistant to the idea, then here is how to build a business case to hire more staff.

Why is building a business case the best approach?

It's easy for a senior manager to say 'no' when you don't have any evidence to back you up.

Hiring new staff is an additional cost for the company so senior management will always want proof that hiring new employees will be beneficial (and profitable). Having a business case is a supported proposal you can use to persuade your management that hiring new employees is the best solution for you, your team and the company.

What does a business case look like?

Your business case can take many different forms.

You can create a presentation or a multiple page document. It all depends on what your senior management is like. Do they have time to read a detailed report or would they rather have a 10-minute presentation? You don't want to spend hours on your business case if the format will have no impact.

Before you start building your case, speak to your senior management first and tell them you would like to hire more staff. If they say, "yes, that's fine" then you won't need to build a case but if they don't seem keen on the idea, then you will need to book a meeting with them to talk about it.

From your own experience working with your management, you might already know the best format for your business case, otherwise, ask them which they would prefer to see: a presentation, a report, a spreadsheet, etc.

Once you know your format, then it's time to start building your case.

How to build a business case (and what to include)

To help you create a business case quickly and successfully, we've highlighted the key elements you really need to include to state your case and persuade your higher management, your team will benefit from extra help and it will benefit the company too.

Perform an audit of your staff's current work

Doing an audit will help you show how much work your team is doing. Your management will want to see your team's current performance and determine whether they are actually working at full capacity.

You can complete an audit by speaking to your team individually. Ask each of your staff how much time it takes to complete their tasks and responsibilities. Mapping out their weekly tasks on a spreadsheet and highlighting how much time it takes to do each task will help you show each employee is working at their full capacity.

By showing your team is struggling to complete workloads or it's just impossible to take on any more work, it will encourage senior management to hire more staff.

Highlight the negatives of not hiring more staff

Explaining the negatives will help senior management realise there is a detriment to the company if they don't hire. Here are some examples:

·       Projects will not be completed on time

·       Customer satisfaction is declining

·       Work quality is significantly reduced

·       Negative impact on ROI

·       Current employees are suffering from stress and overworking

Make sure you have evidence to support your claims.

For example, if your team is working at full capacity and you've noticed your customer satisfaction has declined, you can show testimonials or responses from customer surveys. Having evidence will have a bigger impact on your senior management rather than repeating what you've heard someone else say.

The financial benefits of new staff

Once you've explained the negatives, explain the benefits of adding new staff to the team. Explain how new employees will benefit the company and benefit how your team works.

Here are some examples:

·       Your team will be able to take on more work because you will have a bigger workforce.

·       Bigger teams mean more support which means your team will have more helpwhen working on time-sensitive projects.

·       You won't have to hire freelance or temporary staff anymore. If you'recurrently hiring temps or freelance, they will be a major and recurring cost.There are many benefits to having an in-house employee instead.

·       Growing internal teams looks good for clients and customers, from their point of view, a bigger company looks more successful so inspires repeat business.

Explain what type of staff you need

After you've explained the benefits of hiring more staff, you need to explain what type of staff you're looking to hire. It will show your senior management that you've thought this through and you've got a plan prepared.

Describe what type of employee(s) you're looking for:

·       How many people do you want to hire?

·       What would their job title be?

·       How much experience will they need?

·       What skills will they need?

·       What will their main responsibilities be?

·       Who would they work with?

·       What salary would they need? This gives your senior management a clearer indication of how much it will cost.

Having a clear plan of action will likely impress and show your manager that your business plan is clearly planned and organised.It's probable they will rely on you to hire the new employee (which is perfect because you will know exactly the type of person you need for your team).

After you've prepared your case, practice your presentation to friends and/or colleagues. They can help identify anything you've missed. When you're ready, present your business case to hire more staff to your senior management. Good luck!

Your business case was a success... what's next?

Once you've got the green light to go ahead and hire more staff, it's time to create your job advert and start the recruitment process.

Cubiq is geared for people who want to expand their team quickly and find the best talent. We partner you with a specialist consultant within your field who will guarantee to represent you and your business in the most professional way and deliver quick and accurate results.

See how easy and simple it is to recruit with us by calling our team on 0161 214 3842 or email [email protected] for a call back.

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6 Steps To Create a Staffing Plan That Covers Your Business and Resource Needs

See how to create a complete staffing plan by diving into forecasting, financial metrics, and team capacity.

Marcel Petitpas,   Agency Profitability Expert

• people management

Are you struggling to find the perfect balance for your team? You're not alone. Creating a staffing plan is essential for achieving business success and reaching your strategic goals. 

This process involves forecasting, analyzing past projects, and pinpointing areas that need improvement. Your delivery team might say they're swamped, while your financial team claims you're overstaffed. It's tough to know who to believe, right? 

Remember, it's crucial to put people first when planning your staff. Make sure your team members have the right skills and are well-rested and well-utilized. By crafting a well-thought-out staffing plan, you'll be on your way to building a strong, effective team that drives success and helps you achieve your strategic goals.

In this post, we'll show you how to use objective data to get the clarity you need to decide when to hire and how much staff to add, as well as gauge the efficiency of your investments. Creating a staffing plan is a simple task, but there's more to it than meets the eye. 

Stick with us; we'll guide you through this process to set your business up for success!

Step 1: Understanding your business economics

What needs to be true for your staffing plan to make economic sense?

The process of creating your staffing plan can be started by zooming out and taking a look at your business through a set of metrics that will help you answer whether or not your agency is healthy and has the right balance of staff and income.

By understanding the key metrics, and pairing them with your current position and future goals, you’ll have a solid foundation to work upon.

A.) Delivery margin

Delivery margin, or the profit generated from the sales of services after deducting the cost of producing or providing them, is considered one of (if not the) most important metric to track at your agency from a financial perspective. The formula is simple:

Delivery margin = Agency gross income (AGI) - Delivery expenses

Or on a percentage basis:

Delivery margin (%) = (AGI - delivery expenses) / AGI

The delivery margin percentage represents the portion of each dollar of revenue that remains after deducting delivery expenses.

Your delivery expenses, as mentioned below, will mainly consist of your staffing costs and other expenses like tools, fees, supplies, etc. If you’re aiming for a 60% delivery margin, meaning that for each dollar you make as an agency, you keep 60 cents of it, then you must ensure that your staffing expenses will line up with that. If you’re only keeping 40 cents of each dollar you make, you might have to consider a tweak in your staffing plan to hit your goal. 

B.) Overhead benchmarks

In addition to monitoring your staffing plan based on the delivery margin you're making, it's essential to ensure that your overhead spending ratios align with your current staffing plan.

Having worked with hundreds of agencies and financial statements over the years, we at Parakeeto have developed a benchmark range that successful businesses should aim to operate within for a sustainable agency. These benchmarks can be divided into three overhead areas:

• Sales & marketing department: Aim for 8-12% of your AGI (Agency Gross Income).
• Administration: Target 8-12% of your AGI as well.
• Facilities: Strive for 4-6% of your AGI.

Keep in mind that the ranges for each department aren't necessarily set in stone, as we understand that every agency is unique. What's most important is that your total overhead (the combined expenses of all three departments) falls between 20-30% of your AGI.

C.) Salary allocations

It’s important to benchmark all of these financial metrics having factored in the cost of your team in each of those buckets. This means attributing each person’s salary across these areas of your organization to understand the impact that their salaries have on your financial health and the balance of these different spending categories as you update your staffing plan. 

You may realize that after tallying up salary expenses for your S&M team that you’re far too invested in this team, above the benchmark range listed above. Conversely, the opposite could also be true. 

Being aware of salary allocations and adjusting your staffing plan accordingly can help ensure that your organization remains financially balanced and on track to achieve your goals.

D.) Staffing impacts on delivery margin

Let's examine how your staffing can affect your delivery margin, the factors that influence it, and how to keep it under control. There are three factors that impact your delivery margin , all of which relate to your agency's staff: Average cost per hour (ACPH), average billable rate (ABR), and utilization.

Scenario 1:

Imagine you're considering closing a deal and wondering how much you can discount the price while still being profitable. You're aware that payroll is your agency's most significant cost, but do you know how much each hour of your team's time costs you to appropriately mark up those hours?

That's where ACPH comes into play. This metric directly affects your delivery costs and, consequently, your delivery margin.

Scenario 2:

Suppose you're deciding whether to add a new team member. The first question you'll ask yourself is, does this department need another team member?

Utilization , or the amount of time your team spends on revenue-earning activities (in delivery), helps you determine how busy your team is. It's also an opportunity (or risk) for moving your delivery margin metric.

The busier your team is with revenue-earning activities for the agency, the higher the overall delivery margin you can expect (assuming that time isn't spent over-servicing). Conversely, the more your team has to wait for more work to be won, the less efficient their time usage will be.

Scenario 3:

Imagine you have capital to invest in additional team members, and your company offers design and development services. By calculating each revenue stream's average billable rate , or how efficiently revenue is earned, you'll be able to compare the two and decide where you'll get the most value for your investment. You'll also gain more clarity on the revenue capacity a given team member should add to your business.

Tracking billable hours can be done with a simple spreadsheet, but using a dedicated tool helps you avoid errors and bill clients correctly. You can also test our new timer to see how you can take the hustle out of time tracking.

Step 2: Develop a capacity model

Start by creating a capacity sheet where you can model the following details for each team member:

• Salary, benefits, commissions, and payroll taxes
• Role and department
• Total hours worked by the individual
• Number of hours spent on delivery tasks and other departments they may work in

Consider these departments:

• Sales & marketing (internal)
• Administration/back office (internal)

Once you've gathered this data, the capacity sheet will help you understand how much of your payroll costs can be allocated to each department in your business. It will also give you an idea of how many hours your team has available to complete deliverables . You can find a template for a spreadsheet like this in our free agency profit toolkit .

An optional but valuable concept to consider is the role category . The goal is to group your capacity into a few meaningful subsets of delivery. Choosing a role category for each team member might be challenging, but try to make it work by rounding the edges a bit, and we can refine the details later. 

For example, here's what a role category exercise might look like for a design firm:

This model, with role categories defined, allows you to drop a potential hire into your plan and immediately see how it impacts a subset of your business. It will also show you how much revenue you need to add to fully support them, how it impacts your utilization target, your potential delivery margin and overhead ratios.

Capacity planning made easy

With Float's resource planning tool, you can track real-time capacity to plan project work with confidence and keep your staffing plans informed.

Step 3: Develop a financial forecasting model

Understanding the three values that impact delivery margin helps you build a financial model that projects into the future.

Let's work through an example to see how this is done. We'll start with a simple case of a designer on your team using the following capacity grid, which you can create using the agency profit toolkit :

Capacity for one team member

In this example, we have a designer named Tina who works 40 hours a week (2,080 hours a year) and makes $100,000 in total compensation, including benefits, commissions, and payroll taxes. Tina is expected to deliver 32 hours of work to clients each week, and she's likely to take 30 paid days off this year.

To forecast financially, we need to figure out how much revenue (AGI) Tina can generate using this formula:

AGI = (Capacity x net utilization) * ABR

Tina's annual capacity is 2,080 hours.

Utilization

We calculate Tina's projected utilization rate based on her weekly expectation to deliver client work. Out of 40 available hours, Tina is expected to bill 32, giving her an 80% utilization rate.

Gross delivery capacity

Tina's gross delivery capacity is her total capacity (2,080 hours) multiplied by her utilization rate (80%), which equals 1,664 hours.

Net delivery capacity 

Before using the formula, we must account for Tina's time off. Converting her 30 days of annual leave into hours (8 hours a day) gives us 240 hours. These 240 hours can't be billed to clients, so we need to subtract them from Tina's original delivery capacity and recalculate her utilization.

Gross Delivery Capacity - PTO Hours 1,664 - 240 = 1,424 delivery hours

To find Tina's net utilization, divide the new delivery hours (1,424) by her total available hours (2,080). This gives us a net utilization of around 68%.

Your standard rate

For ABR, this is the rate you'll charge for Tina's time. Let's say it amounts to $200/hour.

Putting it all together

AGI Capacity = 1424 * 200 = $284,800

You can expect Tina to add $284,800 of AGI capacity to the business, meaning you should be able to sell and deliver roughly that amount of extra work, assuming things work out as modeled.

The levers mentioned above, namely, average billable rate (ABR), average cost per hour (ACPH), and utilization, can significantly impact your margins. If someone is only half as utilized as you planned, they will generate much less revenue for your agency. Conversely, even small increases in utilization or ABR can positively impact your bottom line.

If you feel understaffed but don't have the funds to hire more employees, you may have an efficiency issue with your current team. In such cases, assessing your capacity model and identifying opportunities to improve utilization and optimize ABR to achieve better margins is essential.

This table illustrates the revenue capacity and margin for the same team as improvements to utilization, and ABR are made

Small tweaks in utilization or ABR can significantly impact budgets and margins. By understanding the revenue targets you need to set based on your staffing plan, you can ensure financial sustainability for your agency. 

Additionally, since your capacity model includes department allocations, you can get an idea of how much you're spending on each department in terms of payroll and compare it to the overhead benchmarks noted in Step 1 to assess whether you're on track.

Step 4: Develop a planned work model

Developing a planned work model is crucial to plan your work effectively . 

This can be as simple as tracking the number of scheduled hours for a project or set of projects and then comparing this to your capacity model to see how much work you have planned and how it relates to your current staffing. This is where the role categories you defined in Step 2 come into play.

For example, imagine you run a creative studio that offers various media projects such as brand kits and websites. Your role categories might include design, development, accounts, and strategy. If you've sold a project for a small brand kit to a new agency that needs to be delivered within a week, you can use the role categories you've defined to list the planned hours for this project.

Once you have this information, you can compare it to your team's capacity for each role category during that period to determine if your team can handle the workload.

For example, the design team might have a capacity of 96.2 hours per week, while the strategy team might have a capacity of 28.8 hours per week. By comparing your planned hours to your capacity, you can ensure you're staying focused on your team and risking burnout or missed deadlines.

It's also essential to consider developing a simple set of products or service lines to create meaningful segmentations of your work. This will help you collect better data for estimation and forecasting purposes in the future.

Step 5: Forecasting your staffing needs

The next step involves forecasting your staffing needs. However, before you dive into the details of your resource plan , it's essential to understand the difference between precision and accuracy. Being overly detailed in your plan can harm your accuracy, so keeping it simple is vital.

People often use a bottom-up approach when creating a staffing plan. This involves breaking down a project into smaller tasks and assigning them to individual contributors to understand how their work matches up to their capacity. While this approach is precise and provides insight into team capacity in the short term, it becomes less effective early on in a project's lifecycle or for longer time horizons and can create problems when changes need to be made.

That's where top-down forecasting comes in as a more helpful approach for getting forward visibility into your staffing needs. It's more focused on accuracy than precision and involves using higher-level estimates about projects, often using historical data to estimate the time required by role category. By rolling capacity up into role categories, we remove a lot of the precision that slows down the process of building a capacity model while maintaining a reasonable amount of accuracy when looking forward over longer time horizons and running multiple scenarios.

As the project progresses and the scope and sales process are de-risked, the forecasting process can move towards a more precision-focused approach. Eventually, the project management team will generally use bottom-up forecasting throughout the project to maintain accuracy and ensure that the team has the necessary resources to complete the project successfully.

➡️ Learn more about how to conduct effective resource forecasting .

Step 6: Install feedback loops

When creating a staffing plan, it's important to remember that plans are built on assumptions. Agency operations involve taking assumptions about client work and projecting them into the future. However, sometimes those assumptions are wrong, and the plan falls apart. 

So, what can you do to be ready for anything? The answer is to install feedback loops.

By setting up a feedback loop, you can continually improve the accuracy of your models and forecasts. To do this, you need to track three important metrics: Scoping accuracy, average billable rate (ABR), and utilization.

Scoping accuracy involves comparing your estimates of the time required to complete a project or group of projects with what happened. Did your estimates match up with the actual results?

The average billable rate (ABR) tracks your rates trending over time. Is the ABR different depending on the service offering or the person doing the work? 

Utilization measures whether or not you're hitting your targets. Are you using your resources effectively? Is utilization different depending on the person or the role category?

To set up this feedback loop, ensure that your time-tracking data is aligned with the structures discussed in earlier steps (capacity model, planned work, etc.). Your project names, service lines, products, and role categories should be consistent in your time tracking or project management tools. This will make comparing estimates vs. actuals easy and not require hours of data transformation, cleaning, organizing, etc.

Set a regular cadence to measure these metrics, and use the information you gather to adjust your models and forecasts. By continually tweaking your staffing plan based on the feedback loop, you'll be able to adapt to changes in your business and improve your accuracy over time.

Track time and utilization easily with Float

Track hours worked with our pre-filled timesheets, and keep track of team utilization throughout projects.

Who can you look to for this information?

When collecting the necessary information to create a comprehensive staffing plan, it's important to remember that you might need help to gather all the data. 

Different parts of your business will have separate data and processes relevant to the staffing plan. Your financial, operational, HR, and delivery teams will all play a role in providing the information you need.

Creating a staffing plan is a group effort, but you may be responsible for bringing it all together and making sense of it. Feel free to contact your colleagues in different departments and ask for their input. Collaboration is critical to creating an adequate staffing plan.

Maximizing your agency's success with a staffing plan

A comprehensive staffing plan is crucial for any agency to maximize its success. Your team is the lifeblood of your business, and having the right people in the right roles at the right time is essential.

Creating a staffing plan may seem daunting, but you can make informed decisions about hiring and resource allocation by developing models, monitoring KPIs, and setting up feedback loops. Collaboration with colleagues from different departments is also crucial in this process, as they can provide valuable insights and help collect necessary data.

By dedicating time and resources to creating a comprehensive staffing plan, you can create a data-driven approach to staffing that will allow you to adapt to changes and make informed decisions. This will not only support your agency's success but also ensure your team's well-being.

With a comprehensive staffing plan in place, you'll be well-equipped to face any challenges that come your way and make the most of new opportunities.

Related reads

How to succeed in your agile transformation journey, your agency's guide to improving operational efficiency, the ultimate guide to resource management for 2024.

How to Build the Right Small Business Team

10 min. read

Updated January 5, 2024

Can you afford to bring on new employees? What roles will lead to the most significant growth? How do you navigate the hiring process?

These are critical questions you must answer when building your team. 

This guide will help you answer those questions and think beyond hiring—so you can retain and grow the capabilities of your team.

1. Determine if it’s the right time to hire employees

Here are four signs you need to hire employees.

• You turn down work: If you’re declining projects due to a lack of time, it’s a sign that you need more hands on deck to capture all available revenue.
• You can’t pursue new revenue: You’ve discovered new revenue opportunities but lack the necessary skills to capitalize on them. Hiring the right employee could make it possible.
• Decline in customer satisfaction: If customers complain about your work’s quality or timeliness, you may be stretching yourself too thin. Hiring additional staff, even for administrative tasks, can help you focus on delivering quality service to clients.
• You have steady revenue: You’ve reached the point where your business has consistent revenue and can cover a new employee’s salary.

Weigh your options carefully when hiring. If unsure, you can start small with a part-time employee to assess the needed help and how a new employee will fit into your business. 

Hiring is a significant step; you must be honest about your business’s needs and capabilities.

Dig deeper:

How to grow your founding team

There’s a lot of comfort in starting a business with limited people. You’re scrappy, involved with everything, and have complete control. You also have less growth potential and need to find a way to expand your team…

Should you hire freelancers or full-time employees?

Bringing on more employees doesn’t mean they have to be full-time. Check out this resource to help determine if you should hire a full-time employee or work with a part-time freelancer.

How to work with freelancers

Learn how to identify, hire, and manage freelancers with the right platform.

Things to consider before hiring friends and family

Hiring someone you know may seem like the easy way to bring on more employees. Unfortunately, this can lead to complications and issues if your friend or family doesn’t bring the right value to your business.

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• 2. Define the roles you need

Here are some key considerations to help you define the roles you need and decide who to hire first:

• Identify immediate needs: Consider the tasks essential to business operations that are currently neglected or not performed optimally.
• Prioritize: Rank your needs based on potential business impact. Will it increase revenue, improve customer satisfaction, or reduce your workload? 

For example, if customer service complaints and cancellations are increasing, hiring a customer service representative may improve retention.

• Create a personnel plan : Forecast employee costs , including salary, benefits, taxes, and any additional training or equipment needed. Consider the expected return on investment (ROI) by evaluating how the new hire will contribute to your business.
• Consider your budget: Determine if you have the financial capacity to cover the costs of hiring new employees. A financial forecast can help here.    

Should you hire a board of advisors?

An advisory board is a group of business professionals who provide non-binding advice on how a business owner can better manage their company. Is it worth paying for this experienced guidance?

Should you hire an executive team?

It doesn’t make sense to have executives if you’re in startup mode and bootstrapping your business. However, the proper executive can be worthwhile if it leads to growth and helps you focus on areas you care about.

When to hire a CEO

When starting a business, it’s not uncommon for you to act as CEO. However, there may come a time when more experienced executive leadership can lead to more significant growth.

When to hire a manager

If you’re wasting time, feeling overwhelmed, missing milestones, and making more and more mistakes—you may want to add a management role.

• 3. Select employee benefits

A comprehensive compensation package, including competitive pay and meaningful benefits, is critical for attracting and retaining top talent. 

When selecting benefits, you need to understand:

• How they impact your personnel costs
• What your competitors offer
• What benefits your employees want

The benefits you offer should be competitive and fit the expectations of your employees. The potential financial return from hiring a given employee should also offset the cost. 

Do your research and explore what benefits are necessary for your business. You may find less costly options are far more valuable to your employees.

When to offer employee benefits

Learn when to offer employees a retirement plan, health insurance, and paid leave.

Revenue-neutral employee benefits to consider

Providing a great benefit doesn’t mean it has to be costly for your business. Benefits like flexible hours, professional development, and unlimited paid time off can produce tangible results that offset the investment.…

4. Be thorough and particular when hiring

You must be careful and thorough when selecting candidates to interview and ultimately hire. Here are a few ways to improve your chances of choosing the best candidates.

• Refine the job description : Clearly outline each role’s responsibilities, required skills, and expectations.
• Expand your hiring advertising: Utilize multiple platforms such as job boards, social media, and your company website to reach a broader audience and attract a diverse pool of candidates.
• Screen every applicant: Review each application thoroughly to select candidates with the required skills, show growth potential, and align with your company culture.
• Dig deep during interviews : Prepare a list of questions for the interview that assess the candidate’s skills, experience, and fit for your company. Consider conducting multiple rounds of interviews with different team members to get a well-rounded perspective.
• Follow up with contacts: Verify the qualifications and work ethic of the candidate by contacting their previous employers or other references.
• Consider a trial period: Offer a temporary or probationary period to assess the candidate’s performance and fit for your company before making a long-term commitment.

Remember, hiring employees who will help your business grow is the goal. Being thorough and particular during the hiring process will increase your chances of finding the right fit.

15 steps to hire a new employee

Follow this checklist to go from creating a job description to legally hiring an employee.

How to recruit and retain top talent

The time and money it takes to recruit employees will continue to grow if done incorrectly. Follow these recruiting best practices to ensure you hire the right people and do not break the bank.

Traits to look for in your first employee

The right skills, mindset, and personality for a role will differ depending on your business needs. However, there are consistent traits that will increase the likelihood of an employee being a good fit.

How to write your first job description

A job description is like an advertisement—it must be clear, to the point, and convince people to check out your business.

Questions to ask when interviewing

Are you struggling to come up with critical questions to ask a potential employee? Check out our growing list organized into specific categories like experience, career goals, and personality-focused questions.

Things to never ask job applicants

During a job interview, the applicant is trying to determine if they want to work for your business. Be sure you avoid these problematic questions and not deter a promising individual.

How to reduce recruitment costs

Here are six strategies to help you minimize recruitment costs and still find the right candidate.

• 5. Explain your vision and purpose

You need employees to be invested in your business. To feel like they are making an impact in their role. To make this connection, you need a mission statement that clearly explains the purpose of your business. 

Your mission should be present in every other business goal or vision-setting aspect. How you talk about culture, your customers, and growth plans—should all reinforce how you and your employees will pursue this more significant purpose.

Be consistent and keep these ideas front and center. The more the mission is supported and represented in day-to-day aspects of your business, the more likely employees will connect with it.

Dig Deeper: Why you should focus on more than making money

• 6. Set performance goals

Think of your mission as the shared goal for your team. You must break this goal down for each employee to make it attainable. These individual goals should support the broader business goal and lead to personal growth.

When setting these goals, use the SMART framework (Strategic, Measurable, Achievable, Realistic, Timely). Be sure the employee understands exactly how their work contributes to company success, and set up regular reviews to provide feedback.

Ensure you have a system in place to measure and report on performance. While these metrics will likely be specific to their role, you should explore how to connect them to revenue at some point. You should be looking to grow; if the work isn’t impacting the bottom line, it may not be all that important.

How to create employee personal development plans

Follow six simple steps to identify what skills employees should improve and set up a personal development plan that enhances their professional expertise and accomplishes business goals.

How to evaluate employee performance

While you don’t want to micromanage, you should have tracking and metrics in place that help you gauge the performance of your employees.

7. Foster a healthy work culture 

Don’t establish your company culture as you run your business. You should have the environment, values, attitudes, and practices you want your business and employees to represent. Without any sense of your culture, you’ll struggle to establish a vision, hire, and set goals. 

But that doesn’t mean your culture shouldn’t evolve.

No company is perfect. The environment, desires, and interactions will change as you add more employees. You need to clearly state what your expectations are and be willing to listen to your employees’ concerns and ideas.

Try to foster open communication and establish a structure for feedback that makes it easy for employees to voice their needs. The more you include them in the process, the more likely your business culture will thrive.

What defines your company culture?

Learn what qualities define a positive company culture and the basics of establishing a culture that fits your vision and goals as a business owner.

How to establish an employee-centric culture

Learn how to involve your employees in forming and evolving your company culture.

How to create an inclusive workplace culture

A more diverse business leads to broader perspectives and talent within your workforce. Learn how to prioritize inclusivity and make it part of your business culture.

How to manage conflict in your business

Conflict will inevitably occur no matter how positive and consistent your culture is. Here are four simple tips to get ahead of disputes and encourage healthy employee relationships.

• Plan for the right team

You should plan for what roles you need on your team long before hiring. By knowing what gaps you need to fill and how much you’re willing to pay for those skill sets—you’ll be prepared to build your team at the right time.

To help you document current employees and planned hires, check out the company overview section of our business planning guide. You can also learn to forecast personnel costs as part of a larger financial plan. 

Clarify your ideas and understand how to start your business with LivePlan

Kody Wirth is a content writer and SEO specialist for Palo Alto Software—the creator's of Bplans and LivePlan. He has 3+ years experience covering small business topics and runs a part-time content writing service in his spare time.

Table of Contents

• 1. Is it the right time to hire employees?
• 4. Be thorough and particular
• 7. Foster a healthy work culture 

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How to develop a staffing plan

Lucid Content

Reading time: about 8 min

Your employees are one of your greatest assets. However, too often, organizations struggle to manage their human resources and plan for the future. In fact, according to a survey from the Society for Human Resource Management, 43% of HR professionals say human capital is the largest "investment challenge" for employers. 

Plagued by turnover, skills gaps, over-employment, low productivity, and ever-changing business landscapes, it’s no wonder that businesses are struggling to keep up. But these issues can be mitigated with a strategic staffing plan. 

Use the following tips to learn how to develop a staffing plan that puts the right people in the right place at the right time. 

What is a staffing plan?

A staffing plan answers the questions: 

• What work needs to be done?
• How many people do we need to employ?
• What skills and experience are necessary to do this work?
• What skills gaps need to be filled (and are there any areas of redundancies)?

Staffing plans can encompass the entire company or apply to smaller teams or departments and even individual projects. 

For example, if your company’s business goals focus on expanding its salesforce in the coming year, a staffing plan can help prepare the sales department for that growth—so that the right people with the right skills are brought on board at the right times. 

Additionally, a staffing plan helps your business to:

• Reduce labor costs and maximize productivity.
• Eliminate skills gaps.
• Increase employee engagement.
• Increase employee retention and reduce turnover.
• Improve customer experience.
• Streamline business growth.

Having a clear staffing plan helps prevent issues that could delay growth or hinder the quality of your products and services that could result in unhappy customers and lost business opportunities. 

Not only do staffing plans help companies effectively recruit, hire, and develop employees, but they also help guide budgeting and financial decisions within the organization. 

How to calculate staffing needs

A staffing plan involves three main steps:

• Determining current staffing levels 
• Forecasting future staffing needs
• Identifying the gaps between the two

Once you’ve assessed your staffing needs, you can outline recommendations for how to address those needs, which might include recruiting and hiring new talent, promoting internally, focusing on training and employee development, or adding contractors to your staff. These forecasts and recommendations will help you develop your overall human resources plan for the organization.

Use the following steps to learn how to calculate staffing needs and make a plan for the future.

1. Identify the business goals

Before you dive into staffing plans and changes, you need to know what the overarching goals are for the business. These goals are typically outlined in a strategic business plan. Use this plan to clarify the company’s objectives and align the staffing plan accordingly.

What you do with your staff will affect business outcomes (for better or for worse), so you want to make sure the two plans align.

For instance, if the business plans to open a new location, you may need to move current staff around or hire new employees to fill those roles. The business plan will help inform those staffing decisions.

2. Determine your current staffing situation

To develop a staffing plan, you must first understand your current staffing environment.

If you have a robust HR database, this step could be reasonably straightforward. However, if you host personnel information on multiple sources, you will first need to consolidate that data into one source of truth. Work with business leaders and managers to help you ensure accurate and complete data on your human resources.

Once you have your staffing data in one place, you can assess the current staffing environment and begin to pull actionable insights from the data.

Pay particular attention to:

• The number of people on staff
• Staff distribution (team size and who works where)
• Skills and competencies within the workforce
• High performers and potential leaders 
• Low performers or “flight risks” who could indicate turnover
• Staff age and tenure (to anticipate retirement numbers)

Pulling out these data will help you better understand the current staffing landscape and more accurately identify staffing needs and opportunities down the road. 

Lucidchart can help you assess your current staff to glean new insights. Import employee data directly into Lucidchart to build an org chart or group employees in Smart Containers by role, competencies, performance, etc. Visualizing your workforce can help you identify important relationships, correlations, or gaps in the staffing.

3. Forecast future staffing needs 

After you assess your current staffing landscape, it’s time to make some predictions about your future staffing needs. 

As you conduct your staffing needs assessment, you will want to consider the factors that can affect staffing decisions and opportunities, including: 

• Business goals 
• Turnover rates and projections
• Expected mergers or acquisitions
• New product launches
• Business investments (e.g., new technology) 
• Changes in the economy
• Competitors attracting key talent 
• Industry labor costs
• Unemployment rate 

All of these internal and external factors can influence the workforce and your staffing needs. 

While forecasting will always involve some guesswork, you can make confident, educated, (and more accurate) predictions using the following methods.

Trend analysis

Trend analysis works well for established businesses with several years under their belt. Trend analysis uses historical data (i.e., past experience) to inform future needs. 

To perform a trend analysis, start by gathering historical data. Focus on gathering information for at least the past five years—but you may want to go back as far as 10 years. (Keep in mind that the larger the sample size, the more accurate the results.)  

Collect data on the following: 

• Hiring and retirement patterns
• Transfers and promotions
• Employee turnover
• Years of service
• Employee demographics
• Skills and qualifications
• Past work experience

Once you have collected the data, you can analyze it to understand turnover rates over time as well as to discover trends or patterns between the data sets.

Ratio analysis

A ratio analysis is a dual-purpose forecasting method that both predicts staffing demand and compares forecasting results against an industry standard. 

The beauty of the ratio analysis is that it doesn’t rely on historical data to predict future demand. This is an advantage for younger companies who don’t have the benefit of years of historical data to provide insight into future trends. 

Here’s how it works.

A ratio establishes a relationship between two things. A business can calculate ratios between business factors like future sales revenue predictions and staffing requirements. 

For example, let’s say your business plans to expand its sales in the coming year and predicts sales revenue at $500,000. You’ll need to estimate how many sales employees you will need to support that growth. 

To calculate this, you need to determine the ratio between sales revenue and staff. To do this, divide current sales revenue by the current number of sales employees. If the ratio is 50:1 (with 50 representing $50,000 in sales), that means a sales revenue of $500,000 would require 10 employees. 

Once you have that ratio, you can then identify gaps in your staffing. For instance, if you plan to increase your sales revenue to $500,000 but currently have only five employees, you know you will need to hire five more people to support that goal. 

4. Do a gap analysis

With your current and future staffing assessments complete, you can compare the two reports for gaps. In other words, look at where your staff is now and where it needs to be. What discrepancies are there? Do you need more staff? Are there skills missing from your current workforce that you will need in the future to meet your business goals?

Note any gaps between the two assessments.

As you go through this process, our skills supply and demand chart can help you determine how many current employees and job candidates have the skills you need and whether you should hire or train to gain those competencies.

Make sure that your workforce has the skills and experience required to meet company goals. Learn how to conduct a skills gap analysis.

5. Make a staffing plan

With your staffing needs analysis completed, you can now make a plan. 

Your staffing plan might include recommendations to implement a corporate training program to address skills gaps or to develop succession policies to streamline handoffs following retirements or promotions. 

During this process, work with the business’s leaders to create a strategic action plan to address staffing needs that aligns with the organization’s goals, culture, and mission. 

Learn how Lucidchart can help your organization plan for the future and hire employees with the right skills.

Lucidchart, a cloud-based intelligent diagramming application, is a core component of Lucid Software's Visual Collaboration Suite. This intuitive, cloud-based solution empowers teams to collaborate in real-time to build flowcharts, mockups, UML diagrams, customer journey maps, and more. Lucidchart propels teams forward to build the future faster. Lucid is proud to serve top businesses around the world, including customers such as Google, GE, and NBC Universal, and 99% of the Fortune 500. Lucid partners with industry leaders, including Google, Atlassian, and Microsoft. Since its founding, Lucid has received numerous awards for its products, business, and workplace culture. For more information, visit lucidchart.com.

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How to Write a Proposal on Additional Staff Required

by Ruth Mayhew

Published on 25 Oct 2018

Human resource planning begins with determining workforce needs: the levels, positions and numbers of people the organization needs to carry out its mission and objectives. This type of planning generally occurs before the company opens its doors for business. Factors such as company growth, increased revenue, expansion into new markets and employee attrition also can require additional staff. When you're sitting at the table with executive leadership, it's wise to have a written proposal that justifies your request for additional manpower.

1. Start With the Essentials

Depending on the size of your organization and the complexity of your staffing plan, your request for additional staff proposal should have at least four basic sections:

• Executive Summary
• Needs Assessment
• Methodology

Some proposals may require additional sections, such as Project Evaluation and Communication Strategy, but a human resources planning proposal may not need more than the basic four. The proposal requires input from your entire human resources team because staffing involves recruiting, employee training and development, and compensation.

2. Write an Executive Summary

State the purpose of your proposal and identify who provided input. Summarize the contents and provide information about how you intend to carry out the plan for additional staffing. Readers with access only to the executive summary should fully understand the underlying reasons for the request for additional staffing. Also make clear how you arrived at the conclusion that you need more employees and how the budget will cover the costs to recruit, train, onboard and pay them.

The ABC Company Human Resource Manager, [insert name], submits this proposal, dated [insert date] to justify the addition of five additional staff across two departments: Corporate Sales and Accounting. The HR team researched the company's needs, assessed the current labor market and estimated the overall cost for the additional employees. The details are set forth in this proposal approval by the ABC Company executive leadership team.

3. Describe Your Additional Manpower Proposal

Describe the reasons why the company needs additional staff and explain the methodology you used to determine how many staff are required to sustain the organization's operations. The needs assessment is likely to include a review of the company's current staffing plan and when it was implemented. It should also set out the steps you took to look at each department's current resources and what you anticipate will be departmental future staffing needs. For example, your needs assessment might include descriptions of average employee tenure, succession planning, employee training and development, and attrition and turnover.

4. Describe Your Methodology

This is the process used to conclude that the organization or department needs additional staff. For each one of the components of your needs assessment, describe the sources for your information and how you used that information. For example, averaging employee tenure is a simple calculation:

•  Review employee personnel files for hire dates
•  Calculate the number of years employed
•  Total the years worked
•  Divide the total by the number of employees 

For some departments, you might want to examine individual employee tenure to estimate attrition numbers. The methodology should also include the availability of workers, because there's no sense in petitioning for additional staff if the labor market is such that you don't stand a chance in attracting qualified applicants. Labor market availability determines whether you have access to human resources, such as nearby schools that produce graduates or a general labor market within commuting range. You might also include in this methodology what could happen if the company is unable to hire qualified additional staff. For example, increased overtime for current employees, loss of productivity or sales, or low employee morale because the current workforce is carrying the burden of excessive workloads could result.

5. Propose a Budget

The budget for additional staff is more than just what employees earn. Compensation for each employee includes annual wages or salaries, plus the cost of benefits. As of December 2017, the U.S. Department of Labor's Bureau of Labor Statistics indicated the cost for private sector employee compensation was 31.7 percent of wages. For example, the cost to employ someone who earns $50,000 a year is approximately $15,850, making the total cost for that employee $65,850 year. Benefits include paid time off, insurance and retirement savings contributions. There are also costs to recruit, train and onboard employees, which depend on the time and wages of human resources team members engaged in the hiring process. Many organizations base hiring decisions on cost, so your proposal's budget section should describe the costs and the basis for your projections.

6. Sum It All Up

The conclusion of your proposal for additional staff should indicate the timeline, based on when you receive approval, because you can't usually pinpoint the exact date when you can actually bring people on board. Contingencies, such as background checks and candidates who need additional time for providing notice to current employers may cause delays. Don't rush the time frame within which you can bring on additional staff.

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How to Hire Employees: The 12 Components to a Good Hire

11 Min Read | Feb 19, 2024

Leading your business is easy . . . until people get involved. They’re your greatest asset and greatest challenge. That’s why investing the time and energy to hire well is so important—and so freaking hard! But here’s the thing: Just like the Kentucky Derby, you can’t win in business with a team of donkeys—you need thoroughbreds.

Look, we’ve all been tempted to cut corners here. The pressure is real trying to figure out how to hire employees for your small business. Maybe you’ve even used the mirror system (if the candidate can fog up a mirror, they’re hired). But the only way to build a strong team — with high morale and low turnover — is to take more time . Learn how to hire employees the thoroughbred way, following the components listed below, and you’ll be set for business success.

Related article: America's Labor Shortage

12 Components to a Good Hire

• Get referrals.
• Do a 30-minute drive-by interview.
• Check the resumés and references.
• Use testing tools.
• Ask yourself, do you like them?
• Look for passion. (Do they light up?)
• Review their personal budget.
• Discuss compensation.
• Create a Key Results Area (KRA).
• Go on a spousal dinner.
• Implement a 90-day probation.

Why Time Is Powerful When You Hire

Before you explore the details of the 12 Components to a Good Hire, it’s worth repeating: Take. More. Time. Here’s why:

• Hiring affects everything in your organization: your brand, culture, product delivery, customer care—everything.
• You don’t want crazy, incompetent, toxic gossips in your building !
• Time reveals gold—and also brings junk to the surface. Invest in the process to get the results you want.

You’ll also want to take plenty of time to create the job posting for your open position. A well-crafted description will attract the personality, skills and character traits you want. Give enough detail to help candidates rule you out if you’re not a fit for them . Check out this example post for a copy editor position that’s clear on what the company wants and doesn’t want:

Attention, grammar geeks! We’re looking for a highly skilled, detail-obsessed, professional copy editor with a great attitude and high work ethic. We want someone who has at least three years of experience in professional copy editing (i.e., not just editing your college roommate’s papers). We’re not looking for a writer who can edit. We’re looking for a copy editor who loves to edit copy—period. Is that you?

Free KRA (Key Results Area) Template

Want an easy way to create KRAs for your team members? Grab our free template, plus get a couple examples of completed KRAs for reference!

The Nitty-Gritty: 12 Components of a Good Hire

Once you’re clear on what you’re looking for and have an awesome job description, you’re ready to build out your hiring process. These 12 steps will help you keep out the donkeys and bring in the thoroughbreds.

Ask God to send the team members you need to do the work He’s given you to do and keep out the crazy. If that’s not your thing, at least take some time to nail down the type of person you want (and don’t want) to work with every day. Reflection brings clarity.

2. Get referrals.

Thoroughbreds run with thoroughbreds, so ask your team members to refer people from their circle who they’d want to work with. If their referral is hired and completes the 90-day probation period, give the referring team member a cash bounty—and hand it out in front of the whole team. Nothing like a little cash to inspire great leads!

3. Do a 30-minute drive-by interview.

Never—never—hire someone after just one interview. Start with a 30-minute “get to know you” conversation where they do most of the talking while you ask questions and listen. And be sure not to go over the 30 minutes. You’ll be amazed at what you learn in that call, and you’ll be clear on whether to set up a second interview.

4. Check the resumés and references.

A resumé gives you an overview of the candidate’s formal training, skills and certifications. Use it as a conversation starter, but don’t lean on it (or on their references) too much. People can say anything. Occasionally when you check a reference, you’ll find a candidate didn’t tell them to expect a call or email. The candidate may even include someone who doesn’t have nice things to say. These are often signals to run in the opposite direction.

5. Use testing tools.

You need enough relational intelligence to know who to bring on, but the right tools can also help you figure out if someone would be a good fit in the role. You might give assignments in writing, copy editing, presenting, or web development, with hard deadlines, to test the chops of candidates whose roles require those skills.Another fit indicator is the DISC personality assessment . It’ll give you a quick look at how the candidate’s personality fits the team and the work you need done. For example, if you need someone great at crunching numbers, you should see high scores in organization and details on their assessment.

6. Ask yourself, do you like them?

Hire people you like. It’s that simple. You run a small business and probably spend a lot of time with your team, so relationships matter. Skills alone aren’t enough.  If someone’s good at the task but they’re a jerk or have a vastly different value system, you won’t like working with them (and they won’t like working with you either).

7. Look for passion. (Do they light up?)

Look for passion when they talk about the position and your company’s mission. Lack of passion is the easiest way to spot someone just looking for a J-O-B. If all they want is a paycheck, you’ll never keep them happy. You want employees who are excited about what they’re doing—construction workers who want to build homes for families to make memories in, writers who want to inspire hope, web developers who want to create an easier experience for customers. Look for fired-up people who love their work and own the why behind it.

8. Review their personal budget.

Can the candidate afford to live on the salary you provide? If not, sooner or later, they’ll blame you for “not paying enough” even though they accepted your offer and should know what they can and can’t live on. When people are worried about their bills, they’re distracted and can’t give their best. So serve your top candidates—before they join you—by making sure they can care for their family and meet their obligations with what you pay.

9. Discuss compensation.

It makes sense for people to want to know what the compensation package is, so share it with them a few steps into the hiring process. But if their first question is about what you’re going to do for them, they’ll leave you for 10 cents more an hour. They’re takers, not givers. You want people excited to add to your organization. If they’re preoccupied by the benefits, don’t hire them.

10. Create a Key Results Area (KRA).

This is a job description that shows what winning looks like in the role you’re filling. A KRA can be as simple as defining the number of calls and sales volume required of a sales position or the maximum time a customer should be on hold. Operating without a KRA is like taking people bowling and turning out the lights. They’ll make a lot of noise but won’t really know what they’re doing. That’s why you need to be clear about the role you’re hiring for—otherwise, the person you bring could leave when they find out what their job really is.

Ready to be challenged, inspired and motivated by the world’s top business and thought leaders? Join us online for the EntreLeadership Summit livestream—you can even invite your team to watch with you.

Related article :  How to Create Role Clarity Using Key Results Areas

11. Go on a spousal dinner.

This may be the best advice on the list. A spousal dinner is your chance to get to know the candidate and their spouse and share your company story in a casual restaurant setting. It’s a game changer. As the spouse hears about your culture and the job role, they’re usually eager to share whether they think the position fits. One more bonus: You’ll discover if your candidate is married to crazy. If they are, stay away.

12. Implement a 90-day probation.

Once a person is hired, put them on probation so everyone can make sure the fit is right. This is a low-obligation period where they can walk away if they choose. But if they decide to leave, discuss what went wrong and try to fix it first. You’ve invested a lot to get here. Every quarter or so, celebrate all your new team members who made it through their first 90 days. This is the perfect time for you and your leaders to pass the baton to them as protectors of culture and make it what they want it to be.

Bonus Tips for How to Hire Employees for Your Small Business (and Develop Winning Team Members)

Are you seeing why some company cultures tank and how bad processes create a revolving door of frustrated employees ? That’s good! You’re getting it. Resist the urge to keep doing what you’re doing if it’s not working. That’s the definition of insanity. And you’re better than that.

Also remember: The cost of churning through team members is high . (You’ll pay the equivalent of six- to nine-months’ salary to replace a team member alone.) So, have the courage to do the right thing the right way for your company’s sake. Then, go to battle early and often to care for, connect with, and keep the team you’ve built. That’s called great leadership!

These additional tips will guide you too.

Look for team members who are motivated by opportunities and your company’s philosophy.

If they only care about opportunity, sure, they’ll grow and add to the bottom line, but they’ll miss the greater mission of serving people. If they only care about your company philosophy, they’ll care about mission and culture but potentially miss business objectives and fail to operate at the speed of your business. You want excellence plus integrity from your team members.Thought leader Patrick Lencioni puts it this way: “The kind of people that all teams need are people who are humble, hungry, and smart: humble being little ego . . . hungry, meaning they have a strong work ethic . . . . smart, meaning not intellectually smart but inner personally smart.”

Never sell a J-O-B.

Always have an opportunity available, an adventure, a disrupter. Sell the idea of doing work that matters and invite candidates who are the right fit to climb on board. People want to be part of something bigger than themselves. Help them see how your mission offers that.

Don’t forget the paperwork.

You’ll jump through a mind-numbing number of hoops as you document and report on your hiring process. These are among the most common:

• An I-9 form and supporting documents to make sure the candidate is eligible to work in the United States. The form includes their contact details, Social Security number and employment eligibility.  
• A background check, once you’ve made the job offer, to keep you, your team and your customers safe. Once the applicant authorizes this, you’re free to use a third-party agency to run the check.  
• A W-4 form completed by your new team member for federal income tax withholding.  
• A W-2 form you’ll complete to detail their earnings and taxes withheld. If your state has a state withholding form, you’ll need to complete that too.  
• Other details, like reporting new hires to your state employment agency, getting the right insurances, setting up payroll, and onboarding.

Related article : How to Create an Onboarding Plan Your New Employees Will Love

How to Keep the A-Team You Build

Hands down, your largest business investment is your people. So, once you’ve got the right ones in the right seats, you’ll want them to keep thriving. One way Ramsey Solutions stays connected with team members regularly is through Weekly Reports—a tool delivered through the EntreLeadership Elite system.

Weekly Reports give you a weekly one-page snapshot from every team member so you can see (and respond to) their highs and lows, morale, stress, and workload. It’s a game changer for trust, care and communication!

So now that you have the knowledge, go out there and hire your A-team!

• Learn  how to create role clarity so your new employees know exactly what's expected of them.
• Grab our free guide to crafting Key Results Areas (KRAs) for the roles you're hiring.
• Subscribe to  The EntreLeadership Podcast to keep learning.
• Join EntreLeadership Elite and start using Weekly Reports to help you lead your team, grow your business, and create world-class culture.

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Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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Should I Hire More Employees? What the Numbers Say

Posted october 24, 2019 by tim berry.

It’s a common question for business owners: Can I afford to hire more employees? 

Having more help should make it easier to grow your business, but it also means higher payroll and more risk . How much money will it take? How much risk? Doing some numbers will help you decide. 

You’ll still deal with a certain level of uncertainty and guessing, but having a good sense of your cash flow and other financials can help you break down the decision so you can examine it in a more meaningful level of detail. 

In my experience, it’s easier to visualize these uncertainties when you break them down into components first. Here’s a process to use when you want to use data—your business’s financials—to help you decide whether or not you should hire more employees.

Step 1: Define your objectives

Whether or not to hire should never be a generic question. It’s always about hiring for specific skills and abilities that address your company’s specific needs. That means you need to put some numbers behind your rationale.

Different kinds of hires come with different underlying assumptions. For example:

• Short term growth . Some hires are about increasing your revenue in the short term. More salespeople is an obvious example. More people answering the toll-free sales lines are another example.
• Long term growth . Others are about increasing revenue over a longer-term—people involved in product development and marketers come to mind. Better or increased product development presumably gives your business more to sell. Marketing is not as immediate as sales, but presumably increases the numbers of people who know, like, and trust your brand over time.
• Decreasing costs . Some hires are about decreasing costs or expenses. A classic example is bringing shrink wrapping or packaging in-house after it reaches enough volume to make this more economical than paying an outside service. Your goal is to address challenges that emerge as your business grows and scales . 

Step 2: Estimate monthly financials

Focus on what’s going to change according to your best information. You know your business so you can make some educated guesses.

Estimate financials using spreadsheets

Start with some convenient form of row and columns like in a spreadsheet (if you are using LivePlan, skip to the LivePlan recommendation below the spreadsheet illustration). 

Set months in the columns along the top of your spreadsheet, leaving the leftmost column blank. 

Use that leftmost column to name or identify the rows below, each with estimates for the upcoming months.

First, use rows to lay out the gains you estimate from hiring. That’s all from your specific business objective in the first step—sales, costs, expenses, or whatever the benefit objective is. 

Think it through, month by month. Make realistic estimates. It’s easy to just type numbers in a spreadsheet, but useless if you’re kidding yourself.

Second, in rows below these first rows, lay out your monthly costs for hiring. Include estimated compensation, benefits, and commissions if there will be any. You can do simple math to link estimated commissions to estimated sales.

Third, do the math. Do the benefits outweigh the costs? How many months does it take for that to happen? How long before you break even?

Or Use LivePlan forecast scenarios to model or estimate financials

If you’re using LivePlan then you can use the create new forecast feature to create one or more new scenarios to manage your educated guesses. 

When you create a new forecast , it starts with all the numbers you already have filled in. You can then go to the Personnel section and add personnel to reflect your new scenario, and then go to the Revenue, Direct Costs, and Expenses tabs to change your assumptions in those areas. 

Then, compare the new scenario forecast, with the new personnel added to the existing forecast, without the new personnel. 

Step 3: Serious reality check

Don’t just believe your numbers with one pass. This is your business. Test your assumptions.

Consider timing. 

For example, look hard at how many months it takes a salesperson to get up to speed with your business and customers. Look too at the tendency of salespeople to overestimate sales and underestimate the time it takes. 

Maybe you should push your estimated sales a few months further into the future. Maybe you should do the same with the cost savings.

Make sure to check your cash flow , not just profits. Your cash flow has to be able to pay employees right on time, even if the money from incremental sales takes months to flow in as your customers pay their bills. 

If you’re using a spreadsheet, then keep cash in mind as you lay out assumptions. Do you have a cash flow spreadsheet ? Have you adjusted it to see what happens? If you are using LivePlan, then your cash flow projections will automatically adjust to your new scenario, using your cash flow assumptions. 

Vary your scenarios. Remind yourself that you are just guessing. Does your initial analysis show only slight gains from the new hires? Ask yourself how sure you are. What if your estimates are off by half? Are you still better off? 

You can also consider some alternative tactics. For example, in some cases, you could hire someone temporarily as a contractor or consultant, without the promise of long term or expense of employee benefits (but make sure you follow employment law and ethical practices). If they seem right for the long term, you hire them. If not, you don’t. And you can hire somebody part-time, in some cases. Or for a specific project. 

Consider your peace of mind. Employees are fixed costs, real obligations, and extra risk. Are you comfortable with that? Do the gains you estimate justify the extra spending and extra risk?

Does this really work?

If you’re a business owner, you live with uncertainty. This process has helped me many times, as I grew a financially independent business from zero to multi-million-dollar sales . I like breaking my uncertainty into pieces.

However, like almost everything in business analysis, the results are only as good as your assumptions. You know yourself—how good are your estimates? Do you tend to be too optimistic or too pessimistic? In the end, it’s your business. Do your numbers as accurately as you can, and they can help you run it better.

Editor’s note: This article originally published in 2017. It was updated in 2019.

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When to Hire More Employees: 4 Signs It's Time to Expand Your Workforce

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This article was updated on Oct. 22, 2018.

As a small business owner, you may often worry about when to hire more employees. While some business owners feel the urge to hire an entire working staff in the early days of their startups, others feel more comfortable waiting until their businesses have experienced some initial success. Before making this crucial decision, you must consider all of your options and weigh a variety of different factors.

Here are three signs that it might be time to hire additional employees:

1. You're Losing Valuable Time on Nonessential Tasks

Look carefully at your current situation. Do you consistently end your workday with a host of unfinished tasks? Are you working at home as often as you're working at your place of business? If you find yourself bogged down by administrative duties (at the expense of much more critical revenue-generating and customer-acquisition activities), it's a clear sign that you need additional staff members to tackle tasks such as answering phones and paying bills. After all, your time would be better spent developing long-term growth strategies.

2. Customer Service Is Suffering

Have you noticed a spike in customer service complaints? Perhaps these complaints involve problems with delivery, refunds and so on? Unfortunately, an insufficient workforce can result in customers falling through the cracks or the loss of prospective customers whose inquiries go unacknowledged. If you've noticed that you're struggling to provide stellar customer service, it may be time to consider increasing your staff. No business can afford to alienate existing customers or neglect potential new ones.

3. Your Staff Is Conspicuously Overworked

To help you determine when to hire more employees, consider your staff's current workload. It should be easy for you to tell when your employees are struggling to keep up with the demands of their jobs. They may experience increased stress levels, display a lack of attention to detail or request time off more frequently due to illness. Try not to ignore these red flags.

4. Make Sure Your Business Can Afford to Grow in Size

While hiring additional staff members can certainly help you tackle current and future tasks more efficiently, it's important to keep your budget in mind. "Hire only as your business can afford to pay for your new hires," writes David Finkel at AllBusiness . If you ramp up your hiring and don't experience a quick increase in sales, you may strain your cash flow and have to lay off some of your employees. Outsourcing is another option that may be appropriate for your business.

Every business is unique in its needs and challenges, and it can be difficult to determine the best time to expand. By keeping the above factors in mind, you can be on the lookout for signs that a new hire is necessary for your continued success.

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How to Convince Management to Hire More Staff

Whether you are managing a team, the head of your department, or a part of upper management at your company and need to hire more staff, you will need to get a green light from your boss to move forward. 

Once in a while, this will be easy to get, but it usually takes some convincing before you can get what you want or need, especially if you intend to include the issue of compensation for freelancers .

In such situations, the key is to talk to senior management so that they will end up seeing things the way you do. The first step toward achieving this goal involves building a strong business case that will convince them.

The following information outlines several steps that can help you in persuading management to hire more staff.  

If your company happens to be currently undertaking various cost-cutting measures, then it would probably not be a good time to request additional staff, even if it’s to hire a freelance blog writer . 

Try to look at the full scope of what your boss is dealing with when you approach them with your request. However, if the company is in a good position financially, you should go ahead.

Create a Situation Where It Will Be Hard for Them to Say No

If you don’t present evidence that will help support your request for additional staff, then management will think twice about saying yes. Remember, hiring more staff means extra costs for the company.

As a result, you need to show that doing so will lead to tangible benefits. You can even outline for them the pros and cons of full-time employment to soften them up. 

The other thing is to come up with a proposal that will persuade the top executives at your company that hiring new staff will be the best thing for the business and its associates.

Present Possible Consequences of Failing to Hire More Staff

It is vital that, when asking for extra staff, that you explain to management what will happen if they fail to take your recommendations seriously. You can highlight possible issues like missed deadlines or lowered customer satisfaction using verifiable data. 

You could also say that your team or the office employees, in general, are struggling with the current workload.  

One of the best ways to prove your claim regarding reduced customer satisfaction is to show customer reviews or survey responses. This sort of data will more than likely impact your boss’s decision more convincingly than something you heard from someone else.

Highlight the Benefits of Adding New Staff

You have to show management how the company stands to benefit from the expertise brought on by adding new staff. For instance, you can say that an additional workforce will enable employees to do more work and dedicate essential resources to projects that are time-sensitive. 

Another good point to make is that HR will be able to avoid the hassle of finding and hiring freelance contractors, who would be an additional cost. 

You should also demonstrate the value of in-house staff in the best way possible and ask your boss to think about how growing internal teams can present an image of success to clients.

Tell Them the Kind of Staff You Need

To get management on board with your idea, you will have to explain what kind of additional staff you would like to hire. Come up with the number of people you need, what roles they would fill, what sort of skills and experience they will bring to the company, and what salaries you want to offer them. 

All this will give management a clear indication of how much it will cost the business.

Hiring more staff can be very beneficial to a company. It can help to increase its customer base, bring in more revenue, and improve client relations. 

The key is to know how to present the issue to management. You have to remember that hiring more staff means more costs, and the goal of every profit-making business is to reduce expenses and increase revenue. As a result, you will have to show how hiring more staff will help the company achieve those goals. From managers to expert advisor programmers , you can find the professional you need at Guru.

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Business Tips from SCORE: Payroll mistakes can be costly

There is so much more to payroll than ensuring your employees are paid correctly . Essential to a good payroll plan is having the proper documentation policies and withholding practices . Many small businesses subcontract payroll to avoid costly mistakes. Some considerations to an effective payroll policy are:

Making errors in an employee’s legal name, Social Security number and/or address

Do you have an Mary Elizabeth that goes by Betty? Or a Nancy Jane that goes by Janie? It’s important to make sure you use an employee’s full legal name for reporting purposes. The Social Security Administration sends out no-match letters for W-2s if the name on the W-2 does not match the employee’s Social Security card.

An incorrect Social Security number can cause a misapplication of funds for your Social Security amounts. This results in changes to your W-2 and your state unemployment return. An incorrect address will also cause issues for timely filing of W-2s, especially if you mail them.

Not only will you have to amend your W-2, but you’ll also have to amend all your state unemployment returns. If you don’t move quickly to correct this information, you will face a financial penalty for each time you provide incorrect information.

Not completing all new hire paperwork for your employees

When a new hire starts, you are required to have them complete specific forms and documents so that you can not only pay them correctly but also report their personal information correctly to both the federal and state agencies. The W4 and I-9 forms are very important and will have all the details needed to report new hire information. It is also hard to contact termed employees (ones who no longer work there) when missing information needed for reporting.

If you do not have copies of the new hire forms, you’ll be facing a penalty in the amount of $50 for every W2 form that’s incorrect. In addition, it will cost you valuable time visiting the SSA online portal and submitting the corrected information.

Not understanding the difference between an employee and an independent contractor

There’s a big difference between W-2 employees and 1099 contractors . Misclassification of employees results in lost benefits for an individual and can cause the individual to pay higher tax for self-employment.

This is a costly mistake for your company and your employees. Not only will your organization owe back taxes and unemployment taxes, but you’ll also owe any unpaid wages and benefits on top of any state and federal misclassification penalties.

Not having a plan document in place for pre-tax deductions

Pre-tax deductions, like health insurance or health savings accounts , are a great benefit to employees. Pre-tax benefits offer substantial savings for both participants and employers. However, before you offer this benefit (sometimes called a cafeteria plan), you need to have a plan document in place. Reminder that if you are a 2% or greater shareholder of an S Corporation you are not eligible to participate in a pre-tax plan.

Not establishing a documented plan will mean that your entire plan will have to be set up as an after-tax plan, which is not beneficial to either the employer or the employee. Failing to maintain compliance can mean both hefty penalties and a devastating loss of savings to both the participant and the employer.

Not reporting all taxable wages on an employee’s W-2

You should check in with your accounts payable department at least once a year towards year-end. You should be looking for checks written out to your employee outside of payroll. Items like cash bonuses, moving allowances or non-business-related expenses could be missed taxable wages.

If audited by either federal or state agencies, they could identify this as missed wages and require you to amend past returns/forms and could be costly for both employer and employee on missed tax payments and penalties.

Not monitoring payroll software updates and limit changes for both federal and state

When using an accounting or payroll software, make sure you’re closely monitoring your software updates. If you’re not, you could see an issue where you over/under-withhold from an employee and over/under pay the taxes.

Not only will you have to take time to amend your payroll returns and W-2 forms, but you will also have to explain the error to your employees. You may also face additional penalties.

Applying tax payments to the wrong quarter

Your check date determines what quarter your tax payment is applied to. If you misapply this payment, you will receive letters from the IRS that show over- or underpayments depending on how the payment was misapplied.

It depends on how long the payments have been misapplied, but correcting this error will almost certainly cost you a significant amount of paperwork and time.

Incorrect time reporting for your employees

It is important to have a time and attendance system to correctly document your employees ’hours for both worked time and non-worked time. Time systems can help account for proper rules on reporting overtime. They are also good to help employees request time off and track their paid time off.

This mistake can put your company's name into the paper letting everyone know that you did not report overtime correctly and the amount of back wages that you had to pay out to your employees. This is a costly mistake when you underpay your employees and will also lose your employees' trust in your company.

Not reconciling your payroll returns to the W-3

Your federal and state forms should always match your W-3 taxable wages and tax withholdings. If this does not happen, you will receive notices to either fix the returns or the W-2s.

Payroll is critical to your accounting operations

Failing to maintain proper payroll procedures can be time-consuming and costly. The good news is, by taking a more strategic approach to payroll, you can avoid costly mistakes and ensure your payroll is completed timely and accurately.

Some organizations choose to do payroll completely in-house, while others find outsourcing works best. Either way, it is critical that you ensure your organization is up to date on ever-changing regulations and timely with reporting requirements.

Contributed by Marc L. Goldberg, Certified Mentor, SCORE Cape Cod & the Islands, www.score.org/capecod . 508/775-4884 Free and Confidential Mentoring. Source: Eide Bailly LLP.

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Mustafa Suleyman, DeepMind and Inflection Co-founder, joins Microsoft to lead Copilot

Mar 19, 2024 | Microsoft Corporate Blogs

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Satya Nadella, Chief Executive Officer, shared the below communication today with Microsoft employees.

I want to share an exciting and important organizational update today. We are in Year 2 of the AI platform shift and must ensure we have the capability and capacity to boldly innovate.

There is no franchise value in our industry and the work and product innovation we drive at this moment will define the next decade and beyond. Let us use this opportunity to build world-class AI products, like Copilot, that are loved by end-users! This is about science, engineering, product, and design coming together and embracing a learning mindset to push our innovation culture and product building process forward in fundamental ways.

In that context, I’m very excited to announce that Mustafa Suleyman and Karén Simonyan are joining Microsoft to form a new organization called Microsoft AI, focused on advancing Copilot and our other consumer AI products and research.

Mustafa will be EVP and CEO, Microsoft AI, and joins the senior leadership team (SLT), reporting to me. Karén is joining this group as Chief Scientist, reporting to Mustafa. I’ve known Mustafa for several years and have greatly admired him as a founder of both DeepMind and Inflection, and as a visionary, product maker, and builder of pioneering teams that go after bold missions.

Karén, a Co-founder and Chief Scientist of Inflection, is a renowned AI researcher and thought leader, who has led the development of some of the biggest AI breakthroughs over the past decade including AlphaZero.

Several members of the Inflection team have chosen to join Mustafa and Karén at Microsoft. They include some of the most accomplished AI engineers, researchers, and builders in the world. They have designed, led, launched, and co-authored many of the most important contributions in advancing AI over the last five years. I am excited for them to contribute their knowledge, talent, and expertise to our consumer AI research and product making.

At our core, we have always been a platform and partner-led company, and we’ll continue to bring that sensibility to all we do. Our AI innovation continues to build on our most strategic and important partnership with OpenAI. We will continue to build AI infrastructure inclusive of custom systems and silicon work in support of OpenAI’s foundation model roadmap, and also innovate and build products on top of their foundation models. And today’s announcement further reinforces our partnership construct and principles.

As part of this transition, Mikhail Parakhin and his entire team, including Copilot, Bing, and Edge; and Misha Bilenko and the GenAI team will move to report to Mustafa. These teams are at the vanguard of innovation at Microsoft, bringing a new entrant energy and ethos, to a changing consumer product landscape driven by the AI platform shift. These organizational changes will help us double down on this innovation.

Kevin Scott continues as CTO and EVP of AI, responsible for all-up AI strategy, including all system architecture decisions, partnerships, and cross-company orchestration. Kevin was the first person I leaned on to help us manage our transformation to an AI-first company and I’ll continue to lean on him to ensure that our AI strategy and initiatives are coherent across the breadth of Microsoft.

Rajesh Jha continues as EVP of Experiences & Devices and I’m grateful for his leadership as he continues to build out Copilot for Microsoft 365, partnering closely with Mustafa and team.

There are no other changes to the senior leadership team or other organizations.

We have been operating with speed and intensity and this infusion of new talent will enable us to accelerate our pace yet again.

We have a real shot to build technology that was once thought impossible and that lives up to our mission to ensure the benefits of AI reach every person and organization on the planet, safely and responsibly. I’m looking forward to doing so with you.

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California fast-food workers will get $20 minimum wage, starting Monday

Vanessa Romo

Alina Selyukh

A McDonald's worker hands food to a customer at a drive-thru window in Los Angeles, on Sept. 28. Damian Dovarganes/AP hide caption

A McDonald's worker hands food to a customer at a drive-thru window in Los Angeles, on Sept. 28.

California fast-food workers cooking Big Macs or whipping Frappuccinos will start making a minimum wage of $20 an hour on Monday. For many, this means a 25% raise.

The new state minimum uniquely focuses on a particular segment, fast food, affecting some of the country's biggest chains, including McDonald's, Starbucks, Subway and Pizza Hut.

It's a big win for cooks, cashiers and other fast-food workers – some of the lowest-paid jobs in the U.S. – whose wages have been growing at a faster clip since the pandemic, after decades of stagnation.

California is one of the country's most expensive states; about half a million people are estimated to work in fast food here, mostly women, immigrants and people of color. Many live below the poverty line.

Uber and Lyft threaten to halt operations in Minneapolis over minimum wage law

Sandra Jauregui from Sacramento is counting down the days to her first bigger paycheck in two weeks. After 18 years working at several Jack in the Box franchises, her pay will jump from $17.50 to $20. That means she could be bringing home another $120 each paycheck.

"It's super great," says Jauregui, 52, speaking in Spanish. "At the very least it'll give me some breathing room ... and make it easier to pay the rent and other bills."

Chipotle, McDonald's warn of price hikes, less work

But the dramatic pay raise has also touched off a heated debate about the impact on local businesses. Smaller franchise restaurant owners warn they'll have to raise prices, reduce worker's hours, cut jobs or even close shop.

California's pay hike is a result of a contentious deal struck by labor leaders, including the large Service Employees International Union, and fast-food companies last year. The new wage law applies to fast-food chains with at least 60 locations nationwide, with exemptions for some bakeries and smaller fast-food outposts inside grocery stores, airports and other venues.

Several fast-food executives have suggested prices would go up 2.5% to 3.5% to offset higher wages; Jack in the Box, Starbucks, McDonald's and Chipotle have all warned of upcoming price hikes. That's on top of price increases many restaurants have been rolling out for months. The cost of eating out has stubbornly inched higher even as inflation has cooled elsewhere .

Other chains plan to speed up their use of automation, including kiosks and robots. A major Pizza Hut franchisee cited the wage hike as the reason for layoffs of more than 1,000 delivery drivers this year, in a switch to apps like Uber Eats and DoorDash that pushes more delivery fees onto shoppers.

One big Pizza Hut franchisee in California cited the upcoming wage hike as a reason for laying off more than 1,000 delivery drivers in a shift to delivery apps like Uber Eats and DoorDash. Justin Sullivan/Getty Images hide caption

One big Pizza Hut franchisee in California cited the upcoming wage hike as a reason for laying off more than 1,000 delivery drivers in a shift to delivery apps like Uber Eats and DoorDash.

Franchisees weigh cuts to workers' hours

Many restaurant owners expect workers to be working fewer hours. That was the main side-effect a decade ago, when Seattle hiked its minimum wage to $15, research suggests .

"I am used to being a champion of labor and I'm in this odd position," says Michaela Mendelsohn, a longtime advocate for LGBT workers and also owner of six El Pollo Loco restaurants with about 170 employees.

Her restaurants lost shoppers after a pre-emptive price increase in February, she says. Now, the focus is on cutting costs by simplifying operations, changing how long it takes workers to make sauces, for example, or to close up for the night.

Minimum-wage workers in 22 states will be getting raises on Jan. 1

"We're having to get more efficient," Mendelsohn says. "So really what's left is ... to reduce labor hours. And I hate saying that."

In recent years, the battle for higher minimum wages has increasingly played out at the city, county and state levels as the federal minimum wallows at $7.25 an hour .

Broadly, California often sets the bar for many business decisions that other states later follow. Advocates hope something similar will happen with fast-food pay – spreading to other industries in the state and across the country.

California's minimum previously rose to $16 an hour on Jan. 1.

Workers are thrilled, but also anxious

Employers' warnings have left many workers with mixed feelings about the raise, despite the potential for extra spending power.

The Jack in the Box worker Jauregui, 52, has been cobbling together two salaries, working about 54 hours a week between the restaurant and a laundromat.

She says she's always trying to save a bit to treat her grandchildren – she has custody of three of them – who are constantly growing out of clothes and shoes. And although she marched alongside fellow SEIU members to win the wage increase, she is fearful of the downside.

These millionaires want to tax the rich, and they're lobbying working-class voters

"My boss told me that he won't reduce my hours but that he will cut others' hours," Jauregui said.

All this makes California's wage hike a high-profile case study for how exactly a higher minimum wage reverberates through the local economy.

"This policy is going to be really different in different parts of California," says Jacob Vigdor, professor of public policy and governance at the University of Washington, who has studied the effects of Seattle's 2014 minimum wage hike.

The research found that after the minimum wage rose from $9.47 to $13 – in the early years of the Fight For $15 labor campaign – workers generally didn't lose jobs even though they did lose hours. And they ended up with higher pay.

"The restaurant business is a really tough business," Vigdor says. "Restaurants open and close all the time, even in places where the minimum wage hasn't changed for more than a decade. ... Generally speaking, we found that in the restaurant industry, businesses were able to find ways to adapt to higher wage costs."

KQED's Farida Jhabvala Romero contributed to this report.

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