How Much Money Should You Have To Hire Your First Team Member?

So this is one of those great questions that doesn’t necessarily have a set answer. This question is basically asking “How much should I have in my rainy day fund?” and the answer to that depends on how conservative or risk averse you are. As with everything in your business, it is ultimately your decision, but I’ll share the process I used to determine how much to save in a rainy day fund for my business. 

So, you can try to determine the amount you want to save per month, but I don’t think about how many months of pay I should have on hand. Instead, I think more about my monthly revenue that I’m projecting for the next three to six months. Then I determine my projected costs for the same time frame. After that, it’s the simple math of figuring out if my revenue will cover my costs for that projected time period. 

I want to be clear that this is based on my projected revenue. This does not include any reserves I might already have for my business, because in reality, I don’t want to have to pull from my reserves if I can plan properly and ensure my projected revenue will cover my projected costs. Now if my revenue won’t cover my expenses, then that’s another situation and I need to determine what I need to do to make more money. 

Now that you know how much you need to cover your projected three to six months, you can determine what type of team member you want to bring on (full-time, part-time, contractor) and that will give you a more accurate estimate of how much you’ll need to bring on a team member. You’ll want to do these projections, even if you only plan to bring on someone for a month to month or project basis to ensure you won’t need to dip into your reserves while you grow your team. 

This is a super high-level overview of how you can plan your savings, revenue and expenses around bringing in a team member and determining just how much you might want in your rainy day fund. I hope it’s given you some ideas and things to think about. As always, I am not a financial planner, CPA, or specialist. Always do your own research and reach out to qualified professionals to help you with these things! 

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