Make your first hire once you've run the maths for your consulting business. Once you know the exact number of hours at which a full-time employee becomes cheaper than a contractor, it's easier to work out whether you can afford the hire.
Are you turning work away? Spending evenings on client deliverables and answering client emails after dinner, again.
It could be time to make your first hire as a consultant.
…Or is it?
Most of us have been told to hire when we feel overwhelmed. But feeling swamped only tells you you're busy, not whether you can afford help.
A better test is the numbers: do you have enough steady, paid work to cover another person, month after month?
Once you've run the numbers, you'll know where you stand and whether to hire a contractor, a full-time employee, or no one at all.
Are you short on hours, or short on clients?
Before you make your first hire, answer one question: are you short on hours, or short on clients? Hire for the wrong one, and you'll end up with a new fixed cost, no solutions, and more problems than you had before.
If you're too busy with client work to find new clients, it may seem logical to hire someone to free up your capacity. But training a new junior consultant eats into your available hours, so you end up selling less and having less work. You're still left with too few hours in your week and a new problem: finding the cash to pay your new hire's salary, who doesn't have enough work to do.
Name the bottleneck first. Then hire for that job.
Say you're a PR consultant with a strong personal brand, and your best clients find you on LinkedIn. You can handle the discovery calls, but you don't have time to write comments and warm up potential clients in your DMs.
Your first instinct might be to hire a salesperson. But clients come to you for your voice, so a writer who can mimic it on social media may be the better hire.
That writer posts and engages as you on LinkedIn, continues the conversation in the DMs, and funnels potential clients to book a discovery call. If that brings in even one new client a month, it can more than cover the cost of the hire.
In that example, the bottleneck isn't discovery calls or closing deals. It's finding time to engage on LinkedIn, a skill different from a traditional sales role.
How many hours do you need before you hire your first employee?
It depends on your business. In our example, we estimated roughly 32 billable hours per week to justify hiring a full-time employee. Anything less, and it makes more financial sense to hire a contractor.
Let's work it out together, so you can run your own numbers.
Say you want to hire someone with a few years' experience on a $70,000 salary.
- Annual salary: $70,000
- Benefits and payroll costs: $32,200 (swap out with your own number)
- Rate you bill clients for their time: $110 per hour
- Working weeks in a year: 48
To cover the new hire's costs, you would need to bill 19.4 hours per week ($102,200 ÷ $110 ÷ 48).
Next, factor in your time. A new hire's work needs review and training, so set aside 4 hours a week for the first six months.
At your own hourly rate of $150, those four hours are $600 a week you aren't billing, or $14,400 for 24 weeks.
Add that in, and you'll need about 22 billable hours a week ($116,600 ÷ $110 ÷ 48) to come out even.
What about hiring a contractor as your first hire?
Say a skilled contractor charges you $75 an hour and you bill their time at $110. You keep $35 on every hour from day one, and you pay nothing in quiet weeks.
An employee only works out cheaper per hour once they bill more than about 32 hours a week ($116,600 ÷ $75 ÷ 48).
In summary:
- 19 hours covers the employee cost
- 22 hours covers your training time
- 32 hours is when an employee becomes cheaper than a contractor
Remember, one busy month isn't evidence you need an employee. If you've had enough work for someone to bill 32 hours a week for at least three months in a row, and you expect it to continue, make the full-time hire.
What changes when someone else is on your payroll?
We've all sent an invoice and realised a few hours never made it onto the bill. When it's just you, it's an annoying loss. Once you're paying someone else, your bad habits become someone else's training and cost you money.
That's why it pays to get your systems sorted before you hire, not after. With a solid workflow from lead to invoice, there's less room for error, and your new hire can learn how you like to work, faster.
Let's make sure your setup is ready before anyone else relies on it:
- Time tracking tool: Get into the habit of tracking billable and non-billable hours. It helps you avoid undercharging for client work and track per-person utilisation rates.
- Invoicing tool: Pick one that pulls in your logged hours automatically and rounds to 15 minutes, so nothing slips through.
- Client hub (CRM): Keep every client's projects, proposals, contracts and invoices in one place, so your hire never has to ask where something lives.
- Client workflow: Create systems for sending proposals, creating contracts, writing statements of work, pulling reports, and processing payments.
None of this needs to be fancy. It needs to exist outside your head before someone else depends on it.
Ready to hire?
Remember, there's no rush to hire. Taking your time to check that it's a good move for your business is normal. If you rush, you might hire too soon or for the wrong role.
Ask yourself:
- Have I had steady overflow for the last three months?
- Have I identified the bottleneck in my business?
- Do I have the systems in place to make onboarding easier?
Kiaro runs the business side for solo consultants and small agencies. On our Team plan ($29 per seat a month, two-seat minimum), a new hire logs time against your clients' projects and submits a weekly timesheet, which stays locked until you approve it or send it back. A team report shows their billable hours and utilisation so that you can check them against your break-even.
Frequently asked questions
How much revenue should a consultant have before hiring?
Revenue isn't an indicator you need to hire. A consultant could bill $250,000 with no overflow and not need help. At the same time, another billing $150,000 and turning away 30 hours a week has a strong case to hire.
How much cash should I hold before my first hire?
To avoid cash flow problems, keep at least three months of the person's loaded cost in reserve before hiring. A new employee won't reach their full capacity straight away and will need time to ramp up. Depending on client payment terms, you might only see income from their first invoices in 30 to 60 days.
Should I hire a junior or an experienced consultant first?
If you're overloaded with client work, it makes more sense to hire someone experienced. A junior person needs training time you might not have, which will only worsen the bottleneck. A junior hire is better if you have more capacity to teach or if you need someone to help with basic admin in your business.