When to hire your first technician (and how to know you can afford it)
It's usually time to hire your first technician when you're regularly turning down or delaying work you want, your response times are slipping, and the math shows the extra jobs a technician can do will cover their full cost, not just their wage. Before you hire, raise your prices if you're booked solid, write down how you do the work, and make sure you have the cash to carry a new hire through the first few months while they get up to speed.
The first hire is one of the biggest steps a solo owner takes. Done well, it doubles your capacity and gives you time to run the business. Done too early or without systems, it can mean paying someone while you still do everything yourself.
What are the signs you're ready?
One busy week isn't a signal. Look for patterns over a couple of months:
- You turn away or delay jobs you'd like to take, especially from good customers.
- Customers wait longer for an appointment than they used to, or than competitors make them wait.
- Estimates and follow-ups slip because you're on jobs all day and too tired at night.
- Quality or safety is suffering because you're rushing.
- You can't take a day off without the business stopping.
- Your revenue has been steady or growing for several months, not just a seasonal peak.
If you're busy but your bank balance isn't growing, the problem may be pricing, not capacity. Fix that first.
Should you raise prices before hiring?
Often, yes. If you're booked weeks out, demand is telling you something about your prices. A modest increase can bring more income for the same hours and filter toward customers who value your work. If you're still overbooked after raising prices, that's a stronger sign you need help, and the higher prices make a hire more affordable.
What does a technician really cost?
The wage is only part of it. The fully loaded cost of an employee typically includes:
- Wages, including overtime where it applies
- Employer payroll taxes, such as the employer share of Social Security and Medicare, and federal and state unemployment taxes
- Workers' compensation insurance, which most states require for employees, with costs that vary by trade and state
- Benefits you offer, such as paid time off, health insurance or retirement contributions
- A vehicle, if they'll drive a company truck: payment, fuel, insurance, maintenance
- Tools, uniforms and a phone
- Training time, when they're not yet fully productive
- Software seats or licenses they'll need
Ask your accountant to help estimate payroll taxes and your insurance agent for workers' compensation and auto costs, since both vary by state and trade.
A worked example: can you afford the hire?
All figures below are illustrative assumptions. Replace them with your own.
Step 1: annual cost.
- Wage: $25 an hour for 2,080 paid hours is $52,000.
- Payroll taxes, workers' comp and other employment costs: assume 20 percent of wages for this example, about $10,400.
- Vehicle, tools, phone and software: assume $12,000 a year.
- Total: about $74,400.
Step 2: billable hours. Not every paid hour is billable. Subtract time off, training, drive time, supply house runs and shop time. Assume 1,300 billable hours in the first year.
Step 3: cost per billable hour. $74,400 divided by 1,300 is about $57 an hour.
Step 4: compare to what an hour brings in. Suppose that, after materials, each billable hour brings in $100 in your business. At 1,300 billable hours, each one then contributes about $43 toward overhead and profit after covering the technician's cost.
Step 5: break-even hours. The hire pays for itself once they work enough billable hours to cover their cost. At $100 per hour after materials, that's $74,400 divided by $100, or 744 billable hours a year, roughly 15 billable hours a week. Every billable hour above that adds to profit.
Step 6: reality check. Do you have enough work to keep them busy beyond that point, all year? Can you carry their cost for the first months while they ramp up? If the answer is yes, the numbers support a hire.
Should your first hire be a helper or a technician?
| Option | Upsides | Trade-offs |
|---|---|---|
| Helper or apprentice | Lower cost, you train them your way, makes two-person jobs faster | You still do the skilled work; you can't be in two places |
| Experienced technician | Can run jobs alone, more revenue per day | Higher cost, harder to find, habits from other shops |
If your bottleneck is heavy or two-person jobs, a helper may be enough. If your bottleneck is the number of service calls a day, you need someone who can run calls alone. In licensed trades, check what your state requires for unlicensed helpers and supervision.
Employee or contractor?
Some owners hope to avoid payroll by calling a first hire an independent contractor. Classification depends on legal tests that look at things like who controls the work, the schedule and the tools, and federal and state tests differ. A technician who works your schedule, drives your truck and follows your procedures is often an employee. Misclassification can bring back taxes and penalties, so talk to your accountant or an employment attorney before deciding.
What paperwork do you need for a first employee?
Requirements vary by state, so check with your accountant or a payroll provider. Common steps include:
- An EIN for your business if you don't have one
- Federal Form I-9 to verify each new employee's eligibility to work in the US
- Form W-4 for federal income tax withholding, and any state equivalent
- State new-hire reporting, which many states require
- Registering for state unemployment insurance and, where applicable, state income tax withholding
- Workers' compensation coverage, as your state requires
- Required workplace posters
- A payroll system or provider to handle withholding, deposits and filings
A payroll provider can handle much of this for a monthly fee, which many owners find worth it for a first hire.
What should you set up before day one?
A new technician can only work the way you do if "the way you do it" is written down somewhere other than your head.
- A pricebook, so they quote the same prices you would.
- Job checklists for your most common work.
- A clear process for arriving, explaining the work, getting approval, completing the job and collecting payment.
- Scheduling everyone can see, so you're not dispatching by text message at 6 a.m.
- Photo and note habits, so you can see what was done without driving out.
Our guide to bookkeeping basics for contractors covers getting your books ready for payroll, and choosing a business structure lists questions to ask your accountant before you add employees.
How should the first 90 days go?
- Weeks 1 to 2: they ride with you. They watch, then help, then do parts of the job while you watch.
- Weeks 3 to 6: they handle simpler calls alone, and you review their photos, notes and invoices daily.
- Weeks 7 to 12: a fuller schedule, with regular check-ins and feedback.
Set clear expectations from the start: hours, appearance, how to talk to customers, what to do when they're stuck. Catching small problems early is much easier than fixing habits later.
FAQ
How much revenue should I have before hiring? There's no universal number. Work out your new hire's full cost and the billable hours needed to cover it, as in the example above, and check that you have steady demand for more.
Can I hire someone as a 1099 contractor instead? It depends on how the work is done, under legal tests that vary by state. Talk to your accountant or an employment attorney.
What if the work slows down after I hire? Plan for seasonality before you hire. Keep a cash cushion, and build maintenance plans or counter-seasonal services to fill quiet months.
Should I use a payroll service? Many small businesses do, because it handles withholding, deposits and filings. Ask your accountant for a recommendation.
How ServFlo helps
ServFlo includes unlimited technicians on every plan, so your first hire doesn't change your software bill. You can assign jobs on the dispatch board, and your new tech gets the day's jobs, checklists, pricebook and customer history in the technician app, which works offline. On the Connect plan and above, time tracking with timesheets and payroll export gets hours to your payroll provider. See pricing.
Photo by Pro Pest Control Canberra on Unsplash.