Can You Afford to Hire? Here’s How to Know for Sure

Hiring is one of the biggest decisions a business owner can make. It’s also one of the fastest ways to either scale your business or strain your cashflow. Many owners get caught between “I’m too busy” and “I’m not sure if I can afford it.” The answer isn’t just about what’s in your bank account today, it’s about whether your business can sustainably fund that role and generate a return on it.

Most business owners wait too long to hire. They’re stretched thin, quality starts slipping, and opportunities pass by because there simply aren’t enough hours in the day. A well-timed hire can help you earn more, pay less tax, and get ahead faster. But, only if you plan for it properly.

Many owners assume if they can cover the wage now, they can afford to hire. But a $70,000 salary isn’t really $70,000. By the time you add KiwiSaver, leave, training, software, and the time it takes to get that person up to speed, the real cost can be closer to $80,000 or $85,000. If you’re paying that from this month’s cashflow alone, it’s a risk. The goal is not to “fit” another wage into your costs, but to build capacity that increases profit.

Is it financially sustainable?

There are three clear signals that tell you when a hire is financially sustainable:

1. Strong Gross Profit

Look at your gross profit (income minus direct costs). You should have healthy margin left to cover overheads and still pay yourself a return. If you’re running at thin margins already, a new hire might tighten things further instead of freeing you up to grow.

2. Cash Buffer in Place

Having at least three months of the new hire’s full cost set aside before you commit. That gives you time to onboard properly, handle a slow start, or navigate a quiet patch without stress. It can take at least 2 – 3 months for a new hire to learn new systems and processes and ways of doing things your way, even if they have the right knowledge and experience.

3. Forecasted Return

A good hire should either increase income, save time that you can use to grow the business, or reduce costs elsewhere. If you can see a clear path to that return, it’s a good sign you’re ready.

For example:

If you’re turning away $10,000 of work each month because you’re at capacity, and a $6,500-a-month employee can help you deliver that work, you’ve already created a margin. Add tax savings on wages and deductible expenses, and the hire becomes even more affordable than it first looks.

Forecasting

Before making an offer, work with your accountant to run a simple projection. Forecast your revenue, costs, and cashflow for the next 12 months with and without the hire. This helps you see exactly when the role will start paying for itself. It also gives clarity on how much cash you’ll need to bridge the gap before productivity kicks in.

If you’re uncertain, consider hiring part-time or contract support first. It’s a good way to test the waters and prove the model before locking in a full-time cost.

What holds businesses back?

Some owners hesitate because understandably they fear committing to a fixed cost in uncertain times. Sometimes, waiting too long often costs more. Overwork leads to burnout, mistakes, and missed opportunities. A hire made strategically, with the numbers mapped out, strengthens your business rather than stretching it.

Summary

You don’t hire to create more costs. You hire to create more capacity. The right person allows you to focus on higher-value work, improve service quality, and ultimately make more money with less stress. Planning the numbers properly, recruiting the right person strategically, and have a sold business plan is what turns hiring into a growth strategy.