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Before You Hire Your First Employee, Run This Math

August 28, 2026 · 7 min read

You're turning down work. You're booked out weeks in advance. You're doing quotes at 9pm because there's no other time left in the day. Every signal says "hire someone" — but a full calendar isn't the same as a business that can afford another paycheck. Before you post the job ad, run the actual numbers.

Short answer: Don't hire because you're busy — hire because the extra revenue you're turning away is bigger than the fully burdened cost of paying someone to capture it. Add payroll taxes, insurance, and gear to the wage (usually 20-35% on top), then make sure the jobs you'd hand them bring in at least 1.5 to 2 times that burdened cost. If the math doesn't clear that bar, you're not ready yet — no matter how busy you feel.

Busy is not the same as ready

Turning away jobs feels like undeniable proof you need help. Sometimes it is. But a lot of the time, "I'm too busy" really means "I haven't priced my time correctly," or "I'm saying yes to jobs I shouldn't be doing at all." Hiring an employee to keep up with underpriced work just means you're now losing money on two people's time instead of one. Before you hire, make sure the work you're turning down is actually profitable work — priced with a real burdened labor cost, not a guess.

If your pricing is solid and you're still turning away good jobs consistently — not one busy month, but three or more in a row — that's a real signal. That's when it's worth doing the math instead of going on gut feel.

What an employee actually costs you

New owners almost always underestimate this number, because they think in wage only. Say you plan to pay someone $20 an hour. That's not what they cost you.

On top of the wage, you're usually adding:

• Payroll taxes (Social Security, Medicare, unemployment) — typically 7-10%
• Workers' compensation insurance — varies by trade, often 3-10%
• General liability coverage increases for an additional worker
• Basic gear, uniforms, or a second set of equipment
• Your own time spent training, supervising, and managing — which is real, even if it's not a line item

Add it up and a $20/hour wage usually lands around $24 to $27 an hour fully burdened before that person has completed a single billable hour. If you don't build that number into your pricing, every hour they work quietly erodes your margin instead of growing your business.

The threshold test: does the extra revenue clear the cost?

Here's the math that actually answers the question. Say your new hire's burdened cost is $26 an hour. For hiring them to make sense, the jobs you assign them need to generate meaningfully more than $26 an hour in revenue — not just cover their pay, but also cover the extra overhead they create (more vehicle wear, more materials, more scheduling and admin time) and still leave you a profit.

A reasonable floor: the revenue from their work should run 1.5 to 2 times their burdened hourly cost. At $26/hour burdened, that means the jobs you hand them should bring in roughly $39 to $52 an hour in revenue. Below that, you're not building a business — you're subsidizing a helper out of your own margin.

Run this forward across a normal week. If your new hire works 30 billable hours a week at $45/hour in job revenue, that's $1,350 a week, or about $5,850 a month, against a burdened cost of roughly $780 a week ($3,380 a month). That gap — a bit over $2,400 a month in this example — is what actually justifies the hire. If your turned-away work doesn't add up to something in that range, the math says wait.

Hiring changes your overhead, not just your payroll

A first hire doesn't just add a wage line — it usually pushes several overhead numbers up at the same time: more fuel and vehicle wear, more insurance, more materials moving through the business, and more of your own time spent managing instead of doing billable work yourself. Recalculate your overhead rate after you hire, not before — the number that worked when it was just you almost never holds once there's a second person on the payroll.

A simpler gut-check before you sign anything

If the full math feels like a lot to run before you've even interviewed anyone, use this shortcut first: track every job you turn down for one full month. Add up what those jobs would have been worth. If that number comfortably clears a month of a new hire's fully burdened pay — with room left for the extra overhead — it's worth doing the real calculation. If it doesn't, the busy feeling is real, but the business case isn't there yet.

Keep reading: How to calculate your overhead rate as a service business →