Am I Ready to Employ My First Employee?
I own and run a one man business where i design and then get things manufactured to sell. I subcontract the manufacturing but do everything else. I have been paying my own wages and doing it full time for 3 years now and the company is 5 or 6 years old. I have always paid myself very little and basically just enough to cover bills so i have enough cash in the bank to keep me going if i dont get orders in for bit etc. The business is growing and I'm having to get a guy in occasionally to help fulfil orders due to business specific order fulfilment time constraints.
I've been doing a lot of reading on here and more formal places and the common advice is i probably should be paying myself more first of all. I could earn at least 5x my current income by working my old job for example so i am underpaying myself drastically. however, i simply don't want the extra money and am happy doing what I'm doing and not working for someone else. I like paying myself very little because of the security of knowing i have a lot of cash in the business that i can either survive on or if needed, extract for any surprise expenses. This security allows me to make better business decision instead of being a slave to orders and my quality of life is much better.
I am thinking about employing someone because the guy that works for me occasionally is now looking for a full time job. He is incredible at what he's doing and i wouldnt be able to find someone as good as him easily again. Looking at the finances, i can afford to pay him what he wants with all the national insurance/pension etc. He likes working with me, im happy to have him and he has expressed a keen interest in a full time position. however, my calculations are based on me still earning barely anything and the amount of contingency cash in the bank drops down to where i was when i started the business. Basically worrying about getting in the next order all the time. I would definitely have to start selling more stuff to be as financially secure as before and having another person should enable that but i don't really know what that ramp up looks like. I am essentially considering that if he ads zero value and does nothing then i can just about afford to keep us both paid with little headroom. is this playing it too safe? Is there a rule of thumb about what level a business should be at to employ someone? should i focus on paying myself more instead of getting an employee in that would be earning more than me? I haven't managed to wrap my head around the logic for everyone advising to pay yourself more. At the current crossroads i can either pay myself more or continue with the same income and hire someone else.