Hire Smart and Fire Fast: Financially Secure Hiring Tips for Your Business

Let’s be real: hiring is tough. People management is tough. And even if you do everything right, sometimes the wrong person still slips through the cracks. Don’t beat yourself up about hiring mistakes—it happens to the best of us. People are unpredictable, and you can only prepare so much. But, one thing you can control is the financial impact of your hiring decisions.

If you want to build a thriving business, it's essential to understand the financial implications of your hiring strategy. Here's a guide to doing it well—and avoiding costly mistakes.

People Are the #1 Cost in Most Businesses

For most companies, people are the largest expense. So, whether you're hiring for a new role or scaling up a team, the decision you make will impact your bottom line. Don’t discount the value of hiring well just because you feel pressured to get a specific task or skill set covered quickly. It’s tempting to hire fast to get a particular problem off your plate, but that can lead to bigger headaches down the road.

Before you start the hiring process, you need to answer two crucial questions:

1. What does success look like in the role you’re hiring for?
2. How long will it take to onboard this person to full capacity?

These questions will help you define the role clearly and set expectations for performance, which will be key to measuring success and ensuring financial alignment.

How to Prepare Financially for a New Hire

Hiring someone means investing in them upfront. If you want to hire smart, you need to plan for the cost of getting them up to speed. It’s critical to have enough cash in reserve to cover their salary and benefits until they are contributing fully to the business.

For example, if you're hiring a Sales Development Representative (SDR) and it takes six months to get them to full capacity, you should have at least six months of their salary and benefits in the bank before you bring them on board. That way, when your reserves run out, they are already paying for themselves through their contributions to the business.

Different roles have different onboarding timelines. A Virtual Assistant may require minimal training and could start generating time savings almost immediately. On the other hand, a VP of Sales might need less training but could require a more extended ramp-up period to contribute at full capacity. The key is understanding the time-to-value for each role and planning your cash flow accordingly.

At a minimum, make sure you have two months of reserves to cover the initial onboarding and training phase, and a clear path to when the person will be at full productivity. This applies to both full-time employees (W2s) and contractors (1099s).

FIRE FAST: Don’t Let Bad Hires Drain Your Resources

Now, let’s assume you’ve hired your new teammate, but things aren’t working out. It’s unfortunate, but it happens. The real question is: how quickly can you make the hard decision to let them go?

If someone isn’t performing or is creating unnecessary stress in the business, you need to fire fast—for both their sake and yours. Delaying this decision will cost you more than just the employee’s salary. There are three hidden costs to keeping someone on board when they aren’t working out:

1. Distractions: Your team will spend time covering for them, fixing their mistakes, or picking up the slack.
2. Stress: The stress of dealing with someone who isn’t a good fit will drag down productivity and morale.
3. The cost of replacement: The longer you wait to fire someone, the higher the cost to replace them becomes.

The True Cost of Not Firing an Underperforming Employee

According to the U.S. Department of Labor, it could cost up to $11,000 in direct training expenses and lost productivity to replace an employee making $33,000/year. And that’s just the beginning.

When you factor in lost productivity from both you and your team, the numbers start to add up quickly. Let’s break it down:

Scenario: Not Firing a Bad Hire

• You’re paying someone $5,000 per month.
• They’re not delivering results, and you’ve lost 2 days of productivity because you’re stressed and distracted trying to pick up the slack. (Assuming your time is worth $100/hour, that’s $1,600 in lost time for you alone.)
• Your team loses 5 days of productivity due to distractions, miscommunication, or having to cover for the underperforming employee. That’s $4,000 in lost team productivity.

In total, the cost of not firing quickly can easily balloon. Let’s say you could have generated $6,000 in additional revenue each month with the person doing their job correctly. By waiting 2 months too long, you’ve missed $12,000 in potential revenue.

The Total Cost:

• Employee salary: $10,000
• Lost productivity (you): $1,600
• Lost productivity (team): $4,000
• Lost revenue: $12,000

That’s a total of $27,600—and that doesn’t even show up on your Profit & Loss (P&L) statement.

Final Thoughts: Hire Smart, Fire Fast

Hiring and firing may be one of the toughest parts of scaling a business, but if you approach it with financial awareness, you’ll protect your business from unnecessary losses.

When you hire, take your time to get it right. Ensure you have the financial resources to onboard someone and give them time to contribute fully. But when you realize they’re not working out—don’t wait. Fire fast to minimize the hidden costs that can eat away at your profits.

Remember, hiring is a process, and failure is part of the journey. The key is to protect your business financially and not let a bad hire derail your growth.

Hire smart, scale smarter.

Not sure if you can hire?? build a budget!

The best way to build a budget is to start with a plan >> Check out this article on how to build your financial targets in 30 minutes or less