Can you afford to hire? How to know before you commit
You need to grow the team. The work is there, the pressure is building, and everyone is stretched. But when you ask yourself the question, “can we actually afford this hire?”, the answer is a shrug and a hopeful guess. You know roughly what the salary would be, and you are sort of assuming it will be fine. That is how most hiring decisions get made, and it’s a nerve-wracking way to bet real money.
It doesn’t have to be a guess. Affordability is a question you can actually answer, with a bit of straightforward thinking about true cost, cash and the return the role needs to generate. Here is how to work it out before you commit, rather than finding out afterwards.
Start with the real, fully-loaded cost
The first mistake is thinking a hire costs the salary. It doesn’t. The salary is just the visible bit. The real, fully-loaded cost is quite a lot more, and it is the number you actually have to afford:
The obvious bits. The gross salary, plus employer’s National Insurance and pension contributions on top.
The setup costs. Recruitment costs, equipment, software, training, and workspace. Onboarding a new person eats time and money before they are productive.
The hidden bits. Holiday, sick pay, and the simple fact that no one is productive every hour you pay them. You are buying capacity, not perfect output.
The ramp-up. A new person rarely delivers full value from day one. There is a ramp-up period where you are paying in full for output that is still building.
As a rough rule, the true cost of an employee is meaningfully higher than their salary alone once you add all of that in. Work out that fuller number first, because that, not the headline salary, is what you are committing to.
The numbers to look at first
Once you know the true cost, three numbers tell you whether you can carry it:
Your cash runway. How many months of outgoings could you cover if income stopped? A new fixed cost shortens that runway, so you need to know what it is before and after the hire. If the hire leaves you dangerously short, that is your answer for now.
Your cash-flow forecast. Not just today’s position, but a forward view of money in and money out over the next year, with the new cost built in. Affordability is about the months ahead, not the balance today.
The margin the role must generate. This is the one owners skip. A hire is an investment, so what does it need to bring in, or free you up to earn, to more than cover its true cost? If you cannot see how the role pays for itself, that is worth knowing before you commit, not after.
A simple way to sense-check it
You don’t need a complex model for a first read. Ask yourself:
Do I know the true, fully-loaded cost of this role, not just the salary?
Does my forecast still work with that cost added in, through a quiet patch as well as a good one?
Can I see, specifically, how this role will pay for itself, through revenue it generates or capacity it frees up?
If the hire took longer than hoped to pay off, could my cash runway absorb the gap?
If you can answer those with something better than a shrug, you are in a strong position to hire with confidence. If several of them make you hesitate, that hesitation is useful information, it usually means either the timing is not right yet, or you need to see the numbers more clearly before you decide.
Confidence, not just caution
This is not an argument against hiring. Done at the right moment, a good hire is one of the best investments a growing business can make, and being too cautious has its own cost: the growth you turn down, the burnout of a team stretched too thin, the opportunity that passes while you hesitate. The point of doing the numbers is not to talk yourself out of it. It is to hire when you can see it works, and to know that you can carry it, rather than lying awake hoping.
Where a Fractional FD fits
Working out the true cost of a hire, stress-testing it against your forecast and runway, and pinning down the return it needs to generate is precisely the kind of decision a Fractional FD de-risks. Someone senior who can model it properly, so “can we afford this?” stops being a hopeful guess and becomes a question with a clear answer.
There is a neat irony here, and we will own it: this is exactly the logic you should apply to hiring a Fractional FD too. Work out the true cost, look at what it should save or make you in better decisions and fewer expensive mistakes, and check it against your numbers. A good FD will happily help you run that calculation, even when the subject is them, and if the answer is “not yet”, we will tell you.
On that last point, how much a part-time FD costs per month lays the cost out plainly, and you can see how we work on our Fractional FD service page.
We work with owner-founders and MDs across Yorkshire and the North East who want to make big hiring decisions with clear numbers rather than crossed fingers. If a hire is on your mind, working out whether you can truly afford it is a good place to begin.