New Venture Lab: Equipping Christian Entrepreneurs

Question

Should I consider hiring employees to grow my business?

Answer

Depending on the business, it can be extremely difficult to grow a business without delegating to others outside of the family.  Take the example of a craft carpenter that is so skilled that only he can produce a certain kind of rocking chair.  Let's say that he can only produce 10 of these rocking chairs per year and that he cannot possible train and delegate any of the tasks to produce the rocking chair to anyone else.  Let's say he sells these rocking chairs for $2,500 each.  His revenue (sales) will be limited to the revenue produced from those 10 rocking chairs ($25,000).  But let's say he figures out that he can get someone to cut the pieces for him and roughly shape them so he only needs to do the final carving and assembly.  Then let's further assume he figures out that he can get someone to stain, varnish and assemble the rockers once he is done carving.  He has now delegated the less important and less skilled tasks to others so he can focus all his energy on only the highly-skilled portion of the work - the carving.  By leveraging the work of others in this way, let's say he can now produce 50 rockers (for a total revenue of $125,000) and the price he had to pay for the lower skilled work is less than his time was worth ($50,000) and therefore his net (without considering materials costs) in this scenario is $75,000.  He has used people leverage to grow his business and produce a higher income.  Now let's say he found a computer-operated lathe that he can input his intricate carving details into the computer and the lathe can crank out 50 chairs a day.  He has now used both technology leverage (the computer and its software) and asset leverage (the lathe) to increase his income dramatically.