A workflow in 5 steps
Should I Hire an Employee or Contractor? — A Decision Framework
Your first hire is the most consequential financial decision after starting the business itself. Most solopreneurs underestimate the true cost by 30-50%. This workflow makes the hidden costs visible before you commit.
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Step 1: Calculate the true loaded cost
A $60,000 salary costs $78,000-$90,000 once you add employer taxes, benefits, and overhead. Know the real number before you budget.
Benchmark: US loaded cost multiplier is typically 1.25-1.50x base salary.
Open the Employee Cost Calculator -
Step 2: Compare W-2 vs 1099
For part-time or project-based work, a contractor may be more cost-effective. For ongoing core work, an employee usually wins after 6-12 months.
Open the Contractor vs Employee Calculator -
Step 3: Audit meeting overhead
Before hiring for capacity, check whether meetings are eating your existing capacity. A weekly one-hour meeting with 4 people at $75/hr costs $15,600/year.
Open the Meeting Cost Calculator -
Step 4: Decide on workspace policy
Office rent, commute time, home-office stipends — the workspace decision has real cost implications. Model both options before you commit.
Open the Commute vs Remote Cost & Time Calculator -
Step 5: Check break-even with new costs
Adding headcount raises your fixed costs. Re-run break-even with the loaded employee cost to see how many more sales you need to cover the hire.
Open the Break-Even Units Calculator
Questions people ask
When should I hire my first employee?
When you have consistent revenue that can cover 6+ months of the loaded cost, and the work is ongoing/core to your business. Do not hire based on a single large contract.
What is the biggest hidden cost?
Your own time. Managing, onboarding, and reviewing adds 5-10 hours per week that you are not billing or building.
Should I hire remote?
For most solopreneurs making their first hire, remote is cheapest and most flexible. Consider hybrid if collaboration density matters.
Part of Bootstrapped growth: See when cash runs out, what you need to break even, and how to grow without funding.