When can you actually afford another tech?

You are turning work away. You are working Saturdays. Everyone says hire somebody.

Busy is not the same as ready. One is a feeling and the other is arithmetic, and the arithmetic is not difficult — most contractors have simply never done it.

What a tech actually costs

Start with the loaded cost, because the wage is not the number.

Take a tech at $28 an hour. Add employer payroll taxes. Add workers compensation, which in the trades is a serious rate. Add any benefits, holiday and sick pay. You land somewhere around $37 an hour, and that is before he has a vehicle.

Then the things that come with a body:

• A truck, or a share of one — payment or depreciation, fuel, insurance, maintenance
• Stock on board, which is cash you have spent and not recovered
• Tools
• Phone, uniforms, software seat
• Training time before he is productive, which is weeks not days

A tech and a truck together is rarely under $100,000 a year all in, and often meaningfully more. Whatever your figure is, work it out properly before you decide.

The revenue that has to come with him

Here is where most people get it wrong. They see a $75,000 wage and assume $75,000 of extra work covers it.

Additional revenue only contributes at your gross margin rate. If your gross margin is 35%, then covering a fully loaded cost of $100,000 needs roughly $285,000 of additional revenue — not $100,000.

That is a serious number and it deserves to be looked at squarely before the offer letter goes out.

The signals that say ready

You are turning away profitable work, repeatedly. Not work you would take at a discount to stay busy — work you actually want, that you cannot fit.

Your billable hours are close to your capacity. If your existing crew is only billing five hours of an eight-hour day, you may not need a person. You may need better routing or better scheduling, which is much cheaper.

The backlog is stable, not a spike. Three good months in storm season is not a trend. Look at the same period last year.

The cash is there to carry the ramp. A new tech costs from day one and produces properly after several weeks. You need enough cash to cover that gap without straining payroll.

Your gross margin can absorb it. If margin is already thin, adding volume at thin margin adds risk rather than profit. Fix pricing first — see why profitable jobs still lose money.

The signals that say not yet

You are busy but not profitable. Then the problem is pricing, and hiring makes a pricing problem larger and faster. This is the most common and most expensive misdiagnosis in the trades.

You cannot say which work makes money. Hiring to do more of something you have not measured is a gamble. Job costing first.

The demand is one season. Hiring for a peak and carrying the cost through the trough has ended more contracting businesses than slow quarters have.

You would be hiring to reduce your own hours. Understandable and often the real reason — but be honest that it is the reason, and price the work so the business can afford it.

The subcontractor question

If demand is genuinely uncertain, a sub converts a fixed cost into a variable one. That flexibility is real and worth having.

It also brings classification and insurance obligations that are not optional, and getting them wrong is expensive in ways an employee never is. See 1099 or W-2 and workers comp audits.

What to do before deciding

Work out the loaded cost. Divide by your actual gross margin to get the revenue required. Check that against your real backlog — not your busiest month. Then look at what it does to your break-even, because it moves permanently.

If the numbers work, hire with confidence. If they do not, you have just saved yourself the most expensive mistake available to a growing contractor.

Related

• Working out your break-even number
• What you should actually charge for a service call
• Profit per truck