Can you afford this hire? The 90-day cash test

You are drowning, the work is there, and the obvious answer is to hire someone. So you do the math in your head: revenue is up, there is $70,000 of room in the budget, the salary is $70,000. It fits.

It does not fit. That hire will cost you closer to $87,000 a year, the cash leaves every two weeks starting immediately, and whatever revenue they are supposed to generate shows up months later — if it shows up at all. Hiring is not a budget question. It is a cash-timing question, and the gap between those two framings is where a lot of otherwise healthy businesses get into trouble.

What a hire actually costs

Salary is the number you negotiate. It is not the number that leaves your account. Payroll taxes, insurance, and the ordinary cost of having a person at a desk add somewhere between 20% and 30% on top for most small businesses. Price the hire properly before you ask whether you can afford it.

A useful shortcut: assume 1.25x base salary for a salaried employee with modest benefits, and 1.15x for a contractor with none. If the hire only works at the un-loaded number, it does not work.

The 90-day cash test

Here is the test that actually decides it. Forget the annual view — it hides the problem by averaging it away. Take your current bank balance and run it forward ninety days with the new person on payroll and zero revenue attributed to them. Not pessimistic revenue. Zero.

Ninety days is the honest ramp for almost any role. A salesperson needs a pipeline before they close. A technician needs training before they are billable. An operations hire frees up your time, which converts to money slowly and indirectly. During that window you are paying full freight for a return that has not arrived, and that is precisely the window that kills people.

The question is not whether $40k is a big number. It is whether $40k is still above the floor you refuse to go below — payroll for everyone else, rent, and whatever buffer lets you sleep. If it is, the hire is survivable even in the worst case. If it is not, you are not hiring; you are betting the company on someone ramping faster than people usually do.

Three ways to make a hire you cannot quite afford

Failing the 90-day test does not always mean no. It usually means not like this:

• Start with a contractor. No payroll taxes, no benefits, no unemployment exposure, and you can stop in a week. It costs more per hour and buys you an exit — exactly the trade you want when you are unsure.
• Hire part-time first. Twenty hours halves the cash drain and still takes the worst of the load off. Scale up when the revenue actually appears rather than in anticipation of it.
• Fix collections instead. If your customers pay in 52 days and your terms say 30, the cash to fund this hire is already yours — it is just sitting in accounts receivable. Pulling DSO in by two weeks often funds a person outright.

Write down the trigger before you decide

The hardest part of hiring is not the decision. It is knowing when the decision was wrong. Before you make an offer, write down what you expect to be true at day 90 and day 180. Something falsifiable: three closed deals, forty billable hours a week, your own time freed up by fifteen hours. Put it somewhere you will actually see it.

Without that, a hire that is not working simply becomes the new normal and the cost compounds quietly for a year. With it, you get a scheduled moment to ask an honest question while you still have the cash to act on the answer.