One of the biggest challenges faced by solo financial advisory firm owners as their firms grow and encounter capacity issues is deciding whether (and when) to hire an employee. While hiring staff members can offer a helpful lift in reducing capacity constraints for the firm owner, it also comes with its own burdens such as managing, training, and supervising employees, which many firm owners may have never considered when first launching their firms. Furthermore, determining the right time to hire an employee and which role to hire first can also be challenging decisions for solo firm owners.
In our 111th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how getting clarity on the reasons why hiring someone is necessary for the firm can help advisory firm owners determine what role to fill first, which business metrics to examine to understand when to hire, and which attributes to look for in a candidate.
Before making the commitment to hire a staff member, it’s important for advisory firm owners to understand if doing so is really necessary in the first place. By listing out what the advisor does on a daily basis and sorting the list in order of what the advisor enjoys most, the advisor can decide if the tasks they don’t enjoy can be eliminated to relieve capacity constraints (e.g., getting rid of multi-step tasks, rightsizing clients, or slowing growth by saying "no" to prospects), or if they are tasks that can be delegated. If there are enough delegable tasks to justify hiring an employee, it may be a signal that hiring additional support makes sense.
Once the reasons for hiring a new employee are clear, the next step is determining if doing so is affordable for the firm (for many advisory firms, hiring the first staff member tends to occur between $150,000–$250,000 of revenue and 40–50 clients). If revenue can support a new hire, the firm owner can then refer back to their least enjoyable tasks as a starting point to create a job description. This will help the advisor be more specific in defining the role they need to fill. By seeking candidates with complementary (not necessarily similar) working styles to the advisor, well-rounded teams can be established that are more likely to excel at problem-solving and developing functional processes.
Ultimately, the key point is that hiring, when done thoughtfully, can benefit advisory firms and their future growth. And by understanding the reasons for hiring someone and how they can support the firm before beginning the hiring process, firm owners can create job descriptions that will keep the search for a candidate much more focused on what will actually benefit the firm the most. And finding the right candidate who enjoys their role helping with the tasks that firm owner least enjoys will inevitably create a better work environment for both the employee and the owner – providing a sustainable role for the employee and a more enjoyable task list for the firm owner!
