Written by
Jonny Stuart
We hired too late twice. Too early once.
In this post
Why the Hire Decision Is So Hard for Small Agencies
Hiring too late meant turning away work, burning out the team we had, and watching two good people leave because we kept promising change without delivering it.
Hiring too early meant carrying a salary for fourteen months before the work properly justified it. A hit to cash reserves we could not really afford at the time, and a junior hire who needed more management attention than we had capacity to give.
Both mistakes came from the same place: we made the call based on how things felt rather than what the numbers said.
Why the Hire Decision Is So Hard for Small Agencies
The hire decision sits at the intersection of the two things agency founders find hardest to predict: future revenue and current capacity.
You are too busy right now - but is that because you genuinely need another person, or because Q1 is always busy? You have a great candidate in front of you - but can the business carry their salary for six months before they are fully productive? You want to grow - but are you growing into confirmed work or speculative pipeline?
These questions do not have clean answers. But there is a framework for approaching them more rigorously than gut feel.
The Wrong Reasons to Hire
Because you are busy. Busy is a temporary state. Before hiring, establish whether the busyness reflects genuine, sustained demand or a peak that will pass. Most agencies have seasonal patterns. A busy October does not necessarily mean a hire in November.
Because a great candidate appeared. Great candidates create urgency that distorts the underlying question: does the business need this hire? If the answer is yes, the candidate's quality is relevant. If the answer is maybe, hiring a great person into uncertainty is unfair to them and expensive for you.
Because you want to stop doing certain work. Hiring to offload tasks you find tedious is a real motivation and not entirely wrong. But it is not sufficient on its own. The question is still whether the business can sustain the hire, not whether the founder would prefer to stop doing certain things.
The Right Questions to Ask Before Hiring
What is your current utilisation rate?
If your team is consistently billing 75-85% of their available hours over a sustained period (not just one month), you have a capacity problem. Below 70% and you have a sales or efficiency problem that a new hire will not fix.
How much of your pipeline is confirmed?
A hire is typically productive within 4-6 months for an experienced person. You need enough confirmed work to carry their salary through the ramp period. "We expect to win this" is not the same as "we have signed this." Count only signed contracts.
Can your cash position support six months of salary before they are productive?
Calculate the fully-loaded cost of the hire - salary, employer contributions, equipment, management time. Then ask whether your cash reserves can carry that cost for six months if revenue does not increase as expected. If the answer is no, you are taking a significant risk.
Are you turning work away?
If you have declined projects in the past 90 days because you did not have capacity, that is a strong signal. If you have not, the capacity problem may be less acute than it feels.
Is the work repeatable?
Hiring for a one-off project is almost always a mistake. You need enough ongoing, repeatable work in the same discipline to justify a permanent hire. If the work is intermittent, a freelancer or contractor is usually the right answer.
A Simple Decision Framework
Use this as a starting point, not a rulebook:
Hire now if: utilisation has been above 80% for three consecutive months, you have 4+ months of signed work in the discipline you are hiring for, and your cash position can support six months of salary.
Hire soon if: utilisation is consistently 70-80%, pipeline is strong but not fully confirmed, and you have turned away at least two projects in the past quarter.
Wait if: you are in a busy period that typically eases, your pipeline is speculative, or your cash reserves are below three months of payroll.
Use a freelancer if: the work is real but intermittent, you need specialist skills you will not use continuously, or you want to test a working relationship before committing.
The Cost of Getting It Wrong
Hiring too late has real costs - lost revenue, team burnout, attrition - but they are recoverable. The business continues.
Hiring too early has costs that compound. A salary that runs ahead of revenue puts pressure on cash flow, which forces short-term pricing decisions (taking lower-margin work to cover costs), which reduces the margin needed to fund further growth. The sequence is unforgiving.
This is not an argument for caution over growth. It is an argument for making the hire decision based on what the numbers can support rather than what the moment feels like.
Frequently Asked Questions
When should a small agency hire its first employee?
When the founder is consistently working beyond capacity on billable work, has 3-4 months of signed client work that would benefit from additional support, and has cash reserves to cover 4-6 months of the hire's fully-loaded cost without relying on new revenue.
How do you know if you have enough work to justify hiring at an agency?
Look at utilisation rates (above 75-80% sustained), the volume of confirmed signed work (not pipeline), and whether you have turned work away in the past 90 days. If all three are positive, the capacity case is strong.
Is it better to hire freelancers or permanent staff at a small agency?
Freelancers are the right answer when work is intermittent, when you need specialist skills you do not use continuously, or when you are unsure whether the demand will sustain. Permanent hires make sense when the work is consistent, repeatable, and sustained over time.
The hire decision is never risk-free. But it is significantly less risky when you make it based on utilisation, confirmed pipeline, and cash position rather than how the past four weeks have felt.
AgencyFlo gives you the utilisation data you need to make this call with confidence - so you can see whether you have a genuine capacity problem or a temporary busy period before you commit.
