Hiring Your First Employee

Crossroads employee entrepreneurMost business owners dream big when they start their businesses. They dream of competing in the market, of providing a superior service, of helping others, of building and growing their dream, and making a great living. And so they dream of the day when they finally have the funds to hire. Hiring means growth and growth means success (in many cases).

It takes a team to make great things happen and entrepreneurs know this. Employees add valuable perspective and offer entrepreneurs added ways to learn and grow. And so they know that the time will come when they must make the leap and hire.

But how do you know when that day will be? From day one, entrepreneurs do everything themselves and the work load just creeps up on them. So how do they know when they finally need to share the load?

How To Know When It’s Time To Hire

There are signs indicating a business is growing beyond a single entrepreneur’s means. An entrepreneur gets used to doing everything himself, even as the business grows, but he should heed the signs that the business has reached the tipping point and hire before things get messy. If he doesn’t, the business’s reputation can be damaged as customers don’t get the service they once used to. Here are a few things to look out for:

  1. High Call volume – You start experiencing a higher call volume that you can’t handle on your own. Customers are leaving messages regularly because you don’t have time to answer the phone. You never chat and establish a rapport with customers like you used to because you are too busy to spend time on the little things.
  2. Lack of skills – You don’t have the right skill sets. Your company is branching out in other directions. Customers have needs for things that you can’t offer on your own. When this starts to happen, you either have to outsource or hire someone to handle it. If you don’t, you’ll have to turn customers away.
  3. Not enough time – There are not enough man hours in a day to fulfill all the work orders coming in. If you’re working all day and continuing to work into the night, you probably need to hire someone! Sure, you probably have loans to pay off and a savings threshold to reach, but don’t let the company suffer just to keep your financials looking good.
  4. Turning down work – After a while of being overwhelmed, orders will be so backlogged or your schedule so full, you’ll have to start turning down work. These customers who get declined won’t recommend you and may even tell people not to go to you because you can’t handle the volume.

When these things start happening, you’re going to have to break out of the one man show and branch out for the sake of your future. But is that time today? Could it possibly benefit you to wait?

Some companies use their best judgement and others use financials as a guide to help them decide when it’s time to hire. For example, some employers believe that payroll should not consume more than 25 percent of their company’s operating costs. Add up your operating costs and see if there is room for an employee in there. It may be that hiring doesn’t quite fit within your budget or that it does but you’re still not sure you need to do it right now. Consider making a list of pros and cons to help you decide.

Pros & Cons of Hiring

Make two lists of the advantages and disadvantages of hiring. Seeing it laid out in front of you can help you be sure you are making the right decision to either hire or wait. Here is a sample list that I came up with for an imaginary company. Yours will probably be a little different since your needs are different from mine but the examples may help get you going.

Advantages to hiring:

  • Free up some of your time so that you can do more for yourself and spend more time with family.
  • Reduce the work load so that you are not overwhelmed.
  • Add new ideas and a fresh outlook with a new set of eyes.
  • Gain the opportunity to work on marketing the company and growing the business rather than just maintaining it.
  • Hand off some duties that you are not an expert in.

Disadvantages to hiring:

  • Figuring employment taxes.
  • Actually paying the salary when money is tight. It’s easy to feel like an employee won’t bring in as much money as you’re going to pay them. But it’s probably not true. None of the most successful companies are run by a single person. A company grows when it employs more people to get more work done.
  • The new employee might not do things the way you would do them – Entrepreneurs can become sort of narcissistic after working alone for a while. They are used to everything being done their way. Hiring a new employee means either micromanaging, which takes up a lot of time, or accepting a new personality and new ways of doing things.
  • You will probably need some of the following: workers compensation insurance, new equipment, software licenses, etc. Can you afford to include these expenses along with the employee’s salary? Consider also making a list of the expenses a new employee would bring. Don’t be fooled thinking the salary is the only expense.

The Cost of Hiring

There are obvious pros and cons to hiring and, sometimes, even when the pros outweigh the cons, you’ll still have the issue of money. The cost to hire an employee can be prohibitive. You know you need to hire to grow and make more money, but you need to make more money before you can afford to hire. It’s a catch 22. Without breaking it down and doing some math, you may only be making an assumption that you can’t afford a new employee.

For example, have you thought about the following:

Do you need a full-time employee or will a part time employee do for now? Let’s say your part-timer costs $700/month. How many additional sales would you actually need to cover that $700? Is getting this much more business reasonable? With an extra hand, it very well may be, especially since you’ll be able to do more marketing and networking. For your type of business, will you see the return immediately or will it take a few months to get paid? If you have $2400 in the bank, then you’ll be able to handle that lag. If you don’t, maybe you should consider taking a small business loan. After all, entrepreneurship is somewhat of a gamble. Maybe this is where you will make your first (of many) leaps of faith.

The Personality of an Entrepreneur

Entrepreneurs are a certain type of breed, like musicians, mathematicians, artists, and athletes. While these people probably aren’t anything like each other, they are similar in that they aren’t like everybody else.

What makes entrepreneurs different is a set of a few specific qualities:

  1. They are inherent risk takers. Most of them quit their jobs to branch out on their own.They accept uncertainty. Most people are not comfortable doing this.
  2. They have passion. Anybody willing to take risks and do something difficult is a passionate about what they’re after. These people tend to show this passionate characteristic in every aspect of their lives. They talk with passion and they work towards goals with passion.
  3. They have vision. There is no entrepreneur out there that doesn’t have a strong vision and thinks ahead into the future. They hold a plan in mind and see the path to their goal. Not everyone does this. For many people, something as large as creating a business is simply overwhelming.
  4. They are confident. They may not always think they’re right, they may second guess themselves sometimes, but they do believe in their ideas enough to pursue them.

All of the qualities that make up an entrepreneur also help to guide him or her in the decision to hire. Hiring is a step on the path to an entrepreneur’s goal. With an entrepreneur, the “right time” may have been planned long in advance. If not, it just takes some calculated planning to bring it into the vision of the business.

2 Comments

  1. Being proactive about hiring can benefit entrepreneurs because it reduces the long term costs and doesn’t leave you in a catch 22, where you need someone today but you haven’t found that right person yet. Using Riipen projects, entrepreneurs can reduce hiring costs while increasing innovation and expanding skill sets.

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