1. Deciding If You Need to Hire
In your first year, you may grow rapidly and feel the need to hire as you get more and more overwhelmed. Remember that there are many costs associated with hiring, so while it feels like the business is growing rapidly and you’re buried in work, this may need to remain the case for awhile. If you truly cannot do the job, consider a part time assistant until you can afford one full time, or consider a contractor. Remember that if you hire an employee you will have a new set of headaches: payroll taxes, deductions, and so on. While many larger banks now handle payroll for you online (and many small business software products do too), it is still a new area to research and understand. In general, if you cannot serve your customers without hiring, it’s time to bite the proverbial bullet.
Be sure you hire the right type of person, too. Personality does matter! If someone is answering the phones, you don’t want someone with a poor “bedside manner” and a grumpy voice representing your business. It reflects on you.
Remember that, regardless of how close you get with your team, you are still the boss. You must always act like one or risk losing control of your business.
Try to figure out what people are good at, too, and then hire them for appropriate jobs. If someone hates a portion of her job, she may just have to deal with it if you don’t have the funds to hire another person. Explain this to the employee; most of us don’t like some aspect of our job. That is life.
Among the costs of hiring include payroll taxes and, of course, the salary or hourly wage that you are paying to your employees. Deciding what to pay can be tough, but salary should be commensurate with value add, how much you can afford (you may not be able to afford the best right now), education level, experience, prior job experience, and number of hours required by the employee.
Other costs may include: healthcare, uniform costs (if applicable), payroll service costs (if you don’t want to deal with calculating payroll yourself), the cost of training new employees (both in training materials as well as time spent), additional insurance needed to cover your employees in the case of an accident or injury while on the job, etc.
Of course, there are many benefits to hiring employees, too: delegating some of the busy work, expanding your business more rapidly, feeling that great sense of progress, feeling as though your business is a true business now, supplying a job for another human being (a great sense of pride for many of us), having someone to bounce ideas off, and gaining a feeling of camaraderie (particularly if you
have been working alone for some time). Unfortunately, no one will ever care about your business as much as you do, but you can find people that care enough to get close.
1.3. Amount of Work Initially
Be sure you give responsibility commensurate with what you’ve seen an individual be able to perform. It might be a great feeling to dump lots of work on your new colleagues, but a bad move on their part can be highly detrimental to your business. Dole out responsibility based on capability and a proven record, not because you don’t want to do it. Be sure that you train employees thoroughly, and give them only what they can handle initially.
1.4. Growth Rate
Look carefully at your growth rate; don’t over hire and don’t under hire. You don’t want to have to hire under the gun when you badly need someone or risk making a bad hiring decision that will cost you in many ways. At the same time, hiring too prematurely can cause incredible financial distress and can make you feel resentful toward that team member—which is unfair to you both.
A general rule of thumb to go by is that if you have the time and energy to do the work yourself, you don’t need another employee (unless you can financially afford to hire someone to allow yourself additional “you time”). If you are finding yourself having to constantly carry over tasks to tomorrow and the next day, chances are it’s time to take a look at your finances and determine what you can afford to pay someone, as you are in the position to take on an employee.
2. Hiring Basics
You want to hire the right people—after all, they represent you and your company! Like many of us, you may be used to interviewing for jobs at a company you don’t own, and suddenly you find yourself being hypersensitive to answers you hadn’t thought twice about in the past, because now it is your company. This is okay and normal! You will want to be sure to do a complete background check of possible employees, and in some states and counties it is legal to do a credit check, too. A credit check might help indicate the level of responsibility that an individual has taken in his or her personal life, and could potentially be an indication of how he or she will treat your business. I hire a lot based on instinct and always have. It hasn’t let me down; but your instinct needs to be based on experiences.
2.1. Skill Sets
Determine and write down what skill sets are absolutely essential, which are nice to have, and which are icing on the cake. Then assess those strengths in each candidate, first by screening resumes and then by interviewing. You must align skill sets and the individual’s desire to do a job with your needs.
You may have found the perfect candidate with an excellent skill set and education, but she wants to work part time and you need full time. She must leave at 4 P.M. to pick up a child, but you need someone to cover evenings. This isn’t a good fit. Time must be assessed as part of your interviewing process.
2.3. What You Offer Versus What They Need—’Iife” Fit
Find out what prospective employees want in a job. Is it just a job? Do they want a place to grow? Do they prefer environments and managers that let them run with things, or do they prefer a set direction and set list of tasks? Be sure that what makes them happy and what you need is aligned.
I made mention earlier in this chapter of someone with bad phone manners (and who may not even realize it!) taking a job where he or she needed to answer phones. But there are numerous other areas where personality plays a role. The mood of one upset or generally irritated person can upset the entire office and make for what we call a hostile environment. If you want a happy place to work, hire happy people. If you need intense seriousness, hire intense, serious people.
Be sure that the individual has the time and interest to dedicate to your business what you truly need. If they don’t, you need to move on.
3. Contractors Versus Employees
When you first hire (particularly in the first couple of years), it’s a good feeling to know you have a team. It makes you feel somehow legitimized as a business owner. But contractors may actually be the way to go. There are rules, though, based on IRS tax regulations, for contractors.
Did you know that under the common law, a worker is an employee if the hiring firm (that is, the person or persons for whom services are performed) has the right to control and direct the way he or she works, not only with regard to the final result, but also with regard to the details of when, where, and how the work is done? This is important because you don’t want to get into trouble with the IRS.
According to Uncle Sam, it is not necessary that the employer actually directs or controls the manner in which the services are performed; it is sufficient if the employer has the right to do so.
The IRS now investigates the status of independent contractors in all business audits they conduct. The burden of proof is always on the hiring firm to demonstrate unequivocally that an independent contractor is not their employee. (IRS.gov)
There are two resources for this section that are very important for you to use:
The first is a summary of legal issues related to the hiring of independent contractors: “Independent Contractors: A Manager’s Guide and Audit Reference,” published by the California Chamber of Commerce, PO Box 1736, Sacramento, CA 95812-1736, 916-444-6670.
The second is a resource when considering hiring independent contractors: “The Employer’s Legal Guide,” by Stephen Fishman, published by Nolo Press, 1997. An in-depth and comprehensive discussion of employee vs. independent contractor legal issues is available online at Fenwick &
The pros to bringing on help in the form of contractors include:
- No costs of benefits.
- No responsibility to continue contracting with them if you cannot afford it (though in at-will states, this isn’t an issue anyway because employers and employees can sever their contract at any time without cause).
- The ability to cut back or increase hours easily (of course, you risk losing the contractor if he or she is unhappy).
The cons are as follows:
- Many contractors though don’t feel as settled or as loyal to a company if they are not “real employees.” Since the IRS requires you not treat a contractor like an employee, contractors often report feeling like outsiders, particularly in mid- to large-sized businesses.
- There is little control you can take with a true independent contractor.
If you even mandate a single hour that a person must be in the office, the IRS can consider him an employee. If you tell contractors when a task needs to be completed, how it needs to be completed, when they need
to start, or pretty much anything for that matter, they are no longer an independent contractor and are officially (according to the IRS and many state legal systems) employees.
Source: Babb Danielle (2009), The Accidental Startup: How to Realize Your True Potential by Becoming Your Own Boss. Alpha.
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