biz ladies by 11

biz ladies 09: That Magic Moment: When to Make Your First Hire

rosie_the_riveter1
It’s time for another installment of “HR for the Self-Employed” — and I’m your host, Lauren, from The Boss of You. (If you missed the first couple of installments, you can find them here and here.) Today I’ll be talking about how to make your first hire and all of the questions and concerns that come with it. Join me after the jump for the discussion!

CLICK HERE for Lauren’s post on hiring your first employee!

It’s time for another installment of “HR for the Self-Employed” — and I’m your host, Lauren, from The Boss of You. (If you missed the first couple of installments, you can find them here and here.)

Today’s question is, “How do I know when to make my first hire?” For me, this is actually a whole series of questions bundled into one. So here are a few of the questions I think you need to ask yourself when considering hiring help for the first time.

Do I need help, or do I just need to take on less work? Often, we start thinking about hiring help when we find ourselves overloaded with work. (And for some of us, that thought only occurs to us after a very, very long period of overextending ourselves. You can’t see it, but my hand is in the air right now, ’cause that was me.) There are two ways to deal with work overload: Start saying no (and raise your prices if that sounds scary from a financial perspective), or bring in some help. Note: the former is a totally acceptable option if it’s your preference.

Do I want to be someone’s boss? Maybe your dream life is to keep your business extra-small, and never have employees. That’s completely legit. Don’t let anyone convince you that you have to grow in size to be successful; that’s complete nonsense. Do what you makes you happiest.

Now, that being said, if you’re afraid to become a boss because you worry you’re going to be bad at it (believe me, I’ve been there), consider carefully whether you’re going to be content being your only employee in the long term. If the answer is no, then you should probably get to work on that insecurity and prepare for the job ahead. (That’s easier said than done, of course. Perhaps I’ll tackle that process in my next blog post…)

Do I need an employee, or would a subcontractor suffice? We’ve got a whole section on this in our book — the entire eleventh chapter is about hiring your first employee, and six pages are devoted to the contractor/employee question — but here’s a quick-and-dirty breakdown of when contractors make sense, versus when you want someone on the payroll.

Contractors are great for:

  • Short-term projects with fixed start & end dates, like holiday help in retail, or assistance with a big project.
  • Filling in missing skill sets, like drafting patterns, for example.
  • Limiting your financial responsibility – but be sure to check your local laws about contract workers and make sure you abide by the rules.

You probably need an employee if:

  • You are consistently overworked and your workload is unlikely to decrease in the near future.
  • You need someone to work in your work space: legally, most states and provinces require you to put someone on payroll if they’re working in your office, shop or studio on a regular basis.
  • You need someone who is 100% committed to working for you, and consistently available. (Most contractors are juggling multiple projects at a time and can’t necessarily prioritize yours above everyone else’s.)

Do I have enough profitable work to keep someone busy, and ensure they pay for themselves? The key word in this question is profitable. While we’re certainly not suggesting you should earn untold riches off the backs of underpaid labour, you also don’t want to go broke here. So open up a spreadsheet and crunch the numbers. Look at how much you’re going to need to pay them, including payroll taxes (check with your federal government for details on that — I’m afraid I only know enough to recommend the IRS if you’re stateside, or the CRA if you’re Canadian), and overhead costs like furniture, equipment, and so on; then calculate how much revenue you can expect their work to generate, and make sure the numbers work in your favour. (Oh dear, can you tell I’m Canadian? Just look at those “-our” spellings…)

Can I afford it? OK, you’ve probably already asked yourself this question, because it’s usually the first place our minds go when we think about hiring help. (“I want some help!” “You can’t afford the help!” — repeat, ad nauseam. Jack Nicholson voice optional.) But if you really can’t afford to bring someone on, at least part-time and short-term, then you don’t have a staffing problem; you have a profitability (or at least, cashflow) problem, and you probably want to look at your pricing. Don’t freak yourself out by thinking too hard about the annual costs; remember that if you hire someone who’s good at what they do, they should bring in enough revenue to cover more than the cost of their salary, and you should see that revenue boost your cashflow within a relatively short span of time.

What are some ways I can mitigate my risks by phasing in help? If you’re like I was, and your daydreams of having your own employees prompt waves of commitment-phobia, consider one of the following options: Hire someone part-time; consider short-term, limited-time contracts (1-6 months, depending on your business and the kind of work you need); or find a local school that trains students in your field, and get yourself a co-op student (or alternately, depending on your industry, post an internship). It’s totally okay to post a job that doesn’t promise eternal job security — in fact, some people are only looking for part-time or short-term work.

Have I got enough room? For those of you who work from home, or in shared space, you might resist the idea of hiring help due to space constraints — but remember, there are a lot of prospective employees out there who’d jump at the chance to telecommute. If you haven’t got room in your work space to share it with someone else, consider the possibility of having someone work remotely. You can always meet up for regular coffee or lunch dates to get some face time. I worked for a tech startup once where we all worked out of our apartments, which were conveniently located in the same neighbourhood — and our weekly staff meetings were held in a nearby coffee shop. (That’s not to say that sharing space doesn’t have its benefits, but you can always work your way up to it.)

Am I spending too much of my time doing stuff I’d be happier farming out? Your time is valuable, and if you’re spending a lot of it doing grunt work — or even non-grunt work that just isn’t a good use of your time — you should seriously consider paying someone else to do it for you, which frees you up to do the things you excel at. If you’re a designer, for example, and you’re spending a lot of time dealing with customer service and bookkeeping, take a hard look at how much more profitable you could be if you had more time to focus on creative work. Sometimes it makes good financial sense to pay someone else to focus on the stuff you don’t love (or — perish the thought! — aren’t great at).

Whew — that’s a lot of questions. But if you can stand one more piece of advice, please learn from my example. We (that is, my lovely business partner Emira and I) waited way too long to make our first hire, and that mistake is the one we regret most in our nine years of business. While I admire anyone who isn’t afraid to roll up their sleeves and do a bit of everything that needs to be done, there’s a point at which doing everything yourself is sheer madness (fuelled by stubbornness, a trait most entrepreneurs require in healthy doses). Try and look a year or two down the road, and ask yourself if you can keep up your current pace without falling down from exhaustion. If the answer is no, then something’s got to give, and you might just have to bite the bullet and — gasp! — ask for help.

Pin It
Categories
biz ladies

11 Comments

Julianne

Hello,
I am a loyal reader and Design Sponge fan. I love design & DIY projects. I recently graduated with a business degree & am trying to find an opportunity that incorporates both.
My e-mail is rinkinen.julianne@gmail.com if anyone knows of any small business that need help! (I am not sure if I am able to post this, but it seemed relevant to hiring employees). Thanks :)

Jess LC

So ironic that you tackled this topic today! I also was asked how I hired people and why on my blog today and I answered as well. I really like your advice, and I had never thought about the idea of just raising prices rather than hiring help. But I think that is a great option to bring up, thanks!

kara

excellent advice…my husband and I were just crunching numbers last week on this very topic. It’s a scary plunge. Thank you for this. I also am Canadian (reside in US) didn’t even notice your “favour” until you pointed it out. :)

Gayle Ellen

I am not self employed but I teach and have staff that work in my room. I read The Boss of You from cover to cover several times. My copy is loaded with notes in the margins and sticky notes. Such useful information! Such a great series!

betsy and iya

I am self-employed and at the cusp of hiring someone. I started with a free intern from the local Art Institue in Portland. She randomly walked into my studio one day, just taking a look at my jewelry—we got to chatting, I found out she needed an internship, and I interviewed her on the spot. She said the Art Institute is CONSTANTLY looking for micro/small businesses where their students can intern. In the 3 months she has worked with me, I have found her help to be so darn valuable, that I hired her part-time.

I think this post is extremely helpful and makes me feel more comfortable with the decisions I’ve made. Thank you!!

-betsy

Amanda

Thank you once again for all the valuable info…
Does anyone know the paperwork required etc for hiring an employee? Do you then have to hire a payroll accountant? I have been paying a girl under the table for part time work, but really need to make the switch to full employee as she has become a necessary player in my business.
Thanks!

grace

hi amanda

hmm..well, i wouldn’t pay anyone “under the table” anymore- it’s always best to document your payments because as a business, that’s an expense you can write off. but you don’t need a payroll accountant to handle payments.

if you’d like to bring her on full-time it’s best to talk to an accountant to make sure you know what information you’ll need from you- and you might want to check out the post on employees in the biz ladies archives so you can craft a good contract for her.

if you choose to keep her part time you can still pay without an accountant, but you should document your payments and file her as a freelancer on your taxes.

grace

Leave a Comment

Design*Sponge reserves the right to restrict comments that do not contribute constructively to the conversation at hand, contain profanity, personal attacks or seek to promote a personal or unrelated business.