Biz Ladies: How to Plan Ahead for Your Next Hire

Today’s Biz Ladies post comes to us from Justine Smith, the outreach manager at FreshBooks. Justine is sharing some helpful advice on how to prepare for your first/next hire. From arranging the budget to determining and organizing your HR methods, Justine offers a step-by-step guide that ensures an easy and successful hiring process. Thanks, Justine, for your insights on this topic! — Stephanie

Read the full post after the jump . . .

Your business is growing to the point where it’s time to hire help, but making one wrong move during the hiring process could set you back considerably.

A few years ago, this scenario happened to someone in my network — I’ll call her Naomi. At the time, Naomi had built up a six-figure business selling children’s accessories and was drowning in work. She knew she needed help — and fast. Without considering several important factors, she jumped right into hiring.

After posting a message to fans and friends through her business network, she was ecstatic to receive interest from a successful marketing consultant looking to re-enter the workforce after years of freelancing.

Even though Naomi knew this consultant was overqualified for the role, she offered her a part-time job, and within a month felt the weight of her to-do list trickling away. She began relying on her employee for a majority of important tasks and finally started to focus her attention on the things she always wanted to do but could never get to.

Just as Naomi was set to take on a lucrative contract with a major children’s retailer, her employee resigned to take a higher paying full-time job at a well-established company. Without any way to fulfill the contract now that she was employee-less, Naomi had to turn down the contract and lost her business tens of thousands of dollars along the way.

The fact is, stories like these happen to small business owners all the time. It’s crucial to evaluate the following three factors before making your first hire:

1. Design Your Hiring Budget

While Naomi gave this factor some thought, she didn’t truly crunch the numbers and ended up hiring someone at a higher cost for less hours than she could have used.

While you may already have a business budget in place, it’s important that you figure out the cost of your new hire separately. This will help you determine whether your earnings can support them through any potential rough patches that your business may experience.

a) Determine the total amount per month you can afford for your new employee. It doesn’t matter if that amount is high or low; even a few hundred dollars can get you some great virtual help.

b) Do a little research. In this case, Google is your friend and can provide you with comparison rates to figure out an hourly rate that is reasonable for the work you need done.

c) Once you have your reasonable hourly rate, use your total budget from step a to figure out the number of hours per month that you can afford someone. If things look bleak, you may need to adjust the number of hours you expect them to work and scale up as your profitability grows.

d) Finally, don’t forget the legalities of a new hire. Things like contracts and tax forms are important. Consult an attorney if possible when drawing up contracts, and for tax information visit your area’s revenue division.

  • US businesses: Refer to the IRS to properly categorize your new hire and make sure you have all the appropriate documentation
  • Canadian businesses: Refer to the CRA
  • UK businesses: Refer to HMRC

 

2. Choose Your Worker Type

Once you’ve figured out how much you can spend on your employee, it’s easier to narrow down the list of worker types to the one that will fit your business to a tee.

Since Naomi decided to hire someone more qualified than she originally considered, she brought on her employee part-time due to costs, even though both she and the employee wanted a full-time arrangement.

In this day and age, you have the option to choose from a variety of worker types, including independent contractors and full- or part-time employees, plus you can decide if that position needs to be in-person or virtual (aka, a remote worker).

There are many possibilities when it comes to hiring out, so it’s important to really nail down what your needs are so you can choose the type of staff that will be an asset to your business.

That said, let’s break down the type of staffing options available to you.

a) Independent Contractors (ICs)

TheFreeDictionary.com defines this as “a person who contracts to do work for another person according to his or her own process and methods.” In other words, you might hire an IC to perform a specific job function or to handle a particular project(s), but ultimately how that job is completed is up to the IC. They are a business entity in and of themselves and most likely will have other clients in addition to you. As long as the IC complies with the agreed-upon terms, the details of producing any work outlined are beyond your control.

b) Full- or Part-time Employees

An employee, on the other hand, is considered an extension of your business and will work only for you. An employee that works for your company means you provide all the tools, equipment and training necessary for them to do their jobs successfully; you (and they) may pay higher taxes; and you ultimately set all the rules and guidelines for how, when and where their job is performed. They may be assigned a “title” and work specific hours dictated by you. They are not operating under their own business, they are operating under your business.

c) Virtual or “Remote” Staff

Virtual workers can perform their duties remotely from anywhere in the world (usually, as long as they have Internet access). Virtual workers “can” be employees or ICs depending on where they fall under state and federal classifications. Typically though, they are ICs and supply services as part of their own business. You can hire virtual help for a variety of projects, and they are usually a great option when trying to keep operating costs down and reduce overhead.

Once you’ve taken the leap and hired your first worker, it’s important to make sure you prepare and equip them for success. You can’t hire someone and expect her to be a mind reader. You have to be able to bring your new hire up to speed in your business as quickly and efficiently as possible.

3. The Nuts and Bolts

Months later, Naomi ran into her former employee, and they ended up grabbing coffee. During their chat, Naomi learned that another big reason her employee didn’t stick out the employment was because she felt Naomi’s business wasn’t ready to support her. She wanted stability, and at the end of the day, she didn’t feel Naomi could offer that.

a) Make sure your business is organized and all your systems are already in place. Unless you are hiring your worker specifically to help you get organized, you shouldn’t bring them into your business without being prepared. That means you already have systems in place for filing and keeping track of information; that you’ve documented the proper execution of processes, rules and guidelines regarding all aspects of your business; and that you’ve done anything else that is relevant and necessary for the business to run smoothly.

b) Written training documents are also important for new hires. Set aside the time (before they start) to map out their first few weeks or months and include all the important things they need to know to do their job well. These can also include written systems on how to perform specific tasks within your company. This is information that your new hire can read at her leisure and then refer back to whenever necessary. Remember, this is time well spent for you because, in case of turnover, you don’t have to spend hours rehashing information to someone new.

c) Make sure you have any and all equipment necessary for your worker to perform their job successfully. If they are an independent contractor or remote worker, you don’t need to worry so much about this because they should have their own equipment. But for employees, it’s your job to provide all the tools necessary, such as a computer, office supplies and storage areas. So make sure you have everything you need before they start.

d) Ensure that you have a safety net within your budget that can support your worker if your business suffers in any way. If you make a commitment to hire someone to your team, it’s your responsibility to make sure they are paid. They have financial obligations just like you, and they are entrusting you to help them do that in exchange for their help and their contribution to the growth and success of your business. On a similar note, set up the payment process for your employee well before they start, so you don’t find yourself making embarrassing excuses come payday.

e) Make your new worker feel welcome within your organization. People respond to people, and teamwork is what sets a floundering business apart from a successful business. It’s your job to make your new hire feel as though they are an integral part of your team and that they are valued. This often happens naturally if you take some time to connect with them. Set aside time in your own busy schedule specifically for communicating with and getting to know your new hire, perhaps even taking them out for a monthly lunch. Establish an open-door policy so they can learn to rely on you and can truly flourish.

Although Naomi had a horrible experience with her first hire, she credits it as a major learning opportunity that impacted her business for the better, eventually. She learned a lot of what I’m sharing with you through her experience and now, several years later, has grown her business significantly with the help of two full-time employees.

Hiring help isn’t nearly as scary as it sounds once you’ve considered and implemented these three important factors. The FreshBooks team has grown from 2 to over 111 employees in the past 10 years, and we couldn’t have done that without being very diligent during the hiring process.

Best of luck!

laura

Wonderful advice!

I’d add that when totaling up the cost of your employee, factor in your time saved by having someone else focus on essential tasks that free you up for those things within your business that, like Naomi, you’ve “always wanted to do but never could get to.” These are the exact “things” that normally propel your business to new heights.

If your employee is doing an outstanding job – recognize it. Even modest, unexpected bonuses, small raises, or a token of appreciation can make an employee feel stable and confident that you are on the path, together, to bigger and better things.

Lauren

I am bookmarking this for the future. I’m not quite at the place in my business where I can hire help yet, but boy would I love to! I’m hoping that this is the year!

Suzi (The Pillow Studio)

It is uncanny how often the Biz Ladie’s post coincide with my own business needs. I am just now looking to hire someone and this was very helpful- especially the part about getting your policies in order beforehand. I will work on that first. Thanks again for the grea post!!

Tia

Great advice, Justine! Hiring can be a very tiresome process, especially when new hires don’t work out.

Josh Zweig, CPA, CA

Great points Justine! I’ve seen enough cases where clients work until their breaking point – when they realize they have to hire somebody. Due to the time pressure, as in the case you describe, they’re not able to or don’t place an emphasis on ensuring that the proper measures in place. This can result in all kinds of headaches later – both legal and tax related. Whether it’s not putting the right employment contracts in place as you point out, or not setting up your payroll account properly with the CRA – this can result in lawsuits and heavy CRA penalties which may all have been avoided by a brief discussion with a lawyer or accountant before taking on the first employee. While it may take a bit more of a time investment up front, it will most definitely be worth it in the long run!

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