Hiring your first employee is a big deal. It’s a major milestone for any company. Hitting this milestone indicates that your business is on the path to growth. But, it can be scary too. There are a lot of unknowns. Do I have the money? Will the hire be great? Will it help my business? Isn’t it adding more stress?
It doesn’t matter what your business does, what industry it operates in, or even where your located. Everyone who has to hire any employee, yet alone their first employee, has these fears. You are not alone!
In this article, we’ll help ease your mind. We’ll help you identify if it’s the right time to hire your first employee, tell you when it’s NOT the right time to hire your first employee, and give you a great example of how hiring an employee can help you succeed. You’ll also learn what steps, and items, you need to make a great hire.
Are You Hiring?
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How to hire your first employee.
Hiring your first employee is both exciting and scary. New employees bring a lot to the table. Things like new skills, perspectives, and expertise. They increase your capacity to grow your business. Sounds awesome, right? It is – but it can be a challenging process. That’s why we put together this start to finish guide for hiring your first employee.
Why is hiring your first employee important?
Hiring your first employee is a big deal. Getting to this point signifies that you are growing or ready to grow. Like most, you’ve thought a lot about this moment before.
Hiring the first employee is one of the first milestones most companies strive to reach. Why is that? Why do we want to bring other people into something that we created? There are plenty of great reasons.
Adding another person to an organization increases your ability to to get more done. Your business can produce more goods. Customer service speed and quality increases. There are less inconsistencies in your final products. You can take on and serve new clients.
And what happens when those things start happening? More productivity, more efficiency, more revenue, and more profitability.
The benefits don’t stop at the business level though. Business owners who bring on employees experience a ton of benefits as well. They may (fingers crossed) actually get to take a vacation. That kid’s baseball game? Attended. The QuickBooks reconciliation you’ve been putting off for months? Done.
Above all though, owners of a growing business have an extra sense of pride in what they’ve built. Mix pride and passion…and you’ve got a combination that increases your odds of long term success.
When is it time to hire your first employee?
By this point you are probably fired up. You are ready for all of those benefits of hiring your first employee! The biggest thing now is determining if you are actually ready to hire your first employee.
Hiring takes cash – do you have enough stashed away? An employee is an asset – will the employee generate a return? You have to keep the employee busy – do you have at least a part time workload for the foreseeable future? These are all questions you must ask yourself before hiring your first employee.
Let’s take a look at some tell-tale signs that it’s time hire your first employee:
1. Customers are complaining.
This is by far the most important sign. Why? Because without customers you have no business. Not to mention, we live in a world where EVERYONE can be an influencer.
Word of mouth is not dead and most everyone has the power to share their experience with the click of a button. If customers are complaining and you can’t address their concerns – chances are you will lose them.
2. Your quality is suffering
No matter what your good or service you will most likely have a competitor. Consumers have access to offerings that they never had before thanks to the internet. Customers will know the quality is lacking if you are doing too much and can’t focus on producing the best goods.
What happens when people pay for something that is not of great quality? They look for something better the next time. That means no positive word of mouth, no great reviews and no repeat business. Moral of the story? It’s time to hire an employee if your quality is subpar.
3. New business opportunities arise.
It’s important as a business owner to always be searching for new opportunities.
A restaurant owner may have high demand for catering or delivery. A brewery may want to put in a bar and lounge. Or the local florist wants to day trade cryptocurrency.
Regardless of the opportunity, you have to have more people take on the new workload. If you are already struggling with your core activities – consider hiring an employee.
4. You can't take on new clients.
As with new opportunities, taking on more can be tough when you have limited help. This trickles down to serving new clients within your current operations.
If you can’t grow your client base because you are at max capacity your business will remain stagnant. If you have an opportunity (or want) to take on new clients but don’t have time – consider hiring an employee.
5. You're not gaining new customers.
As you read this, you may think “Oh, I can’t gain customers because I don’t have time to do marketing.” Yes, that may be the case. When you’re busy running every aspect of the business, marketing can definitely suffer. It’s actually one of the most common things owners push to the side.
We also have an alternative thought. This one is important for those of you who do focus on marketing and still don’t see results. Want to hear our theory? Here it is. If you are too busy focusing on all aspects of operations, you are not 100% focused on ‘wowing’ consumers. What do we mean?
Making a sale is great. It’s what you do before, during and after the sale that makes it special. People buy from those that provide more value than others. You must focus on providing every single customer with the most value possible. And if you don’t? Well, they won’t have any reason to tell the world about your offering! Without that word-of-mouth effect, you could be missing out on lots of great new customers.
6. Back-end activities are suffering.
It’s often very easy to say “I’ll get to that later” when it comes to bookkeeping, payables, and receivables. It’s very common for small business owners to shove these things to the side. And who can blame them? They are tedious. Your business is new (or somewhat new) and growing. There are plenty of other exciting and more critical activities to do on a daily basis – or so you think.
The problem with this mentality is that you are kicking the can down the road. You are self-inflicting harm upon your business. These activities may not be the flashiest or most appealing but they are still important. They are the oil that keeps the machine operating smooth. The check engine light when something’s not running the way it should. The items that help make decisions to spur growth.
Don’t overlook them. If you cannot fit backend activities into your schedule, consider hiring an employee.
7. Your personal life is non-existent.
Many people start businesses because they want to have a better work life balance. The reality is that you take on as much, if not more, work than you did at your 9-5. You are the last line of defense in your business. Everything good and bad that happens is on you.
While you should expect that you have to put in the long hours and roll the sleeves up – it can get overwhelming. If you start missing important events, such as children’s events or a spouse’s work event, it could be a sign.
Before it gets too out of control – do a time study. Evaluation of what you are doing daily can help you identify a lot. Are you spending hours on things that a part-time employee can handle for a reasonable cost? If so, consider hiring an employee!
A real life example:
Let’s say Randy is a restaurant owner. He is passionate about food and wants to cook his Grandmother’s favorite recipes for you to enjoy. Randy sets his business up and rents a small location in the downtown area of his rural little town. He’s now open for business.
Every day, Randy wakes up early and he gets to the restaurant to prepare his food. Oftentimes, he is gone before his wife and kids wake up. He does this because he fears putting his grandmother’s recipes in the hands of other. So, rather than hire a chef – he cooks everything himself.
Randy has done well in his first few months. He is able to cook and serve the conglomerate of loyal locals everyday. The restaurant is making some money and he is chipping away at the debt he incurred for startup.
Thanks to the regular crowd, a few great Yelp reviews, and some darn good food – Randy has built a successful eatery. But can it continue?
Let’s fast forward a month. Randy has noticed that there is a line forming out the door at during the big meal times (breakfast, lunch & dinner). He is ecstatic about the demand.
There is a price to pay though for Randy.
He has sacrificed interaction with his customers. His personal life is non-existent. The quality of his food is inconsistent. Complaints are at an all time high. Those new customers waiting in line to try his restaurant aren’t getting in the door. On top of all that – Randy hasn’t been able to do any of the bookkeeping, make bill payments, etc.
The bottom line is that things are taking a dark turn for Randy and their turning fast.
Realizing that he is on the brink of disaster, Randy has two choices. He can limit his capacity so that he can handle the workload or he can hire his first employee.
Limiting capacity so that he can handle the workload is limiting his ability to grow. That’s not an option. Randy started this business to make his grandmother proud. He started it to build a better life for his family. He wants something to pass down to his children.
So, that leaves door number 2. It’s time to hire his first employee.
Randy weighs the options. He cannot cook high quality food on a consistent level, serve the customers, take payments, etc. all on his own. He is considering hiring servers or a cook. Looking deep at the situation, Randy enjoys cooking. If you remember, he did not want anyone else cooking his Grandmother’s recipes.
So, he decides hiring a server will be best. The server can handle customer service, greet people at the door, take payments and help out as needed. Randy will get have many different tasks done while he focuses on what he is good at (and passionate about!).
How does the story end for our friend, Randy? Very good! His customers are so happy that he hired a friendly face to interact with. His focus on his food has paid off as the complaints turned to compliments. New customers are able to get in the door again. He has been able to keep up with the backend business activities. As it turns out, his accounting shows he’s doing even better with 2 people in the restaurant.
The best part for Randy though is that he can be successful with his business – and regain some time with his family. By having some help, he gains some extra time with his family each day. All in all, as scary as it was to hire someone…it was for the best for Randy and his family.
3 major reasons to avoid hiring your first employee.
We’ve looked at the reasons to make a hire. You’re all ready to get going. Take a step back to make sure you are ready. Why? A lot of people misread their true needs. If you are making your first hire for any of the reasons below – you may want to reconsider.
1. Out of desperation.
Desperate times call for knee-jerk reactions. This type of reaction is not going to yield great results. Why? You’re stressed now, but when this influx of work passes will you have steady work for your employee? Hiring your first employee is a big decision. Don’t make that decision out of desperation.
2. With no clear expectations.
Hiring an employee without knowing what they will be doing day-to-day is a recipe for disaster. You need to hire an employee with a purpose. Make sure you do not hire anyone without knowing their duties and responsibilities. Have a vision for the employee as you would your overall business.
3. You can't afford it.
Bringing on a full-time or part-time employee is costly. There are “hidden” costs, known as burden and benefits, on top of normal wages. This burden rate can be anywhere from from 20% to 40%. That adds up fast. Make sure there’s enough cash reserves to cover each payroll period before hiring. Not paying employees or having to lay off shortly after hiring can be a reputation killer. Not to mention, the cost of replacing employees is astronomical!
Steps to hiring your first employee.
Ok. You’ve made the decision. It’s go time! Be sure to have these items ready before you hire your first employee. Note: this list is not an exhaustive list and/or one size fits all. It is comprised of some common forms, requirements, and practices. Each business could have different requirements. Please check with your certified professionals and advisors to make sure your business is fully compliant.
1. Employer Identification Number (EIN)
Before hiring your first employee you must register your business with federal and state authorities. The IRS mandates that every business with employees should have an EIN. If you don’t have one, you can apply for one here.
2. Tax Withholding Records
A. New employees will need to complete form W-4 (Employee’s Withholding Certificate) to tell you how much federal income tax to withhold from their pay.
B. You will need to report income for your new employee using W-2 forms. W-2s are used for employees rather than independent contractors who receive a 1099 form to report their income. Consult with your accountant to make sure your worker is set up correctly and their income is reported properly.
3. Define the Role and Post a Job
If you don’t have a vision for your employee then you won’t maximize the return on your hire. Make a list of all of the tasks that you are doing right now or things you know need done that you don’t know how to do. This is a good start. Think about responsibilities now and even in the future so you can see if your candidates will be a good long term fit. What kind of background and skills are you looking for? Draft a great job description and create a job posting (using ANJobs by AmalgaNation of course!)
4. Interview Your Candidates
Interview your candidates to see which one is the best fit. Are they a good fit culturally? Do they have good experience? How will they do with your customers? Remember, great candidates can get turned away from interview overload. Try to keep the number of interviews reasonable!
5. Create an Offer Letter
Many things can be discussed during the interview process. To ensure that you and your candidate are on the same page, create a formal offer letter. This will help you visualize the employment package and spell it out for your potential new employee. Setting expectations from the beginning ensures everyone is on the same page. This allows your candidate (and you) to focus on the work ahead.
6. Make Sure the Candidate is Legal to Work
As an employer it is your responsibility to make sure that all of your employees are legally allowed to work here. Fines, and even criminal penalties, could be imposed if you hire someone who doesn’t have employment eligibility. Before, or on, their first day of work have them fill out Form I-9 and provide you with valid ID and authorizations from the form. Some states will also require you to utilize E-Verify (check your state’s requirements).
8. Get Worker’s Compensation Insurance
These requirements vary state by state and business by business. Be mindful that a lot of states will require you to obtain WC insurance. Make sure you check out your state’s requirements and work with an agent/broker that can help you find a policy that fits your business.
9. Hang Up Your Workplace Posters
The Department of Labor requires employers to post certain notices in their workplace to inform employees of their rights. The posters are provided free of charge. Additionally, some states have their own specific poster requirements – so be sure to check out your state’s requirements.
Hiring your first employee is a big deal. While it can be scary, there’s no need to be afraid.
You now know that you can identify the right (or wrong) time to hire your first employee. You’ve seen how making your first hire can improve your business and personal life. And you have a great list of steps you need to take to make your first hire.
So go out there, get the help you need, and grow your company! That is what you want right?