Solo No More: When it’s Time to Bring on Your First EmployeeSix questions for entrepreneurs to ask before making their first hire.
In the world of small business, solopreneurs are the silent majority. According to the U.S. Small Business Administration, 24 million microbusinesses are sole enterprises — compared with only 3.8 million microbusinesses that employ one to nine workers, in addition to the owner.
But when you work for yourself, how do you know when it’s time to bring on that first staffer? To find out, NCR Silver spoke with Katie Vliestra, vice president for government relations and public affairs at the National Association for the Self-Employed. She walked us through six questions solopreneurs should ask themselves when contemplating that first hire.
Why did you start your business?
When it comes to deciding what kind of growth is right for your company, “it’s all about the initial intent for your business,” said Vliestra.
Often, solopreneurs walk into self-employment because they have a certain skill set and want the flexibility of being their own boss — without ever thinking about if they want their company to grow beyond themselves.
“Then all of a sudden, you become very successful, and you realize that if you want to continue at this pace with this level of clients, then you probably need to think about bringing in someone else to support that,” she said.
Whether you decide to stay small or grow into a large company, take time to reflect on why you chose to start your business in the first place, she said.
What are your long-term goals?
Vliestra also recommended entrepreneurs think about what kind of future they want for both their businesses (and private lives) in years to come.
“What is the five/10-year goal for your business?” she asked. “I think you have to recognize where you are in your life right now and where you expect to be in five years. Does owning a small business and being responsible for employees really fit into the lifestyle you want?”
Maybe you want to build a business you can sell at a future date or maintain a small enterprise that provides both an income and flexibility. Or maybe you have a passion for mentoring others and cultivating a close-knit team. In the end, she said, it’s all about defining what you want, and what you’re willing to sacrifice to make that happen.
Do you have enough work?
Another thing to consider before bringing on your first employee is the reliability of your workload. Are you simply in a busy season, or is there enough demand to justify an extra worker even during slower months?
“In the short run, you don’t want to make a decision that could have a long-term impact on your business,” Vliestra explained. “You want to avoid a situation where one client leaves and all of a sudden you have to lay off people.”
Can you afford the commitment?
On the flip side, you should also think about the long-term financial impact of adding someone to your team.
“Benefits are really expensive, and I think that’s why you, as the business owner, really need to think about it,” she said. “Sit down and look at your business plan. At one employee, maybe you could offer a health reimbursement arrangement or provide a different kind of bonus structure, recognizing that it can be pretty challenging [for a microbusiness] to offer benefits.”
Also keep in mind that you will come to rely on your employee’s work output as much as they rely on you for their paycheck.
“A lot of people forget how much [employee] turnover there is, and how that can be really impactful on a business. You may find the best person for the job, but who knows what life events are going to happen that means they have to walk away?”
Could a subcontractor make more sense?
Before adding your first full-time staffer, consider if a contractor may be a better fit. Outsourcing a portion of your workload can be a good preliminary step to helping you decide if your business is ready for the commitment of an employer/employee relationship.
Just remember, said Vliestra, there are pros and cons for both options. With an employee, you can set their schedule and have a little bit more control over the environment. A contractor, on the other hand, doesn’t require a long-term commitment, but will require you to be more flexible about how (and when) the work gets done.
Are you prepared to be a leader?
Seeing success in your business is exciting for any entrepreneur — “but there’s also the reality of things,” said Vliestra. “How much time is it going to take you to recruit someone, train them and then feel confident that they can do the work without direct supervision?”
While you’d like to get more business and bring in additional revenue, think about what adding that first employee really means for you as the business owner, she advised. In addition to your current workload, you’ll now have to start supervising someone and carving out time for one-on-one development.
While it can be hard for the self-employed small business owner to carve out time to think strategically about hiring that first employee, it’s critical if you want your business to succeed in the long term, said Vliestra.
“Ultimately, if you’re really intentional about that first employee, when it’s time to bring on your second or third employee, you already have a framework, a decision that you’ve made that has been strategic in nature.”