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HUMAN RESOURCES

The First Employee
 

Each year, thousands of sole proprietors double the size of their businesses by hiring their first employee. But how do you know when--and whom--to hire?
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For nearly two years, Carrie Wong did it all herself. As the founder and sole employee of Practical Gourmet, an Aurora, Oreg., bakery that supplies high-end desserts to restaurants without their own pastry chefs, Wong baked tiramisu and berry tortes in the kitchen, made deliveries in her Subaru wagon, and still found time to pitch her creations to ever more restaurants.

But soon, local newspapers got a taste of her fancy desserts. Glowing articles appeared and business took off. By early 2003, Wong--a former marketing exec who founded her company after losing her corporate job in 2001--was working 90-hour weeks and barely keeping up with demand. She no longer had time to do what she did best: marketing the business. "I got to the point where I said, 'This is insane," she says. "I had to stop taking on any more clients or just go for it."

In Wong's case, going for it meant hiring her first employee. It's a necessary step for any maxed-out entrepreneur seeking to expand a one-person operation--but it's a scary move, fraught with all manner of anxieties. How do you decide whom to hire? What happens if business flags? "My biggest concern," says Wong, "was, will the person I hire care as much about the business as I do?"

Despite such questions, each year an estimated 550,000 business owners become employers for the first time, according to government economists--taking one of the most difficult and important steps in their careers as entrepreneurs. "Whether your business moves ahead or not is really determined by the people you hire," says Jana Matthews, an entrepreneurship expert at Boulder Quantum Ventures, a consulting firm in Boulder, Colo. "Unfortunately, people often mess it up, big-time."

That doesn't have to be the case. While determining whether--and whom--to hire will always be more art than science, there are several telltale signs that can help you decide when to turn two hands into four. Some of these signs are easy enough to spot. Like Wong, you may feel there are not enough hours in the day to concentrate on the tasks you're best at. Perhaps you've missed an important call or failed to ship a product because you're overwhelmed by other tasks. "It may be time to hire when things are slipping," says Donna Kelley, assistant professor of entrepreneurship at Babson College in Babson Park, Mass. "Or when you feel you don't have control over the business like you did when it was smaller." Make a list of the skills you need to run your company effectively, Kelley advises. Then list the things you're best at. If there are big gaps between the two, it's probably time to add some brainpower.

The kind of brainpower you add depends on whether you want to grow slowly or shift into a higher gear. If you're taking it slow, you might just want someone to relieve some of the pressure by performing the routine administrative tasks that pile up, such as answering phones and opening mail. Picking up the pace, however, usually involves finding someone who has specialized expertise or who complements your skills.

I don't have to be the smartest person in the world to succeed. I just need to be smart enough to hire the right people to help me do it."

That was the kind of soul-searching David Byrne went through six years ago. Byrne quit his corporate sales and marketing job to found BatteriesDirect.com, which sells batteries for laptops and cordless phones over the Internet. Revenue at the Palo Alto, Calif., company had increased from zip to $200,000 in just two years, and he was having trouble keeping pace. New competitors were emerging, and Byrne lacked the finance know-how to wrangle better payment terms from vendors and figure out the most competitive pricing strategy.

So Byrne hired his first employee--Pamela Ballus, a former colleague and finance whiz. To make the hire, Byrne was forced to take a 25% pay cut, as well as give his new employee equity in the company. But he believes it was well worth it. At last, he had time to put together a marketing plan and go ahead with a much-needed website upgrade. Since the hire, business has increased fivefold and the company expects to break $1 million in 2004. Ballus, he says, "made up for the weaknesses I had, and I went back to figuring out how to expand the business. With all the competition out there, we had to really be focused on how to get customers."

Byrne avoided a common mistake of entrepreneurs: waiting too long to make a hire. Consumed with staying afloat, many solo business owners miss opportunities to make needed innovations to stay in the game, says Kelley. By the time they get around to hiring, it's too late. "Their competitors have already made them obsolete," she says.

That's not the only thing dangerous about putting off the decision. Wait too long, and you could be forced to hire in a hurry, increasing the risk of ending up with the wrong person. That's exactly what happened to Loree Taylor Jordan, founder of LTJ Associates, a communications firm in Campbell, Calif. Massively behind in her clerical work, Jordan needed help but had no time to interview a slew of applicants. So she hired a friend as a personal assistant. Unfortunately, her new employee was less than conscientious, breezing into the office whenever she pleased and often failing to complete important tasks. After seven months, Jordan finally let her go. But she learned from her mistake. When searching for a replacement, she interviewed multiple candidates. When she found one she liked, Jordan brought her in on a trial basis before pulling the trigger on the decision. "I wanted to be sure it was a good fit," Jordan says.

You can reduce the risk of hiring a dud by bringing someone on as a consultant or contractor first, says Cleveland biotech entrepreneur Andy Lefkowitz. "That way you can see how you work together before making a bigger commitment," he says. "If things go downhill with an employee, it's harder to go your separate ways." Of course, any first-time employer would like to get it right the first time. Donna Kelley counsels that the first priority often should be not a particular skill--most employees, after all, can be trained--but rather, an appropriate point of view. "Do they have a passion for the business that you're in?" Kelley says. "Do they feel they must respond to customers right away? Do they have the energy for the ups and downs of any small business?"

As for Carrie Wong, last November she found someone who shares her passion. She met Todd Wieweck, who worked as a pastry chef at the tony Phoenician resort in Scottsdale, Ariz., at a charity event sponsored by local chefs. She talked to other candidates, but Wieweck remained at the top of her list. "This is the beginning of something big," says Wieweck, who joined Practical Gourmet late last year. Now, Wong can focus on sales and marketing while her new hire can run the kitchen. If it works out, Wieweck will share in profits after two years. "It's important he's rewarded beyond the standard paycheck," Wong says. To make sure her recipes never leave the company, she had Wieweck sign nondisclosure and noncompete agreements--a wise idea for any entrepreneur whose business is built on proprietary information.

Now Wong is ready to get back to whipping up more business. After moving to a new 3,000-square-foot baking facility (she lives above the place), she's preparing to open an adjacent retail outlet. At the same time, she plans to crank up sales of a line of gourmet chocolates she's launched. And she's looking to add more area restaurants as customers for her desserts. By the end of this year, she expects to hire again--perhaps as many as four more employees. "I don't have to be the smartest person in the world to expand this business," Wong says. "I just need to be smart enough to hire the right people to help me do it."

Last updated: Feb 1, 2004




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