New business owners are often too quick to start hiring people.
I know, because I was once too quick to start hiring people myself. I thought it was the only way to grow the big, successful business I dreamed of owning.
I quickly learned that hiring people right away does not make profits soar any faster. Instead, it creates a lot of unnecessary stress and heartache. You have to learn how to manage people. Those people are now depending on you. Overhead skyrockets. Making payroll is not optional, even when you're struggling to maintain your cash flow. If you make someone work for a day then you have to pay them for that day, period.
I learned if you start hiring too early then you could force yourself out of business before you've really given yourself a fair chance at success.
Hiring test #1: Can I still do this myself?
When I started my second business I chose a different path. This time, my business partner and I put our noses to the grindstone. We did it all ourselves in the beginning. We did all of the sales, all of the marketing, and all of the customer service. As such, we had a clear understanding of what each of these jobs entailed. This helped us understand what we could reasonably expect out of our future employees (see below).
It was a lot of hard work, but it meant that we weren't scrambling for loans or venture capital in order to grow. We let our sales fund our business growth, and the experience was completely different. We hired people only when we absolutely could not do it all anymore, and not a second before.
I slept a lot better.
Hiring test #2: Do I know what I want out of this employee?
Purchasing labor is like purchasing anything else. Ideally, you purchase something because it's going to fill a specific need in your life.
You purchase a dishwasher (of either the human or mechanical variety) to wash dishes, for example. That's a specific function, a clearly understood need which makes the dishwasher a worthwhile investment.
Ideally, you'll hire an employee who is strong where you are weak, and who can free you up to do higher-value tasks. But too many people hire employees without understanding the need they are hoping to fill. Expectations might even be as vague as, "helping out around here." Then they wonder why the employee costs more than he makes.
Want to avoid this situation? Take the time to create job descriptions or training documents. You need procedures, expectations, and policies. This will tell both you and your employee what you expect them to accomplish. It will give you an idea of exactly what you are paying for when you write out your employee's paycheck.
If you don't do this, both you and your employee will be frustrated. Worse, your business won't be growing, because you will have failed to give your employee what he or she needs to help you accomplish that growth.
Scaling is important--it's the path to real wealth. Employees can be a big part of that process, but only if you're absolutely ready for them. If you're not, they're just a drag on both your bottom line and your sanity.