I love the enthusiasm of young entrepreneurs. Excited, ambitious, and blissfully ignorant. I remember those days fondly.
When advising these entrepreneurs about their business, I often hear them express an interest in immediately hiring people -- after, of course, emphasizing they simply need more money. While this perceived need for employees might be driven by a desire to lead a team and be respected, more often than not it is because the entrepreneur just feels bogged down in the "dirty" and mundane work of the business.
Whatever the reason, I am quick to dash their hopes about hiring with a few concerns most have yet to consider. The primary issue I emphasize is that hiring involves revenue output, and in a startup or growing company, when resources and time are scarce, all the focus should be on revenue input.
So if you are hung up on hiring people for your business, and have not done so in the past, just keep these important facts about hiring in mind.
Hiring takes time (and is expensive.)
From experience, I can tell you that haphazardly hiring can cause much more trouble than it solves. You need to take time to properly understand and communicate what is required from the employee (job description). You need to pay, post, and monitor advertisements on recruitment sites. And most important, you need to take time to review applications, interview candidates, and conduct background checks.
All of this activity is fine and to be expected, but when a company is just starting, it can distract you from the more important and immediate priorities.
Training takes time (and is expensive.)
Whether you are hiring someone out of school or an experienced professional, you still need to take time to review company policies and clearly communicate to them the important processes and protocols. This also means, of course, that you need to develop company policies, as well as the processes and protocols needed to allow new employees to transition successfully into their job.
Again, this is a natural part of a business, but for most startups, these policies and processes take time to evolve.
Paying employees requires processes (and is expensive.)
Payroll is not a difficult process to manage, but it is yet another regular function of the business if you have employees. Partner companies exist to manage it for you, but there is a fee. If you do it yourself, you must make sure that you are properly managing taxes, overtime, and accounting.
Having employees can be a challenge (and is expensive.)
When you have employees, problems inevitably arise. These range in severity from key individuals getting sick or not showing up to squabbles about stealing lunches. In addition, the break room needs to be stocked with coffee and dish soap, and you will need to have a policy for leaving dirty dishes in the sink -- I speak from experience here.
And of course, you need to pay employees, and if you want good ones, you will need to pay them well. Many entrepreneurs work for free, at least to start, and are more than willing to soak their own blood, sweat, and tears into the business. They are often surprised, however, that employees are far less inclined to do so, even with a passionate company vision. The reality is employees have their own issues and expenses, and you cannot expect them to work for you without compensation.
Moreover, employees on payroll have other expenses most entrepreneurs overlook. You need to pay employees regularly, regardless of the condition of the business, and you need to budget for payroll taxes, which, depending on your state, can add 10 to 15 percent on top of wages.
When I work with entrepreneurs who are inclined to jump into the hiring process right away, I walk them through a few simple questions.
How will this individual help you meet your sustainable revenue goal?
How are these tasks being handled right now and what would happen if you did not hire anyone right now?
If the situation really does warrant hiring someone, the next step is to make sure the company has the resources available to execute on this, including personnel and time to devote to the recruitment, interviewing, hiring, and training, and that the company will have sustainable revenue to handle the ongoing financial burden.
If all of these conditions do not exist, the real solution is not hiring--it's bootstrapping and more blood, sweat, and tears.
What hiring-gone-wrong stories do you have? Please share them with me at the "sign-up" link below.