Posted: Wed 1st May 2019
Growing a business can feel like a chicken-and-egg conundrum. You don't have enough time to get everything done but aren't sure you can justify a full-time employee. On top of that, it can be difficult to give important tasks to someone else.
You're not alone. We talked to Enterprise Nation members and an HR expert about knowing the right time to hire your first employee, dealing with the financial implications, and finding the right person.
You know your business has potential to grow, but it's difficult to identify the trigger for hiring your first employee.
Bex Band, Enterprise Nation member and founder of Love Her Wild, said her workload increased significantly over the last year and administration and logistics had become the biggest drain on her time.
"These were tasks that keep everything running but not moving forward. I only see clear growth in the Love Her Wild community when I'm free to work on creative ideas and opportunities which help with brand exposure and bringing new members on board," she added.
Workload pressure is a common cause of founders looking to make their first hire. It's useful to analyse the work you do and look for opportunities to get more support.
Wendy Sneddon, Enterprise Nation adviser member and founder of HR advisory business Lodgestone Lounge, stressed the need to implement processes that allow you to share tasks and free up time for growth and development.
"For all entrepreneurs, the first employee will be the most important hiring decision they make and the hardest," she said. "You're bringing someone in to do your job or part of it. To make the right decision, you need to be really clear about the job you're hiring for."
Sneddon recommends using a grid to break down the different tasks you do. List the types of activities along the top: finance, marketing and sales, operations and IT, and human resources. The left-hand axes are the skill levels at which these tasks are carried out: strategic (big picture, making plans for growth etc.); management (organising all the activities to follow the strategy); and day to day (getting things done).
Once you've filled in the grid, you can start to think about what work a new employee might be able to do. It can be difficult to give up tasks you've done since launching the business, particularly when you have a lot of pride in the quality of the work.
Charlotte Laing, Enterprise Nation member and founder of The Content Emporium, said she put off hiring her first member of staff because she thought she was the only person that could do the job. Having a baby meant she had to make the leap.
"At that point, I realised I needed the freelancer to become a bigger part of the business. I thought only I could do the work. I was under this delusion that clients could deal only with me," she said.
"I don't think I would have voluntarily given it to someone else. When you're in a service business, it makes financial sense because the more people you have the more work you can do. But it's hard to make that leap."
It's impossible to hire an employee without any money, but there are ways to prepare for the impact of the expense.
Cash flow planning plays an important role. Try creating two or three forecasts, which show you what will happen in different scenarios. A base case forecast could only include the work you've already booked, for example. You need to take into account not just staff wages but employers' National Insurance contributions and pensions too.
How much funding is available to afford a new team member in each of the scenarios? Remember to think about how much additional revenue the extra resource would generate for the company.
"It's definitely a scary move to make but then I always believe if you play things safe all the time you aren't reaching your potential," Band said.
She made a clear financial plan for the year ahead, which included launching two new adventures, and hired her first staff member on a rolling contract initially to reduce the pressure.
For Laing, the financial complexity of hiring a new member of staff was a step-change in the business's evolution and led her to get an accountant.
"You need an accountant," she said. "A lot of small businesses try to do their tax themselves. When there are employees involved, it gets more complicated. Having an accountant makes sure things are running smoothly and that you don't do anything illegal."
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Once you've planned for a new team member, it's time to try and find the perfect match. This is the fun part, said Sneddon, who provided a series of interview tips:
Have a checklist of standard questions. This makes sure you cover the skill set needed and avoids bias. It's easy to make assumptions about people and ask questions in a different way depending on their background.
Think about the most relevant way to interview the candidate. Phone calls, informal café chats, structured interviews, and test tasks can all play a role.
For competency questions, ask for examples. What did the candidate do and how did they feel about it?
Understand employment law and protected characteristics. Stick to the job role and what the person will bring to the business. Document the procedure.
Internships, freelancers and contractors provide routes to scaling resources and testing potential employees.
Laing's first employee started on a work experience placement. She had used social media to target students who were taking journalism masters' degrees at Cardiff University. One became a regular freelancer, then her first employee.
"If you're an industry where freelancers are an option, it's a really good route," Laing said. "You get to know the person and how they operate. People can pretend they're something they're not in an interview. If you're working with them day in and day out, the proof is in the pudding."
Band took a similar approach. She wanted to hire someone from the Love Her Wild community.
"The lady who is now working with me has supported my business since it launched. This really helped me get over a lot of the worries I had about being able to trust someone with my 'baby'," she said.
The job isn't finished when you've found a perfect member of staff. Onboarding plays a crucial role in how quickly they get up to speed, the quality of the work, and building the business's culture.
When resources are stretched, it's easy to assume new team members will be up and running immediately. You need to allow them to learn the role and make sure you have the time to invest in the process.
Sneddon added it can take a new employee up to 28 weeks to become fully productive, but that you can shorten this time considerably by putting time and effort into inducting the employee properly.
Laing said this is the area she struggled with the most: "You do need to take the time. You need to set out the expectations. Sometimes when you're really busy and you've hired someone because you're really busy, it's easy to let that slide. You think they'll automatically do the things you want them to do."
Laing advised other founders who are hiring their first employee to make sure they have the systems in place that will allow the team to work together and know what's going on. This includes a server, project management system and shared calendars.
Get an employee management process established early. Find out what the employee wants to work towards and create a development plan. Book monthly one-to-ones to check in on progress.
However daunting it might seem to hire your first team member, implementing processes and managing your finances properly will make it possible. And hiring your first team member will have a big impact on the potential of the business.
"If you think you have a really good service and there's a market for it, it's worth taking the leap," said Laing. "As long as there's a profit margin on your business, you're always going to win."
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