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The Entrepreneur’s First Hire

One of the biggest decisions an entrepreneur has to make is when to hire the first employee. As the entrepreneur moves from start-up to growth they reach a tipping point where help is needed. The first hire changes the entrepreneurial mindset and approach. Where once the entrepreneur was able to simply be the creative force behind the venture, success means that the focus shifts to running a business. Many entrepreneurs struggle with the day-to-day details of operating a business or simply dislike managing others. That is why the first employee hired is critical to the continued success of the venture. The new hire must complement the entrepreneur. Not in the sense of, ‘gee, your hair really looks nice today’, but in terms of filling in the skills that the creative force of the venture, the entrepreneur, lacks.

Dr. Greg Bier, University of Missouri College of Business - Ph.D., Associate Teaching Professor

Many times a growing business doesn’t have the cash flow to pay salaries. When that is the case you often don’t get the best employees that can add real value to the venture. However, in today’s economy you may be able to get some surprisingly capable employees at a reasonable rate. No matter what, you’ve got to get the best help possible. When resources are exceptionally tight there are other tools to use that might minimize the costs associated with attracting great help.

• Contract/advisory help. If it is specialized help that you need, pay them on a contractual or hourly basis s for their time. This works for accountants, marketing advice, etc. Not all help needs to be on the payroll. If they are only needed a few days a month, then do not hire them as employees. Take them on as contractors…paid by the hour.

• Partners. If you’re willing to share some of the rewards, and risks, involved in your venture perhaps you don’t need an employee. You may just need a partner. Again, when searching for a partner, you should be looking for someone that complements the skills you already bring to the venture so that they are able to contribute to the business in areas that are not your strength. Changing the business to a partnership requires a firm understanding of what the agreement is. This can often mean a lot of time developing an operating agreement between partners. However, this might still be less expensive than adding employees to the new ventures payroll.

• Interns. Many community college and university programs are great sources of young talent that will work for practically nothing…just to gain experience. If you’ve got the time and energy to nurture new help then an intern may be a great fit. Additionally, an internship is often a very low risk method to determine whether the internee is a good fit with the organization. Internships are usually for specified time periods. If it works out and the venture grows…you’ve got your first great employee. If it doesn’t, get another intern. Many times, since interns are currently working on their education (in an area of interest to your business) you may pick up relevant ideas from them at minimal cost as an added benefit. Many local universities also have graduate programs that require practical projects, such as MBA consulting, that also offer virtually free help.

When the least expensive options have been expended and it is time to put someone on the payroll take a deep breath. There are a myriad of issues just over the horizon. You must now develop a job description that includes the knowledge, skills, and abilities that are necessary to perform the job you envision adding. Part of the job description should document the experience, certifications, and qualifications needed as well as a review of the physical requirements the job entails and a review of the working conditions.

Once you have a firm understanding of what you are looking for in potential employees and what range compensation fits your budget you should begin the search. Great searches take time but they are worth it. Bad hiring decisions take immensely more time and resources to correct. Know the difference between legal and illegal interview questions. Spend the time to do a thorough search for the right worker. This will involve checking references, background checks, and drug tests. Once you’ve extended an offer a new venture process is starting. Now you are an employer! There are employment identification numbers needed, I-9 forms to be collected, W-4s, compliance issues, benefits, and payroll taxes. If those weren’t enough, don’t forget how the Equal Pay Act of 1963, Title VII of the Civil Rights Act of 1964, the Fair Labor Standards Act (sets federally mandated minimum wage), the Age Discrimination in Employment Act, the Americans with Disability Act, and the Immigration Reform and Control Act of 1986 will effect aspect of your new business.

Good luck! Kind of makes those “contract workers” look like an easier way to ease into growing your business.

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