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So you’ve started your business and things are going great! Well, mostly great. You’re working too many hours every day, you might have a project or two running behind, and your spouse has to schedule date night on your calendar to make sure you have time together. But these are all good problems, right?
Inevitably, you’ll start asking yourself if it’s the right time to hire your first employee. After all, if you’re working 80 hours a week, you figure that you and another person could just work 40 hours each. Before you make that leap, here are five questions you’ll want to ask yourself:
1: Is there enough work for two of you?
Hire for a specific job, and ensure that you have enough for them to do every day. Start by making a list of recurring tasks that your employee will be expected to do, and tally how much time each task should take.
This probably means that you’ll be looking for someone on a part-time basis–and where being creative is going to pay off. Depending on what kind of work you’re doing, you might be able to hire a student with a flexible schedule, a family member who loves your business’s mission, or a neighbor that you trust. Work with them to determine their hours, their pay, and what you’ll expect them to accomplish. You may even decide to test the waters with a 2- or 4-week trial period.
2: Are you set up as a business?
Just as a marriage takes place before god and these witnesses, your business must be recognized by the IRS. This includes establishing a legal identity for your business, obtaining an Employer Identification Number (EIN), and setting up independent accounts for your business.
Using an interactive checklist like Nav’s BusinessLauncher can help guide you through the process, which includes the following resources:
- Discover your personal and business credit reports
- Establish a legal identity for your business
- Get an Employer Identification Number (EIN)
- Register your business with Dun & Bradstreet
- Establish a positive business credit history
- Get an accountant
- Establish a business plan
- Get a website for your business
- Get a business checking account
- Obtain business licenses & permits
Proceeding with your first employee without establishing your business is a recipe for disaster—so make sure you’re set up for success before proceeding.
3: Are you setting up your employee for success?
In the excellent article A Bootstrapper’s Formula For Hiring Your First Employee by Brian Casel, he tells the story of how his lack of preparedness for his first employee ended in failure. Thankfully, Brian outlined what he learned from the experience, and incorporated advice from Dan and Ian of Tropical MBA, including how to standardize work, document procedures, and how to plan their first week.
Simply put, you can’t expect to put off planning for your new hire. Investing the time beforehand will give you the best chance of success—for the both of you.
4: Can you pay them every week without fail?
Your business has been steadily growing for months–so much, in fact, that you aren’t able to take on every project that comes your way. But what if there’s a downturn in revenue? Would you need an MCA to pay for payroll? If you’re working with clients who provide you with a steady stream of income, you might be optimistic that the upward trend will continue. When possible, try to line up work for the upcoming months to ensure that every bill gets paid.
It’s time for the hardest question there is: if you come up short and there’s only money enough to pay one of you, who gets the check–and who goes hungry? If you’re unable or unwilling to pay your new hire first, you might want to reconsider hiring them at all.
5: Are your books ready for employees?
Here’s where the good old SBA comes in handy! Their guide to hiring your first employee is a great resource that every growing business owner should bookmark. Included in their list are little-known requirements, such as registering your new employee with your state’s reporting program, obtaining workers’ compensation insurance, and verifying their employment eligibility.
Bottom line: pretty much every detail of hiring your new employee must be documented, and you’re always better playing it safe. Online software exists for just about every aspect of small business ownership, so make the most of these resources to stay ahead of the pack.
It may seem like a daunting task at first, but if you’ve taken all this advice into consideration, you (and your first hire) will be set up for success!
Pro Small Business Accounting Software by Intuit
This article was originally written on February 1, 2017 and updated on July 2, 2020.
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