The leap from sole-trader to small business: Hiring your first employee
Research shows that leaping from a sole-trader to a micro business with employees increases profit, improves work-life balance, and frees up your time to grow the business.
According to the Australian Bureau of Statistics, 61% of businesses have zero employees. As a recruitment specialist, I’ve seen many sole traders who have done a brilliant job growing their businesses in their first year or two, before becoming overburdened with stretching deadlines, backlogs and customer waiting lists.
These are all signs it’s time to recruit, doing yourself — and your business — a huge favour.
Both sales and profits increase in the immediate aftermath of a sole traders first hire. This is proven overwhelmingly true across global research. The quick win is stress relief, and from there, the benefits are measurable across sales.
Still, there’s hesitation: who should you hire and where do you find them?
For many solo operators, you are your business. Simply put, your clients and customers are coming to you because you’re you. What you need to do is hire a support person who brings their skills and strengths to your business, essentially freeing you up to keep being you.
There are a few things to watch out for when making that first step forward beyond being a sole trader.
Unrealistic salary and role expectations
Most business owners will have a rough idea of what their first hire budget looks like, but there are several other things to consider before finalising the job offer and salary.
You need to be able to meet the commitment of paying the new staff member and ensuring their salary is on or above the award that is attached to their role. You will need to consider sick leave, annual leave, superannuation and other costs, such as legal (employment contracts), insurance and general expenditure related to setting them up to work in your business on day one.
In addition to ensuring you have a budget for the above, you also need to be very careful around what duties are expected of your new hire.
Often, employers make the mistake of employing at the lowest award rate, expecting the employee to complete as many duties as possible in the business.
Overworking and underpaying an employee makes it difficult to measure performance. Without clearly defined roles and responsibilities, your second hire in the business will struggle to play their part in the company too.
Performance aside, the last thing you want in your business is someone being underpaid.
Avoid family and friends as a first option
In my experience, many sole traders turn to family and friends as a first option when hiring. But beware, this decision can be fraught with pitfalls.
While I have an excellent working relationship with my co-founder husband Pete, when it comes to family and friends, the consensus is it’s best to look outside of your network when making the first hire.
Friends often expect special treatment, including extra freedom, and sometimes will ignore your professional boundaries.
The same rule applies to friends of employees. Top 10 Forbes entrepreneur Lauren Tickner learned that lesson the hard way. After employing a friend of an employee, Tickner’s new hire permanently deleted over 100 podcast episodes, including interviews with Grant Cardone, Ed Mylett, and the founder of Square.
Not having enough time to handle the recruiting process
As the business owner, you can’t expect your employee to work as hard as you. Your motivations will always be very different.
Advertising a position yourself can bring its own headaches as you grapple with wording, platforms and the inevitable deluge of applications, particularly in the COVID-ravaged jobs market.
According to the latest insights from jobadder.com, the average time to fill a permanent position in Australia is 28 days, which is not so surprising when you consider some employees need to give four weeks of notice to their current employers.
When you’re a solo operator, that’s a long time to be distracted from the main game, so you need to consider this. Are you able to find the time for this process on your own? If not, you should consider a recruiter.
Know who to employ in the first place
I always hire when quality slips in one area of a business, and you will usually know when this happens at yours.
Admitting you need help is the first step. Figuring out what you need help with, or the kind of skills you should be looking for in your first hire, follows soon after.
At this point, you will need to be able to answer these questions: are you hiring in line with what you truly need? And is what you need clear?
If you have no idea, start tracking your daily tasks. Record every single thing you do, and begin compiling a list of the activities or functions that can be offloaded to your first hire.
Nine times out of ten, most first hires are either an executive assistant, administrative assistant or clerk. This person takes on the more repetitive and administrational duties to give business owners more time to focus on income-producing areas within the business.
Interviews and references
When it comes to planning for interviews, it’s essential to have a structure in place for your conversation with the candidate to ensure you cover off all the relevant questions for the role.
If you are looking for examples of how to do this, you can find free templates for interview questions online, which can be tailored to meet the job description.
During the interview, it is a good idea to take some notes on each candidate, as they can all become a blur once you’ve spoken to a few — which brings me to my next point. After shortlisting your candidates, you will want to interview at least three to four, face-to-face, and make sure you complete reference checks too.
I have worked with clients that have not checked references or have trusted their recruiter to do a thorough job, causing serious issues in the business. Absolute horror stories come from being negligent in this area, including fake doctors being employed by government departments to treat real patients.
On a lighter note, getting to the point where you are ready to make your first hire is exciting. Building a business takes grit and determination, and very few people make it to this point, so be proud of your efforts.
My last piece of advice is to avoid the temptation to skip the necessary steps along the recruitment process. No short-cut is worth the cost of a bad hire.
