When to hire your first employee

July 9, 2008: 9:25 AM ET

A one-man business asks, when's it the right time to get extra help?

Matthew, Clearwater, Fla.
I am a new electrical contractor whose business is starting to grow. I will be turning down work soon if the growth keeps up, but that's not guaranteed. How do I determine if it is time to hire some help?

By Malika Zouhali-Worrall, Fortune Small Business staff writer
Dear Matthew: Before you think about whether it's time, you should consider whether or not you really want to be an employer, says Becky Strickland, CEO of Colorado Springs-based Human Resource Matters.

"Think about long-term growth, and where you should be. Do you want to be managing other people?" she asks. "What is your vision? To be a larger business, or remain a sole proprietor and give offshoot work to other people?"

There is more than one way to run a business. For example, should you decide to farm out your extra work, it should be easy to find subcontractors for whatever needs to be done. You can research local electrical contractors at your Chamber of Commerce, union hall or trade association. If you have a particular area of expertise, you could even develop partnerships in which other contractors will also refer work to you. When choosing other contractors to work with, remember to ask to speak to some of their previous customers – you don't want to refer customers to someone who won't do a good job. Professional social networking websites such as LinkedIn can also be a source of information on workers available in your area.

Making projections for that first hire

If bringing an employee on board is your preference, Strickland recommends that you project what you'll be doing in the next month, three months and six months, based on the business that's coming in already.

Next assess which jobs – things you are doing now – it would make sense to hire for: accounting, administration, estimating, storage and warehousing are just a few of the jobs you may want to give away so as to concentrate on what you do best.

You also have to figure how to afford a payroll. "Then work out how much time you are putting into other tasks, " and calculate what you can put into new business generation if you are freed up, she says. Based on how much the deficit is each month, you can work out how many people you require to fill those hours, and whether you can afford it.

Another alternative to making a full-time hire is to bring in contract workers on a project basis – you'll need to know when the workload demands it. Or, as Jo Prabhu founder of Long Beach, Calif. staffing firm International Service Group suggests, you can hire someone on an hourly basis as part of a "contract to hire." That way you can assess his or her skills and whether you're ready to hire someone full-time.

"Make it clear to the potential employee, so that they know how long they have to prove themselves," Prabhu says, recommending three to six months as a good trial period. "Then you can set a date when you will sit down with them to determine whether or not you want to hire them."

Give us your advice: Check out recent "Ask & Answer"questions.

Related links:

The art of the hire: Good employees are hard to find, but this roadmap can help.

Building a winning team

Building a loyal workforce

Prepare to hire your first employee

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