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7 Vital Questions to Ask When Hiring Your First Employee, Straight From Entrepreneurs

Aja McClanahan

Contributor at Fundera
Aja McClanahan is a financial writer who blogs regularly at www.principlesofincrease.com and also writes for other online publications covering personal finance, entrepreneurship, travel and general lifestyle topics.

As a soon-to-be-former solopreneur, you have every right to be nervous (read: terrified) hiring your first employee. After all, this business—your business—is everything to you, and bringing on another person not only requires precious time, money, and energy … but how do you know if this person will care as much as you do?

It’s risky. Of course. There’s no other way to put it, and we totally get it.

But think about the upsides, which is why you’re doing this in the first place. Greater revenue potential, more time with your family, or even gaining efficiencies in places where you aren’t especially strong. There are so many more. That’s only a fraction of the reasons why hiring your first employee can be a fantastic idea, and a weight off your shoulders. And you should feel great that you’re even successful enough to hire an employee!

Now that you know you’re in a position to hire, how do you actually know if you’re doing it right? Although experience is a great teacher, it also helps to have a foundational understanding of what it takes to hire, train, and manage an employee before you make the move.

These seven entrepreneurs across various industries and niches have great advice regarding the necessary questions you should ask when hiring your first employee:

1. Does This Person Have a Direct Impact on Revenue?

Mitchell Harper sold his first company when he was only 22. He’s currently the founder and CEO of seven tech companies, and also advises a number of other startup CEOs and boards.

When it’s time to hire your first employee, Harper says, you need to look at whether the candidate you’re considering can help you grow your bottom line—especially for cash-strapped startups: “If they have a direct impact on revenue hire them. If they don’t, don’t hire them!”

In this critical stage of growth, it’s important that any employee, especially your first, have the ability to add revenue to your business. If you can’t make the direct connection between revenue and their proposed job duties, it’s best to fill another position or create a plan for the position that will help with revenue growth.

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2. Are You Willing to Raise Prices?

Mike Campion, who hosts the podcast Grow My Cleaning Company, teaches small entrepreneurs in the cleaning business how to launch and scale their operations.

He says that many small business owners never make their first hire because their prices are too low to support another worker while also leaving enough room in the budget for owner’s pay and company needs. In this scenario, the answer almost always lies in raising prices.

Especially with agency models, raising your prices works because you’re responsible for booking business for a set price and will use a subcontractor to fulfill the demand. So, if your profit margins feel too low to hire someone, consider raising prices, even if it’s a small amount. Campion advises entrepreneurs afraid of raising prices, “Don’t confuse your pricing with loyalty or morality.”

He says that even a 10% or 20% price adjustment can make the numbers work so you can hire someone else and maintain enough profit for your company and your own take-home pay.

3. Does This Person Have a Complementary Talent?

Patrick Betdavid, CEO of financial services firm PHP Agency, recommends that business owners hire someone who is naturally gifted in areas they lack. So, while you may be especially talented in sales and marketing, your first hire might be someone who can develop products that you can effectively market to the masses.

Betdavid says you should take out a piece of paper and write the answer to the question, “What is my strength?” Then you need to follow up with the answer to this question, “What are the opposing strengths that I need to make my company successful?”

Once you answer these questions, you will be able to hire the person you need most. Hiring someone who possesses a skill set that you lack can really help you grow your business in ways you quite literally couldn’t before.

4. Have You Documented the Role?

Jim Wang, founder of personal finance site Wallet Hacks, says that business owners need to ask themselves if there’s sufficient documentation for the role that they’re hiring for.

He says, “A lot of entrepreneurs seem to know what they do fairly well but rarely document it. They just ‘know’ it.” He goes on to explain, “When you bring someone new, there may be certain things you do that are part of a job that you don’t even realize it.”

That’s why you should have some documentation in place around systems that not only apply to your daily business activities, but also to your potential employee’s activities.

This documentation doesn’t have to be set in stone. It can change as you refine your processes and workflows, but something should exist well before you hire someone. This way, you’ll know exactly what they should be doing to help your business.

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5. Have You Defined Your “Breaking Point”?

Nicki Morris is a startup business coach who also helps business owners hire the right person. Her company, Ignite Your Passion, was born out of a common need she saw among entrepreneurs. Working in a small business herself, she knew that many needed help learning to hire employees effectively and at the right time.  

She recommends determining ahead of time the point at which you’ll need to hire someone. It can be an amount of revenue, number of orders a month, or a “breaking point,” like when you consistently find yourself working more than 10 hours each day.

Morris suggests business owners set this standard well before the time comes to hire so that you can sufficiently plan for the hiring process. After all, hiring the right person is a long process—and you don’t want to scramble and end up with the wrong employee, especially as your first.

She gives an example of the timeline a business owner should consider: “By the time you advertise the position, get résumés, interview, and train someone, it can take a long time.”  

6. Do You Understand Local, State, and Federal Requirements for Hiring?

Bringing an employee on board isn’t quite easy as inviting them to your office to start work. Oh, if only! Josh Hartwell, CEO of Mobile Deluxe, a software firm that develops mobile gaming apps, stresses, “Go to your state’s website on hiring and find out all the requirements.”

Understanding proper hiring requirements includes correctly classifying and paying employees. You need to know whether your new hire will be a 1099 or W-2 employee and if they’ll be hourly or salaried. Oh, and then there are benefits, too. How will those be  structured?

Making a mistake with these designations could cause big problems down the line, so be sure to connect with a CPA or labor attorney who can point you in the right direction.

“If you make a mistake [with hiring practices], don’t stress about it,” Hartwell says. “But try to get as much information as you can to get hiring requirements out of the way.”

7. Do You Know How to Manage an Employee?

This seems like a simple question, but it might be the most important and surprisingly complex one on the list. Once your business grows to include employees, you need to have systems in place to manage and lead them. You need to have guidelines to help you evaluate how the engagement is going. That’s doubly important if your employees are remote and you won’t be there to watch them.

Jonathan Pototschnik of Lawn Care Millionaire and Service Autopilot is a fan of the SCRUM framework to help him gauge employees’ productivity—especially those who work remotely. His daily SCRUM routine includes having employees give him updates, each day, that answer the following questions:

  1. What did I get done today?
  2. What do I need help with?
  3. What do I plan to do tomorrow?

He says, “With this method, you can have some level of accountability with this individual along with some means to measure them. [With daily updates] you’ll get some feeling that you know what’s going on.”

Managing an employee does take time away from your day, it’s true—so make sure you have a plan for gauging an employee’s progress (or lack thereof) along with productivity. You want to know if the objectives you envisioned for the role are being met.

Above All, Be Prepared!

You can be nervous, but don’t be afraid! There’s a method to the madness of making your first hire, especially if you’re prepared.

Take your time, put systems in place as best you can. When you’ve done what you can in advance, pull the trigger, and get ready for a huge learning experience. It’s going to be good—remember, you’re doing this for a reason! (And if it doesn’t work out, it’s not permanent. Don’t worry.)

You might not do everything correctly the first time, sure. But learn as you go, just like every other business person, and you’ll be passing on your own wisdom soon. Happy hiring!

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Aja McClanahan

Contributor at Fundera
Aja McClanahan is a financial writer who blogs regularly at www.principlesofincrease.com and also writes for other online publications covering personal finance, entrepreneurship, travel and general lifestyle topics.

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