Expert tips for hiring your first employee

are you looking to bring on an employee for the first time maybe it's just been you as a solo entrepreneur just running your business or maybe you in a partner and you've decided that it's time to start hiring employees but it might feel a little bit daunting you might not know how much you can afford to pay somebody you might not know how much savings you need to have in the bank you might not even know what role you need to hire first and you might just be kind of confused about the whole process and what do you really need to do in order to bring on your first employe well if that is you I've got you that's what this video is about and I am excited to talk to you about it today because it's something that I'm pretty passionate about about small business owners bringing on the help that they need so that they can grow and scale their businesses so if you don't know me my name is Hannah smolinsky I am a small business CFO and I run a virtual CFO agency and this specific topic is something that we have talked to all of our business owners with how to bring on employees and how to do it in a financially sustainable way how to be profitable while growing your employee base all of this information that I'm bringing you today really comes from practical application and actually helping clients do this okay if that sounds good please stay for this video I've got lots of tips for you and then if you aren't already subscribed to the channel I would love to have you here we are all about helping small businesses grow in that profitable and financially sustainable way so if that sounds good we'd love to have you here since we've done this with so many clients I wanted to share some of the things that we've found as businesses are starting to hire employees there's a lot of fear around hiring employees for different reasons and you know people are worried about bringing somebody on then maybe not being able to afford them or you know bringing somebody on and then not really sure like what exactly to do in order for those people to become like good contributing employees there's lots of different things that can kind of stop people or maybe just make them very hesitant from hiring employees so I want to go through some steps for you so the first thing that I want to help you guys with is that you really need to think about what role it is that will be the best first hire and this really comes from you analyzing everything that you're doing and I think that this video is going to be mostly applicable to people who are solopreneurs who are probably doing some kind of service business now this could definitely work as well for a product business you know I'm thinking about like all people who maybe are making like handycrafts and they are maybe running like a booth and you know maybe they're doing like Sunday fairs things like that this is also you know the solo bookkeeper or maybe the graphic designer or maybe an architect who's just by you know herself selling things and then also doing all the work you know there's lots and lots and lots of businesses in this country I I feel like it's definitely in the millions of businesses that are run like that but they're starting to get to the place of hey there's only so much I can do I need to bring on that employee and the first thing that you need to think about is what is that role that will be the most helpful that's the first thing now a lot of times you're going to know exactly what that role is right away hey it'd be so helpful for me to just have somebody who could take on X task and if that was off my plate then I could do more of something else you know that might be really really clear for you but if it's not clear I think that what you need to do is sit down and write down literally every single thing you do in your business okay everything like even just just keep a list on your desk and as you're working throughout any kind of time or wherever you work maybe you work in a workshop or something write down everything that you do you take orders you fulfill product you do your SEO for your website you design your website you do all of your invoicing you do all these things you know write everything down and then when you have that list go through that list and circle the things that you really don't like doing or Circle the things that really take up a lot of time or Circle the things that are really you're not very good at and start to you know see what are the things you're not very good at you really hate to do and take up a lot of time those are going to be some of the first things that you're going to try to Outsource okay so as you identify your list that will help you decide what type of role you need do you need somebody who's maybe a billing specialist maybe it's maybe you run a therapy practice and you have to build insurance and billing insurance takes up a lot of your time then maybe one of your first tasks is actually hiring a biller to be able to do that for you maybe it's not even a full-time role maybe it's a very parttime role but that might make a lot of sense for you if it makes more sense for you to be doing something else with your time okay so think through that and I think having that list of really like what are you not good at what doesn't make sense for you to be doing what do you not even like doing somebody else likes doing that task and they can be hired to do it okay so identify that role is Step number one step number two is going to be to think about how that role can create operational efficiency and revenue you want the role to be able to help you be more efficient as an overall business and you also hopefully that means that will be generating more Revenue now if you hire let's say an admin assistant they might help the operational efficiency for you to be able to do other things which then in turn May create more Revenue so some of this will be maybe not so direct as directly creating new Revenue but it might be sort of an indirect way to therefore allow you to create more Revenue so I'm going to use me as an example here when I was a solo CFO doing CFO work I needed um some help with just some really basic Financial tasks some basic bookkeeping and some things that my clients just needed to have done for them and it didn't make sense for me to be doing that my time was worth more by doing a more higher higher level strategic things and so by me taking 8 to 10 hours a week to do these kind of lower level Financial tasks it really didn't make sense for me to do that so that was one of the first things I outsourced I found somebody who could take on this more of like tedious lower level accounting work took that off my plate it was much cheaper for me to pay somebody else to do it than for me to do it if I was really valuing my time correctly and then I was able to go out and sell add work that I could do at my higher value okay so that was a way that somebody else took off some of my work off my plate and then it allowed me to create more Revenue that was way more than what I was paying this person to do that task okay so think about that like is this person what is this role is it going to create extra extra revenue for us and I want you to think about that lowest hanging fruit of where is the next best Revenue dollar some people might bring in maybe like uh marketing person so that they can grow the business but marketing can take time for that level of work to actually create new Revenue so you have to keep that in mind okay so think about like what is the quickest way to additional Revenue how can you make that happen fast that's the best thing to do for this first hire now what I see often times these roles might be administrator or executive assistant and then they might be like what I did where they bring in kind of an entry level support for a professional so if you are a lawyer maybe that means bringing in a paralal type person or if you are a website designer maybe that means that you bring in somebody to help with Graphics you know there might be lots of different things that you can do but you know some something that you're doing can be potentially offloaded to somebody else at more entry level position okay also bringing in like an accounting support or something might also be something you can do there too now the next thing that I would like you to think about is to plan for how much this person is going to cost okay and when we think about how much this person is going going to cost we need to think about how much they're going to cost on a monthly and an annual basis okay that and we want to think about it monthly because we want to know what is that monthly cash flow need that we're going to need for that individual because sometimes I think business owners get a little bit wrapped up in oh my gosh I can't afford to hire a $50,000 salary person because I don't have $50,000 in the the bank and yes that would be nice to have $50,000 in the bank but you actually don't need that much money to to hire these people so what you need to know is like how much do I need right now because if I'm hiring somebody and I'm following steps one and steps two then I should be in a place where I'm hiring with the idea that they will be helping me generate more Revenue in some kind of way or they will be helping me increase that efficiency and we want to know how much that is on a monthly basis that we can for our cash flow okay so I'm going to give you guys a really simple rule and this is like super basic I do have a more complex way to calculate this but just for easy peasy starting point a number take the salary of what you want to pay somebody and even if that it could be a salary or it could be hourly rate times average hours that you want them to work times the weeks of the period that we're looking at either like if you're just looking at a month or if you're looking at the whole year and then you multiply that number times 1.1 which would be a 10% amount or 1.15 so 10 to 15% on top of their wages is what you should think about for taxes okay employment taxes now this is if you're offering no benefits we're not going to talk about benefits right now I do have a more complex hiring tool that has all of the things included where I it's an Excel spreadsheet and it shows it shows the salary can in the salary or the hourly rate I have both and then you can type in you know what the benefits look like if they're you know 3% IRA match or they are software subscriptions that you put in or the cost of their computer or travel benefit or health care or whatever those things are all of those things included can give you like a more robust number that's going to be much higher than just con you know considering the taxes but for your first hire you're probably not offering benefits let's be honest it's probably not happening very often that you're very first hire are going to be able to offer that full suite and I'm trying to get you to hire number one okay if you want to go and look for that worksheet I will link it below and it's definitely worthwhile if you are looking at trying to figure out what that full robust cost is but this simple simple calculation if for employee taxes is think it's going to be 10 to 15% over the wages that I'm paying the employee okay sometimes people like don't know how much employee taxes are and they just think wow that's too expensive I can't afford it but like you've got got to find out exactly what the number is and even if you plan for that high end of the range of 15% you're still it's it's something you can handle okay it's something you can plan for okay and think about that like if you're if you're paying for somebody and then you're paying them an extra 15% for taxes you know think about are they going to be able to help you generate more Revenue you can just test it okay and then I like having a range so that's why I say 10 to 15% so you can kind of say like okay uh on the low end it might be this on the high end it might be this and they can play around with different wages so if you think maybe I could hire somebody who's really great at $20 an hour maybe I could hire somebody really great at $25 an hour you know you can look to see what that range looks like too and then you can maybe plan in your cash flow forecast for that high end of the range and then if you find somebody great for a lower amount that's great you you know that you will definitely be covered okay okay so now that we understand how much it's going to cost you to hire somebody let's talk about how much you need to have saved in order to hire somebody so at the beginning I kind of mentioned and hey there have been people who' said yes you want to have all this money in the bank before you hire somebody and yeah okay sure ideally if you were hiring somebody for $50,000 you would definitely have $50,000 in the bank that would be great but how are we going to produce an extra $50,000 in the bank if we don't have employees to help us create more profit so you've got to start somewhere okay now I don't recommend you know having no savings I mean sometimes people will start their buiness business off with a business loan and they've got cash in the bank and then they're going to use that to help them hire employees sure okay that's a strategy I like to have some savings generated from profits from the business in the business so that you can use to fund your business that way I do like that I prefer it because then you're not paying interest expense for debt but Different Strokes for different folks okay like it's it's fine whatever you are comfortable with I'm fine with it but what I want you to think about is think about the type of person that you're hiring and how long it's going to take them to have that return on their paycheck okay so what I mean by that is let's say you are a therapy practice and you are private pay and so what that means is that when you sit down with a client they give you a credit card or maybe it's already on file your credit card is charged for that minute or that minute that the appointment is over appointment's over click the button credit card charged money gets deposited into the business's bank account 2 days later in that situation you are very cash positive like that employee is generating like a cash positive situation for you as a business owner so you actually get paid before you have to pay the employee in that situation you almost have to have no savings to hire an employee like that because they're going to be cash positive from you for you for day one especially if they're an experienced person they don't need any kind of training now and what you need to think about is do the people need training can they start generating Revenue right away how long is it going to take them to get their role to where it's actually going to alleviate you to do more work okay so like in my situation when I brought in that Financial person they were not in a situation where they were really taking work off my plate for a couple weeks because they needed to get trained up to figure out what to do I was spending time training them so I was actually working more for a little bit before they were actually being helpful so I needed about a month of wages saved up before they were actually helping me okay so that's something to think about if you have a really long training cycle and somebody you hire somebody but you don't even let them talk to a client or be in any kind of Revenue facing or Revenue generating role for 3 to 5 months then you might need to have 3 to five months of salary in the bank before you hire that person okay think about the role what really makes sense I don't like these hard and fast rules of like you have to have 6 months or you have to have 3 months or you have to have you know all of this because you need to think about what make sense for your business and for the role very specifically it could be different you could have some roles that you hire for in your business that you need to have three months of savings and then there could be other roles where one month would be just fine look at that and think how long is it going to take this person for them to really start helping me generate more Revenue in the business or how long is it going to um like are they going to be able to save me money right away you know those are some considerations too maybe you've been paying a contractor to do something but by bringing in an employee you're immediately saving money that's great I love it you've already been paying somebody so those are some things to think about when it comes to savings the next thing now that we know how much we're going to pay somebody and we know the savings that we have we want to put this into a cash flow forecast now I'm not going to show you guys how to do a cash flow forecast because I have an entire video of how to use a cash flow forecast so I just want to mention it and I will make sure to link that video up above but definitely forecast your cash so that you can see very clearly how long your savings is going to last you when you have that added expense of the new employee the next thing I want to point out is that you will want to post your job for a fair market wage okay do not try to get the cheapest person to do the job that will cost you more money in the end and we've already done the work of figuring out what role we need and how much we need to pay them or we've got a range of what we can afford and we know how that person is going to be contributing so you should be able to actually pay a little bit more than just kind of operating out of this fear mindset of you know oh no I can't afford it so I need to get the cheapest person possible this is where people start end up hiring you know family members to come in and do things or you know children come in and do things for them just to pay them lower wages and I have never seen it work out for somebody that getting the lowest wage worker is a good move in the end for their business business okay so post the job at a fair market wage and you know you have done your planning for it and just know I want to get somebody who is the best person I can find in the wage that I can afford okay but with doing all the planning it eliminate that fear mindset of just like oh no I can't afford it okay because we've done the work and you've put it into your cash flow forecast and you know what you can afford okay I think that that is good and we don't need to we don't know to need to scrape the bottom of the barrel for our companies we want to get really great people in our companies and we want them to be contributing members and be part of the team the next thing the next thing I want you to do is to get set up in your state to be an employer and actually get set up in whatever state your employee is in so say you're in Washington and you hire some money in Oregon you're actually going to need to get set up in Oregon so wherever the employee actually is so if you are hiring in state that makes it really easy you can go to your state employment there's lots of different names for these so it might be like Employment Security Department that's what it is here it can be Department of Labor you'll need to figure out exactly where to go to start to set up those accounts our friends over at Gusto actually have a great post that I will link below that has state by state what you need to do to get registered in every single state so it's a fantastic resource they do it for their clients but it is you don't have to be a client to use this list it's like a blog post kind of go and check out that in the description box below I'll make sure to link that because it's a fantastic resource you do need to get set up to get your registration numbers and your employee ID numbers you should already have a tax employer ID number which is your your tax identification number but if you don't have that you can get that from the IRS and then you can also um go to your States and get set up there so after you have that done then you will set up a payroll system and do not for any second think that you are going to do payroll on your own it doesn't make any sense you're bringing people on to take work off your plate don't put more work on your plate by trying to do payroll by yourself to save 50 bucks a month okay just do not do it I see people trying to do this and I'm like why though it just really doesn't make any sense these systems help so much they take care of all of the tax filings which can be a huge pain in the butt and they you know run payroll automatically in some cases you just have to put in hours if you have hourly employees like they make payroll so simple they'll let employ employes onboard themselves so you don't even have to get all that information from your employees and a lot of these payroll systems also have like onboarding systems and things so like it makes so much sense to just use a payroll system we mentioned Gusto a little bit earlier Gusto is a fantastic small business resource for payroll and they're really great for small teams and it's a good place to get started for your first kind of jump into being a payroll or needing to provide payroll and needing to play pay employees so we'll put the link for Gusto here I think they always like give a gift card if you do a sign up for it so you can check out and see what their promotions are our promotion isn't any better than what you can find on Gusto's website so I mean you can sign up through us it does help support the channel but you can also go and see if you can find any better deal anywhere else and see if you know get the best deal you can we're always like we're always about that here we also have some relationships with just works was which is a peo a professional employer organization that's really good if you're hiring in multiple States and we have a video about peos and I'll make sure to link that here as well peos are a great option just works is who we use as our peo and so that's also a one that you can go and check out and then we also have a deal with ADP as well so we'll link all of that in the description box below so shop around see what makes sense for you do a demo check it out and see what is the right choice if you want to get into a payroll system okay all right you guys that was a lot of advice but following these steps you will feel a lot more confident f figuring out what you need to do to hire that first person in your business and you will come back and you will thank me because great employees and and doing the hiring process right really vetting people bringing in people that are aligned with your vision and your values make sure that you screen people I mean there's there's lots of hiring tips make sure that you go and you know do your best due diligence to make sure somebody is who they say they are I can't guarantee that you're following all those you know onboarding steps but I think you will not be upset if you hire a good employee to come in and help you with your business and they will be able to create more value for you so that you can create more Revenue in the business and you can generate more profit in your business by having employees okay so I hope all these tips are helpful if you have any other questions please put them in the comment section below I will do my best to answer as many of them as I can and it might also be able to trigger another video if you guys have a lot of questions and I can explain some other things about bringing on new team members and how to plan for that okay well thank you so much for being here I really appreciate you guys taking the time and I will see you next week all right bye [Music] everybody

Channel: Clara CFO Group

Views: 964

Keywords: hiring your first employee as an entrepreneur, how to hire your first employee, hiring employees, hire an employee, can i afford to hire, hiring an employee, how to hire employees, planning for hiring, cost of hiring, afford to hire, hiring plan, small business hiring, small business financial plan, Expert tips for hiring your first employee, gusto hiring, gusto payroll setup, ADP payroll, adp payroll setup, hiring first employee startup, steps to hiring first employee

Id: z2vCPSEN75k

Length: 22min 18sec (1338 seconds)

Published: Fri Feb 02 2024