Small Business Tips: Hiring Your First Employee

For a small business owner, hiring your first employee is a significant milestone: It symbolizes a transition from a solo operation to a growing business and marks the beginning of a new business development phase. This decision also reflects confidence in your business’s stability and long-term potential.

In this guide, you’ll learn the signs that it’s time to hire, special considerations, and practical tips for hiring your first employee.

How does hiring your first employee change your business?

While hiring your first employee brings numerous benefits – including increased productivity and new skill sets – it also means navigating a range of new responsibilities. Before you hire a permanent employee, be sure that this is the right solution at the right time.

For example, a physical retail store may need someone in-person, but a graphic-design firm might not. Freelancers, seasonal staff, temporary help through an agency, and outsourcing work to a third party can be great strategies to cover your needs that may not require a permanent hire.

5 signs that it’s time to hire your first employee

For many small businesses that launch with the owner as the sole employee, there are clear signs that it may be time to bring on additional team members. These include:

1. An overwhelming workload: If you’re missing deadlines, rushing work, and have a general sense of stress and fatigue with too much work and not enough time, it might be time to hire help.
   
2. Consistent revenue growth: Your business’s revenue is growing and hiring fits within your plans. If the financials line up and you can afford to hire, that’s a great sign.
   
3. Opportunities to grow: If you see potential opportunities that you can’t pursue due to time constraints, hiring can give you the capacity to leverage new opportunities.

4. Decline in customer service: If customer service is suffering because you’re a one-person show and can’t keep up with demand, bringing on an employee can help.

5. Skills gap: If you lack certain skills that are essential for your business plan, bringing on a new employee who fills skill gaps can enhance operations.

Key considerations before hiring your first employee

Growing your team can have tremendous positive benefits, but managing a staff presents a range of challenges. Before you make an offer, or even begin the hiring process, consider:

• Your financial readiness: Ensure that your business has a stable cash flow to afford an employee’s salary, benefits, and any associated costs like taxes and insurance. If your plans and projections demonstrate that a new hire will eventually lead to substantial increases in revenue, then securing a working capital loan now can position your business for future success.
  
• Legal requirements: Before you make your first hire, consult with your attorney and accountant to ensure you understand the legal and compliance issues. Review federal, state, and local employment laws, including wage requirements, working hours, and employee rights. For example, you may be operating using your social security number, but when you bring on employees, you’ll need an employee identification number (EIN) from the IRS.
  
• Payroll requirements: If you choose to handle payroll and related tasks yourself, research whether your existing bookkeeping software can streamline the process. If not, talk to your accountant about transitioning to one that will accommodate your growing business. Also, explore using a third-party human resources and payroll service that’s focused on small businesses.
  
• Employee benefits: Decide on the benefits you will offer, like health insurance, paid time off, and retirement plans. Offering competitive benefits will help you attract and retain quality employees.

• Job-role definition: Define the role that you’re creating, including responsibilities, required skills, and qualifications. This will help you attract the right candidates and set clear expectations. Craft a detailed job description and use it as a blueprint for your search.

10 tips for hiring your first employee

1. Think long-term about the role: When hiring your first employee, it’s important to think beyond immediate tasks – consider how this new position can develop and contribute to your long-term goals. For example, if you’re hiring for a customer service role, think about how the role could eventually support customer-retention strategies or train future hires. Anticipating a long-term future can help you find candidates with the potential to grow with your business.

2. Take your time: Rushing the hiring process can lead to mistakes that waste your time and resources. Take the necessary time to clearly define the role, outline the specific tasks, and determine the type of person who would be the best fit. In addition, ensure you have systems in place for compliance and record-keeping.
   
3. Create an employee handbook: Since your first hire likely won’t be your last, develop a handbook that outlines business policies, procedures, and expectations to give clarity and consistency for new hires. This is also a good area where you could work with an outside HR consultant for help.

4. Advertise effectively: Post your job on relevant platforms such as job boards, social media, and local newspapers. Leverage your network and consider reaching out to local business organizations or colleges.
   
5. Conduct thorough interviews and reference checks: You should prepare for and conduct structured interviews to assess candidates consistently. Ask questions that evaluate skills and cultural fit, and make sure you’re asking the same questions to each candidate. Be sure to verify the candidate’s background by checking references to gain valuable insights into past performance and reliability.

6. Consider an aptitude test: An aptitude test is a great tool when you’re hiring for specific skills. For example, if you need someone for outside-sales responsibilities, in addition to providing samples of past work, create a scenario and have them write an appropriate piece – like a new client pitch – in-person during the interview process.
   
7. Consider a trial period: Even simply inviting the candidate to spend a day at your business can give you valuable insights into their work habits. This also gives the candidate a realistic preview of the job and ensure that they’re comfortable with the role, increasing the likelihood of a successful match.
   
8. Onboard and train effectively: Develop a comprehensive onboarding and training plan to help the new hire integrate smoothly into your business. Provide them with the necessary tools, resources, and support to succeed.
   
9. Create a positive work environment: Foster a supportive and inclusive culture that encourages collaboration and innovation from the start. Even if your team has grown from only-you to a team of two, open lines of communication and regular feedback can help the new employee feel valued and engaged.
   
10. Define success: Set clear performance metrics and conduct regular reviews so you can give feedback and recognize achievements. In addition, try to identify common pitfalls and challenges that the new hire might face and explain the consequences of not meeting performance metrics. When you define the demands of the job, you’ll have a framework for constructive feedback and improvement.

Hiring your first employee is a milestone achievement and Pursuit can help

Most small businesses can only grow so much as single-person operations and bringing on a new employee can have significant positive impacts. It can also be one of the most challenging and consequential moves you’ll make, so be sure you’re prepared by implementing these tips.

And if you need working capital to support your hiring and other business goals, take a look at Pursuit. We have loan options and a line of credit that for businesses throughout Connecticut, New Jersey, New York, Illinois, Nevada, Pennsylvania, and Washington – if your business is located in our service area, contact us to learn more.