Growing your business: Taking on your first employee

However long you’ve been in business and however successful your firm is, there is always the opportunity to expand. In this series we are taking a look at how to grow your company, from taking on staff for the first time to broadening your product range and seeking out new markets and customers, both at home and abroad.

Making the transition from a one-man band to a company which employs staff is one of the biggest changes a business can make.

But if you are serious about growing your firm, it’s a step you will probably have to take at some point. So how do you decide when the time is right to take on your first employee – and how can you make sure your expansion is a success?

The bad news, according to Marco Soares, a business coach and mentor from Haywards Heath, West Sussex, is that many entrepreneurs fail when they try and grow their enterprise in this way.

“Take a hairdresser, for example,” he says. “They have been working as a hairdresser all day long. But if they want to take on staff, they need to increase their financial, sales and marketing, and management ability. That is a big change.”

It is vital to understand exactly why you want to bring in someone to help and what your goals are.

“You also need to be really confident in the numbers,” Soares adds. “Basically your firm needs extra sales to be able to afford new people.”

Work out your break-even point

Start by establishing how much in extra sales the new member of staff needs to bring in to justify being hired – or how much of the owner’s time can be freed up to generate extra revenue if the employee is taken on to deal with admin or operational matters.

“If you’re a hairdresser, you need to know how many clients your new employee has to see every day,” Soares says. “If you’re taking on someone in sales, you have to have a clear idea of how much they need to sell.”

Formulate a plan to drive sales

It is not enough to take someone on and simply expect sales to grow by themselves: it is vital to know in advance how your company is going to drive that extra revenue.

What marketing plans do you have? Do you already have clients who need extra work doing?

Bear in mind that one mistake many business owners make is waiting until it is too late to increase the size of their firms.

“They only do it when they are really busy and end up making a snap decision on recruitment which doesn’t work out,” adds Soares.

He says there is no hard and fast rule about when is the right time to take on the first employee, but he thinks that if your business is operating at about 60-75% of its full capacity and you have aspirations to grow, it is time to start looking for staff.

“Make sure you have sufficient cashflow to fund the new person’s salary for the first three to six months,” Soares says.

Get recruitment right

The next stage is finding the right employee: this means being clear about the role you are hiring for and what skills the successful applicant will have.

But finding someone with the right approach to work can be just as important.

“In a small business it may be the case that a new hire doesn’t quite have all the skills but if they have the right attitude this can make up for it,” Soares says.

Put your plan into action

Once you’ve found the right member of staff it is time to put them to work. But you need to have clear goals for them – for example monthly sales targets – as well as milestones during their probationary period.

“Make sure your goals are realistic and not too ambitious,” Soares adds. “But remember that if things are not working out, you will need to make a brave decision and let them go.”

You can dismiss an employee during or after any probationary period provided you act fairly – for example you are doing so for business reasons, and you observe any notice periods.

For more information on fair dismissals, see the government website here.

If, however, the new hire is a success you can start the process again with your next employee.

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