Hiring employees is one of those big milestones in the life of your fledgling business. If your business is reach a point where you can’t handle it all alone, congratulations! But sometimes the temptation is to hire employees in order to grow the business.
Brad Feld, who started his own business about 20 years ago, tells how he nearly killed the business by Hiring Too Early. He started out by leasing a 1,600 sq. ft. space and hiring 6 people. They “had some business…but not much. I think we broke even for a month or two but then lost $10,000 in August when we had an office full of people but no business. Ever the optimistic entrepreneurs, we didn´t panic. We figured we´d find some business somewhere. We lost $5,000 or so the next month…” and they kept on losing money. When they finally realized they couldn’t go on like that, they fired everyone, got out of their lease and moved into spare bedrooms. It was another year before they hired another employee, but by that time they were netting $10,000 monthly after their own salaries.
You may need more people to do what you’re doing, or you need someone who can do certain things better than you. Many new entrepreneurs, for example, need help in the areas of sales or accounting. But do you need to put someone on the payroll to help your business grow? Maybe not for a while. Here are some ways to augment your human resources without hiring too early:
* Use a consultant for a critical project that you know needs to be done, but you don’t have time to do.
* Form an alliance with another business that can handle part of what needs to be done — a warehouse, for instance, who can store and ship products for you.
* Hire a part-timer to ease the load, but without the expense of a full salary.
And don’t forget to keep operating expenses to a minimum while you build up to a cash flow that will allow for employee salaries.