Deciding whether or not to bring on your first full-time employee? Here's how to know if your business is ready and how to go about the hiring process.
If you’re ready to hire your first employee, chances are you’ve been thinking about it for a while. Your business is likely growing fast, which is exciting and exhausting at the same time. And burnout is a very real risk.
To sustain healthy growth, it only makes sense to bring in help. But, it’s a big step to trust someone else with your business (and livelihood) and give up some control of how things get done.
How do you know if the time is right? And once you’ve made this decision, how do you tackle the hiring process?
To help you along, here’s a short guide that covers those important details, including tips from business owners who’ve been in your shoes.
Table of Contents
How Do You Know When to Hire Your First Employee?
1. You Have the Work
One of the obvious signs it’s time to hire your first employee: You have so much work that you have to pass on new projects or turn down new clients.
Before you even consider writing a job posting, make sure you:
- Have a steady stream of work. If you operate a seasonal business or generally find you’re stuck in feast and famine cycles, it may be tempting to hire a new employee during busier periods. But when things suddenly slow down, you may be unable to afford the employee—and you’ll likely have to let them go. In these instances, it may be better to hire an independent contractor (more on this later).
- Are clear on what work you want to delegate. Even though work may be consistent, you may choose to keep certain types of work in-house. For example, suppose you’re a copywriter. In that case, you could outsource smaller and more manageable projects (like the odd blog post) while tackling larger and higher-value projects yourself.
2. You Have the Time
Hiring a new employee is a time commitment. You’ll need to dedicate time to get the employee up to speed on what needs to be done and how you want it done. If you don’t have the time or energy to delegate and train them properly, you may want to reconsider bringing on a new hire.
3. You Have the Money
Hiring employees is a financial investment. You need to consider the following hiring costs:
- Costs to advertise, conduct interviews, and do background checks
- Onboarding and training the new employee
- An employee’s wages, including all the benefits like worker’s compensation and a 401 (k) plan, or equivalent, depending on where your business is located
- Equipment needed to do the job (e.g., a computer)
- Unemployment and payroll taxes
The most important factor in whether you can cover all these costs is your cash flow: Is enough money flowing in compared to flowing out?
Again, it may be tempting to hire someone when work suddenly picks up, but if client work—and cash flow—isn’t steady, you may want to hold off. And, even if work seems stable and you hire, unforeseen events can make it more challenging to cover all your costs. In these instances, you can always turn to a small business loan. Just avoid doing it too often.
4. You Need the Expertise
As your business grows, you may choose to offer new services that require different skills you don’t have and don’t particularly want to learn from scratch. For example, suppose you’re a lawn care professional specializing in softscaping (planting horticultural elements like flowers). You may also decide to offer hardscaping (installing features meant to last, like fountains) as more and more clients ask for it.
In these circumstances, you’ll likely need to consider hiring someone to head up this division.
5. You’re Wearing Too Many Hats
It may be a cliché, but it’s true: You have to wear many hats when you own a business. While doing everything may be manageable at the start of your business, staying on top of it all becomes increasingly harder the longer you’re in business.
Before you know it, the odd email slips through the cracks, and you’re behind on tasks like expense tracking. Worse yet, you may drop the ball on 1 or 2 client projects.
You can quickly solve this problem by hiring an employee to take care of those lower-value tasks that don’t move the needle when it comes to making money. Examples include bookkeeping, project management, and administration.
You can then focus on higher-value tasks like marketing and building client relationships to get more work and referrals.
Tried-and-True Tips on Hiring Your First Employee
Who better to provide advice on growing a team than those who’ve been in that position themselves? Below is a roundup of tips from FreshBooks customers who are also small business owners based on their own experiences in hiring their first employees.
Tip #1: Understand Your Needs and Vision
“Have a clear understanding of your vision, be clear on the responsibilities and how things are being done, and set clear expectations. This will empower the people you hire by enabling them to do things right.”— Petros, Global Leadership Movement
Before you even start the hiring process, understand what you need from them so you can adequately communicate these expectations to your new hire. Start by looking at how your business operates and identify gaps or tasks you cannot give your undivided attention to.
For example, consider hiring an accountant or bookkeeper if you’re struggling to stay up to date on day-to-day financials. Or, if you don’t want to take care of administrative tasks like emails and calendar management, think about hiring a virtual assistant.
You might also want to determine if you have enough work to keep that employee busy. More than 20 hours is usually a good marker. If there’s only enough work for a couple of hours per week, you’re probably better off hiring an independent contractor. In fact, hiring a contractor may be more cost-effective as you don’t need to consider office space and employee benefits.
Keep in mind: Managing multiple independent contractors can take up more of your time, and they don’t offer the commitment and loyalty of a regular employee. So you’ll need to weigh the pros and cons to see what’s right for you.
Finally, be clear on the long-term vision for your business. Where do you see your business in 3 to 5 years? This provides a strategic path forward and helps guide you and your team. From there, you can define the role in detail by writing a clear job description.
Tip #2: Hire for Culture Add (Not Just Skills)
“Prioritize hiring to your culture.”— Scott, MCity Creative
Factors like skills and experience will undoubtedly play a role when hiring your first employee. However, hiring to your culture (how you typically do things) is arguably even more critical. A qualified candidate can have all the skills in the world, but if they’re not suitable for your culture (maybe they don’t share the same values as you?), odds are you won’t be able to change that.
To be clear, when we’re talking about hiring for culture, we’re talking about hiring for culture add and not a culture fit. For years, hiring for cultural fit—how an employee’s work style and values lined up with a company’s—was considered a best practice. The result? Homogenous businesses that followed a straight line and were easily edged out by competitors with fresher, more innovative, and adaptable approaches.
Culture add, however, is not as limiting. While it encourages hiring those who share a company’s values, the idea is to hire employees who can add to, inform, and improve the current culture. There’s an emphasis on hiring based on diversity and inclusion and hiring those with different ideas.
Tip #3: Find Someone Who Complements You
“Find someone that complements your skill set, not a carbon copy of yourself.”— Brent, Brandish Studio
Hiring someone who can complement your skills can help you expand into a new market by offering new services to your existing clients. Just think back to the example of the lawn care professional who wants to offer hardscaping services.
It’s also wise to avoid hiring someone too similar to you. As mentioned, someone who is different and brings different ideas can add to your culture. They can also help you solve problems creatively and boost your business’ bottom line.
For example, instead of hiring people with similar interests to you, hire employees with different hobbies. Or instead of hiring someone who would fit right in with other employees and processes, hire someone who brings a different approach or has knowledge about different systems that could improve your business.
Tip #4: Don’t Just Trust Your Gut—Do Background Checks
“Background check and references above everything.”— Sean, Sold Factor Group
Unfortunately, your gut can be wrong: The person you plan to hire may not be the perfect candidate they say they are. So be sure to check their references and do a thorough background check.
You’ll conduct a background check to keep your business and customers safe. It involves you checking if a potential hire has a criminal record. The legal requirements around background checks vary by state, so do your due diligence and consult a legal professional before doing one.
You’ll also want to check an employee’s references to confirm they’re a suitable candidate. Contacting a previous employer will allow you to review their previous job performance, character traits, and how easy they are to work with.
Tip #5: Go Slow—Don’t Rush the Process
“Start slowly with an intern or a contractor so that you don’t have to make drastic changes to your administration or workflows as you begin to expand.”— Elyssa, Firm Forward
As Elyssa points out, many small business owners get bogged down by the red tape around hiring their first employee. While there are specific considerations you cannot ignore, if you know you need an employee to help but are struggling to pull the trigger, start slow and test the waters.
Start with that intern or freelancer who can work with you on specific projects to ease the workload. Then, as you feel more comfortable, bring on someone more permanently.
Checklist: 11 Steps to Follow When Hiring Your First Employee
Assuming you weighed the pros and cons of hiring your first employee vs. a freelancer (read more about that here) and were clear on what you needed, it’s time to hire your first employee.
Below is a step-by-step breakdown of how to do that. Remember that your exact process may differ over time, especially as more new employees join your team, but this is a solid template to get you started.
1. Clearly Define the Role and Salary Range
- Defining the role will help attract suitable candidates for the job
- Be clear on the skills, qualities, and values you want from your candidate
- Do your research to see how other small businesses write their job descriptions—and look for any additional skills and requirements you may have missed
- Determine suitable compensation based on industry averages
2. Write and Share the Job Description
- A job description tells candidates what the role is about and sets expectations
- Include an overview of your business, a high-level summary of the role, an accurate job title, skills, duties, compensation, and an employee benefits package
- Post the job description on social media (e.g., LinkedIn) and use career websites (e.g., ZipRecruiter)
3. Review Applications
- Narrow down your candidate base by first discarding those who are clearly not a fit. Maybe their skills don’t match, or their resume is riddled with mistakes.
- Then, dive deeper to create a “top candidate” list. Do they have the skills? What is their past experience?
- Send a short email to successful and unsuccessful candidates.
4. Interview Chosen Candidates
- You can interview in person, over the phone, or via video call.
- The interview process is an opportunity to dive deeper. Ask specific questions to learn more about the candidate. Examples include:
- Tell me about yourself.
- What are your values?
- Why did you apply for this role?
- Why are you the ideal candidate?
5. Check References and Do a Background Check
- References allow you to confirm that the candidate can perform as indicated on the resume and gather extra insights on the candidate from someone else
- A background check is essential to identify candidates with criminal records
6. Choose a Candidate and Make an Offer
- If you’re torn between 2 candidates, consider conducting another interview. To help you choose, decide what factor is most important to you and who possesses it. Maybe 1 candidate clearly has values that better align with your business.
- Make an offer by considering the whole package (salary, benefits, profit share, etc.).
- Be open to negotiation and arrange another call to chat over the offer’s details.
7. Onboard the Candidate
- A decent onboarding process makes candidates feel welcome and sets them up for success on their first day
- Send an introductory email and a welcome package if you have one
- Schedule a kick-off meeting and let the person know you’re available if they have any questions
- Add employees to internal systems and provide them with login details
8. Set up Internal Systems
- You’ll need a payroll system to pay your employee and take care of payroll taxes, whether you’re doing it yourself, outsourcing to an accountant, or using a payroll software service.
- It’s also advisable to set up accounting software to record, track, and manage all your finances and taxes. The right software will let you give an accountant or employee access to manage certain key areas of the business.
9. Get Worker’s Compensation Insurance or Equivalent
- Worker’s compensation is mandatory in the U.S.
- Requirements vary by state, so familiarize yourself with the details in your state
10. Get Your Employer Identification Number (EIN)
- All businesses with employees need an employer identification number.
- Your EIN is a unique 9-digit number the IRS requires you to have for tax reasons.
- You may have one already if you’re a corporation. If not, apply online.
11. Complete New Hire Paperwork
- The following forms are legally non-negotiable:
- Form I-9, Employment Eligibility Verification: A form that confirms your new hire can legally work in the U.S.
- Form W-4: A tax form that records how much federal income tax the employee will withhold.
- Form W-2: You must complete this form by inputting an employee’s name and Social Security number (SSN).
- State Tax Withholding Forms: In addition to a Federal W-4, you may also need to complete a state W-4 (varies by state). Check your state government website for more information.
- State New Hire Reporting Forms: You need to report new hires to your state to comply with the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA). Read the State New Hire Reporting Guide to learn more.
- Just because the previous forms are all you’re legally required to collect doesn’t mean they’re the only forms you need. Other job- or payroll system-related documents to consider include:
- Emergency contact information documents, so you know who to contact during an emergency
- Benefits forms for each insurance provider, like health insurance and retirement policy forms
- Employee handbook papers a new hire should sign to acknowledge your policies and procedures
- Policy forms new hires should sign if you don’t have an employee handbook
- Direct deposit form if you pay employees via direct deposit
For a comprehensive list of of paperwork required for a new employee hire, check out: New Hire Paperwork Checklist for Your U.S. Small Business
Start Hiring Your First Employee Today!
Even though you’re growing and know you need an employee, pulling the trigger can be hard. You need to decide if the timing is right and tackle what can feel like an intimidating hiring process.
But the decision to hire and the process of finding the right employee doesn’t have to be challenging—you just need a little help. To decide if the timing is right, consider factors like whether you have the work, time, and money to do so.
The best part? Once you’ve gone through this hiring process, you can simply follow it the next time you need to hire someone else to build your winning team.
If you need more help growing your team, grab this eBook: Ready, Aim, Hire: How to Build a Winning Team for Your Growing Business.