Aug 28, 2023 | Hiring & Retention

How do I move from contractors to hiring full-time employees?

Q. Dear Zenagos,
My company does social media marketing for other companies. My clients think I have a really big team, but it’s actually just me and some contractors. I’m overwhelmed with work, and it’s starting to affect my health, but I’ve never had any real employees. How do I hire full-time employees?
–Eric

We work with quite a few entrepreneurs who are projecting the outward image of operating a big company without actually having any full-time employees. If you work efficiently and carry yourself very professionally, you can grow your business quite a bit by selling the work yourself and delivering most of the work yourself, with some support from contractors. However, as you are experiencing, this is not a sustainable business model. All it takes is one accident or illness, and you will see that every dollar you make depends on an hour that you work. And, you may simply burn out. If you want to build a sustainable business, you will need to start hiring some employees.

It Is Important to Prepare
In order to hire full-time employees, you need to have predictable revenue. Most full-time employees receive a salary, so you need to pay them every two weeks, whether or not you have steady work. In order to prepare for this transition, it is important that you build the weekly habit of projecting your cash at least three months in advance. It is also good to have some sources of cash in case your cash flow is uneven. For example, you can have savings, such as a cash buffer to cover six or more months of operating expenses. This will enable you to continue to pay your employees if you have a brief dry spell. Also, it is smart to get a credit line from your bank, in case you have a cash crunch in the event that a client doesn’t pay you on the exact day that you expect. You never want to lose sleep because you are afraid you won’t make your next payroll.

The Transition May Not Be Easy
Most small business owners will need to forego some revenue while they get their first employees in place. First, it will take time to train and supervise your new employees, which may mean turning down some work that you could otherwise have handled. Second, adding employees will bring some new expenses, such as payroll taxes and workman’s compensation insurance. In the short term, these expenses will reduce the percentage of revenue that you keep after expenses (your “margin”). In the long run, your employees should free you up to win more business and earn more revenue, but that won’t happen right away.

Not Everyone is a Good Manager
Managing people is a specialized skill, and not everyone develops it quickly. The capabilities that have made you successful at your job may not make you a good manager. Many small business owners discover that they need to hire a general manager to handle their employees. If you have no experience managing people, make sure that you have a business mentor in place before you start hiring. Look for someone who has broad business experience and can serve as a sounding board while you learn. You can get a free mentor from SCORE.

Managers Need to Have a Sense of Humor
It is the rare employee who takes the same kind of ownership and responsibility for the business as the owner does. Most employees are more focused on what they want and need than they are on what the business owner wants and needs. You can expect to feel some exasperation at your employee’s behavior and demands. Working with humans is always a challenge.

Making the transition from solopreneur to true business owner will stretch you in ways that you cannot anticipate. However, if you can work your way through the challenges, you will be rewarded with new joys, such as the possibility of taking an actual vacation.

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