Ade in Business

As I mentioned in my last post, the business is growing and there are more things that I’d like to do without time to do them. I’ve been using a couple people part-time for a while now, but their time is limited since they each have full-time jobs and we’re somewhat limited on what tasks we can work on together because of it.

This has led me to think a lot in the past couple months about hiring my first full-time employee. Here are some of the questions I’ve tried to answer before deciding whether or not to take that step:

Do I want to grow?

My answer to this is not an immediate “yes”. There are a lot of things that I like about being a one-person business, and there are a lot of headaches that come with having even one employee. I’ve had a number of recent conversations about this with a web designer and consultant here in town, and it’s something that (at least for now) they’ve both answered “no” to. (You can read some of Ian’s answer here).

The alternative to not growing is of course to deliberately hinder growth by not accepting new clients and/or tabling new initiatives. There’s a lot of sense to that option, but I feel like that could be more detrimental in the long term — hindering growth could keep the business from being able to withstand troubled times, even though expanding too quickly could certainly cause problems of its own.

Do I want the additional expense?

From a financial standpoint, hiring an employee is a huge risk. Along with having to pay someone’s salary (every two weeks on schedule), I’ll have to pay benefits, buy them new equipment, and get a place for them to work. Roughly speaking, this means that my expenses are going to double. And if I can afford that, I naturally have to ask myself if I can just take that amount as additional income.

But really, the financial considerations are moot since if growth continues I’ll have more work than I can physically and mentally handle. It’s not an option for me to plan to work every night and weekend so that I can pocket the additional money.

Do I want to manage employees?

Something else to consider, which in some ways is more important than anything else, is whether or not I have an interest in managing employees. Skills that enable me to work well with customers and develop applications apply very little towards managing employees.

I know a lot of people who would feel completely out of their element if they had to write a review or talk to someone about poor performance. My worst managers have been those who didn’t like their jobs, and I wouldn’t consider hiring someone for a second if I felt like it would cause me to stop loving my job.

How many employees?

At Bottled Software, my first company, we started with five people and enough business to pay the salary of one. This is a gross over-simplification, but basically our thinking was that we couldn’t land the type of projects that paid five people unless we had that many on staff. The strategy failed since we essentially increased staff before the business grew.

I’ve learned my lesson, and don’t plan on repeating the mistake. These first few years are critical, and I’d rather err on the side of growing too slowly than growing too quickly. The only thing that makes sense to me at this stage is to hire only when revenue can support the additional expense.

I read about a small web design business in Nashville the other day and it sounds like we share the same strategy:

A challenge they faced as they grew was the expense hit that each of his early hires created had on the income statement. Expenses never grew in a straight line, but in significant steps as each new programmer was added. This created a major cash flow challenge. He met this by being very conservative in cash management. He never hired until he had the money already coming in to pay for the new employee. Also, he always keeps 90 days of cash reserves to cushion any unexpected downturn. During growth keeping this reserve took careful planning. Both of these tactics restricted his growth to some degree, but they also helped him to grow at a pace that he could afford to pay for.

What’s next?

I’ve decided to post a job opening for a web developer in the next week or so. If you know someone who would be a good fit and wants to work on some exciting projects let me know.

I’m also curious to know what you think — would you hire in my situation? How do you want your business to grow?