How to hire your first employee

Aside from making the decision to quit your job and start your own business, hiring your first employee can be one of the scariest and most exciting moments in the career of an entrepreneur.

If it’s done wrong, it can cost a considerable amount of money and possibly put the survival of your business on the line. If it’s done right, it can potentially be the first big step on your company’s path toward explosive growth.

If you’ve decided it’s time for your business to grow and you’d like to know how to hire your first employee, here’s a basic outline of the process.

Please note: This process is based on my own experience of hiring successes and failures. The steps you take might vary depending on what’s appropriate for your situation. As I mention below, you should consult an accountant and attorney before you hire anyone.

1. Determine if you really need to hire someone. Can the work that needs to be done be accomplished by hiring a contractor, a virtual assistant, or even another company?

2. Hire an accountant and an attorney. It’s vital that you understand the financial and legal ramifications of hiring someone. After hiring your first employee, your tax situation will get a lot more complex, and in most cases it’s best to leave the paperwork to an accountant so you can focus on your business.

3. Determine the overall cost of hiring an employee. Your accountant can help with this. In addition to the employee’s compensation, don’t forget to include taxes, benefits, accounting and attorney fees, insurance, office space, equipment (e.g., furniture, computer, phone, etc.), software, training and professional development, and other incidental costs such as meals and office supplies.

4. Consider how you’ll pay for your employee. Once you know how much your employee will cost, you’ll have a better sense of whether you can afford to hire someone in the first place, and how much you can pay them. In addition, think about the ways in which your employee will contribute to revenue generation, either directly (by providing services that you can charge for) or indirectly (by freeing up your time).

5. Make a plan for employee orientation and training. Most likely, you’ll be training the employee yourself, so it helps to start documenting what you need to teach them. Even if your first employee has all the technical skills necessary to do the job, you’ll need to introduce them to the finer points of how you do business, including workflow and processes, expectations, and the company culture you envision. If you don’t have the time and/or ability to adequately train and oversee an employee, this might lead you to reconsider whether or when to hire someone in the first place.

6. Write a detailed job description that outlines the employee’s responsibilities. Think about what kind of education and experience will be required for the position, and how your employee might have the opportunity to advance.

7. Spread the word. Quite often, the best way to find your first employee is through networking—getting connected to candidates through people you know and trust. If you advertise, consider industry-specific job boards and websites in addition to (or instead of) larger, more generalized job sites.

8. Select candidates to interview. Typically, only a small percentage of the candidates who contact you will merit further consideration. It can be difficult to narrow down the list, but it helps to keep three things in mind:

  • If the best candidates on your list are only marginally qualified, you don’t necessarily have to pick one. You might be better off changing your selection criteria or the job description, or simply continuing to look, rather than settling for someone who isn’t a good fit.
  • If a candidate’s cover letter and resume don’t provide the information you asked for, this could be a sign that they’re not detail oriented, can’t follow instructions, or aren’t that interested in the position.
  • It’s often harder to find someone with the right attitude than it is to find someone who is highly qualified.

Use the interviews to fill in the gaps about each candidate’s qualifications, and just as importantly, to get a sense for how well you would be able to work together. Make sure you ask appropriate, relevant questions.

9. Check references. Take the time to contact the references for each of your remaining candidates. This is a tremendous opportunity to find out about each candidate’s strengths and weaknesses. Don’t assume that everyone will give a glowing review; asking the right questions can lead to some very candid answers.

10. Do a second round of interviews, if necessary. If the first round was over the phone, it might help to do the second interview in person.

11. Make a written job offer to the candidate you select, if you find one who meets your criteria. Include important details such as the salary or hourly wage, benefits, responsibilities, start date, work schedule, and prerequisites/terms for employment. Make sure your attorney reads and approves your offer letter in advance; he or she can advise you on the language, what details to include, and whether to incorporate additional documents such as an employee manual or an at-will employment acknowledgment.

A word of warning: Think twice before giving a ground-floor employee a title that goes beyond their responsibilities or their qualifications. For example, you shouldn’t necessarily give your first salesperson the title of Director of Sales just because they were hired first.

12. Inform the other finalists of your decision. Once you’ve filled the position, it’s common courtesy to inform the other candidates you interviewed, and to thank them for their time. Who knows—if end up hiring another employee, it might be one of the candidates you passed over the first time around.

13. Set up payroll. Your accountant can probably do this, or recommend a payroll service. Even if you write each paycheck yourself, it’s helpful to have someone do all the paperwork. Remember to set aside taxes in accordance to each pay stub, and to submit tax payments on time!

14. Give your new employee what they need to succeed—namely, guidance and communication. The hiring process is just the beginning, and employees need more than training and equipment. Make sure your new employee understands his or her expectations and responsibilities, and check in with them regularly. Point them in the right direction and empower them. Avoid being the kind of boss who goes long periods of time without communicating with employees, and then overcompensates by taking over and micromanaging when they realize things aren’t going well.

This may seem like an overwhelming process, but it’s crucial to hire carefully because it gives your business a much better shot at long-term success. Again, you don’t have to go it alone; I can’t stress enough the importance and value of enlisting the services of an accountant and an attorney. They can be expensive, but if you’re hiring your first employee, it’s well worth it, and your costs for doing business are about to increase anyway. Welcome to the big leagues!