The Australian Small Business Ombudsman recently shared a stat that over the 2 million small businesses actively trading in Australia, 93 per cent had annual turnovers of less than $2 million. So hiring staff can be an exciting but very risky business for small business.
Many start-ups begin with one or two founders, but growth and maturity of a start-up often means at some point, you’ll have to hire staff to extend your capacity and be regarded as a viable small business. How, when and who to hire are pivotal questions that have the potential to propel your business forward or limit its growth – depending on how you answer them. This is especially true for new small businesses who are typically resource constrained and do not have dedicated full-time human resources personnel at hand to help manage employee underperformance and misconduct.
How to hire
There are two main ways to think about hiring: people as an investment, and taking on staff as a way to meet demand requirements. Depending on the industry you’re in, the kind of business you run and your own feelings about employees will suggest one way or the other to you. Personally, I have found planning for growth rather than reacting to it garners more success in the hiring department.
It’s usually clear when you need to hire as an investment. Often business founders have a particular skillset, such as building software, and need to bridge key gaps – think sales and marketing, accounting or logistics – to make sure the business runs smoothly. Hiring staff will yield a near immediate return on investment: you may, for example, be able to spend more time working on the core part of the business instead of spending your efforts on daily operations.
Employing according to demand, or projected demand, requires you to be good at planning. You need to set the standard in terms of the service level you would like to offer customers and understand how each new customer adds to your working day so that you can maintain that level as your business grows.
There’s a temptation to think of hiring staff as an ‘opportunity cost’ – that it will take you longer to train someone than to do it yourself – but this is a fallacy. An important factor in the hiring process is therefore timing the onboarding process so that your staff are ready and able to serve customers when they are needed.
When to hire
Timing can make or break a business. Hire too early and you risk increasing your overhead costs when you can least afford it; hire too late and your initial customers are under-served, leaving them with a bad impression of your ability to support demand and denting crucial word-of-mouth referrals.
Business plans are critical at this stage. Start-ups are particularly vulnerable to constant change and need to balance new business optimism with growing costs and fluctuating revenue. Be mindful of growth trends and potential acceleration points in your business. For example, are you finding that for every three new clients you get, one recommends you, which starts a new growth spurt? Do you have a marketing campaign planned next quarter? Closely monitor situations that might trigger demand so you are ready.
Your ability to forecast growth will help you understand when you need the right people in place to support it. It is before that period, and this is often before you can actually afford it, that you need to onboard staff. This will give you enough time to hire the right person, or people, who will sustain the culture and values you want your business to uphold, rather than ‘someone adequate for now’.
Who to hire
Making sure every new employee has the right skills is, of course, a priority. However, other traits such as their adaptability, ability to work with others, willingness to learn and their level of commitment to the team and the business is just as critical.
In a small business, the type of people you hire and their dynamic as a team will set the tone for your business’ growth. It is therefore of utmost importance that whoever represents your business at this delicate stage shares your vision and passion, or at least has the open-mindedness and capacity to grow into that mindset. As the founder, you should be part of the hiring process so you can share your vision and ask culture questions to gauge how well the candidate fitted into their last organisation.
Be upfront about the business in return. Spend time and share your story so new hires clearly understand the ‘heart and soul’ behind the business and can make an informed decision about whether they want to be part of the journey. Not everyone is suited to working in a start-up environment, probably only 25% of the population, so don’t be afraid to stress-test upfront. While there is a war for talent, the cost of changing staff is higher than just money – your time, sanity and your business’ reputation are at stake.
A healthy business plan for growth should involve building and shaping a team to serve the increasing demands of customers. Knowing what your requirements are and being able to anticipate them will help maintain service levels as you scale. To send your business in the right direction, select people with high integrity and shared beliefs as well as skills from the start to ensure the culture and values of the team properly reflect your business, giving it a solid foundation on which to grow.