Hiring Your First Employee
Joshua Davidson wrote this article
CJ on Twitter (@CraiWai) asked me a few solid questions a couple weeks back — how did we go about hiring our first team member(s) at Chop Dawg and how does that dynamic change over time? I figured this would be a very important topic to many of our clients at Chop Dawg who are (or about to be) reaching this obstacle and for those who read our blog.
One of the biggest things is understanding right away when it is the right time to hire your first team member. For many new entrepreneurs (including myself at the time), this is the hardest thing out of everything I am about to document. You often fool yourself into thinking you need more help in order to maximize efficiency (and profits). This is usually false. I truthfully believe that you should only hire your first team member when the following criteria have been met below:
1) You have the security of knowing you will have enough work to keep your company/business sustained for a minimum of two quarters.
2) You have enough cash in the bank to cover at least one full quarter. You should calculate this based on your average expenses in a month as a company (and as well, your own salary if you are paying yourself at this given point).
3) That you have so much work, so much on your plate, that you can’t handle it all and need outside help to sustain it all. This is the hardest one as mentioned above, as you need self-awareness and being able to resist convincing yourself you need to hire for the ego side of things (trying to show you’re a ‘legitimate business’ because you have a team under you).
Since we’re a company that focuses on helping tech based startups (mobile and web) — the remainder of this blog post will be focused on this audience (we aren’t really that knowledgeable when it comes to brick and mortar businesses; however, some items below may be useful).
When we started adding our first team members onto Chop Dawg way back when, we never brought in our own employees right away. We focused on 1099 Contractors, or as some people know them, freelancers. The reasons were that it is much less risk when it is your first time running a team under you. You do not need to worry about insurances. Employer taxes. Scheduling. You are able to find those who fit your criteria, accept your terms and can get the job done satisfactorily. There are a few things though for finding the right people to start with:
1) You should not be focused on anything customer service related as your first hire. As a founder, you should be handling this for as long as possible, to the point that the only reason you need to hire this area is to scale or because you genuinely cannot respond back within 24 hours to most requests. I personally still handle 90% of our customer service requests here at Chop Dawg. You can run a successful company with a great team while handling this yourself.
2) You should be set on using people at first that you have known prior (connections, referrals or individuals you have known about for a bit of time). Make sure to do things such as a Google Hangout with video-to-video before seriously considering hiring. You want to use video-to-video to get a real sense of personality, emotion, integrity and to ensure the person at the other side of the screen is who you think they are.
3) Setup terms on financials, milestones, and communication. This is your first time managing, so you need to trust you have someone who has a payment plan at the least amount of risk to you (but still being fair to the professional that you’re hiring), define the milestones that need to be accomplished and lock down all the proper channels for project communication (daily emails, once a week meetings, etc).
Let’s say though that you are at the point where a contractor won’t cut it — or perhaps you are already at that point by the time you know you need to bring some people on. That is okay. You should, above all, before jumping into this, ensure you chat with a proper attorney and accountant regarding all the legal things you should have set (contracts, business setup, proper insurance) to ensure you do not run into any hiccups later down the line. Once you know you’re setup right, here are some of the things that we would recommend from experience:
1) Do not hire a friend or family member. This is a rookie mistake. Once they depend on you for a salary, the dynamic of your relationship with them will rapidly change. You are not in business to be buddy-buddy. You’re in business for your customer and to make money. Once someone depends on you for a living, things will change. You may need to fire this individual sometime in the future. Think longterm.
2) One of the things you should leverage is some of the freelancers/contractors you have worked previously with. Many times they will buy into your vision of a company if they have stayed around long enough, understand your operations better than anyone else, and be able to support the roles you need supporting. Brandon Teller and Eddie Contento, both executives here at Chop Dawg, started off as 1099 Contractors before later becoming employees with us.
3) Friend recommendations and professional recommendations are integral. 95% of our team came from this. Most of the time these are individuals of high quality, who will have a bit of background on your business and understand what they’re getting into ahead of time.
4) Utilize social media.
5) Use trusted job boards. We, for example, love using Dribbble and Authentic Jobs for the nature of work that we do at Chop Dawg. You may need specific target job boards for your industry, but I do not recommend the big, generic boards such as Monster Jobs. They’re a sea of genericness and a quantity of crap too. Not what you want.
Once you know that you have someone that you want to bring onto the team, one of the most important things for you to do as an entrepreneur and leader is to openly communicate what your expectations are. Define everything. Include the hours you expect them to work. Salary range and how it will change overtime. Responsibilities and deadlines. The tools that they will be using. How they should communicate. Your long-term vision as a company (this is vital). I am a big believer in hire slow, fire fast. I know it sounds negative but it isn’t. You only want A+ players on your team and your first hire is the most important one. You want someone who will set the tone of the quality you will expect future employees to have. Once you have that in place, future hires will lead to not only your example, but those you have brought in personally.
One of the things that we have done at Chop Dawg with our team is we have outsourced payroll. This is something we would recommend. We hired a payroll company local to our original company’s headquarters in New Jersey called Payroll Express which handles everything from direct deposit, taxes, W2 forms, legalities and more. All that we do is once every two weeks, send them over how much individuals are owed in payroll and then they do the rest. You want to avoid those headaches as if you do anything incorrectly, not only could you potentially ruin a relationship with a solid team member, but you could face trouble with the IRS. Let the experts handle this for you and importantly, we spend less than $75.00 a month on this service. It is small change compared to the fees/penalties you could potentially face — plus it helps you sleep better at night knowing that you’re fully prepared and your staff will be paid correctly.
One last major tip of advice — do not give your first employee a manager title. It is going to be tempting but you do not know if they’ll fit in your long-term plan, nor if they have leadership capabilities in them. Many times, those who make a solid fit for you early on won’t match the long-term vision of your company, especially if you pivot. You also won’t know if this individual on day one truly can lead a team to success. Sometimes the best team members in one role will make the worst management positions in other roles.
Hiring your first employee (or even contractor) can be a bit daunting and is a skill you’ll slowly craft overtime — but these are some of the key items we have learned as a company which have helped us both scale plus find the right talent even today. Utilize these items and you’ll be able to avoid some of the headaches that many first time entrepreneurs make. Once it is done though, that is when the real fun begins for you!