Well, they are. But the Hr people working for them should be your friend.

Before walking along in disbelief let’s think about something. You are a small company. Maybe you don’t even have a HR employee. It’s hard to hire because less people would like to work for a small business, with a future that sometimes is not clearly drawn and a second grade work environment.

But before convincing a potential employee to join your business, you’ll have to get people to the interview. Chances are that if you get more people to the interview you could get a better, more suitable employee. You could probably get 20-30 maybe 50 people to the interview (although if you get 50 it’s already a very expensive process).

Now, guess what. Big corporations have hundreds if not thousands of applications. And chances are again that you might just find the right people you need from there. And it doesn’t really mean you get the leftovers because corporations have a complex hiring process and they might refuse candidates for reasons that could be perfectly ok for you.

So why not take advantage of this great number of already verified potential employees? All you need is to know the right HR people. They might just recommend the best people for you.

First, as you are just starting up it’s harder to get experienced people on board. I said this before, employees feel they take a risk when leaving other well established work places. But there are other factors to consider as well.

Think about the company culture. Right, you don’t have one yet, so establishing one with young employees is easier. And then there is the level of expectations: young employees don’t necessarily expect to have a company car, the latest PC nor the best payment in the industry.

After exiting my last company I’ve already started thinking about the next (if you are an entrepreneur, you know that once you have the entrepreneurship bug is hard to live without). Of course, one of the first things you have to consider when starting a company is the initial investment – in my case I’m one again thinking about an It company so I’m quite sure to say the biggest expense is the cost of the employees. So what can you do to control the expenses and reduce the initial investment? Hire young, it’s cheaper. Of course, on the long run I’ve said it before and I’m saying it again cutting costs on the human resources is not wise because the loss of productivity and results might eventually kill the business, but in the beginning you anyway don’t know if your business is going to hold water so why not hire young?

Then again, in the beginning for sure the office will not be a real office building, and probably some of the furniture will be old. The location however is important, as I want to hire young it should be next to an University. I’m putting my bet also on the young exuberance and willing to prove themselves. I will hire young, so why wouldn’t you?

I still look for one answer: what should be the new company doing?

This time I’m commenting on an article called How to Select a Startup Person? that appeared on Indian Startups, Entrepreneurship, Web2.0 blog. I’m happy to see that most of the views on hiring are common no matter the geography. Lets see:

• Right Mindset : For any startup, understanding the mind-set of prospective employee/partner is very important. It takes special peoples to work in a startup. I should know best, I’m some sort of startup junkie, loving to do the hard work in the beginning and getting bored once everything is set up. Even if you are a simple employee, working in a startup is harder and riskier. There is no saying if the company won’t go under and next thing you hear is that you have a dark spot on your resume. Of course, it doesn’t mean the company went under because of you, but in a way you were part of the things that didn’t go well.
• Financial expectations : People with startup mind-set would prefer to delay their financial gains. It’s way harder for a startup company to match the benefits an established company could offer. Luckily, the start-up employees take brain food from accomplishing things and making things matter.
• Higher Responsibilities : A Startup person would always emphasize his worth and capability to take higher responsibilities. You get to do a little bit of everything. And that especially good if you think about this as a learning experience. If I think well, most of the things I have an idea about today are things that I have experimented while being employed at my first start-up. Better than any college or anything.
• True Reflection of his aspirations/skill-set : A startup person would try to bring-out real aspirations in front of decision makers. Hm. What?
• Flexible Mind-set : A startup person is always open to new ideas and approaches. Chances are that sometimes you don’t know how to make things because they haven’t been done before. Or you have to make them different because of limited resources, or because you have enough liberty to do that. No matter how you put this, you’re walking paths than have never been traveled before.
• Innovation : A startup person would always think in innovative direction. He/She won’t try to solve problems in usual manner. Or as I said, you don’t know how to do stuff, and you… innovate

Good article. Now let me list the other articles I wrote about hiring in a small business.

ADDITIONAL RESOURCES:

• Good news: Small Businesses can hire part time or project based
• What kind of employees for your small business?
• Make your employees happy – it’s an entrepreneur task
• Hiring new employees versus profitability
• Hiring in a bootstrapped company
• Small Business compete with Big Corporation

Then, I realized something. While for a bigger company hiring part time or on project base might not be acceptable (usually you need to have all the resources available during working hours), for a small business is perfectly acceptable to have part time employees or project based people. I think there are several reasons for this:

• You don’t necessarily have so many customers that require that particular thing your part time employee is doing. Like for example if you are building sites, you won’t necessarily need a designer every day
• Small business owners are capable of handling little bit of everything. Usually a small business is started based on the abilities of the founder. This means that for the most of the things you might have short term solutions
• It’s cheaper. You don’t have to pay a full salary and you don’t have to pay for the dead times an employee has. Basically if you hire full time, not only that you have the challenge to have enough money in the bank each month, but you also pay sick days, smoking breaks and so on. A project based employee gets paid only for the work that gets done

• It’s easier to get abilities in a multitude of directions. Because you don’t have to accumulate all the knowledge in your company, you could have a part time employee or project based for each important task. If you are not forced to hire full time, then you can have a best PR person, a best designer, a best everything.
• Someone else is paying most of your employee money. Chances are that a part time or project based employee already has a 9 to 5 job that pays most of the money he needs. So no matter how often or how much you are paying, that person already has some level of satisfaction and security.

There are some downsides as well. While I believe for a small business the benefits of hiring part time are much bigger than the downsides, let me list some of them:

• Your not building a company culture. Because that part time employee does not really care of your company culture, for them it’s just another place to work and get paid
• Part time or project based people might be unavailable. They have less commitment towards your business, so you will have to carefully plan projects, delivery times and so on.
• They are harder to motivate. Because they don’t care of your company culture, have less commitment, how else can you motivate them than money?

Usually if we are talking about a bigger business, it’s better to have more types, even if you consider them individually they are not the very optimum. I mean yeah, you want the best sales people, but you might just want one that can’t sell well in general, but has the luck or ability to sign just one huge contract a year. Or yes, you want the best programmers in the World, but you might want lighter ones to deal with your site.

Anyway, there are several types of employees you might want to have. I’m listing below the ones that comes first to my mind:

• the rookie. Good for tasks that are very repetitive or just plain operational
• the YUPPIE. Usually the best if you have an interesting business with great growth potential. They just want to grow together with you. They leave you the moment they have a better opportunity
• the seasoned professional. Good experience, but sometimes they might lack fresh new ideas
• the working mom or career woman. One of the best choices when it comes to pick up a CEO. Yes, you heard me right, if you have something to be done, then you can be sure it’s done.
• the lucky bastard. They don’t do much, nor are very skilled, but they seem to get it right each time it’s actually important. They might bring you more money, contracts or anything else than the most skillful dedicated sales person
• the Evangelist. Usually it’s in your company from the very beginning. You can count on him, he will be day in day out at the office and he knows stuff. He will spread only the very best words about the company and good for forming new teams as well.
• the opportunist. Heading to a better paid job already…
• the rich boy. He doesn’t really need to work, but still does it. They are not in for the money, so they must do it for fun. So they like it, and do it well
• moonlight entrepreneur. Works for you by day, has a second business to run at home in the evening. Interesting, usually they think just like you the entrepreneur. If they become successful, they head towards their own business

Which one would you hire?

• your payments can’t be so great – employees are a cost, and costs are important for a small business
• your package of benefits can’t beat the corporate packages. No free tickets to spa, no paid vacations, probably no company car
• no professional HR. This means less evaluations, less trainings, less team-buildings
• difficult to give a raise

In fact I wrote an entire article about Hiring in a boostraped company, no need to repeat myself over and over again. So, let’s discuss something that is even more important than hiring: keeping your employees happy.

First of all we will start with the assumption that you don’t have a HR department to do the job, and even if you do, keeping employees happy should be on your everyday to do list while you are the owner or shareholder of the company. In fact, most of the successful entrepreneurs I met have a special section in their speeches about sharing success and wealth with employees – the reason why a company exists as a social entity is to produce for: clients, owners and employees. Take any of the 3 out of the equation and your chances to succeed are near 0.

Ok, so now that we have established that the company owners/ entrepreneurs should work on keeping the employees happy, what about CEOs? CEOs work directly with the employees more than the entrepreneurs/shareholders. So, next time you talk with one of your employees, how much is real and how much is HR?

When you congratulate someone, you do it because you really believe it or because it’s your task to “serve the accomplishment feeling” to your employee? When you say you appreciate an idea, a plan or anything else, is this for real? And how do you deal with the things you don’t like, how do you raise the problem when something got wrong? You keep it low so you don’t demoralize the employee? You try to find out the reasons why the things went wrong or you start yelling?

I don’t know how other employees are, but I try to understand things behind what my boss is telling me. I understand that some things can be dictated by the company policy, some other are compliments because they have to be, and some are masked approaches on things aren’t so great. But you, the entrepreneur, are you ready to deal with the multitude of human behaviours?

Because, bottom line, no matter the reasons or how you do it, being a small business entrepreneur also makes you a HR Department. And next time you talk with your colleagues keep that in mind.

Doug Caverly from SmallBusinessNewz quotes some interesting facts:

“As well as the highest job satisfaction rate (21% strongly agreeing and 41% tending to agree), small business employees were also the most committed (64%) and loyal (58%) to their organizations,” reports the Federation of Small Businesses.

Furthermore, “Employees in small firms also felt most engaged by their employer and reported the most freedom to choose their working patterns.  There were also far fewer reports of bullying in small businesses; lower stress levels and less complaints about long working hours.”

This is the part where you, the reader should identify yourself with the article: you started small, probably working from home, got some nice customers, income is going steady, but you feel you can’t expand and grow profits unless you get some help (this is one of these moments when you are working 12 hours a day, and over weekends to get stuff done but it’s still not enough). If you are in this situation, the only valid thought is that you need to hire somebody so you could have more customers and cash more in. And now the question again: if you hire a new person, your profit will go up or down? I mean if you have a profit of 3000 euro per working man (yourself) now, does this mean that if you are going to hire 2 more you will get 9000 euro profit at the end of the month?

Well…no. In fact, at least in the beginning, your profit per man will drop. You can expect that for at least 6 months (until the new employee will really get to doing stuff the right way) you will get 3000 euro profit per 2 working persons. And that’s half. And after the 6 months, you will still not get to the 3000 euro/person level, because simply put, your employee will not work 12 hours a day and over weekends. And moreover, if you hire more than 5 people, then you will need a boss to manage them – and bosses are particularly known as not doing anything by themselves so, once again your profits will go down !

Of course, if you have a bigger company, you could hire people who can improve your profits because you can afford. So yes, hiring more people could also mean increasing profitability, but it just take a number of conditions to do it; I’m thinking at the following:

• when hiring, have a very good plan on what the new employee should be doing. I know you are busy, and not really keen to make schedules, procedures and plans, but simply put, if you hire and then got nothing to delegate to the new employee, then you are going to spend money for nothing.
• hire the best man you can afford. When you are small, is quite difficult to hunt for new employees, and any change is very expensive. Also if the employee doesn’t perform to the max, your profits will drop even more and you can’t afford it
• make sure that you have resources to pay the new employee for at least 6 months, even if the business is going to slow down. When you don’t have employees, it’s easier to get through slow times, because it will only affect you. But if you hired, you will have to provide money to your employees no matter what.

So I would say that your profits will drop in the beginning when you hire. But then again, you need to hire!

Hope this helps.

• you got so many things to do that is impossible to make them all by yourself.
• it’s essential that the things are done as efficient as possible.

I can also go a little further and think that in most cases you might not have a “proper office” and still have a home based business. Before reading the first resume, there are a number of things that you need to consider.

Delegate tasks, accept mistakes and loss of productivity and spend money.

By far the most challenging aspect of hiring your first employees is to get used with the idea that you will have employees. I’m thinking at the following:

• Employees cost money. In the beginning, the money are scarce. You probably don’t even pay yourself what you deserve, so how about paying your employee more than you’re paying yourself? Brrrrr…..and still, it happens.
• Learn to delegate. You started by yourself. Everything got done by you. You know best how to do things. Are you ready to let somebody else to do things that can turn bad for the customer? That’s why you have to find out what tasks can be done better by your employees and what are the really important things that you will have to do yourself.
• Accept loss of productivity. As you are dedicated 110% on your business and as you already did all the stuff in a very efficient way (that’s what got you so far), you can be sure that your new employee will not be as good as you are at doing the tasks. At least in the beginning. You will have to learn how to teach your employees to do stuff. They might not understand.
• And they might make mistakes. Which, you will have to pay from your profits. They are going to make mistakes with your hard earned customers, putting you in a bad position. That never happened while you were controlling everything. You will have to accept mistakes, understand them and find ways to correct them on the fly, while making sure they will never happen again. But they will happen again. And again, and again.

Office space and infrastructure.

• If you have a home based business, are you really ready to let your employees in your house? Are they going to come working in a “non-office space”? So basically you have to think if you are going to be able to share your private space with some strangers, and probably change some of your habits (like naked walking in the house and second if you can make your job offer so interesting that people will accept working from your home as opposite of a downtown office building.
• If you have a “proper office” or the home office is not a real problem, then you will have to think if you have enough space to accomodate a new desk, (and if you will be willing to share the same room with your employee that is going to hear all your “secrets”), if you have enough money in the bank to buy a new PC and if your internet connection is good enough for more people.

Responsibilities and risks.

I would say that by getting people in your team, the risks and responsibilities will increase exponentially.

• You will risk twice. First, you need to have enough revenues to pay your employees. And second, the chances of things getting wrong are increasing with the number of employees.
• Responsibilities. No matter if you are underpaid or not getting money at all, you have to pay your employees.

Ability to attract employees.

I think the best description of the challenges of getting employees in a small business is in one of my older articles:
Small Business compete with Big Corporation

If you got the idea, then you can read more about 10 steps to get the right employees if you are a small business

So what’s going on? It’s bad work efficiency. Most managers think that because labor is so cheap is always better to hire an extra cheap man than to improve processes, technologies and tools. Let’s get some examples to see what I’m really talking about:

CRM Usage
Most of companies don’t use (and they don’t even know they should use) CRM systems. They use excel and word, because investing in a good CRM seems always more expensive than hiring some more people.

Agriculture
Most of the agriculture is done by…horse !@#! And now, as it was a very dry year we see reports on TV about lost crops because it haven’t rained in a while. Because nobody invested in irrigation systems…

Overall business activities Bad computers. Bad networks. Bad infrastructure. It doesn’t matter if I need 15 mins to boot my computer…

And then people wonder why they don’t have more money and how an “employee with less work” it’s better paid in Western countries. Because we lack the efficiency culture, and no matter how many hours we put into doing something, always a better trained, better organized employee will get more work done.

In theory with their limited resources, small businesses should be the first ones to look for ways to improve work efficiency. In reality, my experience has shown that “we should do that or accomplish this no matter the costs” are far more popular words amongst small business owners.

We are talking about more than just competing for the same market and customer base, about competing for the same resources.

Now, I can lose one customer, I can lose 10 customer and I can also lose even 100 customers. But the ugly, terrible fact is that I can’t afford to lose resources (example programmers) to them. And still, can’t really fight on it.

Being a small business, it’s very hard to attract good working employees – they are not going to relocate for you, they are not going to leave a better paid job for you, and most likely they are going to leave when they an offer from a big corporation. You simply can’t stop them. Sure, each business has it’s work force turnover, but when this happens to a really small company – you will be hurt personally and the business is going to take a big hit as well.

Being small, you can’t really assign tasks to another person. If you have to deliver something – well, you just have to find your way to do it without the missing person. At a larger level it could make a big negative impact on your business plan – (if you have for example to hire 2 people to replace the leaving person, you might be forced to relocate, buy more office hardware – which is especially difficult in the first years).

It’s really hard to give raises. Big Corporations usually have an evaluation/rewarding model in place. You have targets, you get more money. In small companies, even if the employee is doing his target, it’s very hard to find supplemental resources to give him a bonus or a raise.

No trainings available. One of the reasons people choose to work in Big Corporations is that they can improve their skills with free trainings from the company. Can’t do that if you are small.

I’m not going to play smart on this one, because I really don’t know how a small business could really compete with a big corporation. At a certain level we are doomed to lose employees to Big Corporations, because we (entrepreneurs) don’t know to sell our ideas well enough to have so loyal employees.

ADDITIONAL RESOURCES:

• Good news: Small Businesses can hire part time or project based
• What kind of employees for your small business?
• Make your employees happy – it’s an entrepreneur task
• Hiring new employees versus profitability
• Hiring in a bootstrapped company
• 10 steps to get the right employees if you are a small business

Having your first employee feels great. But for the part time entrepreneur, the implications could be bigger than for a regular business. Let’s make a list.

Chances are that because you run your business only in the evenings you don’t have a proper office and you’re doing most of the stuff from your own home. Great. So now you have to think where you are going to put your first employee – you might not want him to invade your private life by coming to your house to work each day. If you are not a telecommuting fan and have your first employee working from his own home, you should already be thinking to rent an office.

Renting an office can be a real burden for the part time entrepreneur, mostly because running the business as a second job might not get enough cash flow and profits to cover the new office expenses. But because you are an entrepreneur and like to evaluate challenges and find solutions, you might come up with an idea. For example you could share your office with somebody else: search your network for an entrepreneur that has some office space to share.

Now that the office space is taken care of, you will hit the next challenge. You’ll need to double your office utilities: you have a fax at home, now you need one for the new office. You have a laptop, now you need two. Buying paper to print contracts? Make it double now.

Great, you have the space, you have the tools. Now you need the “humans”. First thing that comes to your mind is that you can’t afford to pay them. Also you can be sure that they will be far less efficient in getting things done than you are: first they are not owners and they care a lot less about the business, and second you know the business best and you can’t expect anyone else to be better at it.

Actually the most important evaluation is to calculate if by paying a person you will be able to generate enough extra income to cover the costs and make a little more profit from it. You have the following results:

1. Cost of employee bigger than extra income : not a good way to go
2. Cost of employee equal extra income : not making a profit but growing the business
3. Cost of employee smaller than extra income : great

But what would be the reasons you would like to hire an employee? One of the following:
- you are spending way to much time with time consuming/repetitive tasks that kill your innovation/growth potential
- the new employee could bring new business (mostly if he’s a sales)
- exit strategy if your work could be done by somebody else while you are enjoying Hawaii.

But you have even more challenges than paying for the stuff and people – and that a psychological one. You have created the business, you have run it so far, you are the master of all things:

- hire an experienced employee and he will have it’s own opinions and tell you things you do wrong. Hey but you are the business master, how can he know better? I hate him already.
- hire a freshman. He doesn’t know anything about the business, but because you master it, everything that he does seems very bad. I hate him already.

Either way, the human interaction between you and the new employee will play an important part on how things will go. You are used to do everything on your own, isolated in the basement, now you get to communicate your needs, get feedback and receive results.

Now…you have some more responsibilities. No matter what, you have to pay him the insurance and the salary. You have to help him, train him and do everything else a normal company does with it’s employees. Including Team Building

Did I mention that you are running your business only in the evenings? Yep, most likely your employee will have normal working hours. You can’t actually get in contact with him very often, because you are not available during the day…He is on his own. Or maybe he didn’t even come to the office today? Or maybe he is playing Tetris all day long?

Get back to the sharing office idea. You will actually need more from your office pal. You need to ask him to somehow keep an eye on your new employee… Hard, you might have some confidential things going on so how could he check on your new employee?

OK, I think there is something I didn’t tell you. I’m sharing the office with my mom. Thanks mom!

While I’ve already talked about the quality of the services (that has to be good enough to be sold even to your family and friends the other points need a little support.

Lets see about of the targeted customers. If you are a small company (providing IT services for example) its a complete non sense to target every potential person that might need such service. Instead, pick a niche, lets say dentists, and make your best to cover as good as possible their needs. This will help you: gain good references amongst dentists in your area, deliver a customized solution to their needs and spend wisely your resources. This is niche positioning. Here is a post from MicroISV that might explain the trick.

Competition. Competition might be strong, might be good. But the key to fight competition is differentiation. As no 2 companies are the same, focus on the aspects that might bring your the biggest competitive advantage. It might be a feature in your products, it might be your price, or maybe location. It might even be your looks or your voice. And you can fight with guerilla marketing – small marketing actions performed as the opportunities come and go. A press release there, a logo there, a promotion.

People. If you are providing IT services, the most important asset your company could ever have is “people” Hire now a cheaper specialist, and you will start loosing money tomorrow until the moment he will go away. This is more than a paying a good salary. Go for the best specialist you can afford.

And keep up the good work!