Navigating the first few hires in a new Small Business

Starting a new business is an exciting and often daunting time with all of the admin, compliance and other pitfalls that the new founder has to navigate. For many businesses the first few hires can mean the difference between success and failure and each needs to be handled with the proper care and attention.

Find the right person

The first thing to assess is which roles are absolutely necessary and key to success. Often this will be someone with considerable experience but the very best person on the market is probably not attainable due to high salary demands that cannot be met by a new startup. Perhaps you will have success enticing them to join you with the promise of flexible working arrangements or a small equity stake in the business, however it is more likely that you will have to set your sights a bit lower and hire someone with less experience for a lower price. In this case it becomes less certain as to how it will work out and therefore balancing all of the different factors is key.

Any new hire in a small business will often need to fulfil multiple roles. It is the nature of a new business that things will arise from time to time that don’t clearly fall under the remit of a certain person and there will have to be a degree of ‘mucking in’ to get things done. Whilst the founder(s) will usually take care of such things, other staff should also expect some of this.

Finding someone who is excited to work for you is paramount in the early days. Your excitement and enthusiasm about your vision will likely be the determining factor in their decision to join your more risky startup vs a more well established alternative. You need to present your business as interesting, agile and to have clear goals in order to attract talent that might otherwise look elsewhere.

Keep it affordable

With almost every small business, financial decisions made in the first few months play a critical role in future prosperity and mistakes can be an incredibly painful, or even terminal, lesson. The largest proportion of the cost base of businesses in many industries is staff costs and budgeting this correctly requires some thought. It is easy to fall into the trap of thinking that something is affordable only to find later that the ‘hidden’ costs of hiring them are quite significantly higher.

Annual salary or hourly wage is only part of the equation when hiring staff. Businesses also have to pay Employer’s National Insurance and make Pension Contributions for their staff which bumps up the cost significantly. In addition to this, staff may require training, travel reimbursement, and a host of other costs that would not otherwise be there if the person wasn’t in their role.

Depending on the type of industry, the additional costs of hiring someone over and above their basic pay will vary, however a good rule of thumb when considering whether a hire fits in with the business budget is to take their pay and multiply it by a factor of 1.3x. This allows for Employer’s National Insurance at 13.8%, Pension Contribution at (at least) 3% and an additional amount for the other items noted above. Oftentimes small business owners overlook these additional costs and it is a shock when someone they hired for £36,000 actually costs around £3,900 rather than £3,000 per month.

Stay the course

Recruiting new staff is a huge commitment in both time and monetary terms and it is easy to become jaded with the process when either candidates are not up to scratch or are out of your budget. It is always tempting, particularly where a persuasive recruiter is involved, to over-stretch the budget for someone who is seemingly the ideal candidate, however whilst this will pay off sometimes, often it will not and the knock on effects can be large. You can easily talk yourself into ‘just a bit more’ and will realise that for the same budget you had for hiring 4 people you have actually hired 3 and are missing the extra pair of hands your business plan requires. Try not to fall into this trap and never make an excessively costly hire out of desperation – there will always be someone else available.

One final thing to note is that once you hire your first member of staff you must obtain the appropriate business insurances. This is very cheap and easy to set up online and can be flexed as your workforce grows.

Key steps

  1. Have a clear picture of what you want;
  2. Budget so that you take account of all the costs (including recruitment fees where applicable); and
  3. Take your time and make sure that candidates not only have the experience you need but have the attitude that is needed for a start-up