So you have launched your small business and have grown to the point that you need employees. How do you go from being a solo entrepreneur to a successful employer?
The first thing you need to do is figure out what the job looks like. What tasks will the employee be responsible for? What skills are needed to accomplish the tasks? Is the position going to be full-time or part-time? Hourly wage or salary? Writing a job description is a task few entrepreneurs enjoy, but it really is helpful.
Next, educate yourself on employment laws. You don't need to be an expert, but you do need to understand the basics and you do need an expert to help you navigate all the complexities. The IRS has a good site to learn the basics. Publication 15 (Circular E) is a good place to start.
We recommend using a payroll processor or hiring an expert to get your payroll system set up properly. Training on how to file and pay payroll taxes is a must if you are going to process and file payroll taxes yourself. The federal government takes payroll taxes very seriously (seemingly more so than income taxes) so it is important to take this job seriously. Many small business owners fail to understand that taxes withheld from an employee's check are his/her money and not submitting the taxes to the appropriate authority is considered theft. It is often best to leave the whole processing of payroll and filing of taxes up to the experts and this frees up an entrepreneur's time for revenue generating tasks. There are many big processors like Paychex and SurePay as well as small local providers. Some provide portals where the business can enter hours and then the processor handles the rest. While many small business owners are loathe to spend money on outside services, this in an area where you don't want to make mistakes as they can be costly to the point of sinking a business.
Another issue to be dealt with as an employer are the tasks a human resources department deals with for larger companies. There are many service providers who can handle this for a small business on an outsourced basis and we do recommend having someone like this as a resource. There are many things you legally cannot ask a job applicant and many business owners are not aware of these questions and limitations. Understanding laws surrounding the hiring process, maternity leave, family illness, drug testing, and termination routines can prevent actions which can result in painful lawsuits for a small business owner.
Once you have found the right employee, you will want to take the time to properly train him/her. Again, it is helpful to put together an organized, thoughtful training program. Well trained employees make fewer mistakes and are happier than those thrown into a job. Having regular performance reviews may sound tedious, but they give both the employer and employee the chance to connect and problem solve.
How do you become a successful employer? Do your homework, hire an expert to get you started strong and take the time to find, train and retain the right employee.
Wednesday, August 26, 2015
Wednesday, August 19, 2015
If you have answered the previous questions in a way that supports your ambition to open a small business, the next thing you need to think about is how you will finance the start up. A bank loan is the traditional source of funding so let's talk about what you will need to do to get the loan.
First you will need to create a business plan. Banks will always require a full business plan for a start up and creating one takes a good chunk of time, even for professionals. We generally expect a plan to take 40-60 hours to complete and a novice can expect it to take much longer.
Next you will need to supply the bank with information about your personal finances. For most small business start ups, the owner is as important as the business plan so if you have a poor credit history/rating and little personal equity or cash, then a bank loan is not the way to go. The bank will ask you to complete a personal financial statement which will detail all your assets and debts and sources of income. They may ask for documents, like bank statements. to verify this information. They will also ask for three years of personal tax returns to verify your income and they may ask for a current pay stub.
Pull together the resumes of all pertinent owners and employees. The bank will want to see that you have amassed the proper skills to run the business successfully.
Have a folder with all your legal documents: articles of incorporation, business licenses and registrations you may need, operating agreements, franchise agreements, commercial leases and any other relevant contracts.
You will need to be able to explain to the lender what you will be using the loan proceeds for and how the business will repay the loan. Have a detailed list of any assets you expect to purchase including price and anticipated supplier.
Be prepared to explain who will be handling all the important tasks in the business.
It can be very helpful to hire an expert to put together the business plan, but the owner(s) need to comfortable with the details and assumptions in the plan so they can answer the questions put forth by the lenders.
Getting a bank loan is one of the most stressful parts of starting a business, but if you pull together all the expected information and prepare for the meeting with the lenders, you can succeed.