Best practices-employees

We thought it might be helpful to run a series called Best Practices.  We are often asked what the best way is to handle various business tasks so we have a lot a material available.  We will start with one of the trickiest areas of owning and running a business: employees.

The best advice we have regarding employees is to do all your homework first!  Decide what tasks you will be delegating to an employee and what skill set the employee will need to accomplish these tasks.  Next, create a detailed job description for the position.  We often see frustration on the part of owners and employees when there isn't a good fit.  Consider the core values or your mission statement when thinking about the skill set your employee will need.  If you need the employee to be able to sell, then make sure they understand this, are comfortable with this and have the personality and experience to achieve this. 

Once you know what the position will look like and what skills you will need, you need to be ready to hire an employee.  If you have never had an employee before, there are a lot of rules and regulations you need to be aware of before you start.  Brush up on the types of questions you can legally ask and which ones you cannot ask.  The US Department of Labor has a good site to get you started: http://www.dol.gov/compliance/guide/   You will also want to check with your state to see what additional laws you need to comply with.  The State of Wisconsin has a good website for employers:  http://ww2.wisconsin.gov/state/employment/app?RESPONSE=/jsp/assistance_emp.jsp You will need to get set up with the Federal and state government's to have employees and get the proper identification numbers and payroll filing sites set-up.  You will also probably need Worker's Compensation Insurance so check with your insurance agent. 

When you have the job description complete and you understand all the rules you need to follow to be an employer, now you can set out to advertise for the position.  For many entry level or part-time positions, advertisements on craigslist or local registry may be sufficient.  For positions requiring more education and experience, you may want to consider using an employment agency to do the initial screening for you.  Make sure you understand what the costs are upfront so you can decide if it is a good use of your money. 

The summary for this article:  the best practice for being an employers is to do your research and homework first to make sure you understand everything you have to do and to insure that you hire the best person for the job. 

Who will run your business if you get hurt or sick?

Small business owners are often so busy working in their business; they don’t have time to work on their business.  This phrase is repeated often by experts and is a legitimate issue.  We recommend every owner set aside a day or two each year to work on the business and a great way to start is putting together a risk management policy.
What is risk management for a small business?  Identifying all the potential risks to the business and establishing policies and procedures to mitigate or eliminate the risks.  One of the major risks for the smallest of businesses is the loss of the owner.

What happens if you get really sick or injured?  Who will run the business while you recover?  Once you identify who can help with this risk, put together a manual to help the person do it.  Write down all your valuable contacts: names, addresses, phone numbers.  Write down all your due dates and deadlines for projects, contracts, jobs, etc.  Write down all your passwords and logins.  Ideally, the manual should have schedules showing what to do daily, weekly and monthly.  Assume you are going to be completely incapacitated and the person taking over will be on their own.  Talk to your insurance agent about a disability insurance policy.  Most people have life insurance which will provide for their family if they die, but many do not think about what happens if they are unable to work due to illness or injury.  Some comprehensive business insurance policies provide this type of coverage which can pay to staff to fill in while the owner is recovering. 

Another area of risk management is for small businesses with multiple owners.  The partners need to determine what they will do if one of them is disabled.  How long can they remain part of the business if they are unable to work?  How will the business determine if they are disabled?  How will the business buy them out if they are unable to work any longer?  This also applies to the death of a partner.  We recommend working with a good business attorney to really work through all these types of issues in an operating agreement.

This is a good time to look at your calendar and set aside a specific time to deal with this issue.  Write it on your calendar and take the time off to get this crossed off your to-do list!

Pricing your services

Pricing your services is always an interesting process for people like ourselves.  You have to look at what your competitors are charging, of course, but here is a starting point to determine if your business is capable of earning enough income to support itself and you!

First you need to create an operating budget for the business which will tell you what your annual expenses will be.  Make sure you consider all the different things you will need in order to run the business.  Next determine how much money you will need personally to draw from the business.  If you don't have a personal budget, now is a good time to create it.  The amount you need the business to provide you with is your target income. 

Next you take the target income and divide it by the number of weeks in the year you will be working (if you are planning on taking time off for vacation and you are the only revenue generator for the business then take that into consideration) and then divide by the number of hours per week that you are going to be available to work on the revenue generating tasks.  Be aware that your business will also have non-revenue generating time needs as well (administrative tasks must be done as well) so be honest about how much time you will have each week to generate revenue.

Here is an example:  I need my business to earn $50,000 to support me and the business needs $13,000 to pay its expenses so my target income is $63,000.  I am not planning on taking any time off my first year of operations, but there will be holidays like Christmas and Thanksgiving so I will use 51 weeks as my available weeks.  I can work 10 hours a day so this start-up period and I anticipate that there will be a lot of administrative things I will need to do, such as writing a blog, networking, writing proposals, continuing education, answering emails, handling other social media, taking care of the business' accounting, etc.  I am leaving 6 hours a day for revenue generation for now.  That leaves me 1530 hours a year to generate income (6 hours a day x 5 days a week x 51 weeks in the year). 

Taking the $63,000 target income I need divided by the 1530 I have available, I need to charge $41.18 an hour to have the business earn enough to support itself and me.  I then will need to look at my competitors to see if this is reasonable.  If it is too high, perhaps starting a business such as this isn't right for me!