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Are you ready to hire your first employee?

Rebecca Huehls's Layout avatar

You’ve developed a strong base of web design clients and referrals keep coming your way. However, you daydream about finding help managing the workload or expanding the services your design business can offer clients. Hiring an employee can help you accomplish these goals and scale your business.

These tips and steps will help you determine whether the timing is right for hiring your first employee.

Creating a job description

Your first step is clarifying what you’d like your employee to do. A clear job description helps you determine what skills your employee needs, how much you need to pay your employee, and whether the work you’d like your employee to do will support the business.

As you get started, this job description doesn’t need to be one you’d post online as you search for great candidates. Instead, write the initial job description with the intention of clarifying your own goals for the position. The following steps can help you determine what work the employee will do.

1. Figure out your goals for the position.

An employee might take over some of your responsibilities so that you can spend more time on work that suits your expertise and that you enjoy. For example, if you want to stay focused on design, marketing, and sales, perhaps you’d like an employee who can handle administrative and support tasks.

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On the other hand, an employee with a different technical skillset than yours might enable you to expand the types of websites your business can offer. If you don’t have a strong business background, perhaps you’d like someone with the skillset and connections to help you grow your client base, market your services, or expand into a new niche.

2. Outline the employee’s broad responsibilities.

For example, if your goal is to get help with administration and support, list all the tasks that you’d like the person in that role to do, such as invoicing clients, paying vendors, tracking and resolving technical support emails from existing clients, tracking whether clients have sent or received files needed, scheduling meetings, making sure contractors have the files or materials needed to keep projects on schedule, and so on.

If you have any long-range projects you’d like this person to handle, such as starting an email newsletter to keep in touch with clients, list those projects, too.

3. Determine how much time the employee will spend performing the different parts of their job.

In this step, your goal is to refine your understanding of the employee’s day-to-day responsibilities and how many hours of work those tasks entail. For example, you can estimate how many hours per day, week, or month the employee does each task on your list.

Tip: If you track your hours, you can use that information to specify an estimate for your employee. If hourly estimates seem arbitrary, I recommend tracking your hours for a week or a month so that your time estimates are grounded in reality.

Estimating the time each task requires has several benefits. When you advertise the job, you’ll be able to communicate what the job will be like on a day-to-day basis, such as 50 percent of the employee’s time supporting existing clients, 25 percent supporting vendors, and 25 percent handling other administrative tasks. You’ll also clarify whether you need a full-time or part-time employee.

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Can your business afford an employee?

Before you hire an employee, you need to make sure you have the revenue to support both yourself and your employee. Although this question of whether you can support someone else’s salary doesn’t always have a clear-cut answer, here are a few considerations to help you recognize whether the time is right.

How will the employee help your business make money?

Typically, an employee does this by supporting your business product, creating products, or marketing products. An employee who helps with administration and support might free up your time so you can take on more clients. An employee who creates websites might enable you to expand the website services you offer and thus attract more or larger clients than you currently support. An employee who maintains your business website, builds your email newsletter, and promotes your services might connect you to new clients or revenue streams.

Tip: Setting goals for how much money these roles will make can help you determine whether the costs associated with an employee are worth the expense of hiring someone full- or part-time.

hire-first-employee-goals Photo credit #WOCinTech Chat

How will the employee save the business money?

This question can be a little bit easier to answer, because you know your current expenses and can compare those to how much hiring an employee will cost. If you frequently rely on a contractor to help you build websites or for other services, you’ll likely save money by hiring that contractor as an employee instead, because employees are typically cheaper per hour than contractors. (Of course, your contractor must be excited about the idea, too.) Similarly, if you spend a significant chunk of time on administrative work, an employee might be able to do this work for a lower hourly rate than you charge clients. So you can save money if you can bill the time that you’d spend on administrative work to client projects instead.

At Entrepreneur, Raymond Grainger says you can determine whether you can afford an employee by analyzing your bookkeeping: “If the billable time of current full-time employees is at or above 85 percent and the profit margins are at least 50 percent, those are good indicators that the company is ready to add another full-time employee.” What the heck does that mean?

In this case, you are the full-time employee. To determine whether your billable hours are at or above 85 percent, you need to track your billable hours as well as the hours you spend running your business (for example, tasks like creating client proposals that don’t result in billable work, keeping up with your email, maintaining your business website, and bookkeeping). Then, divide the number of billable hours (such as 1,270 hours for the year) by the total number of hours you worked (such as 1,500 hours) to get the percentage, like this:

1270 ÷ 1500 = 0.846

In this example, if you round up, the billable hours are right at 85 percent. Awesome. But how do you determine your business’s profit margin?

  1. For a given period of time, such as a year, add up how much you made (sales) and your costs (your expenses for web hosting, software, and so on, as well as your owner’s draw). For example, say you made $80,000, but you’re a frugal business owner whose expenses were only $33,600.
  2. Plug those numbers into Bankrate’s gross profit margin ratio calculator.
  3. Convert the ratio into a percentage. This conversion is easy. The example numbers in Step 1 generate a ratio of 0.58:1. That means your business has a profit margin of 58 percent, so you can hire away.

Tip: After you look at your business’s numbers, you may decide that now isn’t the right time to hire an employee. Waiting is a smart move if you can’t afford to support an employee. If you’d still like help expanding your business, you might consider finding a partner or hiring subcontractors instead.

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Preparing to make a hire

If you find out you are ready to hire someone, you want to stay on the right side of employment law and make sure you fully understand how to handle taxes. In the U.S., the SBA guide for hiring your first employee is a fantastic resource. The guide walks you through all the steps for withholding taxes, getting worker’s compensation insurance, following labor laws, and keeping adequate records.

Before you start scheduling interviews, you also want to set up your bookkeeping system to process payroll. You can do this yourself or hire an outside service to handle payroll for you. If you have an accountant, their office may offer basic payroll services, and using your accountant’s payroll service may save you a little work collecting payroll information when your accountant files your annual tax return.

Last but not least, you need to revise the job description you created into a description that you can share on your business website and anywhere else you’d like to advertise the position. Be sure to share the open position with your network via email, LinkedIn, and other social media sites where your business has a presence. If you use Behance or Dribbble, these sites’ networking tools can be a great resource for finding people with web design skills.

Although hiring your first employee takes substantial up-front work, you’ll appreciate the confidence that work will give you as you grow your business and bring your first employee on board.

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