Quick note before we dive in:
I'm hosting a free online workshop on Buying a Franchise vs Starting a Business on Monday, June 2nd at 2:30pm EST.
We'll cover the pros and cons of franchises, who should consider one, success stories, failures and more.
RSVP here.
--
One of the mistakes I’ve made again and again is waiting too long to hire for a critical position.
When I first started Storage Squad in 2011, my partner and I did everything. We drove trucks, invoiced customers, answered the phone, leased the warehouses, rented the equipment, answered emails, called every upset customer, and more.
We had no time to focus on hiring, training, selling new customers, marketing initiatives, or any of the important, high-leverage things that would have grown our business.
We didn’t have time to expand to new regions or chase talent. We didn’t understand that hiring overseas was even a possibility, and we couldn’t afford a full-time, U.S.-based employee for more than $40,000 annually. So we did it all ourselves.
Our business was doing okay because we had tapped into a proven opportunity, and we had cash flow—but I talked myself out of making more hires than I care to admit.
“We don’t need to outlay the capital for this,” I thought. “I’m not sure we have a full-time job yet. I can just keep doing these tasks myself. We’ll have more money at the end of the year if we spend less money on people.”
Don’t do this.
I’d end up pulling the trigger eventually after a lot of unnecessary stress. Then, a week after making a hire I was sure we didn’t need and couldn’t afford, they were already adding so much value that I wondered how I had lived without them and kicked myself for waiting so long.
If you’re spending too much of your time doing the work required to actually keep your business running, it is time to hire.
If you’re spending too much of your time doing work that you could pay somebody $20 an hour to do, it is time to hire. Today.
Basically, whenever you find that you are the bottleneck keeping your company from growing, it’s time to hire.
Obviously when it comes to life or business, there are no perfect answers or steadfast rules.
Every situation is different. It requires a bit of figuring it out as you go.
It requires a lot of practice.
It requires making mistakes and changing course.
I’ve hired hundreds of people in my life. Many of them have worked out. Many of them haven’t.
But here are the best practices, tips, and strategies that I’ve developed over the years for you to learn and apply.
The First Hire Is the Hardest
Trusting somebody with your business, your livelihood, your customers, and your reputation is scary.
What if they mess up? How can I afford them? When is the right time? What do I pay them?
These kinds of questions will keep you running in place... forever.
One of the biggest myths of running your own business is that you have to do every job yourself for as long as you can take it.
It’s a ridiculous badge of honor among entrepreneurs, but at a certain point it becomes too much. And more importantly, poor customer service and missed calls impact your bottom line. Good enough ends up not being good enough. Before too long, things start to break.
In my mind, there are three types of hires:
The administrators who do repeatable tasks on a computer. They answer phones and send invoices. They handle the bookkeeping and keep things organized. They send emails and create proposals.
The technicians who provide service to your customers. They do the day-to-day work. Many times they are manual laborers in home service businesses, or they work remotely in a lot of agencies or companies.
The managers who are the glue that holds it together. They make decisions on the direction of the company. They explore
new initiatives and drive growth. They lead people. They set employee schedules. They interview, hire and fire, and make key decisions operationally. They are the highest paid and hardest to replace.
It almost always makes sense for the first hire to be either an admin or a technician while you, the owner, free up time to do more high-level work.
An example:
My friend runs a consulting business, and she was working more than fifty hours a week, struggling to keep up with invoicing, customer service, collections, and other simple tasks while also providing her core service, sales consulting.
She couldn’t handle more business, because she was spending way too much time on administrative work. Answering emails, sending invoices, scheduling meetings, sending recaps and takeaways from her calls, etc.
Her first hire was an admin assistant from the Philippines for $800 per month to help with client scheduling, emails, travel booking, billing, and more.
She bills her clients more than $300 per hour for her sales consulting. An expense of $800 per month allowed her to bill an extra five to ten hours per week with ease and actually work less. This hire changed her life.
For me, my very first entrepreneurial endeavor began when I was thirteen years old and I hired my first employee when I was fourteen.
My father helped me secure a lawn-mowing job in Tell City, Indiana, for his boss, who owned a lot of retail and apartments in the town.
He sat me down at the kitchen table and set up a lease program on the family truck and zero-turn lawn mower so I could use both. I wasn’t old enough to drive, so the original plan was to pay my mom $10 per trip to town and she would drop me off and run errands.
The job was difficult in the Indiana summers. I cried on the first day in ninety-eight-degree heat.
I had several years of experience mowing the family lawn, so my father had simply dropped me off to do the job. But I mowed over about 100 pieces of trash and turned them into 10,000 pieces of trash by chopping them all into little pieces.
When my father came back to check on me half an hour later, I was mowing along and creating this disaster in real time. He pulled me aside and gave me constructive feedback and made me begin picking up the trash.
It took three hours. I cried and told him that I wanted to quit!
He put his arm around me and gave me a cold Gatorade. He very wisely told me I couldn’t quit until my first paycheck came. We got home after a long day, and I faxed an invoice for $120 to the customer.
A check showed up two weeks later. I was hooked from then on and haven’t had a real job since.
My mother got tired of our arrangement, so I was forced to hire a high school kid with a driver’s license and mowing experience.
I went to the high school hallway at Perry Central Jr.-Sr. High School and slipped a handwritten, copied flyer inside each of the two hundred lockers for juniors and seniors. The flyer said “Lawn Mowing Job. $12.50 an hour” along with my phone number.
I found a great employee quickly, and he turned three and a half hours of work into two hours and 15 minutes. With travel I could do the job door to door in three hours. I began to make real money— north of $40 an hour after all my expenses—at age fourteen.
I added more jobs and worked more hours as I got older but never grew beyond one employee. I went to college at eighteen years old with $40,000 in my bank account and owned my own paid-off vehicle.
Today, I own several businesses which employ 325 people around the world.
My companies will do more than $30M in annual revenue this year. It would not be possible without hiring and delegation which is a skill that I began practicing at 14.
It's never easy but it is the only way to grow.
Just look at any company that you admire and ask yourself one question:
Does the founder do everything by themselves or have they built a team?
It's obvious that hiring is the unlock for many of you.
A note:
Hiring employees is expensive.
As a rule of thumb, you want to be able to bill a customer two to three times what you are paying an employee to deliver the work.
That means $50–$75 per hour to make a healthy margin if you are paying an employee $20–$25 an hour.
It may feel like a lot, but between employment taxes, benefits, overhead, and lost time due to training, vacation, idle time, and travel, 2-3X is often the multiple to maintain healthy margins.
So back to lawn care as an example:
If you are paying your crew members $20 per hour, a one-hour lawn for two employees should cost a customer $80 to $120 per visit.
You might not think this is possible.
Why would anyone pay $120 for me to mow a lawn that takes two people one hour?
But they will. You have to build trust, show professionalism, and deliver a great service.
You can work on your sales and marketing to achieve this rate or get into a better business if it isn’t possible in your area in a certain industry.
Now I have an assignment for you:
I built a spreadsheet where you can experiment with the wage you should pay your employees, the price you charge your customers, and your profit margin when it is all said and done.
You can go to sweatystartup.com/wages, download the model, open it in excel or google sheets and play around with it.
Input what you charge, what you pay, and how long the job takes. Take some time to experiment and figure out exactly how much you need to charge a customer to operate at a 50 percent labor margin and a 30 percent overall margin.
You might be pleasantly surprised that you have the revenue to hire someone today, or you might be discouraged that you don’t. Either way, now you know and you can begin your journey of getting one step closer to the only thing that will allow you to buy back your time which is hiring a team.
--
A few posts to check out:
--
--
--
Onward and upward,
Nick Huber
.gif)
