If you intend to grow a successful business, you will most likely have to hire employees at some point. This is not to say that you can't have a successful business without employees, but you will definitely reach the limit of what you can handle by yourself.
If you do decide to hire employees, you will most likely face the dilemma that many small business owners encounter... where do you get the money to hire? Oftentimes, when you are a small business, your business will support your personal financial needs (if you are good at being in business). However, it is challenging for your business to support both your needs and the investment needs of the business in the form of employees.
It is really a catch-22 when you go to hire. You typically reach a limit in your business of what you can do by yourself. You need to hire, but you can't afford it. So what do you do?
I'm going to focus my thoughts on the typical small business that is trying to transition from solo-operator to an employee-based company. I'm not talking about the next big startup here with intentions to go public. If you are a startup looking to hire, you have options. For the small business looking to bring on its first employee, here is my advice on how to hire without money.
Create Predictable Recurring Revenue
One of the best things you can do to support hiring is to create predictable and automated recurring revenue. This would come in the form of automatic weekly, monthly, quarterly, or annual revenue.
In order for revenue to be both automatic and recurring, it must flow to your business without any interaction from your customer beyond the first touch. What I mean is that a customer should authorize the recurring charge just once and then the income should flow to your business automatically per the schedule laid out in the contract.
In order to automate your income payments, you will need a signed engagement and payment authorization form. Therefore, you will have to accept either credit card payments, bank ACH, or both. Checks would not be considered automated since you are leaving the flow of cash in the hands of your customers and you also have the manual process of depositing the checks in your bank (either in person or via online picture imaging).
I see a lot of business owners make the mistake of not accepting credit cards because of the merchant fees. This is a huge mistake because it does not support a healthy cash flow, which can cripple your business. I suggest that you consider this when setting your fees. Do you really think any one will care if your price is 3% higher?
Automated, recurring revenue will create a business environment that supports both scaling and hiring.
Have A Sick Marketing Crew That Creates Leads
The next thing you will need is a marketing person or team who can create predictable, qualified leads for your business. Some of those leads will become customers, which will eventually increase your recurring revenue.
It is extremely important to know your ideal customer and have your marketing efforts target only those types of companies or individuals. You don't want to market to every potential customer, only those who are a good fit for your product or service.
Will these targeted marketing efforts disqualify some potential customers from working with you? Yes, and that is exactly the point. You only want to work with customers who are ideal for your service.
Remember, it is the marketing department's job to create qualified leads, not just a bunch of random leads that don't convert to customers.
A Sales Team That Converts
The next thing you need is a sales team who can convert qualified leads into customers. If the marketing team is doing their job of sending qualified leads to sales, then they should be making the sales team's job easier; not simpler, but easier.
Converting a qualified lead into a customer is not accomplished by tricking them, it is done by helping them.
Sometimes, you may face a challenge if a blame-game finger-pointing match breaks out between sales and marketing. Sales will blame marketing for sending them crappy leads and marketing will blame sales for not doing their job of converting leads. This is called a sales and marketing misalignment. It can happen, but is unlikely in a small business environment. If you do find yourself facing this challenge, dissect the issues to determine a resolution to move forward and keep sales coming in.
Forecast The Future And Then Act
My last piece of advice is to forecast your small business financials several months out into the future. This is a critical step that many business owners fail to take when they are hiring.
Forecasting your financial future will give you a look at what your bottom line will look like if you do decide to hire. First, start by creating a financial forecast of your profit and loss. Then add in the burdened costs of hiring a new employee at what you feel is the optimal time. You want to consider salary, taxes, benefits, equipment, and any other costs related to hiring that employee.
Next, you can take a look at the bottom line of your business to see if hiring an employee is both possible and attractive. You may look at the forecasted figures and not like what you see. It may not make sense from a cost/benefit viewpoint.
If you do like what you see in your forecast, then take a look at your cash flow position. Will you have the cash necessary to make this new hire? If not where will that cash shortage come from? Owner pay? A line of credit? Personal savings?
You should follow this process each time you plan on hiring. A financial forecast can help you create a hiring plan and validate the decision to make a new hire.
But That All Takes Money...
This sounds great, right? The only problem is that it all takes money. And that is why, in the beginning, it is all up to you. If you are able to create automated recurring revenue without a team, then you can certainly do it with a team. I started with the recurring revenue aspect because it is the foundation for the rest of the process.
By building out recurring revenue, you are doing several of the key things in this process. You will get to know and easily recognize your ideal customer. You will know how to market to that potential customer to qualify them as a lead. Finally, you will know how to convert that lead to an actual customer.
OK, you are up...
What are your thoughts on hiring for a small business when you don't have the money?