Today’s podcast is all about hiring – when to hire, who to hire and how to bring on team members that aren’t directly generating revenue.
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As a solopreneur, when you’re trying to build a business, you’re wearing a lot of hats. In the early phases, when you’re just starting to create revenue, subcontractors are a great way to get tasks done without investing in a salaried position. Always focus on creating revenue before hiring.
Once you’re moving in the direction of bringing on a full-time team member, for me, it comes down to looking at either a sales person or an assistant. A sales person will cost justify immediately. If they sell something, you pay them. If they don’t sell something, you don’t pay them. It’s not a fixed expense. Now, here’s the flip side, what if you are the great sales person and don’t have enough time to do everything else? That’s when you bring on a administrative person. When the administrative stuff is off of your plate, you’re freed up to bring in more revenue. Make sure you’re just not covering their salary with the extra revenue, ideally the extra time will allow you to generate two to three times what you’re paying in salary.
From there, when it comes to hiring an accountant or graphic designer or marketing person it all comes back to cost justifying the position.
Accounting: I’m of the philosophy that in the beginning you do all of your own accounting so you understand the P&L process. As you grow and have a lot of receipts or invoices, utilize a small business book keeper that specialized in accounting and tax services. Later on, when you’ve got team members generating outside expenses and using debit cards, etc. then it might be time to bring on a salaried accountant. Make sure that person doesn’t just understand the books but understands the P&L process. When it’s time to hire a CFO, this absolutely has to be someone that’s experienced and can show your team how to win and take the business to an entirely different level by guiding and leading. At this time, you’d have around 40 people on your team and would be generating at least a million dollars in net profit.
Human Resources: You’re not going to hire an HR person early on. I want you doing all of those interviews and as you hire leaders, they can do the interviews and get with you towards the end of the process. A big piece of HR is creating culture. How do you establish your companies culture? How do you make sure you’re bring on someone with the right culture? Force the culture that you want or your new hires will bring the culture from their last organization and force it on you. When you’re generating half a million dollars in net profit, that’s when it’s time to start looking for a salaried HR person. If you’ve got plenty of revenue, bring on a rockstar. This is someone who has plenty of experience and can show you how they’ve brought success people into businesses and helped grow leadership.
Here’s a recap of the whole process, from start to growth:
- Start with subcontractors so you’re not bringing on full-time hires.
- When it’s time to bring on a team member ask yourself, “What is the most important role I can bring on that’s going to create more revenue and cost justify itself?”
- If it’s a sales person, they must cost justify themselves. If it’s an admin person, you’re freed up time will cost justify their fixed expense.
- Make sure you’re adding people according to your needs.
- Non-revenue generating positions must always cost justify. You need to have plenty of revenue so you can watch and make sure you’re doing the right thing for the business.
- Later on, start bringing on heavy hitters that will explode your growth.
Question: What are your hiring questions?
7 thoughts on “42 | Knowing When and Who to Hire”
Very practical episode! I like the trigger points for knowing when you need fill a given position.
My question is: $1 millon in PROFIT(!) before I get a CFO?
Whoa! That seems like a long time to wait before getting the right financial person on board.
Ken, I haven’t had a chance to listen to the episode yet, but in the blog post he said you’d generate at least a million in net revenue. Did he say profit in the episode?
Hey Ken, I say that because I’m not wanting you to hire a 40K CFO. When it’s time, I want you to get someone who is phenomenal. A high quality CFO should be able to create money through their position.
$1 Million isn’t scientific by any stretch of the imagination. If you want to spend that money sooner, and it will create more revenue than it costs you, go for it. Does that make sense?
Definitely makes sense. The idea is to have enough going on that you can afford someone who capable of a huge impact. Totally agree.
Also wanted to mention that I loved the idea of HR leading the growth and development of the leadership team. Great stuff!
P.S. As Joel mentioned, in the written post the “million” and “half a million” are revenue vs. in the podcast it’s profit.
Ah! Now I gotcha!
Excellent podcast, Chris and on the point. I’m a strong believer that as a solopreneur you should be very careful with the people you work or cooperate with and, if you can, you should be able to communicate effectively with them (not only on business terms) in order to form a common understanding of things (culture, would be a very heavy word!) you have to handle together!
I find your process excellent, but I would squeeze in your steps and some time for on-the-job training and for relationship building! It is essential for small groups and especially when the work from a distance.
Thank you for sharing, Chris.
Fantastic. Hiring is so important – in Valve’s (a software company) employee handbook, interviewing and hiring a new team member is described as “the most important thing you do here” – and this is coming from a company that makes video games!