The easiest and most risk free way to start a business is to base it at home and do all the work yourself. Many successful firms started that way and grew organically; funding growth from increased sales rather than by borrowing cash.
But for some businesses starting up it’s virtually impossible to get going or grow without employees of some kind.
If you want to open retail premises and need to stay open seven days a week to keep the revenue levels up, you will soon find yourself burning out if you never have a day off. And you may even lose custom; some shoppers might not be prepared to wait long if you are already serving a customer. Or worse – if you’re so busy serving customers you don’t have time to order stock; your business will soon lose valuable sales.
These kinds of businesses tend to be pretty expensive to start anyway, what with the costs of renting retail premises, fitting them out and getting enough stock in.
So what do you do when you need people but don’t have any money to employ them yet? It’s not an ideal situation, but there are options open to you. Bytestart examines the different routes you can take and the pros and cons:
Don’t hire till you have the work
Financially, the ideal time to take on a new employee is when the work has already been generated for them. However, this can place a great deal of stress and increased workload on you and your existing staff. Finding you are tired all the time or losing a key person who can’t cope could do more financial damage in the long-term.
Employ someone to generate revenue first
So if you can’t afford to wait till the work is there, then make your first employee someone who will bring work in. This might be a sales person, or maybe a product person who is more customer focused and can improve retention rates. Ensure you hire someone with this goal in mind and set clear targets for them, so they contribute to your business rather than being just another cost.
Be aware that a new sales person will normally take a few months before they start to generate revenue. And sales people tend to have high expenses in phone calls or travel costs, so ensure that the figures add up. Can they sell enough of what you do to cover their costs and still contribute a nice chunk of revenue to the business?
Use casual workers, temps, part-timers or freelancers
If you need a pair of hands to help out, then don’t assume that has to be full-time help. Casual workers can be very useful for your business to cope with a rush of work, seasonal demand or if you just a bit of help now and again. Be aware that casual workers may be unskilled and temps through agencies can be quite expensive.
Part-timers are the ideal way to get the same person helping out regularly without a massive commitment. Freelancers will normally already have the skills you need, and will work with you for an agreed period of time, which you may be able to extend if demand continues.
At home parents
A huge potential source of talented workers is parents who have given up their career to bring up children. As long as your business can fit around nursery or school times, you can often get skilled people at a very good price. The right person will be focused on getting their work done in the six working hours of their day and may be particularly efficient.
Parents working from home may also be able to work some evenings for you. The other benefit of working parents is loyalty – if your business can be flexible to their childcare needs, they will reward you with immense loyalty.
This can be a tough one to pull off correctly – look at how many charities are desperate for voluntary help. But if you operate in an industry with a oversupply of workers you may be able to attract students or other wannabes to gain valuable work experience. Remember you need to give something back. They will expect to learn skills, and probably have expenses reimbursed.
Pay on performance
This is commonly found in bottom level sales positions as it removes many of the risks of hiring people. Employees are given a low basic salary, and then a generous unlimited bonus based purely on their performance. It’s low risk for you, as you don’t have to pay out until you get results. However you may struggle to hire non-sales people on this kind of basis.
You will also find anyone with a track record can get a good basic plus a bonus elsewhere. And employees who are paid on performance will soon figure out every loophole they can to boost their figures, at your expense!
Give some of the company away
This is the most extreme way of getting help on a budget, and one to be approached with caution. Some ambitious employees may be willing to accept a lower salary in return for a percentage share of the company. This encourages them to work productively as they will get some of the profits, and will get a windfall if the business is sold.
However, you need to be careful not to lose control of your own business. Have clear legal agreements in place about what happens to their share if they leave the business. Another option is to take on a business partner to work alongside you. Just don’t think of them as an employee, as unequal business partnerships rarely work.
Last updated - 29th September, 2017