As you imagine and plan how to grow your business from an idea into reality, it can be hard to envision the day when you will expand your team, hiring employees who will actually carry out the work and mission of the business.
But employees are a company’s most important asset, so establishing a hiring strategy from the very beginning will help ensure your business’s success. Understanding the necessary consideration when you’re hiring your first employee from the get-go lays a strong foundation for your company and helps you avoid rushed hiring decisions as business and staffing needs expand.
While the nitty gritty details don’t need to be presented to potential investors and partners in your formal business plan, a brief company overview including your hiring projections and roles needed demonstrates that you have thought through all elements of your business.
Beyond what is in your formal business plan, it is important to understand the practical and financial impact of hiring employees to determine when hiring is possible or necessary. Understanding employment law and developing interview and management skills takes time as well, so rather than rushing through when it’s time to hire your first employee, begin this process at the start of your business venture.
Understand legal employer requirements
Learn your obligations
Employers are subject to federal, state, and local regulations that you really need to understand to avoid legal or financial consequences. Understanding these from the beginning will help you establish your hiring timeline, determine your financial obligations to employees, and ensure your business is compliant from the beginning. Employers are also subject to labor law and work environment rules and regulations, which should be reviewed early on (and at least annually) to ensure compliance.
Be aware of how wider legal trends can impact your business. For example, GDPR has an impact on anyone who collects customer information. Even though it’s an EU law, companies around the world have to comply if they want to continue to do business with customers in the EU.
File the right paperwork
Steps like obtaining a federal Employer Identification Number (EIN) may take time, so anticipating when you will need to hire workers ensures you begin that process in a timely fashion. Other important paperwork includes paying unemployment taxes, and, for most U.S. employers, obtaining workers’ compensation insurance. These and other employment laws may vary state-to-state, so be sure to research your obligations based on your location.
Also consider the time it will take to implement a payroll system, and the state and federal requirements for reporting and collecting employment tax. Look in the “human resources” section of this startup tools guide for some recommendations on payroll tools to consider.
Determine whether your finances can support an employee
More important than the timeline, however, is the financial impact of employees on your business budget. Employer tax and benefit requirements differ depending on whether a worker is an employee or an independent contractor.
Review the differences between the two to determine what best fits your business, and use this in your budget calculations. The number of employees in your company can also affect what benefits you are required to offer, such as workers’ compensation, health insurance, or the Family Medical Leave Act (FMLA). Don’t forget to factor in direct hiring costs like the fees to post ads on job boards.
Outline employee benefits
Once the basic employer obligations are established, define or outline any additional benefits you will offer, such as employer contributions to health insurance or retirement accounts, and include this cost in your employee budget.
If you’re a startup looking to scale quickly, you might consider offering company equity in lieu of a robust benefits package—this guide can help you weigh your options. These kinds of additional perks are much easier to change based on the financial reality of your company is at the time of hire, but including them in your budget can help you get closer to your ideal company culture.
Create initial job descriptions
Outlining a staff structure is an essential part of any business plan. It’s important to look closely at your own skills, and what skills other people will need to bring to your endeavor.
While potentially difficult to do at the outset, take some time to go beyond a staff hierarchy of titles and create job descriptions where possible.
These descriptions could also be profiles of your ideal person for each role: what experience they should have, what skills they should bring, and what responsibilities they would take on. This exercise will help you solidify how you’re thinking about the gaps and roles that need to be filled. It can also help you identify potential candidates within your network and build relationships with people who may be interested in working with you when the time comes.
Identifying key roles will also help you determine the order in which you will need to hire people. Perhaps your first hire needs to be an executive assistant to help with daily logistics, or a marketing professional to evangelize the business and drive interest. These should line up with your business priorities and action steps for executing your business plan.
Remember that not all of this information needs to be presented in your formal business plan. A staffing structure and acknowledgment of skills gaps are important for investors and partners to see, but detailed job descriptions, ideal candidates, and other extra material is for your internal preparation and planning. Some of it may be appropriate to include in a business plan appendix but do not expect everyone to read it.
Outline a hiring process
Understanding employer obligations and personnel needs is just one piece of the puzzle. While those help flesh out the financial pieces of your business endeavor, developing an outline of your hiring process will help establish a timeline.
Develop an ideal hire date and work backward to understand when to begin the process and post jobs. Since there are many important components to the hiring process, it is important to begin earlier than you think you need to so you can allow for any delays or snags. You want to be in the best position to evaluate candidates—not so desperate that you hire the first person that walks in the door.
To attract a sufficient number of applications, keep the job posted for at least two weeks. Having job application information on your own website is beneficial for applicants to do their research, but to advertise your job to a wider range of prospective employees, post the job on major job websites such as Indeed, Monster, or ZipRecruiter. Depending on your industry or region, posting the job on more niche sites may help with the initial filtering of applications. From there, you will need to determine the steps of your hiring process.
Phone interviews: Some companies conduct an initial phone screen to minimize the time spent on lengthier in-person interviews.
In-person interviews: Decide if you’ll accept applications from long distance applicants. Get clear from the start on if and how much you’ll cover in terms of interview travel costs for your top candidates.
Employment screening: Reference checks and background checks are standard across companies, but usually, the first elements to go in a rushed hiring process at small businesses. However, these kinds of checks can be crucial in protecting your business and ensuring the best possible hires, so plan ahead to allow time. In all, you should plan to post a job at least four weeks before you expect to need the assistance.
Lay the groundwork early
It can be useful to start thinking about how to establish the policies and procedures that will guide your hiring process from the beginning, at the same time that you’re writing your business plan. Brushing up on management skills, determining essential interview questions, and developing a policy for required employment screening are all ways you can get ahead of the game while you wait for the final pieces of the puzzle to fall into place.
It will help you think ahead and identify opportunities for growth and how you’ll fill essential roles as you go. Detailing every step of your hiring process to potential investors is unnecessary, but doing the research before your business starts growing exponentially will save crucial time when you feel like you can’t wait another day to make a hire.
Take the time to understand employer obligations, outline job descriptions, and create a hiring structure to lay a strong foundation for your business.
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