Experian is celebrating National Small Business Week by inviting leading influencers and thought leaders from the world of small business to contribute guest posts. Today Ebong Eka, Corporate CPA, Speaker and Business Expert shares some best practices for finding ROI when hiring an employee.
It’s National Small Business Week and time to honor the millions of businesses started by entrepreneurs who stay up late for the opportunity to live the American Dream.
If you’re an entrepreneur, self-employed, freelancer or solopreneur, you’ve probably asked yourself the following questions when you were exhausted at 2 am:
1) Can I actually afford to hire an employee?
2) Won’t hiring an employee cost a lot of money?
3) Aren’t I too small of a business to have an employee?
Remember the saying, “it takes money to make money”? That’s partially true but in this case every dollar you spend in your business should yield a return. In other words, if you spend $1 of expense, you should expect $2, $3, $4 etc. in income or revenue.
So how does a small business owner determine the “Return of Investment” on hiring an employee?
If I had a dollar every time I heard “I can’t afford to hire an employee yet because my business is too small!”….well you know the rest. The difference between a solopreneur and a business is the ability to grow or scale.
Your business can’t grow, if you as the business owner are doing the sales, fulfillment, customer service, website and everything else under the sun.
In my experience, many solopreneurs and small business owners don’t hire employees because they believe doing so will cost more money than their business would earn. There can be catastrophic consequences and negative financial implications if you make a mistake in the following areas:
1) Recruitment
2) Retention
3) Expansion
1) Recruitment
Recruitment of talent is one of the biggest challenges small businesses consistently face. Hiring the wrong person can be costly because it can damage your sales process, product/service delivery and overall productivity of the business.
Pro Tip #1:
Visiting websites like Upwork or Freelancer is a great way to find a great employee, save money and see reviews of their past work.If you want to hire someone locally, ask the perspective person if they understand the job description and responsibility. Then give them a small project to start.
2) Retention
Whether you’re a traditional business or a solopreneur, it costs a lot of money to not only hire but keep employees. One of the biggest challenges I’ve seen with clients who’ve hired me to speak to their sales teams or employees is employee retention/empowerment. It’s a problem, but if done correctly you can have inspired employees that will work hard to increase your bottom line!
Pro Tip #2:
Believe it or not, money or higher wages are rarely the problem for the employee. Your employee feeling a lack of significance is the bigger problem. One tip is to ask an employee for feedback on the best way to perform a task. That increases the employee’s feeling of significance and increases the revenue for your business.
3) Expansion
If your business isn’t growing, you may be going out of business. The same questions you’re asking yourself at 2 am can be alleviated by hiring an employee, whether in person or virtually. For every $1 I spend, I expect a return of a multiple of that amount…in some cases as much as $10 in revenue.
Pro Tip #3:
Before hiring an employee, identify what that employee will be doing and make sure that task has the potential to yield a return in revenue for your business.
If you want to grow your business, hiring an employee is an important part of your growth. Legendary business mentor and expert Jim Rohn said “If you do the right thing at the wrong time, you get pain!” In other words, there are financial implications to every decision you’ll make in your small business. However, hiring an employee will cost your money in the short term but the investment will yield a great return in the long run.
Ebong Eka is a Certified Public Accountant, keynote & TEDx speaker, small business and pricing expert who regularly appears on MSNBC, Fox News, Fox Business Channel, NBC, Arise Television, China Central TV America, Huff Post Live and CNN. He is also a Huffington Post Small Business Blogger and Office Depot blog contributor. Ebong is also the author of the bestselling book, “Start Me Up! – The No-Business-Plan Business Plan”, published by Career Press.