How to Know When to Hire Your First Employee
Michael Gerber has a great little play-by-play rundown of what goes through most entrepreneur’s minds when they hire their first employee in his book The E-Myth. It goes something like this:
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“There’s a critical moment in every business when the owner hires his very first employee to do the work he doesn’t know how to do himself, or doesn’t want to do. In your business, Harry is that person. And this Monday morning is that critical time.
“Think about it.
“You’ve taken a big step. The books are on Harry’s desk now rather than yours.
“And what’s more, Harry is about to become the only other person in the whole world who knows the real story about you and your business.
“Harry is going to take one look at the books and know the truth.
“Harry, your very first and most important employee, is about to find out a secret you’ve been hiding from everyone lese in your life: that you don’t know what you’re doing!
“The question is, what’s he going to do about it?
“Will he laugh?
“Will he cry?
“Will he leave?
“Or will get to to work?
“And if Harry won’d to the books, who will?
“But suddenly you hear the quiet, systematic clattering of the calculator’s keys from Harry’s desk.
“He’s working!” (Gerber 45)
Hiring your first employee can be quite frightening indeed. Part of that is just a fear of the unknown and the fear of making a mistake or “being exposed.” But part of that fear is also that it’s difficult to know exactly when the right time to hire your first employee is. This article won’t be about how to hire (for that, see here), but instead will focus on figuring out when to take the hiring plunge and what alternatives you may want to consider.
When NOT to Hire Your First Employee
Unless you’re coming at real estate investing with a large sum of money and/or a partner, you will want to start off doing most of the work yourself. This not only reduces your costs up front, but also allows you to learn the various parts of the business. One essential thing to have when managing employees is a decent knowledge of what those employees’ jobs actually entail.
But there are other reasons that it is not necessarily wise to hire an employee, depending on the circumstances. Neil Patel with Entrepreneur.com gives two important ones:
- “You’re desperate. Often, a hiring decision is made in the heat of a stressful moment. You have more work than you can humanly handle, and you just need to get another body behind a desk. A hasty decision born of desperation is rarely a good one.
- You don’t know exactly what you want the new hire to do. Another mistake involves realizing you need help, but not knowing exactly what that help is going to look like. Unless you have a defined set of responsibilities and expectations for your new hire, do him or her a favor and don’t hire anyone. A new hire at this stage will rightfully be confused and ineffective. So, instead, hire a coach, not an employee.”
Doing almost anything out of desperation is a bad idea and bound to lead to a mistake. And it’s also important not to hire someone without having a good idea of what you actually want them to do. Overly broad job descriptions usually lead to an employee procrastinating or being confused.
Related: Why the People You Hire Are the #1 Factor to Make or Break Your Investments
When It’s Time to Consider Hiring Someone
The key questions to ask yourself when looking to hire someone are the following:
- Is there something more productive I can do with my time than the job I would be hiring out?
- Does it make financial sense for me to bring someone on at this time?
- Does this job fall under a particular skill set?
- Is this another alternative to hiring someone?
The answer to question 1 is almost always yes. You are rarely going to be the best person to do everything. Almost no one is great at marketing for sellers, analyzing deals, negotiating deals, managing properties, doing the rehabs and the accounting all at the same time. That being said, if you’re on a tight budget or in the early going, it’s probably not worth the expense of hiring someone—at least not yet.
And as noted above, you will want that position to fall primarily under one skill set. For example, if you have enough accounting work to hire a bookkeeper, go for it. But it’s not a good idea to have a bookkeeper spend half their time on accounting and half on maintenance, or something else like that.
Oftentimes, you’ll realize that you need some help, but not a full time employee. At that point, you should consider alternatives.
Alternatives to Hiring a Full-Time Employee
The most obvious alternative is to hire a part-time employee. There are a good number of people, especially stay-at-home parents, who are looking for part-time work. Jobs like being a part-time bookkeeper or leasing agent make a lot of sense for them. And sometimes, these people can grow into full-time employees as the amount of work you need done expands.
Another alternative is using 1099 contractors instead of W2 employees. Obviously, this works in the construction field, but there are also third-party contractors you can use for maintenance, leasing, accounting, and other such activities. For example, there are leasing companies that will show your properties for you on a commission basis and maintenance companies that do maintenance for local landlords, but without you having to hire a maintenance staff. This is especially helpful for landlords with just a few properties who are managing themselves. If you only have a handful of properties, you won’t have the volume of work to justify hiring a maintenance technician full-time. While you can use contractors for maintenance, their availability may be spotty. So these types of firms can be very helpful.
Related: 4 Steps That Prove You Can’t Afford Not to Hire Your First Employee
And, of course, you can contract out property management altogether.
Finally, for many jobs, virtual assistants are something you should look into. With technology these days, people across the world can work for you, and many of them will only charge a few dollars an hour. Popular platforms like Upwork allow you to set the wage and hours a freelancer can work for you. Then you can assign them all sorts of projects, from finding lists to data entry to transcribing notes to whatever. It’s definitely worth considering whether the job you require can be done with a full-time or part-time virtual assistant before looking to hire.
As you expand, you will eventually need to hire an employee. This is a scary step but a critical one to ensure further growth. It is essential to know the right questions to ask yourself as well as potential alternatives for figuring out when that time arrives.
How did you know when to hire your first employee? Or if you’re considering hiring now, what factors are you weighing?