Now Hiring

What to Pay

It should be obvious, but here goes: Pay what you can afford.

Jeff Medley, 35, offered his first employee $10 an hour, with no benefits and no cubicle--just a chair and a table in the den of his house. Today, Medley's Indianapolis business, Netfor Inc., has 21 employees and 100-plus contractors nationwide--all with the goal of offering franchised businesses computer technology support. His company's sales, which have grown steadily every year, will clear $2 million this year, and his roster of clients includes such big names as Mail Boxes Etc.

And what did this new employee think of Medley's job offer, seeing that it had no benefits? "He was OK with that, because when I hired him, I made the promise that benefits were forthcoming, and they were," says Medley, who launched his business in 1995. "In 1999, we got benefits, and now we have one of the best benefits packages in the city."

Paying his employees a modest salary was also the approach 47-year-old Paul Storfer took in 1995, when he launched his Purchase, New York, human resources firm, HR Technologies: "In some cases, people would self-select themselves and say 'I'm not sure I'm a good fit for you,' but in most cases, we were able to establish a salary that everybody felt was fair."

"Salary is always where most [job applicants] fib," observes Barbara Bruno, who runs HR Search Inc., a Chicago employment agency. "They always quote a higher price than what they'll actually take."

But the bottom-line rule of hiring somebody is that your company has to have enough money coming in. Cash flow--more than cash--is crucial to hiring your first employee, says Mary Wong, a principal and managing partner of HRizen Solutions LLC, a Houston human resources and consulting firm that specializes in helping emerging entrepreneurs. "I dealt with a start-up venture that had a lot of initial venture capital--several million dollars," recalls Wong. "And they thought 'Let's go out and buy computers and phones and 10 sets of desks, and let's hire 10 people to fill them,' but there was no cash flow. As you know, that's probably the number-one killer of a business, and they immediately had to lay off three-fourths of their staff."

Geoff Williams has written for numerous publications, including Entrepreneur, Consumer Reports, LIFE and Entertainment Weekly. He also is the author of Living Well with Bad Credit.

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This article was originally published in the November 2002 print edition of Entrepreneur with the headline: Now Hiring.

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