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Hiring Your First Employee

There comes a time when every entrepreneur can't do it alone anymore. Is it time to find your first employee?

"Good luck," your boss said, clapping his hand on your shoulder. Then the big cheese was gone, and you looked down at your desk. And there it was. Your employee handbook.

If you've ever worked for another company, you probably remember it. You barely glanced at it, but if you had a question, there was your manual, ready to solve all your problems-from what to do with your 401(k) to where to park your car.

But now you're the big cheese, and you're likely the one with all the questions about the hiring process. So where's your employee handbook? Exactly. There isn't one. Luckily, in the following pages, we've put together most everything you'll need to consider when expanding your business beyond yourself. It's the closest thing to a handbook you're likely to get.

Good luck.

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."

Finding Candidates

Medley put an ad in The Indianapolis Star and found three job candidates. He recalls the interview he had over lunch with his first hire, Mike Bankert, who, five years later, is still with the company and now on salary. "I played up the company like I knew it was going to grow," says Medley. "I gave him my vision, and I think he believed it."

If you're going with an ad, be logical in deciding where to place it-whether you decide to post it on or in your local newspaper. "Pretend that you're looking for this job, and then select [your placement] that way," suggests Arlene Vernon, owner of HRx, a human resources consulting firm in Eden Prairie, a suburb of Minneapolis. She's been helping small businesses with their human resources needs for more than 25 years, and she's often found good employees for her clients through the newspaper classifieds.

But if you don't have to hire somebody this minute, she recommends trying to find an employee through word-of-mouth. "Go to industry meetings," she suggests. "Hopefully, you're already doing that anyway, and as you're talking to people one-on-one, mention that you're looking for somebody to hire. Ask 'Who do you know that would be interested in a startup?'"

Mentioning that you're a startup is important, says Vernon, because certain personalities work well with the unpredictable nature of a new business, while others don't.

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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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