When the life cycle of your small business means hiring people, the realization that you’ve grown something from a seedling in your house to blossoming into a bonafide company is exhilarating. It makes one want to proudly march out into their driveway with hands-on-hips and shout, “I did it!” Before you begin making all the risky mistakes entrepreneurs make when they start bringing people on board, let’s talk about the top 3 ones to avoid.
Chances are if you are at the stage of hiring your first few people, money is not exactly flowing at a pace that allows you to pay for talent at the top end of their field. You might want the latest Stamford darling, but he or she is probably working on their own thing anyway, so forget out them. You might be thinking about what would attract the kind of people you want to work for you, especially when the company is so new. That’s usually where the first risky mistake entrepreneurs make likely gets made; when they are trying to attract talent.
A Couple Risky Mistakes Entrepreneurs Make When They Want To Attract Talent That Will Cost A lot
To say that everyone does one of these is an understatement. It seems like somewhere there is an entrepreneurial playbook and these two are right in there as rites of passage. Don’t do these. Don’t. Do. Not. What you think you’ll save in cash flow could cost you much more in headaches, heartache, lost sleep, and even lawsuits.
They Freely Give Away Equity – If you are going to take on an investor (or 5) giving away equity is really just how it works. They have something you need in order to grow and you have something they think they can make money by investing in. It’s a win-win, but not without risk on either side. This is not necessarily so when it comes to giving away equity to anyone and everyone who you hire in place of real money.
There are a couple of reasons giving away equity, like free snacks in the breakroom shouldn’t be done.
- There are only so many slices of your company you can make before your share isn’t worth much and neither is anyone else’s.
- What you divide now out of your 100% ownership you are likely going to need to divide again. When that happens everyone gets unhappy.
- Working for a 33% share in a company you just know is going to take off and make you a millionaire is fine until it takes longer than you wanted it (or it doesn’t at all).
- Sooner or later someone wants to get paid or thinks they should be and that is when the lawyers get called.
Suffice it to say, even if they agree to work for sweat equity now they won’t want to later. Giving away equity to everyone in place of paying for work is a risky mistake entrepreneurs make and many who have gone before will tell you they wished they hadn’t. If you can’t afford to pay for work, do it yourself or see if you can get an intern from a local university to help you out.
They Don’t Formulate Employment Agreements – Ever just really gel with someone right off the bat and think they’d be your new best friend forever? How did you feel about them a few months later? There are some personality types that are so charismatic and energetic they make everyone around feel amazing…for a little while.
It is usually during the honeymoon phase of employing someone that one of the biggest risky mistakes entrepreneurs make is not putting the employment terms, conditions, rights, and responsibilities into a written document that you both read and sign. You might not feel like you need it now, but you will probably wish you had later when your instant new best friend/employee starts to be more like himself and not the version that got him or her hired.
They Fail To Understand What Employees Need To Stay
You may really have the coolest, hippest, most disruptive company out there but working in a rustic barn-like office with free-flowing beer and an arcade is not going to be what keeps great employees in the end. Besides, if they are working for peanuts they are going to stop appreciating all the money you are spending on cool stuff for the office and wonder why you couldn’t just give them a raise.
In order to decide what you need to pay for a given position, there are a few google searches you need to do in order to find out what the pay ranges are for a given position in your area or a candidate’s area if they are working remotely. It will save you a lot of frustration in interviewing candidates and really selling yourself on one only to lose them when you tell them what you can pay. Get the numbers right the first time and you won’t lose good talent to your competition.
The ugly word that no entrepreneur likes talking about is benefits. We know, they can be expensive. When you are just trying to get your new company to flourish in the open sun thinking about the weight of the expense of benefits sapping the life out of what you are growing usually feels like something you can’t do now. Or can you?
PEOs are the best solution to a growing company’s needs in order to provide the kind of benefits their employees are asking for and need to say in their employ. If you thought benefits were out of your price range this year, you could be wrong. Don’t make one of the top risky mistakes entrepreneurs make in creating a high turnover. Get the inside scoop of how PEOs help small businesses help you hire great candidates and keep them today.