Solo to employer

Discussions
#1

Hi all,

Does anyone have any experience / thoughts on going from a solo-entrepreneur to a regular employer - i.e. bringing other people onboard? I’m at the point in my business where I’m starting to think about this now - but have no management experience (aside from running my business thus far as a solo I guess!) and was curious to see if anyone who had done it had any insights?

The company is already setup as a UK Ltd company, so its not so much about the legal entity position of the company, but rather tips, tricks and thoughts!

Thanks,
Allan

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#2

I would say - don’t underestimate the cost, time and extra stress involved in employing people.

You will spend much more time than you ever imagined finding, training and managing and if you have to do it… firing. Accordingly you have to make sure that you have the time which means that whatever they are bringing in covers their time + some proportion of your time + employer related overheads)

I’ve seen this a few times with acquaintances - they think if I bring on 3 employees we will be able to chuck out 4x the amount of work (me + 3 others). But thats not taking account of the overhead.

If you’re actually employing them v’s as a remote freelancer / independent contractor then

  • you’ve got regulatory stuff up the wazoo (some countries more than others). Insurance, rules and regs, payroll & taxes. As just one example look at the complexity in the UK for an employer re: Maternity Pay - this happens over 100,000 times PER YEAR in the UK but its damn complex. SMP, OMP, ShPP, Average Pay during qualifying weeks, EWC, jargon here, 27.3* something there. Differing interpretations & legal precedents… damn.

(NOTE - I had no problem as an employer actually paying maternity pay, just don’t make me study for 20 hours so I know what, when and how much!).

  • You must pay employees first before everything else (including of course, yourself). Doesn’t take many quiet months before your juggling credit cards!

I now think that there is a middle ‘no-mans land’ of between 1 and 5 or maybe 10 ‘real’ employees where (as opposed to freelancers) where it may not be worth the stress. Of course many would say you need to make it out the other side of this no-mans land to have a ‘real’ company.

Would be genuinly interested to hear from someone whos made it work.

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#3

Perfectly said.

After having gone through much of what @Rhino said many years ago, I’d say: start by recruiting a freelancer/contractor, and if the numbers work, stick with that approach for as long as possible. It is much less painful learning this stuff through experience with a freelancer.

#4

I decided I didn’t want to employ people. Too much risk, too much hassle, too many overheads. Also they would probably end up doing all the jobs I like and am good at, while I ended up as a mediocre (at best!) manager.

It depends what your goals are of course. If you want to make enough money to buy your own island and be on the front page of business magazines, then you are probably going to need employees and lots of them.

3 Likes
#5

At my previous company we had about 30 employees. What I really liked about this was the high loyalty rate, the fact that you can actually work together with people in the same room and the chances to find some great friends in the long run.

However, freelancers require less work on your side and are much more flexible. For example, you can usually easily hire them part time and upgrade/downgrade their workload as required, which is a huge benefit when the revenue stream isn’t rock solid yet.

#6

On the plus side:

  • A good developer will add 40h per week to your development efforts as a result your product will evolve more rapidly.
  • It will probably be more focused on the programming tasks that you can be with all the distractions a business has
  • You will have someone to bounce ideas of
  • You will finally be able to add those bells and whistles you never found time for with the 80/20 approach.

On the minus side:

  • Overhead. It will take you a lot of time to train them, plan in detail their tasks, supervise and be their beta-tester since you are the ultimate quality enforcer. Don’t expect programmers to know how to test their own code!
  • They can leave at any time but you can’t fire them easily (the law). With all the work and distraction you have to put on, an employee can decide to leave after they find a better/bigger company to work for, sometimes in a matter of months. They will be influenced by their peers to work for a “real” company. As a small business owner it can be easy to overlook the prestige a big company adds, would you work for a one-person company?
  • You will surrender your programming tasks and if this is your bread and butter (most likely) it will leave you with the not so glamorous tasks. You will probably lower your chances of being employable (if it ever comes to that) by being too much of a generalist
  • Multitasking. It’s common knowledge that multitasking is not productive but with employees you don’t have the luxury of working by yourself.
  • The Need. You have to have the need, that is work planned ahead for a year or so for at least one employee.
  • The Money

From my experience, it’s not worth it with a single employee, but it can be when you can create a team of two or more.

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#7

A few suggestions based on my experience.

  1. Hire outsourcers. You avoid the regulatory hassles (employment tax, etc.) mentioned above. Also, you can modulate their workload. If you suddenly have nothing for them to do for a few weeks or months, they can look elsewhere without severing the relationship. I try to be very good about letting my outsourcers know this as far in advance as I can. I have two excellent outsourcers (one a LAMP programmer and the other is a Usasability guy). They cost around $33/hr and I pay only when they work. They are both very dedicated an “look around corners”. They anticipate how what we are building will be used.

  2. If you do hire someone (especially someone you have a relationship with) tell them you are hiring them for a small freelance job(s) not a permanent job. Then if it doesn’t go well, there is no ongoing work relationship to sever. I can’t tell you how many times this has saved me, and how many other times I wish I had done this.

  3. Counterpoint to #2 : for freelancers, often the dream is steady work. So you might want to advertise it as “XYZ Task, with more work possible” to make your task more attractive.

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#8

Really interesting - thanks for the discussion everyone. Lots to think about!

Reading them together it would seem that a consensus is to avoid direct employing for as long as possible, and using freelancers instead. One or two employees might be difficult, with a jump to a larger team possibly better if that was the direction to go (although that would need venture capital - for me and I would imagine others in a similar position).

All the thoughts and insights are very much appreciated. I’ve been feeling that the majority of what I’ve read around the web on startups is geared towards larger teams, or solos just starting or continuing themselves.

Regards,
Allan

#9

The media is fixated on ‘go big or go home’ VC-funded startups. There are lots of us that don’t fit that model. You just don’t hear much about us.

When most people go on safari they are only interested in the lions and the elephants. They don’t even look at the bugs and insects. But the bugs and insects are doing just fine. ;0)

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#10

Ha! love the work so much that you don’t want any one else doing it :smile: