To Grow Or Not To Grow: Your First Hire
A sole trader is not a business; it is a job. You may have heard that before, and as hard as it is to hear it again, it is true.
In the U.K., 56% of businesses are sole proprietorships. In the U.S., that figure is significantly lower at just over 10%. This is largely to do with different tax and obligatory regulations as well as liability. Also, the U.S. has a more active venture capital market, while the U.K. offers a mix of government grants and venture capital to support startups and new businesses.
In all likelihood, it is fair to say that it would appear the U.K. is a slightly safer place for a sole trader. However, some may argue that this is stunting the U.K. sole traders' appetite for growth. The fundamental difference between a limited company (LTD), also known as a private limited company, is that shareholders aren't accountable for any debts the business might incur.
However, with a limited liability company (LLC) prevalent in the U.S., owners are responsible for its debts. That in itself doesn't sound that great, but LTD companies pay corporate taxes on their profits, whereas LLCs' taxes are passed on to the members to pay on their personal income. This would make an LLC look somewhat more appealing.
The Cost Of Hiring—Or Not Hiring
Limited status aside, what one person can deliver to their clients is finite. This is where growth stops for a sole trader. The leap to employing someone can often seem too great; it comes with new responsibilities. Employing a team is a critical move for the growth of a business, though.
Cost is the most significant factor in sole traders not hiring. It is a good idea to look at the cost of not hiring for your business. If you hire someone, what will that spend allow the business to deliver, and what is the worth of that? It might be an investment. Spend to accumulate. This is still a pretty scary prospect, but my advice is to start small. Consider a part-time employee, a freelancer or an apprentice initially. You don't have to jump straight to hiring a full-time, highly paid role.
I would also urge all sole traders to look into the available funding. Government grants or support schemes are available for small businesses taking on their first employee, certainly in the U.K. When hiring that first person, it is worth considering what revenue you want to generate and hiring someone who can help with that—someone who can directly generate income.
If hiring is new to you, then you may be worried about hiring the wrong person, and this can happen. However, don't rush. It is better to hire the right person than rush into it out of desperation. Invest time in developing a clear job description, conducting thorough interviews and checking references. Have a trial or probationary period, and remember that personality fit is important, but often, teachable skills will benefit your business more.
Another sticking point is usually the legalities of hiring an employee, such as contracts, HR and payroll. These can seem like a real headache for a sole trader who does not have an HR department to take care of all this for them. Once again, there are solutions such as contract templates and AI programs that are relatively fuss-free and can take care of payroll for you.
The benefits of hiring someone should outweigh the negatives: You'll have more capacity and be able to take on more clients and projects or sell more products. You can delegate the time-consuming tasks and free yourself up to tackle strategic thinking, sales and high-value work. Someone else besides you will bring fresh ideas and expertise to the business. It also adds another layer of professionalism to your business, which is always good for your reputation and business development.
Decide If And How To Grow
To grow or not to grow? Where do you start? Identifying your bottleneck is not just a buzzword; it is incredibly important to start here. Ask yourself what specific tasks are holding you back from growth right now. What do you wish someone else would do? Once you have identified that, you have your first role.
The next step is to clearly define that. Be very clear about the tasks, responsibilities and the immediate value this person will bring. Don't just hire "help"; hire for a specific purpose.
If you are concerned about cash flow, then start small and flexible. Consider a part-time hire, an apprentice or even a virtual assistant to test the waters. Get involved in a network of small business owners who have made the leap. If you can't access them face-to-face, there are lots of online resources and podcasts to help you.
There are also business coaches trained in helping sole traders and SMEs in their growth programs. Athletes have coaches in order to compete at their highest level; it should be the same for businesses. To compete at your highest level, find a mentor and seek advice and a consistent growth program.
Final Thoughts
Always be thinking about scalability. The idea for many businesses is to build a business that isn't solely reliant on its founder. If that is what you want, then start building now!
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