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It just seems that sooner or later I am going to run out of gas as a 1 man shop. Thinking about taking the next step in business. What do you guys think? Anyone have the same thoughts?
He said it more gracefully than I just did, but I thought the comment was very perceptive about managing growth. Surround yourself with people who share your drive, vision, and passion.
The first step is critical.
Hiring your first employee doubles your cost base.
I dont think businesses often double their cost base after that point do they?
If I started to 'run out of gas' now, I'd look for business-based partnerships rather than hiring employees or diluting ownership of my business.
First up, is an office really necessary?. I run a multi-million dollar net profit business from a "spare bedroom". Why? Because I don't like the thought of driving to an office everyday in my underwear!
A one man show is hard to run without a doubt. Been there, done that, and I wasn't a particularly social person at the time.....ask my wife!
The big hurdle is who to employ in the early stages. My advice is this....only people you trust with your life and with the life of your baby......which is your business.
My first two employees were my wife and my sister. Followed by a few more relatives. They didn't know squat about the business....but I trusted them to do the right thing. They learnt the business and always did the right thing.
I have made numerous bad decisions in the past, but with regard to how to expand your business in the early stages my bottom line advice is only to take on people who you really trust with your own life!
Look at the world's most successful companies......odd so many are family controlled!
Always helps to have your best buddies as partners/employees.
You should never underestimate the time it takes to manage employees, you will lose some of your own productiveness but with the rewards can be great if you do things right.
Also take an honest look at your own abilities and try to find people who have skills that complement your own.
I would also suggest that you should sit down and produce some sort of business plan if you haven't already done so, especially if you are considering taking on office space as well. As percentages said, do you really need it?
Whatever you decide think things through carefully, take advice and most of all, good luck.
Your post intrigues me greatly. What is your business? Do you have a web site address you could share?
Fortune Hunter
I would not recommend an office. In this business I am not sure it is necessary until you get really big and need to communicate with your staff throughout a day on a constant basis.
Second, hiring employees has a lot of pitfalls, taxes, insurance, IRS, etc. I think it is much better to bring people on as independent contractors. That way if they don't work out they are easier to remove, you just cancel the contract.
Second, you don't have the problems with taxes, insurance or anything. You simply pay them the total of what you owe them for their work and supply a 1099 at the end of the year of how much you paid them. They are responsible for paying their own taxes etc.
Now the comment that goes along with this is that they are not as committed to you and not as loyal. Plus you may have more turn over as they jump around.
To counter this you can always hire the ones you really think will be winners as someone else said if you think you want to go that way.
I started doing this, not because I was necessarily growing like crazy, but because I had limitations to my skills and knowledge. I brought in the business and then found some independent contractors to do the project.
Finally consider the concept of "Virtual Entrepreneurship". This is the concept of creating large companies that work virtually through web, email, fax, phone, etc. No centralized office, no employees, no headaches.
You can read a book on the topic called:
The Virtual Entrepreneur
by: John W. Jones, Ph.D.
I will say the book is becoming dated in terms of technology it discusses, but it has enough in it to give you the ideas of how to implement such a strategy.
Fortune Hunter
I have had many clients who have been burned by freelancers, who disappear for days (even if its a planned vacation) or just decide to quit. I have a few clients who are running ecommerce sites or other critical sites and really depend on my availability.
Basically, I am not burned out yet or even close to it, but I do not want to fall into the trap of not expanding my business while I have the opportunity. What happens if I get sick? Income pretty much stops.
Hiring contractors is fine, but I wouldn't trust many of them and it is very hard to supervise people that are not located in your office. The advice on family is ok, but I would never hire family or friends. I believe family and friends should be seperate from biz.
Yes, I see your point. Maybe my first answer about no office was a bit hasty. I am still a small design firm and I was thinking about it from that perspective.
I have worked for a very large design company that landed some very large national clients worth several hundred thousand dollars each.
At that level I believe you are correct if you did not have a business address with real employees and a long proven track record you probably wouldn't be taken seriously or even asked to compete for the job.
I guess all I can offer is that if you find yourself competing at that level you will have to take the leap on office space, employees, etc.
The good news is that going from a one man shop to a firm seeking national or international business won't happen overnight. I am guessing you will have plenty of time to ramp up to this level and as you grow you will just have to decide what steps are right for you and which ones aren't.
Your other point about time off leaving you without income is dead on. This is an issue I have struggled with as well. You ideally want to set up your business in such a way that you could be gone for some period of time and still be earning income and that unfortunately is easier said then done.
Fortune Hunter
My main goal is to expand the business (doesn't matter if there is an office or not) so that if I am sick, away on vacation, etc... there are people that can handle things for me and I don't have to worry. At the present moment, the only person my clients deal with is ME. That means if I leave I will have to talk to one of my contractors and tell them to keep in touch with the client. I am not even close to being comfortable with that for many reasons.
1. I don't want the client to know some of the work is being outsourced.
2. the contractor might not be too familiar with the clients needs.
3. I can't fully depend on the contractor - they are not an employee and don't have much to gain/lose from doing a good/bad job. I have had experiences with contractors who just quit/disappeared in the middle of a project even if there was good $ involved. So please don't tell me that if there is good $ involved, then the contractor will do a good job.
4. hasn't happened yet, but i think it's possible for contractors to steal your clients.
Basically providing my current clients with top-notch service and getting new clients is very important. I am struggling to find a way to expand the company so that I don't feel things will fall apart without me. Office space creates an overhead, but it gives you the advantage of keeping a close eye on employees and gives clients a sense of security, that they don't get when dealing with 1 person. If you have $10 to spend on lunch and a lot of time, would you go get a hot dog from a street vendor or sit in a diner. Even though the street vendor will have lower prices - many would choose the diner, because of a cleaner more relaxing atmosphere (definitely cleaner food in NYC).
I still have the office and 1 employee. I made him my business partner. I think he worked out because he owned his own business prior to working for me.
My advice: Don't hire anyone or get an office as a means to more business. It doesn't work that way.
However, if your business is outgrowing your ability to service clients by yourself, enlist help. Again, I would avoid hiring people until you have to.
Once I brought other people on board, I quickly discovered how disorganized my files were and that I don't have a process for developing work. That means it was more work to delegate a task than to just do it myself. I would have to gather all necessary files and then explain what needed to be done, which was time consuming. I was shooting from the hip when I was by myself, which works great for a solo operation, but doesn't make for a well-run business with employees.
If you want to hire other people, get organized first, drum-up new business next, then if you have more work than you can handle, you should be able to effectively bring in other people.
What does getting organized entail? Process, process, process. You need to have a systemitized work flow. That way employees know what is expected of them and you can effectively delegate responsibilities. It also means you have to contact your local governement to see what the responsibilities of an employer are. In the US, specifically Oregon, you have to post certain signs, pay quaterly payroll taxes (which sucks royally), notify the State of a new hire, fill out new hire paperwork and send it to all of the appropriate parties, etc. etc.
You will find that if you hire people, you become a business owner, not a creative web developer. I now spend 60% of my time managing the business compared to 40% of time developing websites.
Avoid it, unless you are prepared for a major life shift.
If - like me - you enjoy the business management side of things with occasional dips into creativity / programming then expand your business and take on employees, otherwise don't bother as the administration, systems management and lets face it, red tape, will drive you insane.
Wanting to build a business that keeps going without you is a great idea - especially when you want to sell it - but the truth is that it isn't for everyone. Do your research, get the facts and listen to your instincts, then make your decision.
Whatever you decide there is always plenty of help out there if you ask for it, which is something you should really do.
"There are two people you need to trust: your attorney and your CPA. Until you HAVE those two people and are willing to trust their advice, you shouldn't BE in business."
The reason for this bit of advice is pretty simple really. No matter how LARGE a business you are, if your taxes are a mess, YOU are in trouble. No matter how SMALL a business you are, if your legal situation isn't concrete, YOU are (eventually....) in trouble. And once you add physical space, employees, insurance, OSHA, workers' comp, etc. to that mix, you REALLY NEED both of those professionals - and you'd BETTER be able to trust them.
And his final piece of advice matches what others have said: do NOT go anywhere without a business plan! And make sure it's a smart one.... and also a short-term one to begin with: you don't need ten years' worth of stuff to start out with, but if you want f'rinstance an SBA loan when you HAVE to have that physical presence otherwise known as an office, then you'd better have your business-plan ducks in a row.
Now here's a place where you might be able to get some really good freebie advice (PLEASE don't laugh....): costco.com. They've made a BUSINESS of catering to small business, and they're committed to helping small business in many and varied ways. Really. Check it out.
Hey, be careful, or we will "send 'round the boys" ;)
Expanding is a cultural thing. There are many very well qualified potential employees who just can't handle a culture of no office, no dress code, and a very relaxed flat management structure.
I spent 20 years being the corporate suit and tie executive in the large office block. The red tape and culture was a major hold back, being out of that environment and in a relaxed one does wonders for innovation and productivity.
>They present a much more corporate image and I think in the clients eyes, the price of the website is more justifiable
I have to disagree. The price of the website should be based upon what it is worth to the client and what it costs you to produce. Just because the supplier has high expenses doesn't mean it justifies a higher product price. That simply means they are not as efficient as you!
The world has moved. Ten years ago wearing a blue suit, white shirt, and tie had value, today people (clients) are looking for innovation, aggressiveness, the absolute desire to win for them. Being a little eccentric is actually in vogue.....look at Google's rise amongst others.
The old style of relationship between client and vendor is disappearing rapidly. With that comes opportunity to make your life what you want it to be, rather than based upon old corporate rules.
>There are two people you need to trust: your attorney and your CPA
That advise if 101% on target. Your Attorney and CPA are critically important. By their very nature they are usually the messengers that you want to shoot, but, once you have found good ones, stick to them like superglue. Cheap and cheerful typically doesn't work with Attorney's and CPA's. If there is one place you should expect to have high perceived expenses it is in this arena. The cash amounts may sound high, but good ones earn every penny and are actually a profit center.
