Hiring your first employee

Most entrepreneurs know what they're getting into when they open a small business. When you are your only employee, you're required to oversee every aspect of operations. This often means long hours and no days off.

On the surface, online businesses may seem easier. After all, the Internet has no hours of operation. For online shops selling products, any orders that came in overnight are fulfilled in the morning. At a certain point, if your company becomes successful, the number of fulfillments will outpace your ability to keep up, especially if you also have to manufacture items, order more supplies, maintain a website, implement marketing plans and develop new products.

Deciding when you need help is a personal decision, but one that has far-reaching consequences for your business.

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Create a staffing plan

**The first step in hiring is to determine what you wish to delegate. This will help you define your new employee's role, pay scale and required qualifications.

Draft a staffing plan before you start searching for candidates. Your first employee will likely be a generalist, whose primary function is to get your product to customers. Of course, your initial staffing needs depend on your own skill set and type of business.

Develop your staffing plan beyond your first hire. Plan for growth and anticipate future staffing needs.

Full-time, part-time or contract

Once you determine your needs, decide whether you need a full-time or part-time employee.

Most states define full-time employees as working 30 hours or more per week. Be aware that statutes require differing benefits for full-time workers, often mandating more comprehensive insurance coverage and other benefits. Check your local department of labor for a complete list of your benefit and salary obligations.

Studies have determined that the average cost of onboarding a new employee is anywhere between 10 and 30 percent of that employee's salary. A simpler and less expensive way is to hire third-party vendors or independent contractors.

Many essential business functions are commonly outsourced to outside firms, such as:

• Accounting

• Marketing

• Web development

• Manufacturing

Such services come at a premium. Yet they may prove more efficient than hiring someone to do the work in house. It is easier to verify a vendor's credentials, find recommendations and review their body of work than it is for an individual employee.

The best way to find your first employee is through recommendations and word of mouth.

Begin the search

If you decide to hire someone in house, there are many forums in which to search for employees:

• Employment websites such as LinkedIn or Monster

• Online classifieds such as Craigslist

• Professional association websites, message boards and forums

Placing a blanket want ad in any of these places may result in hundreds or even thousands of applications. While it's nice to be spoiled for choice, searching through all of the unqualified candidates to find the few gems is time consuming.

The best way to find your first employee is through recommendations and word of mouth. Use your social network, both online and in-person, and ask if anyone with the required background needs a job. Because these connections are personal, candidates are likely to be more qualified. Your social network acts as the first screeners - vetting candidates on your behalf before you receive any resumes. If your immediate social circle does not produce applicants, consider utilizing a third-party recruiter. An employment agency performs all the recruiting, verification and interviewing for you before sending suitable candidates. Such services do not come cheap, however. Determine whether the time and aggravation you save is worth the cost.

Whichever route you decide to take, weight your search in favor of people with small-business experience. Typically, employees at small businesses are less specialized than those in a large corporate environment. You want an adaptable employee with relevant skills who does not need hand holding.

Background checks and interviews

You have stacks of resumes and you've winnowed them down to a few candidates. As an employer, you must decide how thoroughly you wish to delve into a candidate's history both before an interview and after. The Internet makes searching for personal information easy, but there are explicit state and federal regulations that outline what information you can or cannot legally gather. The U.S. Equal Employment Opportunity Commission explicitly prohibits asking employees about their:

• Race

• Color

• National origin

• Sex

• Religion

• Genetic information

In addition, employers are only allowed to ask candidates about disability in regard to special accommodations, not as part of the vetting process.

Background checks that investigate a candidate's personal history are also regulated. Military, educational and criminal records can be searched, but only with explicit, written permission from the candidate. The U.S. Small Business Association has additional details about how to perform legal background checks.

Failure to follow these regulations can open your business up to discriminatory hiring lawsuits. It's best to consult a lawyer before initiating background checks to make sure you're in compliance with all federal and local laws.

Check references

After the background checks and interviews are done, be sure to thoroughly check a candidate's references before you make an offer. As a rule, employers ask for three professional references. Do not ask for personal references, although for young candidates with little job experience, references from former teachers are fine.

Make your questions objective. Ask about job performance, duties and any facts that relate directly to information gathered in your interview. Discriminatory questions that apply to interviews and background checks also apply to reference checks.

Get your paperwork in order

Negotiate salary and put it in writing along with a detailed job description. When onboarding a new employee, there is a deluge of information and paperwork to gather. The U.S. Small Business Administration provides a detailed description of all the legal necessities for a new hire, and the U.S. Department of Labor has a comprehensive list of forms that must be completed to avoid penalties.

While it may seem daunting, hiring is an essential step for any company that hopes to grow. Patience and diligence are required to make your first employee a valuable asset to your business.