Many people who believe they own a business are, in reality, self-employed. Now, if you’re self-employed by choice, it’s fine by me, however, make sure you fully realise the risks and negatives:
It’s hard to take holidays and days off
Your business has no value – no one will buy your ‘job’
You need to make sure you’re fully insured against being too ill to work
Be sure you have an exit strategy and strong pension/investments
Keep cash in reserve – you need to be able to weather a storm
Beware – if you aren’t working, you aren’t getting paid!
If you have all the above covered and choose to stay self-employed that’s great! It’s good to be doing exactly what you want to with a secure future.
But if you’re working alone and don’t have all the above covered, you might want to build a business. Our definition of a Business is a profitable commercial enterprise that can work without you.
If you’ve set up a limited company and call yourself a Business Owner, just consider whether you really own a business or you’re actually self-employed with a business name. The vast majority of ‘businesses’ consist of one person and don’t meet our definition, don’t have all the above points covered, and the owner runs in circles trying to do everything. Many tell me confidently that they don’t ever want employees. The reason they don’t want employees is that either they can’t afford them yet, or they don’t want the responsibility. Isn’t that interesting? If you employed someone and, as a result, the business made less additional profit than was being spent on the employee… it would be a bad choice of an employee! Let me be clear – the reason you employ staff is so that the business makes more money.
Say you spend £25,000 per year on a new employee, you’re going to want to see the business generating £50,000 or more additional profit per year as a result.
This might seem obvious, but I continually speak to people who haven’t got their head around this and think that an employee is a cost they can’t afford. In terms of employees being an extra responsibility or hassle, I understand, but it’s often a feeling or a fear that comes out of a bad experience or misunderstanding. Someone recently commented, “I’m not sure I could generate enough extra business to cover the cost of one employee, let alone a team!”. My question in response was “would they be working for you, or would you be working for them?”. I admit there are plenty of bad employees around who will sit and do nothing unless you’re hassling them. But if that describes someone who works for you – why did you employ them and why do you continue to? Deal with it, you get what you tolerate. When you think of employing someone, consider whether there is potentially enough business out there that your company can gain to more than cover their cost?
Next, consider who’s going to get that extra business.
Do you need to prioritise employing a salesperson or marketing person to get more business before or at the same time as an employee that will generate more work or handle more admin? Then, when you’re interviewing and certainly when you recruit someone, make certain that among other goals they know exactly what they need to be generating to keep their job and maybe to achieve a pay rise or promotion. If you have work that isn’t yet or never will require a full-time employee, consider the alternatives.
You could employ someone part-time, or you could use a Virtual Assistant (VA). Using a good VA can be an excellent solution because you can contract as little as an hour at a time as needed, and get the specific skills you need at the time. What takes you three hours might take a good VA only an hour, so the saving potential is excellent. The necessary skills to manage employees are relatively easily learnt – there are hundreds or probably thousands of books on the subject and endless training courses. But first you need to start with a clear understanding and belief that you employ people to generate more profit for the company and that you don’t do the work for them. If someone has to work late… it’s the staff. If someone needs to get more money in to pay the bills… the staff need to do it. Your job is to set the direction, employ the team, make sure they know what they have to achieve, then make sure they’re constantly motivated and achieving the goals.