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Ask Dave

Making The First Hire

Mike runs his own business. He's at capacity as a sole proprietor, and he wants some advice on how to hire his first employee.

QUESTION: Mike in Oklahoma City runs his own business. He’s at capacity as a sole proprietor, and he wants some advice on how to hire his first employee.

ANSWER: I would put the employee on a small base plus a percentage of what the clients they work with bring in. Fair doesn’t enter into it. It’s what works mathematically and what seems reasonable in your mind. You’re the owner of the company. What I would say is the first thing you’ve got to do is make sure your team member can eat. I’d be willing to give them a bigger percentage early, but as the business builds, it may move to a smaller percentage but be more money. In other words, they’d rather have 10% of $1 million than they would 25% of $2. I’d cut them in early at a bigger rate, but I reserve the right in my deal with them to adjust it. I would say to them, “I’m a start-up. I’m by myself. We’re going to starve out together if we don’t do this, so I can pay you a little bit of base, and I’ll give you a big chunk of your first client or two so that you can eat. But that chunk is not what’s going to go forward. In other words, if I give you 50% of the first client or two, that’s not because our 50% is going to be our deal. That’s so we can get you money to feed your kids.”

You’re going to spend a lot of time with your first team member. They’re not going to be on their own for a while. You’re going to mentor them. You’re going to talk to them. They’re going to work with several different clients with you looking over their shoulder. When they begin, it’s not micromanaging to be questioning their every move. That’s called training. But once they’ve been trained for two years and they’re perfectly competent to execute and do things the way you would do it, then if you stay all up in their stuff, then you’re a micromanager. But it’s not micromanaging when they’re starting to make sure they understand how you want it done.

Take a lot of time. People in small business get in too big a hurry with their hires. Lots and lots of interviews, interview their spouse, let their spouse interview you, you and your spouse take them and their spouse out to dinner. Everybody talk about how this feels. Is this good family feel, because we’re going to be working really close together? I’ve got to trust you. You’ve got to trust me. You’ve got to be somebody I want to spend a lot of time with. I’ve got to be somebody you want to spend a lot of time with. This is not a J-O-B where you’re collecting a job from some corporation. This is called family business, and it’s family.

If the team member believes a whole lot of things about life you don’t believe but they’re very talented, don’t hire them because you’re going to spend a lot of time with them. If you vote liberal Democrat and they vote conservative Republican in every election, you guys are going to have a long year. It’s a presidential year. I wouldn’t do it. You guys just have to decide how you’re going to get at this and how you’re going to attack. You’ve got to be on the same team. I don’t want people who all act just like me or think exactly like me. I’m not afraid of other opinions. That’s not the point. The point is who do you enjoy spending an immense amount of time with because you’re about to. One of the hiring questions we ask is do I like them? That’s a requirement. You ought to ask that if you’re going to be employed by me. Don’t hire them if you don’t like them. It’s an excellent way to run a business because I’ve got 300 of them running around in this building smiling.

Don’t try to be all cool and sophisticated and all business. Be more like family—like you were interviewing this guy to marry your daughter. Who is it you want in your family?