Is there a specific financial goal a company has to hit before hiring someone full-time? And what's the best way to recruit talent?

Cody McGraw

Founder, Scout


Hiring your first employee can be a nerve-racking experience, but it doesn't need to be if you're armed with good information.

My recommendation is to rent talent for as long as you can. The upside is it's a pure variable cost. The downside is you're paying for somebody else's overhead, fringe and general administrative costs in their hourly fee. If you are hiring an outside consultant (accounting, legal, coding, general and administrative support), be sure you have an agreement in place that clearly articulates the relationship, expectations and deliverables.

While there is no specific financial goal to hit before hiring someone full time, at some point it will become financially and strategically clear you need to hire employees. This might be an artifact of your increasing consultant expenditures, in preparation for scaling, or directed by your board or investors. Regardless of the triggering event, you need to take care with your legal obligations and protections in hiring.

Before you hire a full-time employee, be sure you have state and federal forms, insurance and an employee handbook.

Forms: Obtain a payroll vendor who will file the appropriate forms for you. Have a good handle on your accounting to enter payroll information properly. Establish online accounts with your state to report employees, withholdings, etc.

Insurance: You may not need some types (directors' and officers' liability, errors and omissions), but you certainly will need liability insurance, short-term and long-term liability, workers' compensation and you will need to address health benefits in some manner.

Employee handbook: Start with a subscription to Docstoc, then contract with a law firm to review the penultimate version. Be sure the firm assigns the boilerplate review to an associate. You don't want to pay senior partner rates for this activity.

About the author

Brian Abraham is an associate dean in the Schulze School of Entrepreneurship at the University of St. Thomas.