Michelle Coyle is president of BGSD Strategies, where she provides strategic advice for political business owners. Have a question about your business? Email her directly at email@example.com and she’ll answer them here.
Q: I’m a sole practitioner and am running at full capacity with the clients that I have now. I’m wondering when I should hire my first employee? Also wondering about the pros and cons of hiring versus subcontracting work.
A: If you’re running at full capacity, you should have already hired your first employee. Nothing scratches at my soul like hearing about businesses that are turning down revenue because they don’t have the capacity to take work on.
If we were having a face-to-face conversation and I could ask you follow-up questions, I want to know what’s prevented you from hiring up to now.
Are you happy with your business where it is? Are you financially set if an emergency happens that would inhibit your ability to work, either because you have someone else supporting you or because you’ve saved enough to live off of for months?
If the answer to any of these questions is “no,” your best path forward is to build at least a small team that can help carry the load to keep revenue coming into the business in the event that you’re incapacitated.
What type of help you should hire is dependent on the exact type of business you’re running and what your end-goals are. Generally speaking, the easiest first hires tend to be administrative support folks who can pick up the easy-but-time-consuming tasks that keep you from sitting in your zone of genius.
As for the pros and cons of hiring contractors versus payroll employees: contractors pay their own taxes, and you can often leverage their high-level expertise for much cheaper than it would cost to bring a person with equivalent experience onto payroll.
The downsides are that you cannot require a contractor to work on your schedule – this includes expecting them to show up at regularly scheduled team meetings. Moreover, the IRS might get cranky with you if you’re paying a full-time, long-term team member on a contract basis (it could be interpreted as tax evasion).
So when is it a good idea to leverage each type of labor? If the position is temporary and/or part-time, and if it involves things getting completed on a project basis, contracting might be a good option. If the intention is to keep this person on the team long-term and the primary functions of the job involve being available at any time, payroll is probably the way to go. It’s often advantageous to both parties to start someone out on a contract for a few months, and then move them on to payroll if it’s working out to be a mutually beneficial long-term arrangement. But there’s no one-size-fits-all answer to this question, so when in doubt, figure out your ideal arrangement and then run it by your lawyer and your accountant.
Q: I’ve been offered the opportunity to run a well-regarded state party, but am hesitant to step away from my business. Can I put my relationship with clients on hold for a cycle, or should I stay put?
A: I hate to sound like a broken record in this column, but I would want many more details about the current state of your business and your future objectives before I would advise you either way on this.
Assuming you’ve got other folks working with you in your business, this is a great time to assess if there’s someone — or multiple someones — on your staff ready to step up and take on a more senior role in the business. And if you already have business partners, even better.
If you’re a solo practitioner, or are working with a skeleton crew of entry-level folks and contractors, this is a tougher call.
It’s hard to replace the brand equity bump (political folks call it “Name ID”) that comes from holding such a high-level position when it comes to your future business prospects. If your business can keep running without you, or if you’re in a position to take the financial hit for a couple of years and then start back up, I’d probably advise you to accept this gig. If it’s the latter, expect to be starting largely from scratch in terms of re-building your client base when you’re ready to come back, but you may be pleasantly surprised.
Q: We feel like we’ve reached the limit of how much strategic advice we can provide and are looking to build products that are more quantifiable. Any suggestions for how to get started doing that?
A: I love this question, thank you for asking it!
First off, baseline advice: launching a product is a lot of work. If you’ve never done it before, take your assumption of how hard it’s going to be and then triple that. There’s a rational market reason that product companies in the aggregate are so much more valuable than service companies: it’s way easier to replicate a service.
When you’re launching a product, you’re taking on a big risk: you could end up losing a lot of time and money if it flops. You’re also standing to gain a great reward: your company’s value could increase exponentially if your product takes off.
When considering this particular undertaking, it is very important to slow your roll and do your due diligence. I have witnessed some very sad cases of people rushing to build something because their spouse or their friends told them it was a great idea, only to find out that there wasn’t really a market for it. Don’t be that guy.
Before you launch a new product, you need to analyze the overall market, do your competitive analysis, survey the crap out of your potential end-users, and build a financial model. This will help you estimate when you’re going to be able to recoup your investment, among other things.
If you don’t know what I’m talking about or don’t really know how to do one or more of these things, hire someone who can help you (*ahem*). You will save yourself so much heartache in the long run, even if the result of your analysis is to kill your idea and go back to the drawing board.