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In the last column I gave you the outline of the standard business plan, and I talked about securing financing. That is the "jumping off" point for any new business. In this column I'm going to take a look at the next most important parts of starting a new business: Staffing and Location. Staffing The first thing to remember when hiring new staff is to start slowly. Only hire on an absolute needs basis. In other words only hire new people when you absolutely can't continue on without them. It's much easier to hire only when needed, than it is to get rid of an employee you hired too soon and later don't need. Make certain you know exactly what you're hiring people to do. The more detailed the job description, the better. If you spell out exactly what's expected of a new employee, and you're confident the person is up to the task, there'll be a lot less handholding during the initial phase of the job. Make sure the new employee knows exactly who they report to, and who in the organization has the final word on all critical decisions. In a small organization this should be obvious, but in a large company it might not be. I remember when I started as a CA student in a big firm, there were a lot of times when I was told one thing by one partner, and another thing by a different partner. I'd then have to guess which partner had the most clout. Not a good situation for a new employee. Decide up front, even before you start interviewing people, how the new employee will be remunerated, and in what capacity they will be employed. What I mean by this is; "will they be a salaried employee or a consultant who charges you for their time"? This has become a critical decision in recent years in new companies, due to the high payroll cost involved with hiring an employee. Every employee that a company hires, will have to have the following monthly remittances made on their behalf: federal taxes, CPP, (which the employer has to match), and EI, (which the employer has to pay 1.4 times). Add to this the increased administrative costs involved in hiring each new employee, and you can see why taking on someone as a consultant and just paying them for their time can be appealing. Getting rid of a consultant is also a lot easier than firing an employee. A fact not lost on new small business owners either. However, a lot of good potential employees may not want to be independent consultants for a new small business for that same reason. If the business has to scale back or goes under, the new employee gets no benefits, and no final compensation. Hiring people as consultants won't instill any employee loyalty to the company, in the long term either. One final note on staffing, make sure you know in advance what other similar organizations are paying their employee's. Make certain that the compensation that your offering is competitive but not overly generous. Location Depending on the type of business we're talking about, this decision could be the most important. Most retail business owners will tell you that where they are determines the success or failure of their business. Have you ever noticed that location in town, where no matter what kind of retail business sets up there, they always go bust? This is the location issue. When setting up a new business location, the dreaded lease & landlord is the first thing you'll have to deal with. Depending on what city in Canada you're in, most landlords are looking to lock you into a five-year lease contract. They do this for two reasons; so that they can budget more accurately; and they're protected in the event lease rates go down (i.e. Toronto in the early 90's). Meanwhile you, as the new business owner, are not looking that far down the road, so getting locked into a five-year lease commitment is probably not what you want to do. However, if you sign a shorter lease, like a one-year, you run the risk of having your lease rate increased at the end of that term. Skyrocketing lease rates have been credited with ending many a good business, (i.e. Vancouver in the mid 90's). Remember it's not that easy to just move an established business, once you've been at a location for a while. The crucial decision is "how important is that location to your business"? If your setting up a retail business that relies on high traffic areas, then location is going to be paramount. However, if you're setting up a Physiotherapy office for instance, with an established client base, then maybe location isn't that important. I've now looked at writing a business plan, financing, staffing and location for starting a new business. If you do all of these things, and they all work out exactly as you've so carefully planned, then hopefully you'll make it through that first critical year of business -- which is when more than 90% of all new business' fail. |
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