So you've made the jump. You're a freelance designer or developer, and a while back you left your steady day job to go it on your own. You repainted the second bedroom in your apartment, bought some furniture from IKEA, and after a year or three things are going well. You work in your shorts, raid the fridge in the afternoon, and stop occasionally to play some XBOX. You have talent, dedication, and clients. Life is good.
You're living the dream.
This success leads to more success. You're traveling, speaking, working for better clients. And this is when you look up and realize, "Oh crap. I'm really busy. Busier than I have ever been in my entire business life."
Sound familiar? I was in this place once. Not too long ago, actually. I left my job almost six years ago to start what became Firewheel. In my mind, I really believed that I would truly be happy freelancing it my entire life so long as I could pay the bills, make a comfortable living, and provide for my family.
I never had any intentions of growing the company or hiring anybody. To be honest, I'm a bit of an idealist, and when you work with someone else, compromise is involved. I didn't like that idea much.
However, after two years of freelancing I was feeling the pressure. I turned down far more work than I even bothered to quote. There were times my schedule was easily booked out six months in advance. While this was all great, it was also a bit frustrating. There were very profitable jobs I had to turn down simply because I didn't have the pipe to take on the work.
After much thought, deliberation, and prayer I made the decision to hire our first employee, John Marstall. And we've never looked back. Today Firewheel has seven salaried employees. It's pretty crazy in retrospect. But hiring the first was by-far the biggest deal. Percentage-wise, that first employee is doubling the size of your company. It's the most important hire you'll ever make. And you need to nail it.
So, thinking about making the jump from freelancing to gosh-to-honest company of people? There are a few suggestions I have for you, starting with this: Hiring an employee is not for the faint of heart. It will change your business forever. And it will potentially change the life of the person you hire as well. Don't make this jump unless you're willing to put your butt on the line for the person you're hiring. Because when clients don't pay on time, your employee gets paid before you do. Remember that.
With that sober reminder out of the way, here are some other small bits of wisdom for you.
Before making a hire, make sure your business structure is set up. Whether it's a corporation or LLC or whatever, take care of this. This separates your personal finances from your business, and is something you should do even if you're freelancing on your own. You definitely need to do this if you're hiring somebody. S-Corporations and LLCs are IMHO the best way to go in the States due to the tax benefits. Talk to your accountant and/or legal counsel on this one to get their take. You do have an accountant and legal counsel, right?
Brush up your bookkeeping and business skills. While I do recommend you have an accountant, I do not recommend unplugging yourself from your business finances. There's a somewhat accurate stigma that creative types aren't good business folks. While this may have an element of truth to it, the solution is not to hire a business guy to offload those responsibilities to. The solution is to become the business person yourself. If you enjoy the creative side, but have no desire to become enthralled with nuts and bolts of the business side of your (hello) business, then you have no business hiring an employee. Advisors and counsel are good. Checking your brain at the door is not.
Hire the best person you possibly can, regardless of location. If you limit yourself to hiring only people in your geographic region, you are limiting your talent base to pull from. Given the landscape of the web, there is no reason why this cannot be a reality for your design business. If they happen to be local, great. If not, don't sweat it. You're better off trading location for talent any day. Also, on that note, you get what you pay for. Talent is not necessarily cheap. But if you're going to hire, do it right and bill appropriately for it. Firewheel has workers in Texas, Missouri, Alabama, and Kansas (and yet we're so cultured, you wonder... I know).
Don't require them to relocate either. While I'm more than thrilled to have our workers here in our home office, I don't require it. On the flipside, having everyone in the same space allows you to combine some expenses. We cover all of the equipment expenses of those working in our home office, while we only cover some of the equipment expenses for those working remotely. Obviously, it would get expensive to pay for everyone's utilities and such. Our remote workers pick up some of those costs on their own, and that allows them to live where they'd like to live.
I should note that all of us are married here except Keegan. Most of us have children (my first is arriving in six weeks!). This puts a spin on the "work from home" concept. But this is probably best left for another discussion. I only bring it up here for context.
Do some contract work with the person before hiring them. We didn't do this with all of our hires, but we certainly did it with some. If there's a question about how working with this or that person is going to go down, do a trial run or two first. This will help you both feel each other out.
After you hire, be prepared to lay you own desires on the ground for your employee. Like I said earlier, they get paid first. You're responsible for their livelihood and well-being. That may also extend to their family as well, should they have one. Don't expect your hours works per week to go down because you hired someone. While you can both share the workload now, there's also more overhead to consider. It'll take some time to adjust. Expect to work harder than ever initially.
So what about the benefits? Well for starters, if you do it right, it's a lot of fun. You work becomes a team effort. You can take on more work, share responsibilities, multiply your talents, learn from each other, do better work, and ideally make more money. This is why you hire the best talent you can. A company's body of work is an average of it's employee's talents. With a small company, one person can drag you down. Hire well, and you'll reap the benefits. Hire cheap, and you'll reap a headache.
With some planning, foresight, and hard work, making your first hire could be the best thing you ever do for your business. For Firewheel, it was a catalyst that brought us to where we are today. I'd like to think that with seven people, we're done growing for a while. Of course, I thought I was content in my spare bedroom four years ago too.
Paul Redmond says
I am guessing these words were more expensive than some of us know. The only thing that I could add, is: don't reference business assests and funds as "yours" when you talk to your employees. This can really make your employees feel unimportant, and tread waters lightly with "your money." Every business choice they make will echo your words "its my money." Remember that those employees are helping bring in the money too.
Another thing. Filing for an LLC does have one clear advantage: NO ANNUAL MINUTES.
nortypig says
An excellent article thanks. You're right, as a part time freelancer working out of my spare bedroom (office lol) its probably the biggest step I could conceive of to actually employ someone.
I have even more respect for your success now I can see this part of the picture too. Great stuff.
ps. if my comment sounds lame its because I have a mid-winter flu here. sorry.
Jon Livingston says
Excellent post, thanks for the insight. I'm a full time freelancer that initially didn't think about "going big" but the work keeps coming in. While I'm not ready to make the jump just yet this was very helpful and encouraging.
Question - how long did it take to jump to the next hire?
hlee says
this is the best advice i have ever recieved online from reading a blog. thank you very much.
Josh Williams says
Paul: Wise words. It is extremely important to look at the business as a team effort. Even though technically you may own the company, it is good to look at it as though you are a steward of the company's resources. And employees should share in the successes of the company in some way or another.
Jon: Our second hire came about a year after the first. It might have come earlier, but it took us a little time to convince Brian to leave his secure, steady job that he had for some time to come work for a young, design start-up. I think he likes it here now. ; )
Ethan says
Nice to hear about prayer and some religion that related to design, the internet, and business. "After much thought, deliberation, and prayer I made the decision to hire..."
Anyways, Great article and I look forward to taking some of this advice when I make my way through the rest of high school and college.
Lucian S. says
Great article! I've been thinking about taking the leap myself, so here comes the big question: in the end, are there financial benefits from hiring extra individuals? How was your overall income affected by this decision? Furthermore, did it provide some extra stability to the monthly income levels, which might be quite different from one month to another for a single freelancer?
Ross Chapman says
Great Article - Wise Words.
justin says
Excellent description. If I could add a couple more things, it's to be aware of additional expenses that don't always come with freelancing. Your employee, his wife, and child need health insurance; and your partner's policy isn't going to extend to them. Federal and State taxes add up; they were more than I anticipated and I estimated high.
This said, the return is worth the effort. The company is much more stable and profitable with employees. I do suggest having the first employee be local; the vision and scope of the company depends so much on this person's input that being accessible really makes a difference.
Dave Wright says
Earlier this year I made the leap from solo freelancing to an LLC with employee number one. I'm a designer and I had a good business producing comps for development shops but I wanted our firm to tackle a larger jobs. Once I located a programmer i wanted to work with we did some contract work together. This went very well so I made him a job offer. At the time he lived in Alabama and he paid to relocate himself to Boulder, CO. I agree with the previous comment that having the first employee be local is key to establishing a solid foundation.
There is no doubt that the first hire is a big change. It meant having to formalize the company structure and write an employee manual. I had to think long and hard about the salary and benefits. At present there is no health insurance but we do offer gym membership and a bonus program by way of incentives.
So far things are going okay. The main challenge has been getting the word out to the marketplace and to former clients that Stormlab is more than just a design house - that we do all of the coding and testing as well now. It's taken about six months for that message to generate solid work. in the interim paying a monthly salary hit pretty hard but I look at this as a startup cost. In the long run we will make it back because the scale of the projects we can work on are that much bigger and we billing two people's simultaneous hours rather than one.
The biggest plus to come from having a full-time employee (versus a contractor) has been R&D. Because the new employee had some downtime while we were gaining marketing traction, he devoted his time to learning new technologies and developing custom blog and CMS platforms. These can be sold to clients off the shelf which will improve profitability of future projects.
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James says
Josh, thanks much for the thought and effort in this article. The observations and guidance are very helpful. As I've heard said and like to say myself: good decisions come from experience and experience comes from bad decisions.
I've been on my own now for almost exactly a year and have had lots of folks approach me to work with them. I'm in the midst of hiring my first employee and many of our discussions have been of the 'what if this' scenarios planning.
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Good article... we're looking for someone to come and develop a bunch of sites we have planned.. any freelancers out there that feel they can tackle it and grow with us? email localjobs@radiatorexpress.com
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