Q: What factors should a start-up company think about when deciding to hire its first full-time employee, vs. freelance?
Scott Gabrielson
Founder, Oliver Cabell
A: First, can you support the cost of an employee? If you and your co-founders are primarily working for equity, your compensation is variable and more long-term. Employees expect to get paid regularly and at a fair rate based on what other companies pay. Employees are like debt financing — they are a fixed regular payment due each month regardless of cash flow. You need to be sure you have the resources to meet payroll every month.
On the freelance side, is there an active market of freelancers? In other words, can you pick from several providers? Like anything you buy, you need alternative suppliers so you are confident that you are getting good service and a good price. Even two or three freelancers can be enough so you can switch to a different freelancer if the one you are using is giving you poor quality, is late or is too expensive. If there are not enough good options, doing the work in-house with an employee is your best choice.
When hiring an employee, I recommend using a two-step screening process. First, can they do the work? They need to have the skills and experience for the job because you have limited bandwidth to train them.
Second and most important, do they fit in with the culture of the company? You and your co-founders have a working style; a way you communicate, collaborate and understand each other that has developed over time, and these aren't likely to change in the near future. An employee has to be comfortable working in your culture, and you with them. Many small companies start with a multiple-day "interview" with them working alongside people in the company. Have them sit with you and write code, make customer calls and attend your meetings. Spending time with them helps you see if they share the same passion for your business model and have the skills and temperament to work for your company.
Hiring your first employee is a big step. They probably won't act like an owner, but a qualified individual can share your workload and free time up for you to work on the business, not just in the business.
Mark Spriggs is an associate professor of entrepreneurship at the University of St. Thomas Opus College of Business.
