Hiring staff when you personally fill the roll of the founder, the only employee, the sales manager, operations chief and everything in between can feel like an overwhelming task.
Many people will tell you that hiring the right people is probably the most important thing that a young business can do.
That’s easier said than done when you have to keep your business afloat while trying to find time to interview people for a position that doesn’t exist yet and for which you feel you’re the only one qualified.
It’s also hard to find incredible talent at an affordable price when you’re a start-up trying to save money to grow. Sometimes growth comes at a price.
We recommend: 5 Tried-And-Tested Tips for Hiring the Best Talent
There are some hard and fast rules that I have learnt over the past few years about hiring staff that I try to stick to. Firstly, hire slowly. No matter how much pressure you’re under, do not rush. Secondly, don’t settle for average.
Average means that you’ll still be doing a lot of clean up work after your team member. Here are a few more pointers to guide you through your first few team hires.
Figure out what you’re good at
Then hire people to do everything else. When you start out in your business you’ll be doing everything. When you start to build a team, you need to hire people who are better than you.
Not better than you at everything (that can come later) but better than you at key things that your business needs and that you suck at.
So it’s important to figure out what you are excellent at and what you want to do versus the things that you have to do because you’re the only person in the business.
I absolutely hate admin and accounts, so I’ve found a person who is brilliant at writing courier waybills, checking stock and managing our invoicing process. The rest is my job in the meantime.
Once you’ve figured out what you’re good at and you’ve reached your breaking point in terms of how much you can actually get done in a single day, it’s time to hire someone. But be sure to hire someone who wants to work at a start-up and as hard as you work. It’s also important to remember that the next person you hire has to add something very material to your business.
They either need to free you up to do what you are good at or they need to be incredible at something that will bring you more revenue in some way. More revenue will lead to more freedom in the business to hire incredible people and grow effectively.
Don’t hire because it’s ‘cool’
Gone are the days when a big head count meant a successful business. Do not value your business by the number of people you employ. If you can build an extremely profitable, sustainable and scalable business with two staff members then do that.
However you must recognise that there may come a time when you will need to hire your way out of a plateau or slump.
Sometimes it’s a great thing to get new blood into the business with a specialised skill that can accomplish a very specific goal.
The perfect example is a sales executive. As a founder you often fill the role of sales executive, implementation officer and everything in between.
Very often there is a point in a business when you need someone who is a born sales person to come into the business and grow your lead pipeline and close those deals.
This position might be expensive to hire, but if you get the right person in they can increase your revenue within a couple of months.
Culture fit is imperative
There are a lot of things that you can teach someone to do in a business.
Just about any intelligent hire will be able to learn how to use your coffee machine, add a ‘to do’ in your project management tool and figure out how to do accounts if they absolutely have to.
Something that is significantly more difficult to teach is corporate culture.
We recommend: 4 Steps to Hiring Killer Sales Staff
At a start-up the team is everything. If there is an odd egg that doesn’t quite fit in with your culture of early mornings, sprints up the road for team building and love of Taylor Swift music at lunch time, then you’re going to have a problem.
One bad hire can destroy a company culture, and when your team is small and your business young, that’s when you need people to really galvanise and want to work for one another.
Make sure that you are hiring the best people for their position who really fit your company culture.
Alan Knott-Craig Answers: How To Build A Debt-Free Business
It’s tempting to go the debt route when building your business or asset base, but be careful — debt can kill your business just as quickly.
I’ve been offered debt secured against my shares. I can use the debt to buy a house or buy more shares in my company. I really believe in my company, it’s growing fast. What should I do? — Bob
There’s no such thing as free debt. It always has a catch. In this case, the catch is that if you don’t pay back the debt, then you lose all the shares in your company that you’ve worked so hard to build.
In other words, if your share value doesn’t go up, then you will lose the shares you have.
Maybe you don’t think that’s possible, and maybe you’re right. But you never know what black swan is swanning your way. The president could be assassinated. Russia could declare war on America. North Korea could send a nuclear missile to Japan. There could be another credit crisis.
All of these things would have massively negative impacts on the economy and sentiment.
The economy affects your profits (sales drop). Sentiment affects your ability to sell your shares (no confidence = no buyers).
Suddenly you find yourself staring down the barrel of a debt repayment deadline, and BOOM! You’ve lost your company and your wealth.
That’s not to say you should never take risks. When you’re young you have to gamble a bit. Roll the dice. Just beware of debt. Debt kills.
Related: Dealing With Debt As An Entrepreneur
The only legitimate reason for taking debt to buy shares is if your partner wants to exit the business. Maybe she’s met the love of her life and wants to move to Tahiti, and if you don’t buy her shares then someone else will and you’ll find yourself in bed with a stranger.
If you don’t have the cash then you need debt. Fair enough. But be very careful. Debt kills. I can’t emphasise this enough.
It’s best to live life imagining the shares in your company are worth nothing. That way you won’t live beyond your cashflow. And you won’t take debt against your shares.
If you’re still tempted to get debt, ask yourself, “Do I love what I do?” If the answer is “No,” then definitely do not take any debt. Debt will simply yoke you to something you don’t love. Debt will make you a slave.
Generally speaking, debt is driven by greed. Greed, greed, greed.
And greed always ends in tears.
I want to build a property empire, but every time I buy a new property I’m forced to sell my existing property because the bank refuses to give me two bonds. At the moment I’m struggling to cover my bond repayments with rental income. Advice? — Phumlani
First thing first, read Rich Dad Poor Dad by Robert Kiyosaki. This book will tell you everything you need to know.
In summary, it’s about using the bank’s money to make you rich. Borrow money, buy property, use rental income to pay off mortgage, you’re left with asset and income stream. Boom! What could possibly go wrong?
Here are some rules of thumb:
- Buy commercial property. A tenant that relies on his premises to generate income will look after those premises more than a simple residential tenant. In other words, you’ll spend more money maintaining your residential property.
- Location, location, location. Pick an area with low risk of property prices failing. It might be more expensive but your first priority is always “Don’t lose money.”
- Yield is everything. Divide the annual rental income by the property value. If more than 7%, go for it. If less, don’t. You want the yield to be close to prime rate.
- Don’t take more than 50% debt. You never know what will happen. If the tenant misses her rent for a few months you want to have a safety cushion so you don’t get caught short of cash when your monthly mortgage repayments are due.
- Never sell. The transaction costs for buying and selling properties will eat away your profits. Buy to hold. Never sell.
Remember, there’s nothing wrong with growing without debt. Many property moguls never ever used debt to grow their empire. It’s slower, but safer.
Debt is a shortcut. Sometimes it works, but most times it ends in tears.
Alan Knott-Craig’s latest book, 13 Rules for being an Entrepreneur is now available.
What it’s about
It’s easy to be an entrepreneur. It’s also easy to fail. What’s hard is being a successful entrepreneur.
For an entrepreneur, there is only one important metric of success: Money. But life is not only about making money. It’s about being happy.
This book is a collection of tips and wisdom that will help you make money without forgoing happiness.
Get it now
Do you have a burning start-up question?
South African Investors And Entrepreneurs, The World Needs You
With governments and corporations across the globe constantly on the lookout for innovators and entrepreneurs, time is most certainly against those who remain constricted by their limited citizenship portfolio.
Citizenship-by-investment (CBI) was once seen as something only reserved for the ultra-wealthy, but it is now also becoming the new normal for business investors and entrepreneurs wanting to expand their reach. We live in a highly globalised world where the flow of goods, people, and ideas means that the freedom to move and do business internationally has never been more important. With governments and corporations across the globe constantly on the lookout for innovators and entrepreneurs, time is most certainly against those who remain constricted by their limited citizenship portfolio.
How can citizenship-by-investment benefit South African investors?
First of all, entrepreneurs with multiple passports or residence permits are able to take advantage of the benefits and best practices of all the countries to whose jurisdictions they belong, while also being less vulnerable to a single country’s risks, shortcomings, and unexpected changing fortunes. The more jurisdictions an investor can access, the more diversified their assets will be and the lower their exposure to both country-specific sovereign risk and global volatility. By acquiring a higher quality nationality, one obtains greater global access and is better prepared for an uncertain future.
Nations within the EU, for example, offer citizens and residents access to all 28 member states, as well as to a number of other countries associated with the EU’s freedom of movement charter. In addition to expanded global mobility and a reduction in sovereign risk, alternative residence and citizenship also offer individuals access to career, educational, and cultural opportunities on a global scale.
The benefits to governments and citizens of host nations
It would, however, be misguided to think that the advantages presented by citizenship-by-investment are for investors alone: for the governments and citizens of host nations the benefits are substantial. For governments, the inflow of extra capital reduces pressure on the treasury and protects national sovereignty by helping to mitigate the need for loans. Indeed, the establishment of a transparent, well-managed CBI program is not dissimilar to discovering a sustainable source of oil within the confines of a country’s national borders. Both scenarios create an immediate injection of new funds into the national treasury, which ultimately leads to greater long-term prosperity for the country and its people.
Successful applicants also bring intangible benefits to receiving countries, such as scarce skills and rich global networks. They add diversity and they uplift host nations through their demands for improved and novel services, which can create new opportunities for local communities. In Malta, for example, the establishment of a CBI program was as much about attracting rare talent as it was about generating much-needed capital in the aftermath of the 2008 financial crisis. Four years after the launch of the Malta Individual Investor Program (MIIP), Malta has one of the highest GDP growth rates — and one of the lowest unemployment rates — of any EU member state. In 2017, the country also reported a record-high budget surplus, with 90% of the gains attributable to the MIIP.
For smaller economies that face increasing trade and industry competition on the global stage, such an outcome can be transformative. Take the Caribbean nation of St. Kitts and Nevis, for example. Three years after relaunching its CBI program in 2007, the program accounted for around 5% of the country’s GDP. A year later, this figure had doubled, and after the sixth year, the figure had doubled again to 20%. By 2014, the St. Kitts and Nevis CBI program was responsible for approximately 25% of the nation’s GDP.
Moreover, other projects made possible through Caribbean CBI programs have had the knock-on effect of boosting employment and contributing to the greening of their economies. For instance, in Antigua and Barbuda an award-winning 10 MW clean-energy project cluster was realised within two years of launching its program. In addition to large-scale installations, over 50 schools and other government-owned buildings have been equipped with sustainable solar-energy systems in order to benefit from the new clean-energy supply. Such innovations were only made possible through the funds conferred by the country’s CBI program.
Thus, the inflows of funds from citizenship programs can be considerable, and the macro-economic implications for most sectors can be extensive. Just as traditional foreign direct investment (FDI) increases the value of the receiving state, bringing in capital to both the public sector and the private sector, so the benefits proffered by CBI — a form of FDI — rapidly turn the fate of a country away from debt and dependency and towards independence and stability.
In short, citizenship-by-investment is a boon to both host nations and investors alike. For South African entrepreneurs and investors who find themselves burdened by visa restrictions and red tape, acquiring a second citizenship is a simple means of expanding global reach, getting ahead of competitors, and giving something back to host nations that are only too grateful to have these talented individuals as part of their community.
First Rule Of Securing Growth Capital: It’s Not About The Product
Paragon CEO, Gary Palmer, discusses the pitfalls facing business owners searching for capital to fund expansion.
A common mistake made by entrepreneurs looking for growth capital is fixating on which product they should choose. When looking to finance growth in your business, the decision process should be focused on longer-term strategic priorities and then finding a partner to help you access the right product to deliver on those goals.
Let’s get real
At the outset business owners need to look at their business realities and decide whether they should be looking for debt or equity financing. For example, if a business can only support debt of 2.5 times EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), and they are already at that limit, then they will need to look for equity financing to achieve their growth goals. In many instances, a combination of both debt and equity financing will hold the key, allowing the organisation to benefit from cheaper debt funding, but ensuring that it is not overextended.
Even if the growth project can be funded through debt alone, business owners face the challenge of dealing with a multitude of institutions, each of which puts emphasis on different aspects of the deal. No business owner can know the minutia of their requirements, and so working with a partner who can help you prepare your presentations is a must.
The challenge becomes all the greater when companies may be looking to finance a non-traditional project. We have a client who is looking for finance to build roads leading to his development. This is not something traditional lenders usually deal with, and so in this instance he will need to access more creative funding options not offered by the banks. Another example is when a founder is looking to buy out other partners, this too may need to go to a lending institution which is able to structure deals for out-of-the-box requirements.
Square pegs, round holes
A common frustration faced by business owners is that some lending institutions sell products rather than solutions. Too little time is spent understanding the needs of the client and designing an appropriate solution, tailored to the client’s unique requirements. These lenders are literally forcing the client’s needs into the limited number of financial products they offer.
It’s going to get more complex
Another challenge for business owners is the sheer number of institutions out there. New funds, new lenders and the plethora of fintech offerings are making it harder for growth companies to find the best offer available. In the US and Canada, more than half of the big property deals are now funded by non-banks. We believe South Africa is headed the same way. The added competition, is of course great for the market and will encourage better service and more creative options, but it does make it difficult for business leaders to keep track of everything available.
Don’t fall prey to borrower’s remorse
In so many cases, companies are in a rush to secure funding and often end up choosing a product which is not suited to their longer-term strategy. Getting out of a transaction can be exceptionally difficult. Far too often companies wake up to better options too far down the line. If more appropriate finance is found, companies will be left carrying the settlement fees attached to their previous funding, not to mention the administrative pain of changing lenders.
Related: Funding Growth
Paragon has over 150 lenders on its books and a network of angel investors which we can access to find the right deal. It’s our job to know exactly what is available and more importantly, to work with business owners to ensure they access lending which is not going to result in borrower’s remorse. The only way to ensure good results is to start the lending hunt with a partner who can help you first determine the right lending strategy, based on your business reality. The alternative could prove both expensive and painful.
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