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Below you’ll find an unedited chapter from my upcoming book 40 Rules for Internet Business Success. To receive updates about the book and get a free digital copy of my book in its current form, enter your email address in the sidebar to the right.
If you’re planning on starting a new business, one of the mistakes you’re most likely to make is spending too much time working as an employee in your business and not enough time as the business owner working on your business. This is the core message of the book E-Myth by Michael Gerber. As a new entrepreneur, you probably have a strong technical background in providing the specific service (or product) your company sells from your past work experiences, but you probably don’t have much experience running a business that sells your company’s product or service.
For example, if you’re going to open up an auto service shop, chances are you’re already an experienced mechanic. You think that in order to have a successful auto repair business, you need to spend a lot of time working on and fixing cars to generate revenue for your business. While doing the repair work is an important component of your auto repair business, fixing cars is not the best use of your time as the owner of the business. As much of your time as possible should be spent doing only things that you as the owner can do, such as identifying your company’s mission, vision and values, creating and managing teams, developing a marketing and sales plan, learning about industry trends, reviewing the company’s key performance indicators and strategic planning.
While it’s easy to think that some of the tasks of working on and growing your business are a luxury for companies with dozens of employees, the principal still applies if you’re a one-or-two person company. Even if you’re a one person company, you shouldn’t be doing everything in your business and there are real benefits to leveraging the talent and abilities of others. Even when you’re just getting started, you shouldn’t perform any task that you don’t have a real expertise at and can afford to hire someone relatively cheaply to perform. For example, you probably shouldn’t be doing your own book-keeping and accounting. For a relatively small amount of money, you can hire an accountant to do your taxes and keep track of your books. If you’re not a graphic designer, you probably shouldn’t be designing your logo. If you’re not a front-end web developer, you probably shouldn’t be designing your own website. If you’re not a marketing person, you probably shouldn’t be writing your own ad-copy. There are a ton of talented individuals on places like Elance (www.elance.com) and oDesk (www.odesk.com) that you can hire to do things that you don’t know how to do for a lot less money than you might think.
You should also outsource or delegate any task that you can have done for cheaper than your time’s worth. If your business makes you $100,000 last year, your time is worth $50.00 per hour assuming a standard 2,000 hour work-year. If you can pay someone $12.00 an hour to do customer service work for your company and you choose not to hire someone to do the work, you’re effectively paying yourself $12.00 per hour to perform customer service work in your company. Knowing that your time is worth $50.00 an hour, you would never go out and take a part-time customer service job for another company that pays $12.00 an hour, but by not hiring that out to a contractor or an employee, you’re effectively working for yourself at $12.00 an hour.
Hiring contractors from marketplaces like Elance and Odesk are a great way to tackle one-off tasks. For tasks that need to be repeated on a regular basis, like data entry, social media marketing and customer service, you should probably find someone to bring on to your team as an employee or a virtual assistant. Hiring a virtual assistant using a service like Virtual Staff Finder (www.virtualstafffinder.com) can be great for some less complex tasks, but for the critical operations of your business, I still prefer to hire someone locally as an employee that you know, like and trust. An employee doesn’t necessarily need to work in the same place as you do, but it should be someone that’s competent and you know will probably be around for a while.
When’s the right time to bring on another team member? I think a good rule of thumb is when you have enough work to fill up at least half of their time. Last Spring I created a half-time position with my company to do customer support, data entry and a few other administrative tasks. When I hired my employee, I probably only had about ten hours worth of work for her to do a week. I knew my company was growing, so it wasn’t hard to find additional tasks to fill up her time after a few months had passed and I saw the types of work she is capable of doing.
You might think hiring your first employee is a big, scary proposition, but it’s really not. You’ll know whether or not your company generates enough revenue to pay your employee’s salary based on what your company has made for the last few months. Your accountant can easily setup things like payroll services and state and federal unemployment. You can use a discount broker like Vanguard (www.vanguard.com) to setup a retirement plan for your company. If you want to help your employee out with health insurance, likely your best bet is to give them a set amount of money and have them buy their own policy on one of the new state exchanges. There’s certainly some administrative work in bringing on a new employee, but it’s not an impossible task.
When you’re preparing to hire an employee or bring on a contractor, I recommend creating a series of standard operating procedures (SOPs) for the various tasks that they will be performing. Each SOP should contain a description of the task, an explanation of why the task is important and what role it plays in your business, a series of specific steps that the employee should perform when completing the task, and an explanation of why it’s important to perform that task using the method you outlined. That way, your employee will have good documentation about the jobs that they need to perform for your business when they first get started and you’ll know that your employee is completing tasks exactly the way that you want them to complete it. A month before my employee started working for my company, I outlined the specific tasks that she would be doing and created an SOP for each task for her to refer to. I also created a document that contains the most common issues and questions our customers have and how to take care of them, so she knew how to answer the vast majority of questions that our customers are going to ask right away. If my employee were to ever move onto a different job with another company, I still have the SOPs and documentation available to streamline the training process for any future employee that has to do the tasks she’s doing right now.
There are some tasks that you don’t even need to hire an employee to tackle these days. There are great tools available which allow you to automate certain repetitive tasks, including Zapier (www.zapier.com) and IFTTT (www.ifttt.com). For example, instead of manually posting every new blog post to Facebook, Twitter, Google+ and LinkedIn, I use IFTTT to automatically share every new post on my blog to all of my social media profiles. To get ideas for other possible uses of these tools, visit the Zapier Explore page at zapier.com/app/explore and the IFTTT recipes page at ifttt.com/recipes. If you’re a software developer or know a software developer that does good work, you can begin to automate major portions of your online business. For example, the daily investment newsletter that my company publishes is sent out automatically each morning without any intervention from any staff member of my company. The data that makes up the newsletter is automatically gathered from a variety of sources every morning, which then gets compiled by software into the actual newsletter, which then gets automatically sent out to anyone that has an active subscription using SendGrid’s SMTP mailing service.
You’re certainly going to have to do a lot of work in your business when you’re first getting started, but as you grow, you can begin to outsource, delegate and automate the majority of the tasks that are required to make your business happen so that you’re freed up to work on your business rather than in your business.