For business owners looking to expand and grow their business, a critical component is hiring help. More than any other area we get inquiries about, this one is FULL of misinformation that can get a business owner in BIG trouble.
Here are the top mistakes we see business owners make in hiring employees:
1) I can't afford to put someone on payroll, so I'll just hire them as an independent contractor.
Total Red Flag! I can't even begin to explain to people how this can land someone in huge, deep, like depths of the deepest ocean legal trouble.
First, someone is not an independent contractor, or freelancer, just because you say they are. There are a number of government bodies interested in whether you are misclassifying a worker as an independent contractor just to avoid payroll taxes. This includes your state bureau of workers' compensation, unemployment, the IRS and state payroll authorities. All have different tests for whether someone is really an independent contractor or should be on payroll. There is no black and white rule or test for this, the government looks at a range of factors generally around how much you try to control them. The more you have to train someone, tell them what to do, provide them with tools, equipment, or a place to work, how to do something, etc., the more they should be a payroll employee, not an independent contractor.
But, I made them sign an agreement that says they're an independent contractor, so doesn't that make it so? NO. The government doesn't care what you had them sign. They care about what you actually do in practice. If it looks like a duck and quacks like a duck, even though it signed a contract saying it's a cow, it's still a duck.
2) Not using proper non compete, non disclosure and confidentiality agreements. So many business owners are either afraid to use these types of agreements at all for fear of upsetting their employees, or they use ones that are overbroad and not likely to stand up in court. Restricting your employee from working for any competitor in the entire country for the next five years is really broad. A proper non compete should be tailored to the situation.
Non disclosure and confidentiality agreements should make it clear that employees should take all measures to keep company trade secrets a secret. Being sloppy about trade secrets and their protection can come back to bite you big time. Make sure these documents have been vetted by an attorney.
3) Not having written policies and procedures. A lot of times a business owner will go it alone or depend on their payroll company for hiring and issue a flurry of generic documents to their new hires. A few months later, when they start having a problem with an employee, they call me and want to know how they can fire this person without getting sued. When I ask to see their policies and history of documenting the problem, they have nothing. Paper trails are critical in employment matters. Regular reviews and written feedback will help to fire a problem person and help you fight an unemployment claim if necessary down the line.
If you're a business owner looking to expand and hire or get your employment documents in line, reach out and set up a call to discuss.
So many clients get nervous about contacting a lawyer because they've heard all kinds of horror stories about attorney billing. Usually, clients are concerned about high hourly rates and runaway time spent on a file that equals tens of thousands of dollars in billing. When people contact my firm, one of the first questions they ask is typically, "what are your fees?"
While every matter is different and sometimes there are complicating factors to a situation that will result in a higher fee, most of the services we offer to business owners are done for a set, flat fee. Particularly for a start up business, we offer comprehensive packages where a new business owner can get all of the initial legal work done at once for a reasonable price. We include things like business plan review, a strategy consult, business license application, LLC or other entity formation, custom contract, commercial lease review and trademark registration.
Already in business? We offer packages for existing business owners as well, particularly those interested in intellectual property and trademark registration and those looking to hire employees.
To view our current list of flat fee legal services, check out our packages.
When a small business owner has realized the dream of running a successful business, often the next step is to expand. Growing a business to the next level requires as much, if not more, careful planning and research as was given to the original dream. It would be unwise to take an already successful business to the next level without doing your homework.
There are a variety of ways to effectively expand your small business. To be successful, careful consideration should be given to the areas listed below:
To effectually know your target demographic as well as continuing supply and demand, you will want to conduct extensive market research. Look to the future to see if your product or service is sustainable in the market. You will also want to determine who your main competitors are, who their target demographic is and what geographic areas they serve.
If possible, you may want to expand into new territories and/or carve out your own little corner of the market to focus on. By doing so, you can eliminate some of the competition. Another consideration is the cost of your product. If you find it necessary to substantially raise your prices in an effort to fund your expansion, you run the risk of losing customers. You need to consider what your target demographic is able and willing to spend.
A lot of useful, demographic information can be gleaned by going to your local Chamber of Commerce. Other helpful information can be discovered by connecting with consumers through social media.
Marketing and advertising efforts are key to the success of a growing business. These days, there are many inexpensive and free advertising opportunities to take advantage of. We are fortunate to live in a time where we can connect with consumers with the touch of a button.
Consumers want to know what other consumers think. Invite consumers to follow your web page. It can be wise to create a social media page and post videos of satisfied customers singing your praises. By interacting with consumers, you can keep on top of who you are serving and how you are doing in the quality and satisfaction departments.
That being said, you definitely want to be sure to earmark money for marketing and advertising.
It is important to get the word out that you are growing and what you have to offer consumers. Ideally, you want potential customers to get as excited as you are. You may have an invaluable product or service, but you need to make sure you reach as many consumers as possible with all of the pertinent information. Your efforts will benefit from a healthy marketing budget.
Develop a Plan for Expansion
Growing your small business often requires investments of both time and money. For this reason, it is imperative to develop a feasible business expansion plan in advance. Much like when you were just starting out, you will want a schedule of projected goals and milestones to keep you on track with your expansion.
This plan should outline key concerns including, your target demographic, competition, supply and demand, marketing techniques and, probably most important, spending. The entire plan tends to revolve around finances. By projecting a clear financial picture of what your expansion will entail, you can avoid getting in over your head.
Considerations for your financial forecast should not be limited to the funding of your product or service. You will want to build money into your plan to cover additional marketing/advertising, and the salaries of additional employees that may be required to successfully run your growing business. You may find that you will need to apply for a business loan or bring in investors, which will require just such a plan. Anyone who is considering investing in your business will want to make sure that you have an attainable action plan, and that they are making a wise financial decision.
Don’t discount tweaking your existing product or service to appeal to another demographic. You may even want to add an entirely new product or service that appeals to a different group of consumers. By doing so, you can reach out to potential new consumers and keep your existing ones.
When considering diversifying, you may want to partner with other business and pull your resources. It is always an option to seek out other small businesses and pull your resources. You may find another small business that offers a completely different product or service that compliments your own. By doing so, you may be able to introduce yourself to an entirely new group of consumers as well as benefit from the other business’ strengths.
Partnering with other small businesses isn’t for everyone and it is always wise to do your due diligence before stepping out in this direction.
When expanding your business operations, you want to stay current and competitive. Make it your business to stay up to date on technology in your area of business. It is no secret that technological advances are popping up every day. Technology can be both good and bad for an expanding business, so it is best to weigh your options.
Technology can help you upgrade your manufacturing process as well as your facilities. By upgrading, you can be more efficient and easily expand your operations. You will want to keep on top of new developments and know what advances you can benefit from. Additionally, being aware of how your competitors are using the same technology can be helpful. Learning from their successes and failures will be an invaluable tool.
While you don’t want to be left behind in the technology arena, it comes with a price. That being said, you must carefully consider how this expense will affect your bottom line. If you have to pick and choose how to spend your technology dollars, carefully consider your true needs are and which ones will give you the most bang for your buck.
Sarah E. Holmes is a Philadelphia business attorney and strategist that helps start ups and established businesses looking to expand, protect their assets and increase their profits in an approachable, down-to-earth way.