We’ve all seen the numbers around failure of new businesses. Stats from the US suggest that 20% of businesses fail in the first year and another 30% fail in the second year. By the fifth year, 50% of businesses are no longer operating.
Starting, building and sustaining a business is a tough game. It’s risky. There are lots of reasons why a business might fail, including
- Lack of demand/market for products or services
- Lack of cash flow
- Poor product or service offering
- Pricing and cost pressures
- Inadequate business model
- Poor marketing
But here is the interesting thing – 80% of businesses that hire employees will survive their first year in business.
The message is clear – starting a business is risky, but hiring employees increases your chance of survival and success.
Why You Need To Hire A Team
Hiring your first team member is a major milestone. If you think your business is ready for this, take a moment to reflect on what an incredible achievement that is!
But I know from my own experience that hiring team members can feel like a risk. You are making a big commitment in terms of finances, control and trust.
Uncertainty about hiring can make us reluctant to move forward with building our A-Team. Sometimes it feels much easier (and safer) to keep soldiering on in our current state. Even though we know it isn’t sustainable if we want to grow.
So it can help to flip our perspective on hiring to think about it as a key factor for our business survival and success rather than a risk. And, in fact, hiring an A-Team will help you reduce your business risk.
#1 Hiring a team provides continuity
One of the biggest risks to your business when you are a sole trader is the reliance on you. When you are sick, or go on holiday, or are burnt out, there is no back up.
Hiring a team helps provide continuity in your business operations and an ability to continue delivering products/services even when you are not available. Developing this continuity is not only about reducing business risk but it is also key to building your own freedom machine.
#2 Hiring a team prompts systemisation
As a sole trader you can get by with all your business processes living inside your own head. But bringing on a team member prompts you to transfer that information over to someone else.
In the process of communicating your processes and preferences to someone else, you can identify opportunities for consolidating and streamlining. It might also prompt you to consider tools and technology that can support working together, automating workflow and improving efficiency. Putting in place systems and workflows will save you time and/or money, which can help improve productivity and cashflow.
#3 Hiring a team helps you capture “Operational IP”
As your business and team grows, you will need to put more focus on developing processes and systems. You need to enable everyone to work together effectively to achieve outcomes. As you tackle each area of operations, you begin to capture intellectual property (IP) around how to profitably run your business.
I define Operational IP as the processes and systems used to produce a profit in your business. In essence, your way of doing things that make you money. When you document your ‘ways of working’ in repeatable, learnable workflows you are building a valuable asset that supports long term success.
Capturing your operational IP means your ability to generate a profit is not dependent on individual people. Your business can operate independent of who is doing what. It involves process optimisation, workflow automation, documented procedures and a culture of continuous improvement.
One key benefit of recording your operational IP is that it greatly increases the value of your business as an ‘asset’ should you ever look to sell or use it as capital. You can prove that your business can survive and thrive even when you are not at the helm.
Building operational IP also shifts your focus from managing people and the ‘work’, to managing the systems and processes that facilitate work getting done. Conversations around maintaining operational IP can help avoid resistance to operational improvement because the focus is on processes and systems rather than individual people and their tasks.
#4 Hiring a team promotes diversity
We have all heard the saying “two heads are better than one”. And we have all experienced how a conversation with someone else can create a pivotal ‘aha’ moment as we struggle with a challenge or decision.
Bringing on team members gives you the ability to access their skill sets, experience and perspectives. This helps you develop better processes and better serve your customers. Tapping into diverse skills and viewpoints could put you in a better place to avoid the big risks for business failure.
Many new businesses are started by specialists who are great in their chosen field. But this doesn’t necessarily mean they are skilled in running a business. And as your business grows this gap in operational ‘know-how’ can become a significant risk. Hiring an A-Team to cover gaps in your own skill set – or to take on those tasks you always put off until last – is the best way to reduce this risk.
#5 Hiring a team supports your wellbeing
As a sole trader, everything falls to you. Which might be ok when you are just starting out and finding your feet. But there will be a tipping point where the demands of holding it all together by yourself become too much. Burnout is a significant risk to small businesses owners, and sole traders especially. It leads to physical and mental exhaustion, feelings of resentment, pessimism and self doubt. You can understand why burnout can spiral into business failure.
Sharing the load with a team of people you trust is key to avoiding burnout. Delegating your workload and building a supportive team flows through to:
- improved productivity
- more creativity
- better sleep
- less sick days
- improved wellbeing overall
Which all contribute to your ability to build a thriving, sustainable business.
If hiring your first team member is a step you are considering for the near future, good for you! It is a sign you have put in the hard yards to start a business that has the potential for growth. Yes, hiring can feel scary and risky. But as you can see from the points above, building your A-Team is also one of the best ways you can reduce your business risk.