Adventures in Micro-Businesss: When should I take on an employee?
Each month Professor Russell Smith answers your queries
Related articles
Q. I am a self-employed designer and my business is getting very busy. Are there any rules to help me decide when to take on my first employee?
A. The classic mistake would be to think only about the design work rather than the business overall – don't assume that hiring another designer should be your first step. Start by looking at all areas of your own activity and seek to contract out things that you don't need to do yourself. For example, contract out monthly payroll calculations to your accountant and engage an independent bookkeeper for a few hours per week to handle your "paperwork". Freeing yourself up to do more design work should make your business more profitable. Consider hiring another designer only when you are almost at the point of having to decline work but you must be sure that you can win enough business to keep a second person fully occupied.
Q. Is it the best policy to have my business bank account at the same bank where I have my personal account?
A. Business banking is all about having a good relationship with the bank manager so that you can call upon services, such as an overdraft facility, when needed. For that reason, most new business owners start by opening a business account at the bank where they have a personal track record. Having said that, business banking is very competitive, so don't be afraid to switch your business account if you can get a significantly better deal elsewhere. But the key phrase here is "significantly better". Do chat with your current bankers before you switch – they may have some flexibility and offer better terms to match the competitor. Business bankers want to sell you products and services and so treat your bank as you would any other supplier.
Q. I would like to start a business but have no sales experience. Where can I find out more about how best to market my proposed business services and products?
A. A good starting point would be the "sales and marketing" section of the Business Link website (www.businesslink.gov.uk). Apart from a good overview of marketing, the website also has an interactive link to help you identify new sales channels (routes to new customers) and a comprehensive selection of case studies that describe how other business owners tackled marketing challenges.
Q. After several good years my business is starting to struggle. What are the most important things that I should do in order to turn this around?
A. Start with an immediate visit to your accountant. You must look at reducing costs and improving the profitability of sales. It would also be important to look at whether you can improve the credit terms from your suppliers and also ensure that customers pay you on time such that you avoid problems with cash flow. If you have a range of products and services then you must be ruthless about dropping poor performers and pushing those that generate profit. Taking a reduced salary from your business may be necessary as a temporary measure but this is not a solution. Although it may be unpalatable, ask your accountant to give you an opinion as to the viability of your business. It is better to cease trading than get into financial trouble.
QUESTIONS PLEASE
Send your questions to Russell Smith at independent@businessboffins.com. Selected questions will be answered each month. Answers are for the general guidance of owner-managers only; always seek professional advice. Professor Smith is the founder of Oxford-based Business Boffins Ltd which, in collaboration with Oxford Brookes University Business School, delivers support programmes to small businesses nationwide. Independent and Independent on Sunday readers can enrol on the university-accredited programme at a discounted rate; see www.businessboffins.com/independent.
- 1 Massive stage collapse before Radiohead concert kills one
- 2 News in pictures
- 3 Leveson threatened to quit after public attack by Gove
- 4 In pictures: The bewildering face of China
- 5 Osborne: The people’s damning verdict
- 6 Ed Miliband: 'Cameron is the last gasp of the old guard'
- 7 Savers start a 'jog' on Europe's banks as Greece votes
- 8 For whom the bell tolls: £20m 'Memo' project takes shape on Dorset's Jurassic coast
- 9 Still standing: George Galloway reveals why his staunchly Leftist outlook is still invariably right
- 10 Aung San Suu Kyi: A lesson in the value of kindness
- 1 Massive stage collapse before Radiohead concert kills one
- 2 Patrick Cockburn: Greece's day of reckoning dawns in a climate of anger and uncertainty
- 3 The Blagger's Guide To: The best (and worst) fathers
- 4 We just click: How Lego keeps building on its success
- 5 Revealed: Harry Potter is the Antichrist!
- 6 The Leveson Inquiry: We're in this together!
- 7 Osborne: The people’s damning verdict
- 8 David Flatman: Over and out
- 9 Frank Zimmerman and me: The truth about the troll who tormented Louise Mensch
- 10 Aung San Suu Kyi: A lesson in the value of kindness

Experience the Heineken Hub
Get free wi-fi and exclusive i content while you enjoy a tasty pint of Heineken at participating pubs.

Win a sumptuous three-night stay in Austria
Get away from it all in the fresh mountain air at the four-star Hotel Edelweiss & Gurgl.

Win a five-star foodie weekend to Liège
Spend two nights in gourmet heaven at a top hotel in the capital of French-speaking Belgium.

A home to be proud of with Halifax
Download the Halifax's brilliant, free new Home Finder app, and take all the pain out of finding your dream home

Playing a game-changing role during the Games
Cisco is providing the solutions for London 2012's complex IT needs.

Enter the latest Independent competitions
Win anything from gadgets to five-star holidays on our competitions and offers page.

Business videos from commercial thought leaders
Watch the best in the business world give their insights into the world of business.
Career Services
Day In a Page

Still standing: George Galloway

Daniel Radcliffe as drug-taking Beatnik poet

Objets czar: David Usborne’s collection of myriad objects

World's richest woman: Gina Rinehart

Comments