Category Archives: Small business

Having a Business Isn’t the Same as Getting Paid

Dude and New Wave Princess want to sell luxury items.  I use the word “luxury” to describe artwork and training because they are items that are not immediately necessary, and in the majority of cases, can be deferred indefinitely.  Running a business has problems similar to getting a job, except you are selling your artwork or classes one at time rather than getting a salary for an indefinite period of time. This will make your income stream “lumpy”, rather than a check every two weeks.  You might argue with me that something is better than nothing, and I’d agree, up to a point. For instance, starting a business doesn’t immediately solve the issue of not getting benefits.  The cost of providing health insurance and other benefits just shifts to you.

There are also costs to running your business that are not borne by employees, such as the need to pay 15.3% of your net to Social Security taxes up to the maximum, and you can deduct the cost of things that I cannot, such as art supplies or room rental for the classes. You might decide to organize yourself as a limited liability corporation, though this is more important for NWP than for Dude.

If anything, people are going to be more particular about artwork than they are about hiring employees.  Taste is arbitrary. Upwards of 90% of people will have no interest in what you do, and those who are interested will probably want you to drop your price.  Anchoring, which deals with what we think something should cost, will kick in, and because you are unknown, you will attract only the “Starving Artists” rate, not the several hundreds of dollars per cartoon that you want. 

In the training world, what sets New Wave Princess Enterprises apart from the “Dummies” books or things that one can get online for free?  Much of the value added of an instructor is guidance and forcing a person to acquire certain skills within a certain amount of time. Where I work, we have “training week”, where we take all of the mandatory annual training at one time.  This is fun stuff like drug abuse awareness and sexual harassment awareness.  A local rehab hospital presents the drug abuse training, probably in the hope that if any of us need drying out, we will think of them. I managed to miss “Heat and Cold Stress”, so I talked the training coordinator into giving me credit for it by taking a more comprehensive course industrial hygiene course that I could get on line.  I did the same for a waste management course that is required.  I had taken the course, but the sign-in sheet got lost, and no sign-in sheet, no credit.

If you’re pricing a training offering, you need to charge something above what you think that your hourly rate sould be to cover the preparation time.  The question that I’d be asking is what value you offer that isn’t easily met within a given company.  Above a certain size, a company may decide to have their own training department, so your market may well be the same small companies that are rejecting you as an employee.    If anything, selling your training offerings may well be an endeavor that requires more of an “in” with managers who can decide to hire you than getting a job.

Another thing to consider with training is the cost of the pay of the people who will be taking your course. This usually is a greater cost than what you will be paid.  Even at $10 an hour, 20 people in a one-day training course is a loss of $1600 to the company. Have you considered private tutoring? This might work better in a college town or an area where a lot of children go to college.

The larger question that I am trying to ask is how do you generate demand for things that are more or less optional and where demand is very elastic?  The guy who ran the birthday parties has the advantage of having children have a birthday every year, and in a lot of cases, the child wanting to have a party.  Neither of you have the options of passively selling via a website. It’s necessary to go out to the art and craft shows or cold call companies about their training needs.

 

Little Napoleons

Some of the other authors on this site have commented about how rotten small businesses are in terms of interviewing and selecting employees.  I believe their reports.  But as someone who runs a small business, I feel compelled to report from the other side of the fence.  However, these are my own observations: I  don’t pretend to speak for small business people in general.

To begin with, the employer’s first commandment is, ‘Thou shalt pay thine employees all of their earned wages every payday.’  This is why, even though I’ve been very busy over the past few months, I haven’t hired anyone: the cash flow simply isn’t there to support new employees.

My second thought is that when you have a real business, you’re busy.  Serving the customer comes first, and then there’s inventory, bookkeeping, maintenance, and all the other things to keep the place running.  Hiring new staff comes after all that.

If a one- or two-person firm is genuinely in business, there is no time for a convoluted hiring process.  If they have time to give three interviews each to 15 candidates for a simple admin position, they’re not actually doing anything to bring revenues in the door.

That said, the decision of whom to hire is the riskiest decision for a small business person to make: even riskier than the decision to go into business into the first place.   The wrong employee can rob you blind, ruin your business, and sue your ass off.

But selecting the right candidate can be an arduous process in itself.  I read a report of what purported to be best practices for hiring someone:

  • By all means, ask for references, and then check them out.  But recognize that if you ask for a reference from a previous employer, all you’re likely to get is confirmation that the candidate worked there, with no further data.
  • On one hand, content on the Internet about a candidate, such as the candidate’s Facebook page and what you find when Googling the candidate’s name, is fair game in assessing the candidate.  But you shouldn’t Google the candidate yourself: you should hire a Googling consultant, so that you don’t find out anything that would lead you to illegally discriminate against the candidate.

Googling consultant?  I’m ready to run off screaming into the night.

I suspect that’s why real small businesses, that actually need employees to do things, don’t run ads and instead hire through their circle of friends, relatives, and colleagues: you can’t sue an employer for discrimination if you never knew the job existed in the first place.

But underneath it all, we don’t teach children anything about running a business in school, so that there are unrealistic expectations about the duties, risks, and rewards.  I suspect that kids don’t even choose up sides for team sports anymore, in the name of protecting the self-esteem of the kids who aren’t that athletic.  But choosing up sides is a very basic example of the problem of hiring from a pool of applicants.

So while I can say that I’ll strive not to be a little Napoleon when I get the point where I’m hiring someone, I can understand why it happens, and I doubt it will go away.