By Dave Ramsey

Dear Dave,

I’m running my own business as a sole proprietor, but the place is growing beyond my capacity to handle it alone. I’d like to find someone to work with my clients and further generate sales. Do you have any advice on how to hire my first employee?

Mike

 

Dear Mike,

I would put any first, new team member on a small base salary, plus a percentage of what’s generated by the clients they work with.  I mean, you’ve got to make sure they don’t starve. But at this point it’s not so much about what’s “fair” as what works mathematically and seems reasonable to you.

I’d be willing to give them a bigger percentage in the early stages. Then, as the business grows and your rep becomes more successful, you could shift it to a smaller percentage and it would still mean more money. In other words, they’d probably rather have 10 percent of $1 million than 25 percent of $20. Cut them in early at a bigger rate, but reserve the right to adjust your compensation agreement as their sales and productivity increase down the road.

It sounds like you’re still in the early stages of being a small business owner. At this point, both you and your newbie have to realize things could still go south. Bringing another person onboard means you’re either going to win together or lose together. So, your compensation structure has to be something that will allow a new hire an existence with room for financial advancement, while still giving the company opportunity to grow!

—Dave

Dave Ramsey is a personal money management expert and national radio personality. His three New York Times best-selling books – Financial Peace, More Than Enough and The Total Money Makeover – have sold more than 6 million copies combined. His latest book is EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches.

 The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank.