The difference between being self-employed and building an empire.

Last month we talked a bit about one of the hard questions a business person must ask: Why choose me? This month, let’s explore another difficult question, one which will divide the business people from the artisans: Whom, and when, do you hire?

The way you answer this question will profoundly affect the future of your business.

The typical contractor story begins something like this: An experienced tech begins to feel that he has become such an asset to a company that he deserves more recognition, more compensation or simply feels he has figured out a better way of doing things. The typical contractor offers no ladder for employees to climb, so breaking out on his own is the only real opportunity for advancement the high-performance tech sees.

The budding business person calls on a few friendly clients and hangs out a shingle (there’s much more to it but that’s a different column). Business is good as the upstart contractor soon learns to juggle service tools in one hand and a cell phone in the other. If the budding business person is as good as he thought, it doesn’t take long before he starts cringing each time he hears the jingling of that cute retro telephone ring on the cell phone.

Gradually, he awakens to the reality that it’s time to hire someone. But whom does he hire?

This is where business people and artisans find different forks in the road. Most often, the harried artisan contractor seeks relief from distractions to his new venture -  he wants someone to answer the phones and file the paperwork. Hiring an administrator might sound like an excellent decision for a budding company because these pesky chores get in the way of doing the satisfying work of solving problems and building solutions. Since he can’t swing a wrench and file invoices at the same time, it just makes sense to hire someone to do the business chores. The question that the artisan is asking is: “How can I do more work?”

The business-minded contractor asks a similar question with a distinct twist. Instead of asking, “How can I do more work?” he asks, “How can I get more work done?” The business-minded contractor will focus on hiring professionals to perform the work he sells. Hiring an administrator will come soon enough but the first priority is multiplication of effort.

This is the difference between building a business or just having a self-induced job. But don’t just take my word for it, consider the following advice from industry legend Frank Blau.

The Empire Builder

Unless you’re new to the industry, you automatically connect Frank to the concept of flat-rate pricing. Because of his, shall we say, strong message about the flat-rate road to profits, many think that flat-rate pricing is the key to his success. Actually, flat-rate pricing is merely one of the tools he used in building his empire. Flat-rate pricing helped Frank’s business earn profits but it would also help an artisan earn profits.

The Blau empire was created because Frank chose to think like a business person, not an artisan. Frank planned to go into business for himself and his employer gave him some sound advice: Create jobs and delegate responsibilities. Taking that advice to heart, before the end of his first week of business, Frank had hired his first plumber. Within six months he had added three more. Not only did his business savvy build a multimillion-dollar empire, he was able to provide his employees with by far the best compensation his market could offer (and I’m not just comparing to other plumbing contractors). Frank didn’t seek more ways he could get work done. He sought more people to do more work.

This is not to say that choosing the artisan method of contracting is a mistake. I’ll venture to say that most contractors today would be happier as artisans than in the office, which is why the hiring question is so important. If you find it difficult or impossible to turn production and other responsibilities over to subordinates, then you’re likely to be happier as an artisan. You might still earn profits as an artisan but you can practically forget about building an empire. You will need to focus on ways to be more efficient with your time, find ways to cover the shop when you take time off or get emergency calls and you’ll need to charge enough to cover much more overhead per sold job than would a multitruck shop.

Don’t underestimate the weight that overhead will place on your operation. For example, if you hire an office staffer to handle the drudgery of phone calls and paperwork, then you will face a much higher overhead per job than would a larger shop. As long as you cover the cost in your budget, you should be in good shape. Just don’t make one of the most common mistakes I hear by thinking that having a small operation is the same as having low overhead.

If you choose to remain an artisan, you’re placing a self-imposed earnings cap on yourself since there’s only so much production a body can generate. This isn’t a terrible result, just one that the artisan needs to be aware of when asking the question about hiring personnel.

Besides the earning cap, you need to keep your eyes open to other challenges. For example, your overhead should include funding for education because there will come a time when the back and knees no longer have the same enthusiasm for the trade as your heart and soul has. You’ll need to either amass enough resources for a timely retirement or you’ll need to have a “softer” profession to ease into when the time comes.

Speaking of retirement, if your physical limitation occurs sooner than expected, are you going to change your tune and consider hiring someone to take over for you? Or will you just decide to let it all go and start over with something else?

Shelving The Tool Box

If this discussion is making the hiring question more difficult, then let’s muddy the waters a bit more. Choosing to hire more producers is imperative for building an empire but that doesn’t mean it’s the easy answer. If you choose to create jobs and delegate responsibilities, then be prepared to shelve the ole Kennedy tool box because your new vocation will be as a full-time marketer/instructor/administrator/visioneer/motivator. You’ll take risks which are not entirely under your control. Your technicians won’t always make the same technical decisions you would make. If something goes wrong on a job, you’ll have to deal with lines of communication with plenty of opportunity for misunderstandings.

On the bright side, as your organization grows, you’ll have opportunities to train your employees to make decisions the way you would make them. You can train for technical procedures, further reducing the headaches that come with delegation. Your ultimate goal might be to train and delegate staff who can be entrusted with training and delegating other employees. One of the payoffs is that you will have much more freedom and wherewithal to do more of the things you love to do.

Whether you are just now launching out on your own or are approaching the “hiring” fork in the road, you should ponder well this weighty question: Will you hire as an artisan seeking relief from the administrative world, or will you hire and delegate as a business person who desires to grow an empire (even a small empire)?

If you are still fairly new to the business world, or if you’re dreaming about taking that plunge, you need to ask the question: artisan or empire?