A company needs people to help it run properly aside from the business owners. An owner might decide to hire employees or work with independent contractors. There are benefits to using both employees and independent contractors.
What is the Difference?
There are differences in how employees and contractors work and how they get paid. The basic differences are:
- Employee: Your company will withhold income tax, Social Security, and Medicare from wages paid to your employees. Your business must also make FICA tax payments. Employees are normally paid hourly, salary or commission.
- Independent Contractor: Your company will not withhold federal or state income taxes for independent contractors. Your business is not required to make payments for FICA taxes. Independent contractors must pay their own income taxes, along with income tax on earnings.
If you are wondering which one is better, true answer is both. There are reasons to use independent contractors and great benefits to working with employees.
Pro and Cons – Employees
There are pros and cons to hiring and managing an employee within your company including:
- Paying an employee, a salary or hourly wage, is often less expensive because there is job security.
- It is easier to assign tasks when you already have employees with the skills to complete them.
- Employees often take pride in their full-time work because it is a large part of their life, so they put the needs of your company high on their priority list unlike a contractor.
- Since you spend more time with your employees it’s easier to get to know them and trust them with your business needs.
- There is a lower turnover rate for employees so they get to know the ins and outs of your company and can help you grow.
- You must supply the equipment and materials your employee uses to complete their work such as phones, computers, software.
- Full time employees expect benefits such as health care, paid time off, sick days, raises and bonuses.
- There is payroll paperwork and HR requirements that take legal knowledge as to not break any rules.
- You must consistently provide an employee with work and pay even when business slows down and your company isn’t making as much money.
- Employees require training and don’t always come fully equipped with the skills to complete the tasks you need done.
Pro and Cons – Independent Contractors
Although every company needs employees there are also benefits to expanding your team through independent contractors such as:
- Your company can save money because you don’t have to provide any benefits to independent contractors such as health insurance or PTO.
- It is easier to end your relationship with a contractor than it is with an employee. If business slows down you have more freedom in ending the business relationship.
- You can hire a contractor with specialized skills that are specific to the task at hand if you do not have an employee with those skills.
- Contractors don’t require much training since most independent contractors have a specific skill set and have years of experience.
- No need to complete any legal paperwork for contractors, in most cases.
- They don’t have a sense of company loyalty and will not help promote your brand.
- There are no fixed rates so pricing can vary depending on the project, so it isn’t as easy to budget for as an employee salary.
- You don’t have as much control over how a task is done.
- There are higher turnover rates on contractors than there is with employees.
- You cannot determine a contractor’s work hours unlike an employee.
Why You Should Use Both
There are pros and cons to both employees and independent contractors. While you may personally feel one is better than the other there are reasons both are important in building your company. For example, if you have 20-40 hours of work that needs to be done that varies in projects and tasks then it might be easier to have an employee to assure you have someone on the clock full-time/part-time. If you have a specialized project that takes less than 20 hours per week, it is beneficial to use an independent contractor and is important to know when to outsource.
Your company should be built with a healthy mix of both employees and contractors depending on your current business needs. You can use the pros and cons from above to determine which type of worker makes more sense for the project at hand.
I know it can be tough navigating the waters of Marketing and that’s why I have created my Monthly Success Guide just for you!
What is your experience with hiring an employee vs hiring an independent contractor? Leave a comment below!
Outsourcing is a common practice in all aspects of life because one person can only do so much and only has so many hours in the day. As a homeowner you outsource tasks such as unclogging the toilet, fixing the garage door and deep cleaning the household. As a parent you outsource your child’s education to the local school, and you outsource childcare to babysitters when you have errands to run or you just need a break. Well, business is the same. You can’t do all of it yourself and you shouldn’t have to.
Outsourcing Business Needs
Business outsourcing is “the practice of having certain job functions done outside a company instead of having an in-house department or employee handle them; functions can be outsourced to either a company or an individual (freelancing).” Outsourcing has become a major business trend over the last ten years for everything from payroll, accounting, and employee training to social media management, sales and customer service.
There are many simple day-to-day tasks that you might feel silly for outsourcing because you think you should be able to get them done yourself to save money. Or maybe there are bigger tasks that you just don’t trust anyone but yourself to handle. Letting go and trusting someone to help can be difficult but outsourcing is something that helps business owners of companies both big and small boost efficiency and productivity and sharpen focus. If you are wondering if outsourcing is right for you ask yourself these questions.
What does it cost to complete the task in-house?
Cost is important in business so of course you need to weigh your options financially. You might think that it is cheaper to keep tasks in-house but that is not always true. Many companies report that they have saved money by outsourcing certain business needs.
Do you currently have an employee who is trained on that task?
If not, you will need to hire and train someone, put them on the payroll and offer other benefits. Or you can outsource to someone who is already well trained in that area who can complete the project with no need for you to manage them and provide them with office space and supplies.
Do you or your employees have the time?
This should be a simple yes or no. If your employees are overloaded with their current projects, you don’t want to pile on more because that is when tasks fall through the cracks. This doesn’t mean the task should fall on you to complete either. It means you should look into finding someone outside of the company that has the time to get the work done in a way that takes minimal amount of effort on your part.
Is it your company’s expertise?
Now this is an important one. For example, if your company’s expertise is designing and making baby clothing then that is exactly what you should focus on doing. You are the expert in manufacturing high-quality clothes but maybe you aren’t well versed in marketing, brand building or social media ad campaigns. These are the tasks you should outsource. Stick to what you and your employees know how to do and what you are good at.
Taking the little tasks and projects off of your plate that you either don’t have the time for or the expertise for will free up time and mental energy for you to focus on what you are good at. Asking for help doesn’t mean you failed. It means you know your limits and your companies limits and you’re more willing to put the success of your business above your pride. Outsourcing is a growing trend and is the perfect way to meet your company’s goals without overworking yourself and your staff and compromising on quality of work. Ask yourself, what projects or tasks could I outsource today?
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Budgeting for your business is one of the most important systems you need to master. Of course, this is easier said than done. As a business owner, you probably have rent or a mortgage to pay on top of payroll costs, utilities, tax payments, and more.
There are several small steps and simple tools you can use to make the big task of budgeting less complicated.
What is a budget?
A budget is an estimation of revenue and expense over a specific future period of time. It is usually gathered and re-evaluated periodically. For a business, a budget is an internal management tool. Budgets are essential to improve efficiency, aid in goal setting, measuring outcomes, and planning for possibilities.
Budgeting isn’t exclusive to your business. Staying accountable with your own income and expenses is just as important as keeping your business afloat. Chances are high that if your personal budget is in shambles, your business won’t be doing much better.
Depending on what your business is, you have some options to research what to expect for your financial future. You might have to make assumptions based on your location, hours of operation, and type of business. If there are similar businesses to your own locally or online, you can try obtaining information about weekly revenue and consumer patterns from them.
Your goal through research is to find out what your average weekly expenses for overhead, utilities, materials, payroll, etc. might be. If you’ve been in business for a while, you can monitor your past expenses and calculate in additional costs.
To be successful with your budget, you need to stay organized. Create a spreadsheet monitoring every expense and income your business has. Include basic bills, employee salaries, taxes, insurance, and small things like picking up new printer ink or paperclips.
Cut Costs when Beneficial
Always keep your eyes open for ways to minimize expenses. Factor in whether or not the lower cost is associated with lower quality, and if your business can afford either loss. Wait to make purchases until the beginning of a new billing cycle.
Budgeting Apps & Software
There are plenty of resources out there to assist you with the many facets of budgeting. Here are a few we recommend:
- Quickbooks is an accounting software for small businesses. This app allows users to keep track of pretty much every aspect of budgeting. It can be tailored to work for your industry and helps you make better decisions with advanced inventory tools. You can make and receive payments and quickly create powerful reports to give you insight into your business.
- Mint is one of the oldest and most well-known budgeting apps. It’s owned by the same company as Quickbooks and TurboTax. There are many features to assist you in tracking and managing your money. Mint automatically categorizes transactions and tracks them against your budget. You can adjust your budget at anytime as things change within your life and your business.
- You Need a Budget has a unique approach to budgeting. You build your budget based on your income, accounting for every single dollar. This app keeps you aware of everything you spend money on, and makes you think about whether these purchases are necessary. This is a good app for personal budgeting, but can be helpful as a business owner, as well.
While you work on your budget, consider how building good habits can improve your life personally and in business. As you work on your budget, you will start developing healthy habits that will make budgeting more intuitive the longer you work at it.
Happy Friday guys!
You know what’s coming…our weekly recap!
So this week was a little different because we shared TWO small businesses!
Let’s dive in
Monday: Small Business Spotlight: JRock Jewelry
- Montana local, Jessica Hanson took a leap of faith to pursue her dream and her craft of making statement pieces of jewelry
- Her style is so unique that there is something for everyone
- Check out Jessica’s story behind her business and see some of the pieces I LOVED!
Tuesday: Comparing Social Media Platforms for Business Marketing
- Not sure which platforms fit your business?
- We have broken down each platform so you can decide which will work for you!
- Believe it or not, some businesses should NOT be on Instagram… why? Because their audience may not be there!
- Check out our quick guide!
Wednesday: Small Business Spotlight: Amanda Radke
- Remember how Ellen announced on instagram that we should eat less meat?
- Amanda has been going viral on social media to try and tell the TRUE story behind agriculture and ranchers!
- We are here to support her the whole way and you should too!
- If you’re on the fence, read her story and it just might change your mind
Thursday: Answering you FAQs
- Being in marketing, I get a ton of questions so I figured I would jot down some of the big ones that seem to be pretty common
- Social Media questions? Marketing? Business? Being an Entrepreneur? I got you!
Have a wonderful weekend and I will see you next week!
I find myself traveling pretty much constantly for my business. If you’re like me and you’re on the road a lot, you should consider taking advantage of a Hotel Rewards Points Program. Many different hotels offer these. I’d recommend looking into hotels you can find in the areas where you travel.
Some of the popular hotel chains include:
You might recognize some of those hotel names, but those large chains include great (affordable) hotels like Comfort Inn, Days Inn, Ramada, Hampton, Aloft, and Hyatt Regency.
Be proactive and not reactive in the way you save money. Hotel rewards can come in a few different forms but benefit those who travel frequently. You can get a Hotel Rewards credit card from most of these hotel brands! If you use the credit card on basic needs like groceries and gas, while paying off your bill every month, you will start gaining points.
Overtime you will accrue enough points for free or extremely discounted hotel stays, possibly even FREE. Pretty awesome, right? You’d already be spending money on gas and food, and you’ll save a ton of money while you travel. You might be thinking that we are getting affiliate money from promoting these Hotel Rewards programs, but we’re not. We just want you to help you save money where you can!
If the idea of another credit card isn’t right for you, you can still benefit from a rewards program. The more hotel stays you make, the more points you’ll gather.
Hotel benefits are not the only way to travel smart. Remember, you want to be proactive, not reactive. Make sure to use no-fee bank cards while you’re traveling. Those annoying fees can add up quickly if you’re not paying attention.
If you use WiFi while you travel, as most modern business owners do, research which locations offer free WiFi in the area you’re visiting. The last thing you want to add to your travel bill is an overpriced internet fee at a hotel. Also, if you’re not a breakfast person you might not care what the hotel offers. But if you are, then make sure to check out the breakfast they offer! Often the cheaper hotels don’t offer breakfast, adding an extra cost for you in the long run. These are just a few factors to think about as you book your next trip!
Travel safe and smart, my hustlers!
If you need some ideas about what I MUST have in my truck when I travel a ton, our blog “Car Essentials for the Entrepreneur on the Go” has all the goodies!