How to Attract Talent to Your Small Business

It isn't easy for a small enterprise to survive in the increasingly fierce business competition without talents work for it. But it seems that talents always prefer those corporations that offer better benefits and bigger salaries.

Dear Karen: How can my company compete for talent with corporations that offer better benefits and bigger salaries?

Answer: Small companies have competitive advantages you can emphasize when hiring.

An up-and-coming firm can offer promising career paths to young workers looking to advance quickly. "People in small companies are rewarded for talent, not time served," said Brad Sugars, chief executive of online consulting firm ActionCOACH.

Let potential employees know they'll have direct access to you and other key executives, while in a large corporation they'll be lucky to meet the CEO.

"With a smaller company, you get a ringside seat at everything from new-product launches to sales meetings and strategy sessions from the get-go," Sugars said.

Though your firm's salaries may be lower initially, think about offering stock options or performance bonuses as your company grows. Major corporations have strict bonus and incentive policies; smaller companies have greater flexibility to reward excellence.

Finally, emphasize your firm's family atmosphere. Being an anonymous cog in an impersonal workplace isn't very appealing. Being one valued employee in a dynamic group of 10, 50 or even 100 can be much more satisfying.

No upside to keeping a bad hire

Dear Karen: I have a new hire who's not working out. How much time should I give him to get his act together?

Answer: A new employee should be experienced enough to fit in quickly or teachable enough to improve with training.

If your new hire is neither, you're better off ending his employment now. Continuing to pay a bad hire hurts your bottom line and alienates other employees.

"When in doubt, terminate," said Ray Gallo of law firm Gallo & Associates in Los Angeles. "A client of mine once put it to me this way: 'Every time I thought about firing someone and didn't, I regretted it.' "

It's also easier emotionally — and legally — to remedy a bad decision quickly. Write down performance-related reasons for the termination and keep them on file.

"The only impermissible reasons for terminating an employee are race, color, sex, religion, nationality, ethnicity or what we'll call whistle-blowing," Gallo said. " 'I have misgivings about this person's honesty and reliability' or 'This guy listens or follows instructions poorly and seems unmotivated' are perfectly legal and acceptable reasons to discharge someone."

Tax deduction on the home office

Dear Karen: If I run my business from home, can I automatically take a home-office deduction on my taxes?

Answer: The rules on home-office deductions were loosened in 1999. Before that, a home office had to be an individual's "principal place of business" in order for that person to claim the home-office deduction.

Since 1999, however, Internal Revenue Service rules state that you must use your home office for "administration or management activities" in order to qualify for the deduction, said Salim Omar, a New Jersey-based tax and financial educator. There must be no other fixed location where you perform your firm's administrative tasks.

So even if you spend a lot of time at clients' offices or making sales calls, as long as you run the firm from your home office you should qualify for the deduction.

"The home office still must be used exclusively for business purposes to qualify," Omar said. So your home office can't double as a guest room or den — it must be for your company's use alone.