How do I know if I'm setting a healthy boundary or just avoiding something uncomfortable?

This is the question at the heart of this whole conversation. Avoidance is an immediate attempt to get away from something uncomfortable. It's short term, and it often brings instant relief followed by a sense of unease, a racing heart, a knot in your stomach, a feeling that something's off. A real boundary comes from a completely different place. It's rooted in your values, it's long term, and it's oriented toward something getting better, in your relationship, your job, your own life. When you set a genuine boundary, you usually feel a sense of calm and alignment, even if it's also a little scary. Avoidance offers relief with a side of ick. A boundary offers steadiness, even when it's hard. Paying attention to your body is one of the fastest ways to tell the two apart.

What's the actual difference between a boundary and avoidance?

A boundary is built on your value system. It's about how you want to engage with the world, and it's long term and goal oriented. If you stop a situation that's harmful to you, the goal is for things to get better over time, in your job, your relationships, your skills. Avoidance is about changing something in the moment. It can start from a real place of self-protection, but it's short lived, and it can quietly become a habit. It can start as small as not wanting to go to the grocery store and turn into someone who no longer leaves the house. Boundaries change your life over time. Avoidance just changes how uncomfortable the next five minutes feel.

Why does ghosting feel easier than just having the hard conversation, even though you feel worse?

Ghosting gives you instant relief. You don't have to sit in the discomfort of a hard conversation, so your nervous system gets an immediate payoff. But it comes at a cost. When you cut someone off without an explanation, you're not just avoiding conflict, you're leaving the other person to fill in the blanks with their own story, usually a worse one than the truth. It creates more anxiety, not less, for both of you. I've come to believe ghosting often comes from a place of people pleasing, not wanting to say no, not wanting to disappoint someone, so we just disappear instead. A real boundary, even an uncomfortable one, at least leaves both people with something true to stand on.

Why does my body react when I try to set a boundary for the first time?

If you've spent years avoiding conflict or people pleasing, your body has learned that staying quiet feels safe. So the first few times you actually set a boundary, even a healthy one, your body might still react like something's wrong. Your heart races, you feel unsteady, because your nervous system hasn't caught up yet to the fact that this new behavior is actually safe. This is where a lot of people talk themselves out of the boundary. They feel that discomfort and assume it means they're doing something wrong, so they slide back into avoidance instead. But sometimes doing the right thing doesn't feel good right away. It takes your brain some repetition to learn that the boundary you're setting is safe, even when your body hasn't gotten the memo yet.

What's a simple process for telling the two apart in the moment?

Think about it in three steps. First, pause and sense what's happening in your body. Avoidance usually feels like relief chased by a knot in your stomach. A boundary usually feels like steadiness, even if there's some nervousness mixed in. Second, check your motive. Are you trying to escape discomfort in the moment, or are you standing on something you actually value? Being honest with yourself here is everything. Third, communicate it, even if that communication starts internally. You can say to yourself, I don't have the capacity for this conversation right now, and that's a boundary. Saying it out loud to someone else, even something as simple as I need to come back to this later, is where the real shift happens.

Alecia St. Germain and Zen Jenn on when to hire and 1099 vs W-2

When to Hire? Why Cheap Help Can Cost You Twice

October 6, 2026

Money Mindset & Financial Growth

Knowing when to hire starts with a clear need and a clear budget. Whether someone is a 1099 contractor or a W-2 employee depends on how you manage them, and cheap help often costs you twice once you add turnover and rework. Define the role, know your numbers, and track whether each hire brings the growth you planned for.

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You’re up late doing the thing you swore you’d stop doing. Maybe it’s your social media. Maybe it’s the bookkeeping. You’re doing it, you’re not doing it well, and the same thought keeps looping. “I shouldn’t be doing this. I need to hire someone.”

So you find someone affordable. You tell them it’s a 1099 role because that’s how everyone does it. You’re a little proud of yourself for finding cheap help. For a few weeks, you can breathe.

Then the results don’t come. You’re checking their work, redoing it, and explaining it again. Six months later you’re back where you started, and now you’ve paid for it twice.

Here’s what’s going on underneath. Most hiring mistakes start before you ever post the job. You hire to get relief from a feeling instead of solving a clear problem with a clear budget.

Knowing when to hire is a leadership skill and a numbers skill. In this Monthly Money Talk, Zen Jenn and I walk you through both, so your next hire moves your business forward.

What We Cover

In this episode on how you make spending decisions in business, you’ll discover:

How to tell when it’s time to hire, and why your profit and loss statement alone won’t tell you
What the stair step effect is and why most hires feel like a stretch at first
The real difference between a 1099 contractor and a W-2 employee (hint: it has nothing to do with the job)
Why the IRS won’t care that your contractor asked to be paid that way
Why cheap help often costs you twice
Why a savvy contractor may cost you more than a great employee
How to research what a hire will cost before you post the job
Why knowing your numbers is part of your job as CEO

How do I know when it's time to hire in my business?

Your numbers alone won’t tell you when to hire. There’s no magic number on your profit and loss statement that says, “Now.” The need almost always shows up first in how your business runs. Sales are growing and you need another salesperson. Or you’re stuck doing work that pulls you away from what only you can do. Your numbers then guide how much you can spend and whether you need to get creative to get there. Jenn Baas, a financial strategist, calls this the stair step effect. Your need for support steps up before your revenue does, so most hires feel like a stretch at first. That’s normal. What matters is that the hire is tied to growth and that you track it for the next three to six months to see if the growth shows up.

What's the real difference between a 1099 contractor and a W-2 employee?

The difference has nothing to do with the type of work. A bookkeeper can be paid as a 1099 contractor or as a W-2 employee. What decides it is how you manage the person. If you set their schedule, tell them how to do the work, and give them the tools, the IRS sees an employee, and you owe payroll taxes. If they set their own hours, bring their own equipment, send you an invoice, and you care about the end result, that fits a contractor. Here’s where people get tripped up. You don’t get to pick based on cost, and it doesn’t matter if the person asked to be paid as a 1099. If you’re ever audited, the IRS looks at the facts of how the work happens. Your reasons won’t count. Talk with your accountant about your specific situation.

Is a 1099 contractor really cheaper than an employee?

On paper, it looks cheaper. You skip the employer share of payroll taxes, which is about 7.65 percent. In real life, it often costs more. A savvy contractor knows they pay both halves of Social Security and Medicare themselves, so they charge more per hour to cover it. They also run their own business, so their rate includes their overhead. The cheap contractor is usually the one who hasn’t figured this out yet. They undercharge, burn out, and get a shock at tax time when they learn nothing was withheld. That’s often when they walk away. Then you pay to replace them. Rehiring is one of the most overlooked costs in a small business. The seat sits empty, and you spend hours hiring all over again. A W-2 role can bring more commitment on both sides and people who stay for years.

Why do I keep hiring people who can't get me the results I need?

Often the role and the person don’t match. Before you hire, ask one question. Am I good at this work? If you are, and it’s pulling you away from work only you can do, delegate it. You know what done looks like, so you can train and coach someone to do it well, as long as you stop jumping back in. If you’re not good at it, you can’t train someone into it. That’s the blind leading the blind. That role needs someone who already has the skill and owns the result, like a consultant, an outsourced firm, or an experienced hire. The pattern I see most is a business owner handing expert-level work to a virtual assistant or an entry-level hire, then feeling let down when nothing moves. The problem started with how the role was set up.

How do I figure out what I can afford to spend on a hire?

Start by writing down what you need in a perfect world. Create a simple job description, almost like an avatar for the role. Then research your options and what each one costs: full time, part time, an outsourced firm, or a virtual assistant. Get quotes. Look at hiring sites. Ask other business owners. You can even use AI to get a rough baseline. Now it becomes a puzzle. You’re looking for the option that meets the need and fits what your business can support. If it’s a stretch, make sure the role is tied to revenue in some way, and track it closely for the next three to six months. If the growth you planned for isn’t showing up, ask why early, before you’re two years in and no further ahead.

Why hiring cheap often costs you twice

Here’s the pattern I see over and over. A business owner is buried. She knows she needs help. So she hires the most affordable person she can find, hands them a big job, and waits for things to get better.

Months later, nothing has moved. She’s frustrated with the person she hired. Most of the time, the person isn’t the problem. The role was set up wrong from the start.

Delegate, outsource, or hire an expert

Before you decide when to hire, get clear on what kind of help the work needs. Start with one question. Am I good at this?

If you are, and it’s taking you away from work only you can do, that’s a great thing to delegate. You know what done looks like. You can train and coach someone to do it as well as you do. The catch is that you have to let them do it instead of jumping back in and taking over.

If you’re not good at it, you can’t train someone into it. That’s the blind leading the blind. That work needs someone who already has the skill and will own the result. That might be a consultant, an outsourced firm, or an experienced hire. I walk through these choices step by step in Episode 109: Outsource, Delegate, or Do It Yourself? How to Get Your Time Back.

Where business owners get into trouble is handing expert-level work to a virtual assistant or an entry-level hire. A great VA is a way to get tasks done. High-level thinking isn’t what they’re there for. When the result doesn’t show up, the owner blames the hire. The gap was in the match.

I’ve seen the other side of this in my own business. I hire a 1099 contractor to handle the tech side of things. Once or twice a year, she goes through the portal that houses my coaching clients’ materials and makes updates. She checks that my enrollment process and funnels are working and makes any upgrades they need.

I do a few weeks of prep on my end. Then she finishes the work in a few days. There isn’t enough of this work to handle it in house, and someone with less experience would take a lot longer. She costs more per hour than a less experienced hire would. She’s also the reason this whole part of my business runs without me. Knowing I have an expert means it’s not renting space in my mind. Mandy McAllister and I talked about this idea of return on brain space in Episode 119: The Framework That Will Change How You Look at Every Income Stream.

The unicorn hire

Another trap is looking for one person to fill a lot of different roles. It feels efficient, especially when money is tight.

Jenn has seen this work when the needs are alike. In her interior design clients, the designers, the procurement team, and the owner all need the same kind of admin help. One strong assistant can support all of them. It breaks down when the roles call for truly different skills, like marketing and operations. Then you’re looking for a unicorn. Part-time or fractional help often fills those gaps better.

“Sometimes you spend money and you make money, but sometimes you spend money and you just don’t have that money anymore.”
— Jenn

How to know when to hire

Jenn said something that stuck with me. You won’t look at your profit and loss statement one day and see a number that says, “Time to hire.” The need shows up first in how your business runs. Sales are growing. Work is piling up that someone else should own.

Your numbers come in next. They show you how much you can spend and whether you need to get creative to get there.

The stair step effect

Jenn says the need and the budget line up smoothly maybe 10 percent of the time. Most of the time, the need for support shows up before the revenue does. She calls this the stair step effect. You’re standing at the bottom of the next step, and you have to step up in expenses before your revenue follows.

That means most hires feel like a stretch at first. That’s normal. The key is to make the stretch on purpose. Tie the hire to something that should grow revenue, then watch it closely for the next three to six months.

If the growth isn’t showing up, ask why early. You don’t want to look up two years later and realize you’ve been paying for a role and still aren’t making more money.

1099 vs W-2: what decides it

This is where so many business owners get tripped up. Most people think they get to choose whether someone is a 1099 contractor or a W-2 employee. You have far less choice than you think.

It depends on how you manage them

As Jenn explains, the label has nothing to do with the type of work. You can pay a bookkeeper as an employee or as a contractor. What decides it is how much control you have.

She uses a painter as an example. Does he bring his own ladder and supplies? Does he tell you, “I’ll be there Tuesday, and I’ll probably be done by Friday”? That’s a contractor. Or do you hand him the tools and tell him to work from 8 to 4, four days a week? That’s an employee.

When you control the schedule, the process, and the tools, the IRS sees an employee. You pay payroll taxes, including your share of Social Security and Medicare. When the person runs their own day, brings their own equipment, sends you an invoice, and you care about the end result, that fits a contractor.

I see a lot of business owners treat contractors like employees. Here’s the checklist. Here’s our protocol. Here’s exactly how we do it. A true contractor gets the result you want, the timeline, and the contract. How they get there is up to them.

Why “they asked for it” won’t protect you

Jenn hears the same reasons all the time. It’s cheaper. Or the person asked to be paid as a 1099 for their own tax reasons.

If you’re ever audited, none of that matters. The IRS looks at the facts of how the work happens, and it doesn’t care why you set it up that way. It groups those facts into three areas: behavioral control, financial control, and the relationship between you and the worker. You can read the IRS’s own guide in Independent contractor (self-employed) or employee?

Offshore virtual assistants are their own category. Truly international help often fits a contractor setup, partly because you lose the ability to control a lot of how they work. Whether it works well depends on the person, the same as any other hire. This is general information, so talk with your accountant about your specific situation.

The real cost of a 1099 contractor

Here’s the part people don’t love hearing. Getting the classification right may cost more on paper. Jenn’s advice is to stop being so afraid of the extra payroll tax. Your share as the employer is 7.65 percent. (Fact check: Jenn misspoke on the episode and said 7.45 percent. We checked it, and the correct figure is 7.65 percent, which is 6.2 percent for Social Security plus 1.45 percent for Medicare.)

A savvy contractor charges more

In my experience, a great contractor often costs more than a great employee. They run their own business. They’ve spent years building their expertise. They find their own clients and pay both halves of Social Security and Medicare on their own, which is 15.3 percent. A savvy contractor builds all of that into their rate.

So if you found a contractor who is cheap, ask yourself why. Often they don’t have the experience or the business sense to charge what the work is worth. They undercharge, they burn out, and you end up with results you don’t want. Then you pay again to fix it, sometimes more than once.

When cheap help walks out at tax time

Jenn sees this a lot with younger workers. They’re told the job is paid as a 1099, and they don’t know what that means. Then tax season comes. They learn nothing was withheld and they owe more than they expected. They feel burned, and they leave.

The owner who was proud of finding cheap help is back to hiring six months or a year later. Rehiring is one of the most overlooked costs in a small business. The seat sits empty. You spend hours on resumes and interviews, or you pay a firm to do it.

Jenn has had clients move people from 1099 to W-2 on their own, just for the security it gave everyone. When someone is on payroll, there’s more buy-in on both sides. Benefits and paid time off start to look less like an expense and more like a way to attract people who want to stay.

“I would rather pay my payroll taxes and have people that stay for three, four, five, ten years versus have a churn all in the name of saving a little bit on payroll taxes.” — Jenn

How to figure out what you can afford

Start with the role before the price tag. Write a simple job description for what you need in a perfect world. Then look at every way you could fill it. Full time. Part time. An outsourced firm. A virtual assistant.

Next, find out what each option costs. Get quotes from a few firms. Look at hiring sites to see what similar roles pay. Talk to other business owners. You can even use AI to get a rough baseline.

You don’t have to do all of this alone. Recruiting agencies often charge a portion of the person’s salary. Jenn used an online hiring service with concierge support. They screened the resumes and did the phone screens, and it cost a few hundred dollars instead of thousands. If your business is growing fast, paying for this kind of help protects your time and your brain space.

Then it becomes a puzzle. Which option meets the need and fits what your business can support right now? If the answer is a stretch, you want to make that call with clear eyes. I talk through how to do that in Episode 118: How to Make Spending Decisions You Won’t Regret in Six Months.

“If you are a business owner, you have to track your numbers throughout the year. It is part of your leadership as the CEO of your business.”

Knowing your numbers is part of your job as CEO

There’s so much advice online telling you to scale, scale, scale. What’s missing from most of it is one question. What do your numbers say?

When you’re not tied to your numbers, you just make the hire. “I shouldn’t be doing this. We need this person.” The intention is good. But without a plan, you can end up two years in with a big team and a business that still doesn’t make money, because it all goes back out the door.

I get it. Math isn’t everyone’s favorite subject. I used to treat my accounting as something I did to stay compliant and file my taxes. Working with Jenn changed that. Now I tie what I do in my business to real numbers and make decisions from there, including when to hire.

Here’s the loving hard truth. If you run a business, tracking your numbers is part of the job. On the podcast, I told Jenn that skipping it is irresponsible. She put it better. It’s a choice, and it has an impact.

You can choose not to look at your numbers. Just know you’re choosing to run your business on luck. The business owners who skip this are the ones who fall behind on taxes, get the big bills, and can’t pivot when things change.

Sustainable growth takes two things. You need to work on yourself as a leader, both how you lead yourself and how you lead others. And you need a financial plan. That’s the work Jenn and I do together inside The Exponential Entrepreneur, and it’s what makes every decision easier, including the next time you’re deciding when to hire.

About Jenn Baas

Jenn Baas is the founder of Peak to Peak Solutions, where she helps small business owners navigate the financial ups and downs of entrepreneurship through accounting, bookkeeping, and strategic CFO services. She serves as a fractional CFO for The Conscious Edge and leads the Financial Leadership Lab for Alecia’s clients, bringing practical financial strategy to the human side of building a business. You can find more about Jenn’s work at Peak to Peak Solutions.

Resources and Links Mentioned

- - - - To explore Jenn’s outsourced CFO services, visit peaktopeaksolutions.com.
      - To work with Jenn inside the Financial Leadership Lab, book a Capacity Assessment Call at consciousedge.com/capacity.
      - Instagram: @aleciastg

The next step is a Capacity Assessment Call. We'll look at how you lead yourself and your team, what your numbers can support, and what your business needs from its next hire before you spend a dollar on it. Simply book your complimentary Capacity Assessment below.

Book Your Call Here

You Might Also Love

EP 109: Outsource, Delegate, or Do It Yourself? How to Get Your Time Back

EP 118: How to Make Spending Decisions You Won't Regret in Six Months

EP 119: The Framework That Will Change How You Look at Every Income Stream

Full Transcript Here

Alecia St. Germain 00:00
It's time for monthly money talks with Zen Jen, and we're gonna pick up where we left off last week. We talked about with Jonathan. Are you in a season of yes, and when are you in a season of no? If you heard the episode a few episodes before that, we talked with Mandy McAllister on return on brain space, and this is going to play right into everything we've been talking about. Oftentimes, when we are trying to take things off of our plate in order to free up brain space, the answer is to hire. So, Jen and I are going to dive into today how you figure out what to actually spend on a strategic hire, the myths about 1090 nines versus w2 that trip people up, why hiring cheap may cost you more in the long run in both time and money, and how to figure out what your business genuinely needs before you go looking for someone. So let's dive in. Hey, you leader, entrepreneur, business owner, solopreneur, whatever you call yourself. We know you're a visionary business builder, wealth seeker, looking to combine a passion for doing good with leading consciously, it's time to shift from a traditional focus of pure wealth accumulation to one that integrates well-being and fulfillment. You're here for a purpose, and it's time to shine your light. So here we go. Welcome back to the Conscious Edge podcast. I'm your host Alecia Saint Germain, founder of the Conscious Edge, and I have with me Zen Jen, who leads the financial leadership calls inside of the Exponential Entrepreneur, which is the group program that I run for women entrepreneurs, Jen. Hi,

Jennifer Baas 02:04
hello. How are you?

Alecia St. Germain 02:05
Good. For anybody who doesn't know you and is listening to the podcast for the first time and maybe isn't familiar with them, please tell them what you do. And besides being inside of my program, what is it that you do

Jennifer Baas 02:21
absolutely. So my company is called Peak to Peak Solutions, and I provide outsourced accounting services and strategic financial guidance. And I'm really hoping to help business owners have more clarity and confidence and less overwhelm when it comes to their financial operations of their business,

Alecia St. Germain 02:41
and if you hear a puppy in the background, this is real life. We both work from home, and we get to-it's all good.

Jennifer Baas 02:47
It's all good. I'm going to shut my window, though.

Alecia St. Germain 02:52
So I started working with Jen, and she has been so transformative for me to transform my money story about not being good with numbers, being very proactive in how I look at numbers, how I decide what I'm going to do next, and taking my accounting from being purely reactive and compliant with filing my taxes to being very strategic about the decisions that I make and tying the activities that I do in my business to real, tangible results and numbers. So she's really cool in that she understands bookkeeping, but she also has a very strategic hat of how we make decisions, and that's part of what she leads inside of the financial leadership lab is to help women think about their numbers differently and make decisions from a different place. So yesterday we were talking a little bit about debt inside of the Financial Leadership Lab and healthy debt practices. And so one of the things we talked about with healthy debt was debt that was strategic for making the business grow, and so sometimes that can look like making a strategic hire, and it can look like a lot of other things. But it brought up a lot around hiring. I think that's one of the most challenging things that I see Entrepreneurs do sure. Everybody learns the lesson: hire slow, fire fast.

Jennifer Baas 04:27
Yes,

Alecia St. Germain 04:27
right. So, where do you want to start with this? I'm thinking first we go with what do you actually need for a hire? Like, how do you figure out what you actually need? When do you know from a number standpoint? I'm going to have you do the number side of things, and I'll do like the leadership mindset side of things. How do you know from a number side of things that it's time to start looking at hiring?

Jennifer Baas 04:53
I don't know that it's just the numbers themselves. Often, a hire is coming from an operational need, right? So there's some sort of need for support in some way, or things are expanding, sales are growing, so we need to add another salesperson. So typically, I think the need or the time to hire is more based on operational need, capacity needs. So the

Alecia St. Germain 05:18
number support support number is going to guide

Jennifer Baas 05:21
the decision and how much you can afford to spend on it, or if you have to problem solve to get there. But it's not a situation where like you look at the P and L and you see X number and you're like, oh, time to hire. So yeah, it's going to really come from those operational needs or supportive needs, and then it's the push and pull between what you need in that person in that position, and then what can you afford? And occasionally, it will happen where it's very much in line, where it's like, "Oh, we need this person, and they're going to cost X, Y, Z amount. And you look at the numbers, and you're like, "Yes, we can do it, and it's very smooth and easy. So that happens maybe 10% of the time, most of the other times we're looking at it and saying that the operational need can kind of tend to come ahead schedule of when the finances really can afford it, and I oftentimes describe this to my clients as like the stair step effect, where we have these times when we're like at the bottom of the next stair, we need to step up. So we need to step up to the next point of support with our people, but our revenue hasn't done that yet, and so we have to take that step up in expenses, and then typically, then hopefully over the next bit of time, we see the growth that we need. So it's all-it's about kind of timing things and understanding at the outset it might be a stretch to hire that person, and oftentimes it is. You're kind of wiggling things around to make it work, and then the goal is always that with that hire, you're expanding resources, you're expanding revenue, freed up to do other things X, Y, Z, and then that helps the financial side of it end up working out.

Alecia St. Germain 07:03
So, if I was to look at this from the leadership side of things, I did an episode, episode 109, outsource, delegate, or do it yourself. How to get your time back. It sounds to me like more that's going to inform your need, and then you figure it out, obviously strategically from a financial standpoint. So I would offer to someone that there are things that you do in your business, and I have a whole in that episode. I go over kind of some of the questions, and there's a whole decision tree that you can actually get access to that will help you walk through some of the things that you're trying to take off of your plate or take off of someone else's plate on your team, and it's really looking at: is it something that you're good at doing? If it is, it something that is the highest, best, and best use of your time, and if it's taking your time away from something that would actually help the business grow in a different direction that only you can do, then maybe that's a really good thing to make a hire for, like to delegate it, because you know how to lead it. You know what done looks like. You would know how to train and coach someone into doing that role as good as you do, as long as you have that leadership skill to impart that wisdom, and you don't keep jumping in and taking over from them, but that's something that's really good to delegate and can look at like a hiring role. Then there are things that you're not good at doing, and they aren't your wheelhouse, but you need them for your business. You really need to outsource something like that because you don't necessarily know how to create the results that you need. You don't do it well, and so it would be like the blind leading the blind. So you need someone to outsource that to someone who is more maybe expert in that thing, or hire somebody like internally who really is going to own that role, who's going to own that result. Which means that's not going to be the same as somebody who is being trained or managed to do something. It's somebody who already has the experience, and so a lot of times I see someone either make a hire in their business for something that really should be-it's a job that should be owned by someone who's already expert in it because you're not good at it, and that-and they don't do that. They hire like a low-level-I don't want to say low-level employee, but they hire someone without that skill, and then they're upset when they can't create traction or a result in that particular part or department, or it's something they should be outsourcing to a consultant or someone else, and that person is solely responsible for the result and how the job is done. But instead, they give it to like a virtual assistant. Who again

Speaker 1 10:00
is

Alecia St. Germain 10:01
a way of getting things done, but not necessarily high thinking jobs, so to say.

Jennifer Baas 10:10
Right.

Alecia St. Germain 10:10
So I think we get into a little bit there of like the 1099 versus the w2 employee, and there's a lot of complex things in what I'm saying. So maybe you can help break that apart a little from a financial standpoint.

Jennifer Baas 10:25
Well, I mean, the first thing that comes to mind is just the whole idea of bringing the support on, even in the context of looking at it. Of like, these are not my highest and best use of time, or these are things that would be better to have somebody else doing. We still have to look at things through the lens of what can the business support, and I see a lot of people get into trouble by hiring and outsourcing too soon because they've heard that of like this isn't the highest and best use of my time, or I could be doing these other things. And there is a reality too when you're starting up or you're small, you simply don't have the money to work with, or you can make a specific thought of like I'm going to invest in the business, or I'm going to fund this. Have either debt or a capital contribution if it's more in that true startup phase of saying here's things we need to fund in order for this to work well. So we always do want to be looking back, and it is that push and pull. Sometimes we do have to take that leap of faith and say we're going to make this higher. We're going to kind of stair step up. We're at kind of lowest efficiency there for a moment, and those are important decisions to make when we're investing in a person that is going to drive revenue in some way. Where it can be tricky is when people hire a lot of different roles and very supportive roles really early, and they don't actually have the funds to be able to do that. And so, I do think there is a time where things just aren't perfect and they don't work great. And like you're doing your own social media and you're not doing it great, but you're doing it because you don't have the budget to afford somebody to do that for you. So that's the first thing I think we do want to measure the financial ability to support that against like the pros and the cons when we're looking at it, and then kind of picking the right people. I think people get very confused, like you mentioned the w2 versus 1099. I think people get confused about what that means and what the distinctions there are, and so I think it's good to provide clarity on that. The conversation of w2 versus 1099, I think people think is a little bit more optional than it is. Very simply put, it's just the IRS saying how you're going to legally pay somebody given the work situation that they're in, and there's a list. I think there's like 20 different things that the IRS looks at when they're qualifying. Is this somebody who is truly an employee, or do they fit an outsourced 1099 sort of situation? So the first thing is that it's truly just a designation of how you're paying the person. It actually has nothing to do with the work that they're doing for you, so you can have a bookkeeper that's being paid legitimately as an employee, and you can have a bookkeeper who's legitimately being paid as a 1099 worker. Most every single type of role is something that could be paid one way or the other. It's more context of how is that person being managed, and what are the expectations of them? So, in an outsourced 1099 situation, you're not controlling how they do their work. You're not controlling their schedule, their timing. It's more about the end result. You're typically there supplying their own materials. You're not giving them a computer. I think the easiest way to think about it is like in more of a labor sort of job. Is that painter bringing all of his own supplies? Is he bringing his ladder and having his own equipment, or is it something that you are providing to him? Is he saying, "I'll be there on Tuesday, and I'll probably be finished by Friday. And you're like, great. Or are you saying, I need you to work from eight to four on these four days of the week? So it's really a context of how that person is being managed, not the type of work that they're being done.

Jennifer Baas 14:19
And if there's more control and more context around the expectations, that's going to fit into a w2 situation. In that case, the IRS is saying, "Hey, this person is truly an employee. You have control, and therefore you're obligated to pay payroll taxes, pay into that FICA, which is Social Security and Medicare. That burden is on you as the employer because you have more control over their work versus a contractor, they have control over their day to day. They provide their own equipment and things, and in that case, they have that responsibility of paying into FICA on both sides.

Alecia St. Germain 14:56
Got it, and that's what I had always understood it. As well, and I do see a lot of people treat 1099 employees like w2 employees, like telling them when they have to do it, how they have to do it. Here is the checklist. Here is our protocol that we follow. Here is the exact way. Whereas a true 1099 employee is that like it's like here's the result we would like you to create. However you get there, as long as here's the agreed upon contract time, here's the timeline, and you control how we get there and provide that result. So that's how I had always explained it.

Jennifer Baas 15:38
It's something where most companies, some companies just truly don't understand the difference. But I've sat in the rooms. I hear the conversations. Most of the time, companies are looking at it as a cost-saving measure because they don't. If it's a contract employee, they're not paying the payroll tax component. They're also not obligated to necessarily have workers' comp, and so it's typically a cost-driven decision. And again, I think people think that they can choose. Or I've also seen it where they're like, "Well, the employee or the person, the hire requested it that way. Maybe they want it for their own personal tax situation, and so they're basically saying we're doing it this way because they asked. And so it's still the IRS is not going to care. Ultimately, if you get an audit, the IRS is not going to care if the employee wanted to be paid that way. They're going to look at do they actually fit into the scenario of being an employee or an employer. They're going to look at things like are they invoicing you? So again, a contractor would be sending you an invoice. A contractor would be at least self-reporting hours and things like that. But typically, sending an invoice. Are they bringing their own materials? Are they setting their own schedule? Those sorts of things. And so, if you end up in a position where you're audited, that's always my caution. Is the IRS is going to look at the facts of how that dynamic is working. They're not going to really care about the rationale for why you're doing

Alecia St. Germain 17:00
it. So, just something to think about. And so many people use offshore VAs

Jennifer Baas 17:08
for sure.

Alecia St. Germain 17:09
That's a different ball of wax. The whole state of

Jennifer Baas 17:11
its own

Alecia St. Germain 17:12
because they're not required to pay the same way.

Jennifer Baas 17:17
Well, a lot of times that does very much fit into a contractor situation, and again, it's offshore, so it's not the same as like a stateside person that falls into all of the U.S. driven rules. But most of the time, when you're dealing with somebody who's truly international, you do lose the ability to control a lot of those things. And a lot of times, the offsite VAs, just because of the cost of living differences and things like that, you're getting them at a really affordable U.S. dollar price, and so again, that's why a lot of people reach for that. And I've seen situations where it's worked really well, and I've seen situations where it has not worked well at all. It tends to be very dependent on the person that you get, almost very much like a stateside hire, where if you get a good one, they're great, and if you get one that's not the right fit or not the right cultural fit, it cannot work well.

Alecia St. Germain 18:05
Yeah, yeah. We're gonna in several episodes from now. We have Sarah Noked is going to be coming on. She trains online business managers, and so it's like a different level of online support that a lot of times that becomes the first hire, and then that person hires the virtual assistant. So she's going to be on to actually go dive deep into like when do you need one versus the other, and that'll be coming up on a future episode. So, so I'm excited to have that conversation with her. So, what I find interesting is that a lot of times people are looking for one hire though to fill a lot of different roles, and I haven't found that to be super effective.

Jennifer Baas 18:49
I agree. I think you're kind of looking for a unicorn. Where I think it can work is if you have needs that are similar in some way. So I actually have seen this in my interior design clients, where across the board everyone needs assistant type help, right? So, like the designers, the procurement people, the owner, all of these kind of different positions, they all need assistants with the same type of administrative help, and I think in that case you might be able to get away with one person who's providing a really similar type of support, just to different people or in different ways, where this can be a struggle is when you're looking for truly different roles and you're trying to combine it into one person because it feels more efficient. And this is the struggle with small business, right? You typically don't grow in the way where you're like, I can support financially a full time marketing person and a full time administrative assistant and a full time this. You're like I have all these needs in different areas, and so a lot of people will try to see if they can find one person to fulfill them. And again, sometimes you can find that unicorn. But oftentimes you're really looking for different people and different talents, different skill sets, and it's really hard to put all of those together into one human.

Alecia St. Germain 20:10
Yeah, so that's where the fractional stuff can come into that can be super helpful, or the part-time person that works for a couple different companies. And I think that's another piece of the 1099 piece is if you've got somebody who does some small part time work, but they work for a lot of different people, and there's a certain percentage of income that if it comes from one employer versus another employer or something like that or higher. So I know like having someone who has multiple clients-that's actually a benefit to the business owner if they have multiple clients, because then again, that shows more towards the 1099 side versus an actual employee.

Jennifer Baas 20:52
It can, but again, it really goes to how that person is managed. Sure. So again, if you're still saying, "Hey, regardless of like you've got other part-time jobs, good for you, but you need to be here on Tuesdays and Thursdays between the eight of four. They're coming into the office. Yeah, that again, I'm not an IRS agent, but

Sound Advice FM 21:11
yeah,

Jennifer Baas 21:11
I think it's you have to look at the full picture, and that's what the IRS is going to do. Is they're going to and it's I think it's 20 things, but you can Google it. There, there is a much broader lens that they're looking at, and it really goes more towards how they're being managed, even versus do they have multiple people that they're working for?

Alecia St. Germain 21:29
Gotcha.

Jennifer Baas 21:30
And they could have a situation where they're working for several people, and a couple of those do fit 1099. They might be paid as a 1099 for those people, but you might be managing them more in the context of an employee and be paid w2 through that.

Alecia St. Germain 21:44
Got it. So that's again all in how they're managed. So I think there's people who are like, hmm, what am I doing here?

Jennifer Baas 21:52
People never appreciate me sharing this information. By the way, because again, it's is more expensive. However, what I will say, and I think this goes to like hopefully what we get into as well is like stop being so afraid of paying an extra 8% People are so scared of paying this extra 8% in payroll taxes. It also gives you a lot of benefits. So from a psychology perspective, having somebody who's on w2 payroll versus being a contract employee, there is a different buy in there. A lot of the times, there is more security for that employee. There's more benefit to them because they're not having to file their own Schedule C and pay 15.3% Like if you have a smart and savvy contractor, they will charge you more per hour because it is more expensive for them. They're having to shoulder that 7.45% extra, so twice on the FICA versus having the employer take care of part of that. And so, if you have a savvy person, you are going to pay just as much, if not more, because that person doesn't have any benefits from working for you. They have to provide all of that on on their own. And that's what I was going to say. Is in my experience, a 1099 employee or a 1099 contractor is more expensive than an employee, a really great employee, because a really good 1099 contractor who would be like who you would outsource to, right?

Alecia St. Germain 23:21
They have a business. They have an expertise. They're really good at it. They've spent years like putting it together. They are more expensive because you aren't managing them. You need someone who can self manage themselves and like runs their own business. And so, because they have all those extra overhead of running their own business, finding clients, paying whatever taxes they have to pay on their side, they're more.

Jennifer Baas 23:47
Yeah, again, if they're savvy, yeah, and especially if it's a situation where you're like hiring a firm or it's truly outsourced versus just paying, like finding somebody who you're paying as a 1099. Yeah, very often they can and should be more. And I've actually had a couple clients who were paying people 1099 specifically for the cost savings, and they switched to w2 voluntarily and most specifically for the security it gives everyone. They had this feeling of like this person's 1099. What if they aren't really invested in staying? And I think some of that's true because it's kind of like in a relationship when you're like not quite willing to be official, or somebody doesn't want to make it public, or there's that like, well, why not? You're not quite committed or invested here, and so I think a lot of people, in their quest for cost savings, they ignore some of those intangible benefits of like there is more security on both sides. Where you're like, hey, this person is more invested. I often think about looking at the benefits that I can provide my people. Like I think that's a good thing if I. I'm at a position where I'm able to provide this, or I'm providing paid time off, or doing certain things, instead of looking that as oh my gosh, this is more expensive. Flipping that script and saying I'm going to attract a more quality hire. I'm going to get somebody who wants to stay and wants to invest back into my company and become part of a long-term team. To me, that's incredibly appealing as a business owner because the one thing that's incredibly expensive is rehiring. You lose the time that the position's not filled. You lose and the hiring costs, the time it takes to review all of the resumes and do the hires or spend money on a firm to help you hire, like rehiring, I think is again very overlooked. Like that's a very expensive experience. So I personally would rather pay my payroll taxes, pay for some benefits, and have people that stay for 345, 10 years versus have a churn all in the name of saving a little bit on payroll taxes.

Alecia St. Germain 26:01
Yeah, and if you're trying to do it cheaper as a 1099 employee, I'm telling you they don't have the leadership, they don't have the experience, they don't necessarily own their like they don't have the the business savvy to charge appropriately, and they burn themselves out because they're not charging enough for what they're doing, and so you end up having the results that you don't want, like undesirable results come from those types of hires, and I think that's what I'm really trying to land: is you end up paying twice or more,

Jennifer Baas 26:41
or more, and a lot of times I see this frequently. Like with when people hire younger folks, they're like they just tell them this is paid 1099. These younger people were just people in general. If they don't have the context, the education, they might not know what it means. So let's say they're getting paid 1099. They don't have any clue what that even means? They're just like, oh, this is how it pays. I just get my check, go on about their life. They go to do taxes, and all of the sudden, they had no idea that they were first of all that taxes weren't being taken out. They have no idea that they're not only responsible for their taxes and should have been paying estimateds, but that they also owe additional tax. So I've seen this actually break up that relationship because they're like, "This screwed me over, man. I had no idea, and this was not favorable to me at all. I'm out of here. So I've seen this where people have no idea. The employer thinks they're getting this great deal, and they're so proud of themselves for getting this cheap help, and then again, it doesn't work long term. So six months, a year later, they're having to sit there and rehire a situation.

Alecia St. Germain 27:47
Okay, so let's shift then to how do you figure out? Because I think, and I have experienced a 1099 consultant who's excellent at what they do, but they are more expensive. Like they are higher price, but they do a lot more in less time. Or even a part time, highly qualified employee can do

Jennifer Baas 28:15
100% it

Alecia St. Germain 28:16
in half the time that it would take you to train, manage, coach, do remediation like on someone who is less of an investment for you. So, how do you figure out where does one start when someone says, "Okay, I have this thing that I need to take off my plate, or I have kind of a role that I need to hire for. Where do you start to figure that out? You said because sometimes people there's a balance between that step up and what the business can afford.

Jennifer Baas 28:54
Well, I think there's two things there. So on the cost side of things, figuring out what you can afford, I think the first step is to look at here's what I need. Even going so far as like here's the job description. You kind of create this avatar. This is in a perfect world what I need, and then you do the research of like how much does this cost and what are my options here. So if I hire this person full time, hire part time, do an outsourced firm if that's an option for what you're looking for, VA. You look at all of those options and you see this is what this is going to cost, and then it's like a puzzle. So okay, I can't afford this person. I can't afford this person. I can't afford them in this situation. I can't in that. So we're just looking at how do we fill the need in a way that also fits in with the context of what we can afford, and in a situation where it's a bit of a stretch, again, I typically encourage that to be when it's something that that we have a hope of it driving revenue in some way. Then, what's really important is that you're monitoring that over the next three to six months. Of like, we have kind of predicated this investment on. Revenue going up and being able to afford this person, we have to really stay focused on: is that growth that we expected happening, and if not, why? Just so that we don't end up a year or two later being like, "Well, we've had this person for a couple years, and we're still not making any more money. So it's really about figuring out what your options are, and then figuring out the best solution for what you can afford at the time.

Alecia St. Germain 30:26
And where does one do all that research?

Jennifer Baas 30:28
Well, I mean, you can either get support with that. Like there are people who will help you. A lot of it is just hitting the research yourself, talking to other business owners, that sort of thing. So, like in the accounting space, you might go consult with a few different accounting firms and figure out, okay, get some quotes. Here's what it would cost if I was going to outsource my bookkeeping. You might look on Indeed and kind of the other hiring platforms and see what's available. If you were going to hire somebody, you can even use AI or the interwebs and say, okay, what does this type of person or this type of virtual assistant cost? Just to kind of get a rough baseline of what you're looking for, and does that fit into what you can afford? You can use a hiring firm, and that's an added expense, but they can help you with all of those things.

Alecia St. Germain 31:19
But that's great if your like business is rapidly growing and you don't actually have the time to put into it. That's a really good opportunity to bring in an expert who preserves the brain space of you trying to figure out something that's maybe a little newer to you or you're not as comfortable with.

Jennifer Baas 31:35
And there are services that are not crazy expensive, so like the HR firms and things like that, recruiting agencies-they're typically more expensive. They're going to charge like a portion of that person's salary. I personally used a service; it was an online-based service, but it came with like concierge service, and so I still had to sit through interviews and do that portion. But they screened all of the resumes, they did all of the phone screenings, and then they were available to sit in on interviews if I wanted their perspective. And it was a few $100, not 1000s and 1000s. So there are some more affordable options out there that kind of bridge that gap and give you assistance as a business owner with that hire without breaking the bank, like some of the more expensive firms do,

Alecia St. Germain 32:23
so we always talk about the balance between being willing to spend in order to support your business well and yourself well, so that it creates a lifestyle that you're not like a slave. You didn't just create another job for yourself. That you, as the business owner, can actually have some freedom, and which is the whole reason that you built the business, but also the flip side being comfortable making the spend and also not overspending, and what this all comes down to, and it's the thing that you and I tout every single month. You really need to do what?

Jennifer Baas 33:03
You need to know your numbers, and you need to have a plan. And I think last time I said anchor a lot, and but that-that's really how I see it: is are you tethered to something? Do you know your numbers well enough to know what you can afford? Do you know them well enough to assess what you need versus what you can afford, all of those things become really important. And what you see when people aren't anchored to their numbers is they just go make the hire. They're like, I shouldn't be doing this. I don't want to do this. I don't do it well. Whatever the thing is, or we need this person, and they just go do it without having thought through like, is this a problem we can solve in another way? And can I afford it? And what's the right solution here? Is this really a full-time person? Is it a part-time person? Is it an outsourced without going through all of that? And they end up being overstaffed. Again, the intention is really good. Like they think that they need that, and maybe they do, but it's about figuring out how to solve that problem within the context of their numbers, so that they don't get to the point where they're a couple years in and they have a ton of staffing. They're really high in all of their support and their people, but they still haven't created a business that makes any money because all of that money is going back out the door to those roles.

Alecia St. Germain 34:17
Mandy called it the scale. She said, "Scaling porn. It just cracks me up. She's like, "There is so much scaling porn out there where it's like scale, scale, scale, scale.

Jennifer Baas 34:28
Yeah.

Alecia St. Germain 34:29
And the thing that is missing from the scaling conversation that is out there online pushing business owners to make it bigger, make it bigger, make it bigger, is this conversation of what do your numbers actually say? And I get it; it's not like super fun. Math isn't every single person's favorite subject from high school, but you've got to develop a passion and a love for your numbers, at least from the perspective that it helps you make. Really good, solid decisions that will help your business's survival. If you do not have them, you are really flying by the seat of your pants and depending on luck that it is all going to work out. And at some point, it catches up with you. Those are the same people who end up behind on taxes, who end up with not paying the appropriate amount taxes. They get the big bills. They can't pivot when things change because they are trying to do the same thing that they've always done before. I cannot express enough that this is not optional. If you are a business owner, you have to track your numbers throughout the year. You have to have a plan. You have to make these strategic decisions. It is part of the job. It is part of your leadership as the CEO of your business. And if you're not doing it, then it's like I hate to say that, but it's irresponsible.

Jennifer Baas 35:52
It is a choice you're making. I think that's the thing: is people need to see it as a choice, and it has an impact. She's always so lovely to take all the judgment and all the shame out of whatever choice you have made. It's a choice, but it is a choice. People don't see it as a choice; they're just doing right. So I think it's taking the step back. And if you're going to make the choice to not be tied into your numbers, then like I'm not going to stop you, but then you're also opening up yourself to the idea that you really are running your business based off luck. And some people do it, and like the stars align, and you're like, I have no idea how they just became a multimillionaire running things the way they do, but they did. But that is not most people's story. That's not. I mean, how many clients I've sat with coming in running their business and they're drowning and it's miserable. They've put everything into it. They're making nothing. They're getting nothing out of it. That's most of real life in small business. Not again this Instagram version or the newest shiny thing that says spend money here so you can make all this money. Like sometimes you spend money and you make money, but sometimes you spend money and you just don't have that money anymore. Like a lot of times, that's how it works, right? And so, I want people to see it as a choice. It's not something that's happening to them. They are deciding to not take an interest in their numbers. Maybe they don't know. Once you know, you're deciding not to, and then there is the very real likelihood you're not going to create the business that you want.

Alecia St. Germain 37:22
Yeah, and you are going to pay that consequence. And I would be really hard pressed, Jen, to say. I mean, you said it's not the norm that someone can just become this multi million dollar person and just like the stars align and it all works for them. I don't. For how long? For how long?

Jennifer Baas 37:38
It's very vulnerable, right? And you see that you see people who make a ton of money and they get really famous. So again, they're very shiny on Instagram, and they might write a book and they might do this and that. But a lot of times it doesn't last, or it's been heavily contingent on certain circumstances. So,

Alecia St. Germain 37:55
so yeah. So I'm gonna scream it from the mountaintops. I know you're gonna be there with me, peak to peak solutions. You're gonna be with there. Like you, you need two things. You need to work on yourself, the leadership, how you lead other people, how you lead yourself, and you need the financial plan piece. I don't care what strategy you want to put on it. I don't care what your business is. I don't care. Without those things, it's not sustainable. So, any final words, Jen?

Jennifer Baas 38:26
No, I think we covered it.

Alecia St. Germain 38:27
We covered it. She's like, we landed it. Let's do it. We

Jennifer Baas 38:30
landed

Alecia St. Germain 38:31
it. If the next step, if you're realizing I really need to change this, and you want to find out more about the Financial Leadership Lab and the leadership work that we do inside of the Exponential Entrepreneur. Your next step is to book a call with me. You go to consciousEdge.com/assessment. We will go through. We will look at your capacity from a lot of different angles. How you lead yourself, how you lead others, what your time looks like, does your calendar reflect your priorities? How's your energy, and do you have a financial plan, or how do you manage your finances? And we will look at where we can make those shifts and what beliefs you are currently carrying that are informing your behavior. And then at that point, I will go through and show you all your options and ways to move forward, and then you get to make that decision. So it's very low stress. It's really just about you getting to know all of your options, and if anything, whether you choose to move forward or you don't, you walk away with the clarity of what you want to fix or start to make some changes in your business, so it's really no risk. So, with all of that being said, sending you so much love, and we will see you here next week. Thanks for listening to the Conscious Edge podcast. Make sure you subscribe and take a moment to be kind. And share this episode with someone you care about. Leave a review to help us bring more compassionate leaders building businesses and creating wealth to the table. And for show notes, head over to consciousedge.com/podcast. This podcast and the linked materials are presented solely for general information, educational, and entertainment purposes, and should not be taken as personal or medical advice or any kind of mental health treatment. Please consult a medical or mental health professional if you feel you need such services. Please be advised that all investing and entrepreneurial endeavors involve risk, and the use of the education and information on this podcast and linked materials is at the user's own risk.

Sound Advice FM 40:49
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