There are three very distinct areas to consider when hiring your first employee. The first is the financial side. Which is what should create the impetus for hiring. Will this decision help make more money? It may sound cold, but every major decision for a business must start there. Lose money as a small business and you lose the business, and maybe far more.
The second aspect of hiring is you, the business owner. Are you ready for an employee and the risks and challenges that go along with it? How will your reality change, and can you accept those changes?
The final piece to hiring that first employee is, "Who to hire?" Assuming you have detailed what you want this person to do, that should help identify the traits and skills and talents required. It is unlikely that this first employee will fall into a specific and limited role - bookkeeper, for example - because you should be able to do your own books as a single person business.
It is far more likely that you will need to hire someone who will answer the phone, interact with customers, handle quotes and sales, help provide a service or create a product, support your customers - basically someone like you. It's really something to consider - can you handle someone like you in your space? To be a business owner generally requires more than a little bit of ego, and someone talented enough to be your Number One will not come with a small ego. And you don't want them to either! Consider yourself warned.
There are two ways to approach this first hire - either as a Partner, or as an Employee. A partner may mean some level of financial buy-in from that person. It may mean some level of control in the company. There is a lot to consider here, and a partner is a whole different venture. Personally, I don't recommend it, but that's a decision only you can make. I have mentioned the NY Times Small Business Blog before, and Paul Downs has a few great posts about his Partner Experience. Here I will stick to actually hiring an Employee.
Of course, hiring a first employee is obviously something you only do once, so my thoughts on it are based on my limited experience. Your situation may be vastly different. There are four groups to consider when hiring - Family, Friends, Acquaintances, Strangers.
Generally speaking, I am opposed to family members working together. The holidays are difficult enough without added stress. Do I know people who have had some success working with their families? Yes... and she now works for me while her sister works somewhere else. They no longer work together, but as a plus, they still love each other! The biggest challenge with hiring a family member is that you are essentially hiring that whole side of the family. You can not expect privacy. Add to that the family members who feel they are qualified to work for you, and you are setting yourself up for planning Thanksgiving vacations away from the family for the rest of your life.
Strangers I think, is a difficult group to consider at first as well. It may be difficult for someone to take your business seriously as a one-man shop. Also, it can be very difficult to judge a potential hire's enthusiasm for your business early on. Once you grow and have a reputation, it's much easier to attract and hire the type of people you want for the business. But initially, that first person is such a make it or break it proposition, I think hiring blind would be tough. Also, it will represent a tremendous amount of time, effort, and perhaps cash that you likely don't have the ability to spend.
So, Friends and Acquaintances is where I would draw from first - leaning towards Acquaintances. I have hired friends and friends of employees, and actually found that to be extremely beneficial. They know your quirks, you know theirs. They know about the business and the passion you have. It can really work out well... for the third or fourth person you hire. Try for and Acquaintance first. Here's who I hired and why.
One of the odd jobs I did for twelve years was to deal craps (yes, the dice game) for a local casino party company. I got into it because I loved the game and I stayed because I really came to enjoy teaching people how to play a very complicated game. Jason was another dealer whom I got to know over the years. We would probably see each other fifteen to twenty times a year - a lot more regularly around the holidays - and the group would often head out for a beverage after a gig. So, my definition of an Acquaintance. We later became friends.
What I learned about Jason during these years was that he was arguably one of the smartest people I'd met - quick with math, capable of multi-tasking, picked stuff up incredibly quickly. He was also good at instructing people. We spent a lot of time teaching people who had never played craps, how to play correctly, and that's not always easy depending on the amount of alcohol flowing at a party. I knew that he had been in the banking industry, doing loans and mortgages, so his business skills were there. He had also moved over into the IT department of his bank, and he complimented my technical skills well. The final piece that fell into place was perhaps a bit of luck on my part - his bank was bought out right at the time I was looking to hire, so he was about to be free.
It was the perfect hire, and he helped Big Bang grow into the business it is today.