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Most entrepreneurs have an optimistic mindset. That optimism tends to carry over into every facet of business — including your innate ability to see the best in people and identify potential.

But seasoned small business owners — those of us that have been at this for awhile — know how vitally important it is to keep a lookout for flaws, especially when it comes to recruiting new hires.

A company is only as good as the people working for it.

Poor hiring decisions can end up costing you time and money. I learned this lesson the hard way. In fact, one specific mistake comes to mind.

For example, I hired a salesperson who lacked sales skills (but they had potential). The end result was this: the new hire exhausted all of my company’s resources and ended up resenting me for their inability to earn higher compensation, because they did not meet performance goals.

Despite such a bad — and costly — experience, I learned a few lessons that every small business owner and can benefit from. Here are three things to consider in order to make smarter hiring decisions:

1. Don’t hire based on a candidates potential. 

In retrospect, I was very optimistic about a candidates potential but overlooked the fact that they didn’t posses all of the skills needed to fulfill my company’s needs. In other words, I took a chance.

Unfortunately, more often than not the potential did not manifest. I quickly learned the opportunity cost associated with “hiring on potential” — it meant that I would lose out on candidates that could have adequately met the requirements of the role and improved our bottom line, rather than absorbing it.

As a reformed people-pleaser, I now focus on hiring candidates that have a proven track record.

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