People ask me all the time how to fire someone. It is simple. Say, "You're fired." It really isn't that complicated. If the employee has done something to warrant the firing, there is no reason to owe an explanation outside of the reason or to become personally invested in the person.
Maybe he or she didn't deserve to be fired. Maybe you have to lay off staff. Still, say it. "You're fired." Don't talk about how sad you are or how the business isn't doing well. Just let the employee know that they are no longer needed and when his or her last day is.
Entrepreneurs throw themselves at life, which is why we tend to become personally invested in our employees. But, we can't be kind in order to make a profit. If an employee isn't responsible, performing well- or the company is in a slump, tough decisions need to be made.
Remember - be honest, keep it simple- move on.