Startup tech entrepreneurs are often eager to grow their businesses as quickly as possible. That means hiring a lot of people, taking on a lot of new work, and aggressively scaling. This strategy is effective if you have a solid business plan and a solid team, but there’s also significant room for error.
One of the most important elements of your business’s growth period is your approach to hiring. How, when, and who you hire can have a massive impact on your startup’s eventual success. So what should young tech startup entrepreneurs know about the hiring process? And how can you prevent disaster?
Let’s start by explaining why hiring is so important for startups to get right.
For starters, hiring is how you’re going to build your team. It’s how you’re going to cultivate the core talent responsible for making your business a success. As you know, no business can grow from the efforts of a single person; even small teams have at least a dozen people working together behind the scenes to make a business plan a reality.
You’ll be depending on the people you hire to execute your directives, collaborate to solve problems, and perhaps most importantly, come up with new ideas on their own. If you get the right people into your business, you’ll have a powerful team of collaborators working together to make your business stronger. If you hire even a handful of weak links, it could compromise your ability to perform—and sometimes result in slowdowns and setbacks.
This is also your chance to develop the work culture from scratch. Prevailing thoughts on what work culture “should” be tend to change with the times; in recent years, it’s become increasingly trendy for businesses to promote a casual, laid-back environment, with loose dress codes, flexible hours, and other unrestricted policies. However, what’s important isn’t fitting into some kind of preestablished cultural mold, but rather, building the culture that’s going to work best for your business.
A startup with a strong sense of identity and a culture that every employee follows (at least to some extent) will be much more cohesive, and much better able to grow long-term. Hiring is your chance to flesh out this team, and reinforce the culture you want to establish.
Additionally, hiring people is costly—and labor expenses will be one of the biggest categories of expenses for your business. If you get the timing wrong, spending too much too quickly, it may become impossible for your business to recover.
So what exactly should startup entrepreneurs be considering when hiring people for their growing business? How can they get this right?
First, you should think about the legal considerations. Depending on where your startup was founded and how you plan on hiring people, you may be forced to follow a number of local and federal laws. As a simple example, you’ll need to ensure you’re paying employees the minimum wage and that you aren’t putting them in unsafe work conditions.
In more complex scenarios, you’ll need to think about things like employee compensation, ongoing treatment, and termination. If an employee files a wrongful termination suit, it could devastate your business’s finances—not to mention harm your brand’s public reputation.
Because there are many legal considerations to keep in mind when hiring people, and you can’t possibly learn all of them on your own, it’s best to talk to a lawyer when putting together your hiring strategy. They’ll be able to help you understand the necessary laws and regulations to follow, and put together the paperwork and strategies necessary to remain in compliance.
You’ll also need to think about the timing of your hires.
Generally speaking, you’ll be attempting to manage two major problems, one at each of the extreme ends of the hiring timing spectrum. If you hire too many people too quickly, you’ll experience financial strain; you’ll be forced to pay the salaries and benefits of more people than you really need, and you won’t have much revenue coming in. If this situation lasts too long, it could exhaust your budget and compromise the long-term financial health of the business.
On the other hand, if you wait too long to hire, you’ll also be in trouble. It takes time to train and educate new people, so you need a bit of a runway to acclimate your new hires; accordingly, you need to hire at least somewhat proactively. If you’re anticipating three times as much work as you currently have, you may want to hire three times as many people now—that way, you’re ready for the impending work. If you begin experiencing growth without the team to back up the business, it could mean your business is unable to perform or keep up.
Resolving this problem looks different for different businesses. However, there are a few general rules you can follow to get the timing “right.”
First, don’t hire impulsively. You should have a clear understanding of who you need and why you need them. This may seem like an obvious point, but many startup entrepreneurs overlook this in favor of hiring to support generic growth.
Second, prioritize establishing revenue. Your budget will quickly dry up if there’s not consistent money coming in. Once you have a steady stream of income, you’ll be much better capable of understanding your hiring capacity.
Third, hire gradually. Don’t build a new team of 50 people in a single week. Take your time, and fill one position at a time. This will help you keep a tighter leash on the company culture and improve your cost management—in addition to helping you nail the timing.
You’ll also need to figure out what to pay your employees, and whether to offer benefits. More robust pay packages will likely attract better talent and increase employee morale and satisfaction—but they’ll also deplete your business’s budget much faster. By contrast, smaller compensation packages will make your financial management much easier, but may also attract less talent or have a negative effect on employee outlook.
One way around this problem is to find alternative forms of compensation. For example, many talented people aren’t interested in high pay—they want fair compensation, but would much rather have a flexible, fun workplace than a ridiculously high salary. You could deliberately seek these kinds of people to round out your team.
You could also seek out people with talent, but minimal experience—such as people straight out of college. They won’t have the background necessary for a high salary, but they may have the knowledge, instincts, and talent you need to round out the team.
Finally, you’ll need to think about the culture fit. Even if your business is operating remotely, culture is going to be one of the most important factors for your business’s success; it’s what brings your team together, unifies your ideas, and establishes your brand identity. You should prioritize hiring people who fit your culture as closely as possible.
This, of course, means establishing your ideal work culture before you begin the hiring process. What kind of workplace do you want to build? What are the core values of your brand, and how will those core values be embodied by your employees? What attitudes or philosophies are important to find in the people you hire? Document these ideas, so you have an objective record to follow when evaluating new candidates.
Hiring is more important to a startup’s success than it might at first seem. This is the team that will support your business’s growth, represent your culture, and keep your budget in balance. Don’t rush through this decision, and try to establish the best core team possible.