When to hire?

November 23, 2015

Abhi, a friend of mine and his brother run an early stage consulting company out of the UK. Here's an email he sent me recently:

How do you synchronize your capacity with your sales? It feels like a chicken and egg problem, no capacity means no sales, no sales means no capacity.

We also do not want to hire unless there is a clear customer commitment for 3 to 4 months and we have enough money to cover for one year salary.

I am in need of your advice on this. Could you help me figure this?

Here's the response I sent him:

Hi Abhi,

This is a bit of a complex topic, so this response is long. Its basically two things:

1. The first few people you hire are the ones who are critical for you to grow your startup. Treat them like your co-founders, not as employees.
2. There is no business without risk. But even risk is sometimes blown out of proportion. In most cases, it’s the fear of failure rather than failure itself, that holds people back.

Here's the full response:

Its not about Capacity Planning, yet

You could think of this whole thing as a purely 'capacity planning' question. But that's more useful once you cross the 15-20 people threshold. At this early stage, you can rest assured that there's more than enough work out there - you just need to get your sales and marketing working well for your market to discover you.

So, this response instead focuses more on the 'how' (and "why") of hiring the first 5 employees. This is important because you're going to grow faster when you've hired some really good people initially. The value they will add will not just be in terms of shipping client work - it will also be in terms of ideas to expand your business - while they're wearing the 'co-founder' hat. Of course you've got to encourage them to do that.

Marketing and Sales

Your primary responsibility as the CEO of an early stage company is to get your Marketing and Sales in order. You should focus on building a pipeline and ensure that at least 50% of your time is spent in working toward that.

[Yes, when you’re also coding, this means 80-100 hours weeks in the beginning. But you knew that already :)]

To make this happen, you will need both of the following:

• The Knowledge and the Skills

• Confidence that you will succeed As you gain more knowledge and skill, you will gain more confidence. And as you gain more confidence, you will gain more knowledge and skill. Its an upward spiral.

The earliest employees

Its best to have the following expectations for the first 5-10 employees:

• That its called a startup for a reason - there will be ups and downs. But therein lies the opportunity to actually make a difference with their work. Its different from a standard 9 to 5 job in that, in this case they have the opportunity to actually help build the business.

  • Of course, you as the founder will also have to invest time to make them feel as co-owners in the company. That they have a significant voice and influence on the company’s future.

• A good test of finding the right employee is if they’re leaving another offer for your company - for the same amount of money, or in the best cases, for less money - that you’d be offering them.

  • Money is not the most important thing for the right kind of people - especially for those who love the startup vibe. And you need to find those kinds of people.

• You might consider giving some kind of reward - say sharing profits or providing stock options - as a recognition of the risk they would be undertaking.

  • But this is not actually required. I did not do this.

Culture

The following aspects of trust are very key to focus on, right from the start:

• Autonomy: You will need to encourage (not just allow) your people to make mistakes and learn from those mistakes. They need that space to experiment and fail. This will lead to two things:

• A high sense of ownership

• Trust

• Embracing Failure: I love this image:

• 

You should have space to fail as the founder. And you should be comfortable in your skin failing in front of your people. You should also give everyone on your team space to fail. So, this goes hand in hand with Autonomy.

• Purpose: Your company has to stand for something more enduring than just making money. Why should your company exist? Why should people come into work everyday? Those reasons may not resonate with everyone - but if it resonates with you and you’re able to get your initial employees galvanized with that sense of purpose, you’ll do fine.

• Customer Service: Here’s a super nice quote from Gandhi that I think explains this very well. To ensure that your people really get the importance of this, you may need to demonstrate how much you personally believe in this. For example, by providing refunds to customers when you guys are in the wrong - or extending a helping hand, when they’re down - just because they were once your customer.

• The Zappos culture is also worth reading about - for example, how they don’t optimize for “call times” for their customer support staff and instead optimize on customer satisfaction - unlike most other e-commerce firms.

• Integrity: This is important at two levels:

• Honesty with others (the team and with customers): This should be non-negotiable. And should be emphasized very strongly, IMO.
• We’ve let people go at Multunus when we sensed a lack of this.

• Focusing on safety will help make it easier for people to be honest with you

• Honesty with oneself : You will know that you’re making progress on this front when people start challenging the status quo. When they politely but firmly question decisions you’re making as the founder, you know that your people are trying to be consistent with their own beliefs and being courageous enough to follow through with what they believe in. That they actually care for themselves and for the company.

• This is admittedly quite hard. And it takes time. But be persistent, and you will eventually start seeing results.You will be able to make it easier for people to be honest (in both of the above ways) if you focus on the Autonomy and the Embracing Failure points above.

Vision

This is related to the point about Purpose above. But this is important to highlight as a separate point, because:

• Sharing your vision for the company is going to be key to attracting great talent - and to inspire people enough to take that leap of faith to join your company instead of another one.

• This will be the compass that will guide both you and your team - when they have to make everyday decisions. Should you work with a customer who has more money or with someone who has a great vision? Should you hire someone who’s a great programmer or someone who’s a much better team player, but has some gaps in his skills? Should you focus on clean code or take shortcuts to ship faster?

Risk

There is no business without Risk. The SpaceX story is especially telling here. You as the founder have to believe in yourself, in your vision and and in your team and take brave steps forward, when the future is not clear.

Sometimes things work out and sometimes they don’t. And that’s okay. But if you stop taking risks, I’m afraid, growth is just not going to happen. In most cases, it’s the fear of failure rather than failure itself, that holds people back.

The other key thing to keep in mind is that Time is a startup’s biggest enemy. Not money. So, when even you’re not totally sure about something, but all of the above points are taken care of, go ahead and take the step forward. You’d have spent your time wisely, even if things didn’t turn out so well. Why? Because you’d learned something in the process and become wiser.

Conclusion

I hope this helps. Its best to see entrepreneurship as a journey of personal growth and an opportunity to interact with and learn from the fantastic community out there.

So, to summarize in just one word: “Start”. :)