Maybe you’ve been flying solo, doing everything from funding pitches and web design to sitting through your internet provider’s repetitive hold music. Maybe there aren’t enough hours in the day, or maybe there are some skills that even you can’t self-teach. Whatever the reason, there comes a time in the growth of your business when you have to consider doubling the coffee budget.
“No founder has built a unicorn just by themselves,” says Michelle Milbourn, co-founder of recruitment firm Kommol, which focuses on hiring for early-stage tech companies. “The realization of your company’s vision will only be achieved if you can attract great talent.”
Now is not the easiest time to embark on a hiring mission. It’s a candidate’s market. Wages are increasing, and there are global shortages of skilled candidates. This is all the more daunting when you consider the cost of a bad hire — 30% of an employee’s potential 1st-year earnings, lost clients, and time spent salvaging subpar work.
But fear not. We’ve put together some advice to help you navigate this exciting chapter in your business’ story.
How to Know When to Hire Your First Employee
Before you start planning the office holiday party, it’s worth thinking carefully about whether you’re ready to hire. It may be that you only need a 2nd pair of hands for a short-term project. Or perhaps you do need ongoing support, but only for a few hours a week. If that’s the case, you’re better off hiring freelancers or outsourcing some tasks.
“I’m not a software engineer,” says Chris Priebe, founder of employee management platform Zelt, “so as a solo founder, I wasn’t even able to start building my product.” He started out using contractors, and the advantage was how quickly they could come on board. Two weeks after he received his 1st check from an investor, Priebe’s contractor wrote the company’s 1st line of code. This strategy worked as a stepping stone to an in-house team. “These guys actually helped me to hire full-timers because I didn’t have the technical skills to vet candidates,” says Priebe.
If the goal of employing someone is to free up time, make sure you’re aware of the heap of paperwork involved (more on that later) and the time it takes to recruit and manage someone new. “It’s not necessarily the case that the more people you have on the team, the more you get done,” says Rachel Mumford, co-founder of medical software startup Anima. “A lot of time is spent teaching, mentoring, giving feedback.”
Some founders recommend staying lean for longer to give yourself time to raise the capital to hire top-notch talent. Milbourn disagrees. “Start looking way earlier than you think you need to,” she says. “So many founders leave it too late to start looking for the person they want and then when they finally find someone halfway good, they’re desperate to hire them.”
Do the math on recruitment costs, wages, employee insurance and office space. If the numbers are adding up, it might be time to count to 10 and jump.
How to Hire Your First Employee
Once you decide to recruit, you need to figure out what you’re looking for. Milbourn warns that there is often a difference between what companies think they want and what they actually need. “Take a hard look at the state your business is in,” she says. “Look ahead at the key things this hire has to achieve for you in the first 6, 12, and 24 months, then work backwards and create your needs list.”
Priebe started out by doing research. “I had a lot of calls with people that are world-class in their fields and I just asked them questions about what they do, how that job works, and what they look for when they hire.”
Not every candidate will thrive in a startup environment. You’ll need someone who doesn’t require too much hand-holding and is willing to muck in wherever they’re needed. Luckily, there are candidates out there of every shape and size. Here is our step-by-step guide to finding and nabbing the right one for you.
Step 1: Craft a perfect job description
It’s competitive out there: Job hunters are viewing close to twice as many job posts per application compared to 2019. Aim for fewer than 300 words, as posts of this length are ~8% more likely to convert views into applications. Keep the tone formal and generic; candidates are 2-4x less likely to apply for jobs when the employer comes across as casual. The post should include:
- An SEO-friendly job title (Galactic Viceroy of Research Excellence — once a real job title at Microsoft — might turn heads, but your dream employee isn’t typing that into a search bar)
- A concise, attention-grabbing summary of the role
- A list of responsibilities that helps candidates envision their day-to-day
- A succinct description of your vision for the business
You’ll need to make a decision about whether to include the salary range. It might seem strategic to keep your cards close to your vest, but data shows that candidates care more about pay and benefits than any other aspect of a job description. In some jurisdictions, like New York City, pay disclosure is required by law.
Salary data sites like Salary.com and Payscale can give you an idea of what your competitors are offering. Job site Otta gathers particularly good pay data in the tech startup space.
Lastly, “flexibility” is the recruitment buzzword for 2022. A UK survey found that 50% of employees would quit if denied flexible working. If you can offer it, flaunt it.
Step 2: Choose a recruitment platform
Priebe spent 100+ hours sending messages to people on LinkedIn in the 1st month of his business. Time, according to Milbourne, is the No. 1 reason founders should hire a recruitment agency. Her firm, for example, has mapped out the 4k best heads of sales across Europe — so if you’re headhunting, they’re already halfway there. Recruiters with a good reputation can also help attract candidates and offer advice on things like salary negotiations.
That said, they don’t come for free. Their commission can be as much as 40% of your new hire’s salary. For founders on a budget, there are more tools than ever to help you do it on your own:
- Indeed: Offers free and budget options
- LinkedIn: Top of class for headhunting
- Otta: Great for finding startup ready grads for non-engineering roles
- Betterteam: Post jobs to 100+ job sites with one submission
Mumford recommends another approach. “What really surprised us was the power of your networks. Ask your friends for introductions to the smartest people they know and don’t discount anyone. It’s led to several of our best hires!”
Step 3: Interview
According to Milbourn, your interview process should have at least 3 stages: one to test chemistry, one to dive deeper into the candidate’s skills, and one for them to ask questions about your company.
If you’ve written a solid job post, you can use it to structure your interviews. Prepare questions in advance and familiarize yourself with the candidate’s resume. Many recruiters use the STAR (Situation, Task, Action, Result) method, which involves asking a candidate to describe how they tackled a project or challenge and how it played out. This can help you evaluate problem-solving abilities, resilience, and interpersonal skills.
Pair good questions with good listening, and take plenty of notes. It will be easier to compare candidates if you ask them identical questions. And don’t forget that you’re selling yourself and your company during the interview.
Watch out for anti-discrimination laws such as Ban the Box, which prohibits employers from asking about criminal history until later in the recruitment process. Many jurisdictions bar employers from questioning applicants about salary history. Questions about gender, disability, citizenship, children, race, and age are also off-limits.
Step 4: Screen candidates
Inviting a stranger into your company is a risky business. Two-thirds of small businesses in the US are victims of employee theft. Sixty percent of candidates lie about their skill set. And 74% of employers say they’ve made a hire they regretted. One woman landed a 6-figure job using a false identity and lasted 7 months before getting caught.
Milbourn warns that too many employers don’t take referencing seriously enough. She recommends taking 5 references including people that the candidate has managed, reported to and worked alongside.
Experts recommend in-depth calls with references in which you do more than just verify the facts. Ask open-ended questions. Discuss soft skills like self-motivation and time management. Describe the role at hand and ask the person if they think the candidate is well suited to it. Gaining these insights can help you assess the candidate and also support and manage them better once they come on board.
To verify your would-be employee’s qualifications, ask for original documentation. You can contact educational institutions directly, but you’ll need written consent from the candidate to request information. Most criminal record information is publicly available. You can make your life simpler by using services like Good Hire, which covers all kinds of background checks. Most services like these start from ~$30/candidate.
Step 5: Assess
Knowing that your candidate is not an imposter with a phony degree is important, but it’s useless if you don’t know whether they can do the job. “A big thing I learned,” says Priebe, “is not to put too much value into someone’s title or where they have worked before.”
You can assess candidates by setting a task based on what they’d be doing day-to-day -— such as writing LinkedIn posts, manipulating data on Excel, or doing live, collaborative coding. You can ask them to respond to a fictional scenario — e.g., a client says they want to cancel their subscription — to give you an idea of how they might perform in the role.
You can also ask candidates to complete competency and personality tests. Some of the most helpful tools are:
- HighMatch tests hard skills as well as personality.
- Athena Assessment focuses its tests on whether someone has good judgment.
- Codify specializes in testing tech competency.
- TestGorilla offers free tests covering areas like Facebook advertising and HubSpot CRM.
If you’re hiring a programmer, you can ask your candidates if they use Stack Overflow and GitHub. These are great places to sleuth out candidates’ knowledge levels.
Step 6: Dot your i’s and cross your t’s
Let the government know that you’re an employer. In the US you need to apply for an Employer Identification Number. You are required by law to keep good records on this list of things. You’ll also need to get your employee to fill out the following forms:
- W-4 so you can withhold the correct federal income tax from their paycheck
- W-2 for Social Security administration
- I-9 to verify eligibility to work in the US
- W-8BEN if they reside outside the US
Additional paperwork is required if you are employing a foreign national inside the US. You may need to submit these forms to both state and federal authorities. Most jurisdictions require that you have workers’ compensation insurance and unemployment insurance. Some have additional requirements like disability insurance. Make sure you’re covered.
Step 7: Sign on the dotted line
Employment contracts are not required by law in many jurisdictions, but a contract allows you to stipulate a notice period, prevent employees from working for your competition in the future, and protect your intellectual property. On the downside, it involves extra paperwork and less flexibility.
If you choose not to sign a contract, be sure to check the minimum requirements in your jurisdiction. You might still be required to put basic employment details on paper.
You can download a free sample employment contract from PandaDoc or use the contract constructor on Rocket Lawyer, which is available as part of a free trial. If you have a bigger budget, you can pay a lawyer to draft or review your contract. This will likely cost $200-$800.
Common areas covered by employment contracts include:
- Job responsibilities
- Duration of contract (e.g. open-ended or fixed-term)
- Pay (including when and how payments will be made and overtime rate)
- Benefits (including bonuses, annual raises, insurance and pension payments, and any other perks)
- Hours (including overtime)
- Location (e.g., remote, hybrid, office-based)
- Holidays (including policy on public holidays)
- Sick pay and maternity leave
- Redundancy pay
- Termination conditions
- Notice period
- Noncompetition conditions
- Legal right to work in the jurisdiction
Consider instituting a probation period because, in short, sometimes it’s helpful to date before you marry.
The journey doesn’t end with a successful hire. “It’s an ongoing, never-ending part of your role,” says Milbourn. “As a founder, you should continuously spend a percentage of your time looking for good talent, because if you’re going to grow, you’re going to need that 2nd and 3rd and 4th hire.”
The good news is, you’re not the 1st person in this position. You can learn from the mistakes of others. Common regrets include taking a chance on a nice person, not doing a complete background check, and ignoring red flags.
Above all, Mumford says, “Trust your gut! There’s a lot of advice out there for what you should be looking for, but you know your company best.”