It’s no mystery that finding good people is the number one differentiator between success and failure in startup. Any repeat entrepreneur would tell you that. Any investor would tell you that. In other words, to succeed in startup, you not only have to land the best talent, but you have to land and keep the best talent at the most value. Whether you’re pre or post-funding, hiring top talent on a growing business’ budget is challenging. Larger organizations can offer candidates lucrative salaries, stability, and expensive perks. However, there are several strategies you can use to hire great talent while keeping costs down.
Value Beats Everything
Once you get above the 95% curve, the returns begin to diminish dramatically. Not only is that top 5% going to be expensive, they’re going to be sought after. You’re constantly going to be fighting off potential poachers until someone throws enough money at them to make stay is inefficient.
While larger companies attract employees with lucrative salaries and stability, startups afford their employees the opportunity to directly reap the rewards of the company’s financial success via equity in the business. Equity is a unique bargaining tactic startups possess that larger organizations don’t, and it should be leveraged accordingly. If a particular candidate is risk-for-reward driven, they will often forgo a higher salary now for the promise of potentially greater financial rewards in the future.
When recruiting talent, may business owners make the mistake of overlooking non-traditional employees. Non-traditional employees might include those who are not currently working, those looking to re-enter the workforce, older employees, or employees who are outside of your industry.
While non-traditional employees are often overlooked, these individuals present a unique opportunity for your business. Often they are extremely eager to work and will go above-and-beyond for your business. It’s also not uncommon for their salary expectations to be more in-line with what a startup can afford.
Another strategy to hire great talent when your cash flows are tight is to offer a lower salary upfront, but with the promise of incremental salary increases in the short-term future. For example, you might offer an employee 50% rate of market compensation up front but include the opportunity for 85% market salary within one year if a financial company milestone is achieved.
You might also structure employee salaries with a below-market base but the option for a significant year-end bonus if your company’s financial goal is met. Aligning compensation with company performance keep costs down and aligns employee interests with company goals.
At startup companies, you always have more freedom to experiment, so companies should play around with their job postings to figure out what appeals to their audience. Top candidates typically want to go somewhere where they can have impact and grow in their career and startups provide the perfect opportunity to do so.
You want an excited, engaged, diverse talent pool. You want your hires to love their job, to fit seamlessly with company culture, and to know what they’re doing. This talent pool may seem too good to be true, but it definitely does exist, and you’re swimming in this massive talent pool.
Promoting from within always beats hiring externally. You already know your internal staff, they know the rest of the team, and they’re familiar with company culture. Furthermore, promoted employees will feel more appreciated and recognized, and could be more likely to stay with the company.
Interns are one of the biggest investments. They are normally young and less experienced than a traditional hire, and those things may make you shy away. But don’t let this cloud you judgement and think of them as a risk or a training time-suck. Think of them as raw potential. They’re looking for experience, and they’ll be grateful and excited to start learning.
Done well, hiring interns provides a great return on investment and, down the line, they may be just as qualified or more qualified for a full-time position with your company as any other entry-level employee, and they’ll have a leg up by knowing their way around the office already.
Just know that you absolutely still need to pay them.