As an ambitious D2C brand, you have unlimited options for where to spend your not-so-unlimited budget. More inventory, upgraded infrastructure and fancy marketing are just a few of the line items that come to mind.
Perhaps the most important place you can invest in your growing operation, however, is your people: the staff responsible for making your business run. But how do you know when it’s time to hire? And how do you prioritize hiring against other valuable investments like your online storefront or advertising?
While there’s no one-size-fits-all answer, there’s a clear formula to determine when you need to hire and, of equal importance, why hiring now is the right move for your business. Follow these four steps for scaling your team in a way that’s both practical and profitable.
Step 1: Assess Your Needs
Most small- to medium-sized businesses don’t take a proactive approach to hiring. Instead, they’re reactive and only start to think about hiring because they have a need that’s not getting met. What is that need?
Maybe your support tickets are backlogged and you need more customer service staffers to tackle them. Perhaps your website is lacking in organic traffic and you really need the help of an SEO whiz. Or, if you’re in the camp that’s being proactive, maye you know you have a big project coming down the pike in six months and it’s going to take more manpower.
Getting clear about your specific needs--the functions within your business that are lacking--is the first step.
In addition to identifying the need, categorize it: do you need more hands on deck for a skill set you already possess (the customer service example from above) or is there a gap in skills you don’t yet have on your team (the SEO example)?
There’s also a quantity question. How much time is required to fill the need (i.e. full time or part time) and what level of expertise is required (i.e. more customer service agents or a manager to oversee them)?
Once you’ve identified the need and defined its category and quantity, it’s time to dig a little deeper to find the causes behind it.
Step 2: Dig Down to the Reason for the Need
Assessing your needs should be fairly straightforward. Oftentimes you can tell where the need is based on what’s falling through the cracks--purchase orders piling up, customers upset about late deliveries, and so on.
The reason behind the need, however, isn’t always so obvious, but it’s just as important to identify for the purpose of future-proofing your business. You don’t always want hiring to be a reactionary measure. Instead, we’re working toward creating a well-oiled hiring machine that ensures your needs are met before they arise. To get there, you have to figure out what’s driving your needs.
Is it increased work from existing business? An influx of new business? A department that’s suffering from productivity issues or an employee whose skills aren’t where they need to be? A lack of leadership?
In any case, a failure to plan has caused the situation. Most times this is the result of a lack of proper monitoring like productivity tools, timesheet oversight, employee feedback, and so on.
Hiring decisions shouldn’t be made in a vacuum. Instead, this data is required to make pragmatic hires. So, it’s important to consider not just the need but the reason behind it so you can make strategic, proactive hiring decisions going forward. Additionally, once you determine why you didn't identify the need sooner, you can put quantifiable measures in place so you’re not blindsided by the same need again.
Step 3: Determine Your Timeline
If you’re reading this post, chances are the answer to the question ‘when should I hire?’ is ‘yesterday.’
If you’re losing work or seeing problems creep up in your business due to being understaffed, you’re already behind the eight ball. Your timeline for hiring is immediate. You may be forced to make a faster decision than you’d like or sacrifice candidate quality in favor of hiring quickly just to meet the demand. This isn’t ideal, but sometimes it happens, especially when you’re just starting to think strategically about hiring.
If you’ve followed steps one and two, however, you’ve probably identified some needs that aren’t quite here yet but are coming soon. This is great news and gives you a longer timeline. It means you can set clear short-term hiring goals for the next three months and longer-term hiring goals for the next six to twelve months.
As we said earlier, there’s no one-size-fits-all hiring timeline, but planning a quarter ahead is a solid benchmark. This gives you time to account for upcoming projects and assess their impact on your needs, as well as planning for seasonal shifts in demand and any other upcoming changes.
Step 4: Understand the Bottom Line Impact
When most brand owners ask us when they should hire, what they’re really asking is, is adding staff a wise use of my money? They’re weighing the cost of salary and benefits against other things they could be spending that money on. We always advise our clients to take a step back and think about the bottom-line impact.
Hiring is a game of diminishing returns. When you’re a young business with a small team, every additional employee you add is going to make a huge difference--in other words, you’ll see big returns. The larger your business gets, the less of a difference each new employee makes--the lower your return.
This is natural and not a reason to shy away from hiring. When done according to the assessment of needs we outlined above, every new employee has a specific function that’s tied to growing your business, so even as you see diminishing returns on hiring, it’s offset by your growth.
Think of it this way: would you rather have 50% margins on the $1 million in revenue you’re earning now, or 30% margins on the $10 million in revenue you could be earning with a few more staff members? Even at a much lower margin, the second option is preferable.
We’ll close with one final piece of advice about the bottom-line impact of hiring. It’s often said that in any business decision, you can pick two out of these three things: good, fast and cheap. If it’s fast and cheap, the quality won’t be very good, and so on.
When it comes to hiring, you want good and fast. Never opt for cheap--you’ll always get what you pay for.
Stay tuned for our next post, where we’ll break down our framework for figuring out if you’re getting the right output from each of your employees so you can determine which position to hire for next.