As a founder, an idea is a spark that leads to something great. You push, you grind, you hustle—whichever your preferred term, you put in the time and effort to transform that idea into a reality. However, for most entrepreneurs, there comes a point when the workload can no longer be carried solo, and you need to bring on your first employee(s). That employee is not just someone taking a piece of your pie: they are an investment into the future of your business.
Over the years founders have seen onboarding strategies from tech titans like Google, which still gobble up the press coverage, all the way down to stories from relatively smaller companies like Dan Price’s Gravity Payments, which set their minimum wage at $70k—sprinkled with plenty of pros and cons, there are many strategies for bringing on early-stage employees.
Here, we’re outlining a few different methods for entrepreneurs to use in bringing on early stage employees. Prior to hiring anyone though, it’s important to first lay the groundwork, estimate to what extent you can afford to bring on new hires, and understand how differences in both skill levels and roles will impact employee onboarding.
Laying the Foundation
Prior to going out on the web and deploying your job listings, it’s necessary to first lock in your budget, get the necessary paperwork in order, and decide on the type(s) of employee(s) you want to bring on. Each of these items could be an article in and of themselves; but at the high-level, each of these are necessary elements you need to consider prior to listing a new position:
Lock in a Budget: Take a hard look at your current levels of recurring revenue and funds raised, and decide how much you can realistically set aside from your monthly budget to dedicate to a new hire. If you need to get creative, some startups are able to offer equity or even deferred salaries—but be aware: you may be hard pressed to find experienced professionals willing to accept that kind of compensation gamble in their hiring terms.
Create Benefits: Working for a startup is always a gamble, and no amount of ping-pong tables or free craft beer will change that fact. You should carefully consider the benefits that you can offer to employees prior to beginning onboarding; or at a minimum, you need to have a plan of attack in place so that early stage employees understand what to expect moving forward based on the company’s success.
Contractor vs Employee
If you don’t yet have the solidified funds in place, or if the work doesn’t require strict scheduling, a contractor may be a good initial option. Many startups develop temps or contractors into full-time employee roles as the business grows. However, it’s important to understand that there are often restrictions placed upon how these types of temporary employment options are regulated, such as not setting regular business hour expectations or not restricting who else contract employees can simultaneously work for.
Compiling Necessary Paperwork
For each type of employee, you will need to develop your own company employee agreement. Then there are the other necessary and important items. Most founders are also tight-lipped about what they are working on, which means creating NDAs, basic employment policies, equity agreements where applicable, and payroll setup.
With this foundation in place, and a lawyer to review any agreements you’ve created, you’re ready to go out and find your first employees. For more insights especially regarding United States legal hiring concerns, the SBA offers some great resources.
Early stage employees that focus on growth outcomes, such as a sales executive or marketing professional, will require a different onboarding flow than that of a technical employee. Obviously, you don’t throw a coding project at marketers or salespeople test their merits, but there are similar ‘hiring funnel’ approaches for each respective employee type.
Once applications are rolling in and you’ve selected some top potential candidates, look to develop your own relationship-driven hiring approach. For sales execs, most are familiar and comfortable working with incentive-based work. That means you set a base salary, and for each sale closed or client locked into contract, the employee earns a commission bonus. A marketing person, on the other hand, usually earns a base salary and then either additional equity incentives or bonuses based upon achieving or exceeding predetermined goals set in place during the hiring process. Below is a basic onboarding flow:
Starting a Courting Process
You’ve selected some potentially great candidates. Now it’s time to determine if hiring them will be a great investment for your company. Once you’ve done the basic screening, regardless how strapped for time you are, relationship building is critical to ensure you and the potential hire will work well together and can buy into a shared vision for the future. Meet the candidate on neutral ground for some coffee, get to know them a bit on a personal level, share your vision and goals for the company, and then see what input they provide. If they can be both supportive and critical, that’s a positive indicator. During this process, it is important to be extremely candid about the foundation you have previously established, as well as about how they will be compensated.
The exception to this is if you are looking for remote team members, in which case a Skype session or two will do the trick.
Develop a Simple Project
To kickoff the working relationship, you should first test the top candidates by issuing a very simple project. This should be something that they can complete in under 20 minutes, as anything beyond that amount of time may put them off, and probably should merit compensation.
For a potential sales hire, this can be a hypothetical situation, asking them for a high-level strategy, or how they would go after three specific brands that would not fit the normal description in terms of your ideal clients or existing customers. For marketing hires, a high-level strategy that helps you understand how the potential employee thinks through a problem or goes about completing task that they are likely encounter should do the trick for you—the opportune goal here is for you to understand the potential hire’s thought processes, and how they go about solving problems.
At this point, you should be able to select two or three candidates for the role. Create a checklist to see who fits the role based on desired professional experience, your company culture, and how well you think the applicant’s results from the initial small project could realistically be integrated into your business, if they were working for you today.
Creating a Paid Project
Even if you’ve locked in your top pick, prior to sealing the deal, it’s a good idea to issue a paid project. This should consist of a few tasks designed to give you more detail and insight into the potential employee’s thought process.
For sales professionals, ask them to spend an hour or so to develop a more detailed sales strategy for some particular customer persona or specific sales scenario. A high-level strategy might include technology tools available to use, and should encourage them to roll up their sleeves. Alternatively, you can even a set them loose on a few lower-tier prospects, and see how they perform.
Marketing professionals can take on a similar task as the prior project, but designed to show more detail, or even executing upon the higher-level strategy. An option would be to the hire detail out a test campaign, what metrics they would track and why, and what the estimated budget would be.
The project is wrapped, and now it’s time to review the results. If a potential hire wowed you over and offered a good plan, make your final selection. Although it’s not always the case, you may find yourself in a position where more than one candidate fits well with your team. If this happens, you can see if there is a way to bring on both, with one being offered a lesser role, or perhaps you can approach the candidate at a later date. Either way, wait until your top candidate has agreed to and finalized your offer before making that decision for strong runner(s)-up.
Aligning Goals and Milestones
In most cases you and the employee-to-be will have already discussed goals and milestones as part of the initial projects; but if not, lock these in prior to making an offer. It’s common for early-stage employees to start at either a contractor level or at a lower rate on a probationary period, and then once an initial milestone is surpassed (time, sales, sticking to timelines, etc.), the base salary will be increased. Other kinds of graded or increasing compensation incentives can of course be created through bonuses, commissions, or promotion/full-time offers.
Give an Offer
You next need to come to the table with a transparent offer, and at this point the candidate hopefully will not be surprised by the base salary offer. Layout what the base salary is, if there will be a bonus and how that will be achieved, any relevant commission packages for sales roles, and equity if applicable. Regardless of what you plan to offer, give the candidate a period of time to think, but assume that the candidate will come back with some sort of a counter offer. If this leads to a second discussion of offer terms, you should hopefully by the end of the second conversation have settled on your own best and final offer, even for the best early employee candidate.
Finalizing an Offer
The negotiations are set, both you and the candidate have accepted the terms, and now it’s time to make it official. From here, you’ll send along the necessary legal paperwork for taxes, compensation, employment policies, and of course the official offer letter.
The onboarding process for a technical employee is relatively similar to early-stage growth employees—but depending on the focus of the company, technical hires can often have a more dramatic impact on the company’s future, especially for a company working to develop any technical solution that does not yet exist. Ideas, beyond the very earliest stage, are cheap. Technical bug-fixing is one thing, but if a product simply doesn’t work, or falls far behind schedule, this puts companies in hot water, and often fails them.
In some cases it can make sense to instead bring on a technical co-founder to balance things out. However, this decision will require a proper share of equity, a shared vision, and an added significance to aspects of co-worker relationship building.
Once applications start rolling in, the process for hiring a technical employee will be similar to that of the above. We’ll break down the differences, but take the previous section into account with the exception of differences in tests and projects.
Initial Competency Test
A resume can only tell you so much about someone’s technical skills. In some cases, developers work as part of teams, and resumes can become inflated relative how much true responsibility and experience some career-builders show on paper.
To weed out any potential inaccuracies, it’s important to offer a basic skills test to ensure that a candidate understands the technical components of what you are trying to accomplish. A skills and knowledge test should be relatively short and only screen candidates for base competency. There are companies - eSkill, CriteriaCorp, etc. - that offer such tests; so you do not always have to create them or try to analyze the results yourself.
After receiving the test results, it should be clear whether or not a candidate has the technical knowledge to accomplish the task at hand. Follow up with an interview to walk through and provide feedback, and allow the candidate to clarify anything that may need it. This is also a good opportunity to begin asking how they would apply, not just use, the skills in question.
Unlike the initial competency test, a test project is one that is significantly more involved and highlights how a candidate will react to certain situations or apply certain skills they have to a particular scenario. When possible, this should probably be a paid project. An initial Test Project should take between two and four hours for a candidate to complete, and the purpose of this project is to (1) engage the candidate in the vision of the business, and (2) test the responsiveness and attention to detail of the candidate. Once complete, it should be evident if a candidate (or which, if testing multiple) will be suitable to take on the key technical role for your company.
Creating an Offer & Sealing the Deal
Much like the non-technical candidates, making an offer is among the last few steps of onboarding. You can again expect some negotiation, locking in timelines for first projects, and any potential bonuses, too. Once agreed, the offer is signed, the benefit paperwork gets sent over, and it’s time to get to work.
Although the above onboarding flows and tips will help you with bringing on early-stage employees, there are near endless resources to help you with interviewing, testing candidates, and of course staying legal. Below are some additional resources to help make the process go more smoothly.
- Questions you can’t ask (legally)
- Questions you should consider asking
- Forms new hires need (legally)
- Differences between contractors and employees
- Testing technical candidates
- More Hiring Tips: A Step-By-Step Guide to Recruiting Your First Team Members
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