This article was authored by Jeanne Heydecker and originally published on the Woomentum network.
How do you balance between your need to keep costs down and getting things done, as well as presenting a reasonably complete team to potential investors, in case you are soliciting financing?
I once founded a web design firm and worked as a team of two co-founders, and to keep costs down, we split the company down the middle. I focused on customer engagement, product development, and marketing. My partner handled sales, HR, and finances. We took turns taking out the trash and vacuuming the carpets. As we grew, we took the least likable parts of our jobs and wrote process documents and job descriptions, then hired the best people we could afford for those positions and let them make whatever changes they felt were needed since these areas weren’t our core areas of expertise.
As we kept expanding, transferring more and more of the operational aspects of the company to other staff, we were able to stop working IN the business, to working ON the business. What were we leaving on the table when pitching clients? Where should we expand? Locations? Services? What could we leverage today to build more tomorrow?
Before we started hiring full-time employees, we hired unpaid interns of very high caliber from very good graduate schools that were instrumental in building the business. They were heavily involved in the marketing and product development parts of the business and gained real-world experience launching real products for real customers. It also enabled us to try out potential hires before we brought them on board full time. Investors want to see a team that has the education and experience to make your business achieve its goals, for you and the investor.
At another firm, one client had cyclical recruiting needs that meant we needed triple the staff in two quarters and a skeleton staff in the other two. We couldn’t keep that many people on the bench. It was just too costly to do so. We decided to look at other business models and took advantage of job portals that were trying to automate the entire recruiting process for SMEs and instead of using agencies, they used individual contractors who did full lifecycle recruiting from identifying the person, interviewing them, presenting them to the hiring manager and on boarding them if they were hired. The job portal and the contractor would split the fee 50/50. Traditional recruiting agencies couldn’t afford to take these job orders because their recruiters’ salaries, commissions and benefits made them lose money on each one. But our people on the bench were perfect to work on these job orders. While the company made less profit during those two quarters, it was still a profitable business model and gave us the flexibility to keep both our very important client happy, our employees off the bench and our CFO happy, too.
So before letting people go that add value to your firm during a downturn, get your best people into a room and brainstorm other options for using your team effectively while still making a decent profit margin. You may find new business models that pay more per capita than what you’ve been doing all along!