This post is by Tomasz Tunguz from Tomasz Tunguz
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As you build out your startup’s financial model for 2019, a key component will be the hiring plan. You’ll need to calculate the number of managers and individual contributors to achieve your goals. But don’t forget to plan for mishires.
You will make mistakes hiring people. We all do and it’s part of the process of building a company. Someone looks great on paper but isn’t a culture fit. Another doesn’t ramp quickly enough. A third might not have the work ethic. Whatever the reason, it will happen.
In the hiring plan, you should anticipate this. Many startups plan to over-hire in sales, but not in other departments. Why is this? It’s because AE hiring is directly tied to bookings capacity and consequently growth. A mis-hire might cost the business $500k in ARR, which can be the difference between growing 2x and 2.5x at the early stages. So it .
Overhiring in other GTM teams like customer support, customer success, sales engineering should be considered, especially if the company is on a steep ramp and hiring quickly; and the business has the balance sheet to support this hedging strategy.
There’s no way to know exactly what fraction of hires won’t work out. Many businesses project 20% mis-hire rate, which is a good initial estimate.
Whatever your estimate, take the time to think through over-hiring in the key GTM and support teams to ensure you’ll have the right capacity to support your growing customer base.