Hiring Plan

Table of Contents

What is a Hiring Plan?

How to Create a Hiring Plan

Mistakes to Avoid When Creating a Hiring Plan

What is a Hiring Plan?

A hiring plan is a comprehensive strategy that aligns hiring resources with business goals and long-term staffing needs. A good hiring plan ensures continuous business operations where when you anticipate talent needs, you can take the time to find the perfect fit for each position.

The hiring plan is one of the most important parts of a good financial model, since it's likely the largest expense that startups and small businesses face. Hiring plans should be well thought out and constantly updated as time goes on and the company evolves. A good hiring plan can be an invaluable resource for a startup or small business because it allows you to hire with confidence and lets you avoid scaling too quickly or too slowly.

How to Create a Hiring Plan

You can create an hiring plan with various degrees of details, we will go over them from the mandatory ones to the more sophisticated ones.

  • Role: this is the name of the position that you are hiring (developer, customer support, CEO, CTO, etc...). You can choose how specific you want to be: for instance you could say developer or frontend developer and another role of backend developer.
  • Monthly cost: this is the salary that you are going to pay for that role. Note that this cost should be the cost for the company, so the gross amount.
  • Count: the number of employees that you start with for this role. If you have 3 developers working on your startup than this would make count = 3. You can also start with count = 0 and hire as you go, this is very useful for resources that you don't need now, but will need in the future (for example, customer support or designers).
  • Hiring rule: this is used to model how your team will grow. This is basically the number of customers that one person on this role can handle. You could also read it as: hire a new employee for this position every X new customers.
    For example an hiring rule of 2,000 means that every new 2,000 customers, a new employee will be hired, so, at 10,000 customers, you will have 5 employees for that position.
    If you leave it empty, then you won't hire new employees for this role.
  • Max hires: the maximum number of employees that will hire for this role. Used to put a cap on the hiring rule. Optional.
  • Annual raise: the percentage of raise that will be given to this role every new year. The raise is compounded year over year. Optional.
  • CAPEX: if you want you can indicate a CAPEX item that will be bought when a new employee for this position is hired. For example a new computer for every new developer. Optional.

Mistakes to Avoid When Creating a Hiring Plan

One of the biggest mistakes startups and small businesses make when creating a hiring plan and forecasting labor costs is forgetting to account for the founders compensation. Failing to account for the founders time and eventual salaries can skew other metrics like CAC.