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4 Things to Consider When Making Your First Hires

Making the right decisions today will ensure your company's survival tomorrow.
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Congrats. Your new venture has some traction, and you're ready to hire employees. While you always expected this day would come, you may not have given the process much thought. Now you have to. Bringing on staff means investing a big chunk of your operating budget, and the right hiring decisions today will ensure your company's survival tomorrow.

Build a team that will take you from solo operator to buzzing work force.

1. Be honest about what you can afford.

Assembling a team isn't simply a matter of staffing up when you need help. The vital hiring metric for startups is overhead. Sure, it's tempting to look at overhead as a moving target by factoring in revenue projections and other hopes. It may be even more tempting to hire based on a desire to fill in spaces on an idealized org chart. But for startups, it's smarter to set a dollar limit and stick to it.

"I've grown to like a max burn-rate model to define this," says entrepreneur Brad Feld, a venture capitalist and startup mentor based in Boulder, Colo. "You use this monthly burn-rate amount to back into the head count, and then allocate around 'Where do I get the most leverage at this point in my business?'"

Feld's burn-rate focus is geared to VC-funded startups, but it gets to the heart of hiring in any business: You should hire based on current revenue, not on what you're hoping to sell.

2. Establish your most pressing needs.

At a startup, job titles are often loose definitions at best. Founders fill out FedEx slips; engineers make sales at trade shows--it's all hands on deck, all the time. Your candidates have to be willing to roll with the chaos.

That said, determine the primary reason you're ramping up staff now. Is it because of bandwidth constraints--too much work and too few people? Or is it because you're in need of industry or management veterans whose experience can take your business to the next level?

Answer those questions for yourself, then hire accordingly using Feld's advice. "Any hire, no matter the pay, should be able to do real work," he says. "If they simply want to manage other people, they are the wrong fit. And C-level peoplefrom big companies are rarely a good fit for a startup, unless they're the founders."

3. Be specific about the skills you're seeking.

Once you've identified the needs you're trying to address, ask candidates if they've been in similar situations and how they got through them. Speaking last fall, Tesla Motors founder and CEO Elon Musk highlighted what he believes is the quickest way to decide if a prospective hire has the skills you need.

"One of the ways, when interviewing someone to work for a company, is to ask them about the problems they worked on and how they solved them," Musk said. "If someone was really the person that solved it, they'll be able to answer on multiple levels. ... And if they weren't, they'll get stuck."

4. Make company culture a priority.

Even the most competent hire can end up failing if the person is not a good fit within your company's culture. After such a situation left him underperforming, Brent Daily launched RoundPegg, a Boulder software company that blends data science with organizational psychology for team-building applications.

"The norms of interaction were the exact opposite of how I work," Daily says of his former job. "There was shouting, swearing, name calling, then everyone would be like, 'OK, decision made. This was good.' It worked for them, but not for me. I went from a previous job where I was a top 5 percent performer to one where I was in the bottom 5 percent. The only difference was the environment."

Feld maintains that skills can be learned, but personality is hard-wired. However, he sees no margin for error for new ventures: "The only people you should hire in your startup are people with high culture fit and high competence fit. Period."