The hiring plan is the list of all the people that are working on your startup and that will work on your startup.
Many do the mistake of projecting the growth of a company without also growing the team that is working in the company.
The hiring plan is one of the most important parts in a good financial model, since it is the biggest expense that many startups need to face, especially those that do not sell a physical product, like SaaS, Marketplaces, Digital agencies, etc.
The hiring plan should be well thought out and constantly updated as time goes on and the company changes. A good hiring plan can be an invaluable resource for a startup since it lets you hire with confidence and lets you avoid scaling too quickly or too slowly.
How to create an 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 = 0and hire as you go, this is very usefull 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 emplyee for this position is hired. For example a new computer for every new developer. Optional.
The most common mistake that is made when creating an hiring plan is not adding the founders to the team as an expense.
An hiring plan is used to show how the team will evolve oevr time, not the spirit of sacrifice of the founders. An investor looking at your financial model and not seeing any compensation for the founder will be very turn off.