When you're growing a company, one of the most important questions to answer is how quickly you grow your team.
If you hire too quickly, you might have to take on more funding than you'd ideally want to. If you're too slow to hire, you might miss out on opportunities to really scale your business.
With so much riding on the question of how quickly you build your team, it can pay dividends to have a solid hiring plan in place.
This article looks through an example hiring plan that you might use to map out the growth of an early-stage SaaS business. It's inspired by a great post by Tomasz Tunguz, which looks at how the structure of a typical startup changes as it scales.
The hiring plan
The below is an interactive model. This means you can tweak some of the input assumptions along the top, and see how they affect the outputs, and the rate at which you hire for each of your different departments.
Have a play around; below the model you'll find an explanation of how it works, and how to build your own.
Note that the input assumptions can take ranges as well as specific values, this can be useful if you're unsure about something, for example how much MRR you generate from each customer.
How does the hiring plan work?
The hiring plan is essentially built around your sales team, and how quickly they can grow your customer base.
The relevant input assumptions here are that:
- You start with 20 customers, generating $2k worth of MRR.
- You have 1 salesperson initially, and hire an additional salesperson every 2 months.
- Each salesperson has a target of bringing in 2 new customers per month.
- 2% of your customers churn each month (which equates to a 78% annual retention rate).
Based on these assumptions the model forecasts out your customer numbers, and MRR growth, for the next 2 years.
The model then also has some hard-coded assumptions built into it about how the other team sizes grow according to MRR and customer base. These are that:
- Each support team member can look after a maximum of 16 different customers.
- You're willing to hire 1 engineer for every $25k of MRR you have coming in.
- You want to maintain an engineer/product manager ratio of 4.
When I said that these assumptions are hard-coded, I mean that you'd have to edit the model to be able to change them. You can do this by scrolling back up to the model and clicking Use this template in the top right.
How can I build my own hiring plan?
Whilst the above hiring plan can easily be modified to cover any sort of SaaS business, or really any business that generates predictable recurring income through sales, there are plenty of businesses for which it won't work as well.
If you're looking to build a hiring plan for a D2C product, or for a high-volume subscription business, then you'll likely want to build your own hiring plan from scratch.
Causal makes this easy to do.
Building a hiring plan in Causal
In the model above, I started by forecasting MRR growth based on some assumptions about my business's sales team.
You'll want to do the same for your own business; decide what you want to base your hiring plan off of.
If you run a D2C retail business for example, you might decide you want to build your hiring plan around sales and revenue figures.
In Causal, you could do this by first creating a variable for your Current Revenue each month:
You can then create another variable to represent your predicted monthly Revenue Growth rate:
Notice that I've set the growth rate variable to take a range, reflecting uncertainty about future revenue growth.
Once we have these two variables, we can connect them together by writing plain-English formulae:
Where timeStep represents the number of months into the future we're considering, and we're multiplying Current Revenue by Revenue Growth once for each month into the future.
This gives us a projection for future revenue that looks like this:
Where the shaded area (the uncertainty interval) reflects the uncertainty in Revenue Growth that we mentioned earlier.
Now that we have an estimate of what our future revenue will be, we can start to build additional variables to map out how we want to build our team based on that revenue.
How you do this is completely up to you. Causal gives you the flexibility to decide exactly how you want your model to work, letting you build a hiring plan unique to your business.