Guide: Building a Hiring Model

As a startup founder or CEO, you're likely always looking for ways to grow and scale your business. One key aspect of that growth is building a strong team, and to do that, you need to have a solid hiring plan in place. But where does financial planning and analysis (FP&A) fit into the picture? Here's a closer look at the role of FP&A when building a hiring plan for your startup.

Step 1: Determine your hiring needs

Before you can even think about building a hiring plan, you must determine your hiring needs. Determining hiring needs involves looking at your current team and identifying gaps or areas where you need to add new positions. Start by outlining your current departments, employees, and salaries. You should also take note of any bonuses or commissions being paid. Once you have a solid understanding of your current employee roster and costs, you can begin making a plan. Your business strategy and goals should drive the process. Here are some things you should consider:

Existing Expenses - How much are you already spending across salary, benefits, commissions, etc?
Current Workload - Can you and your team handle your current workload? Are you at capacity, or can you take on more work?
Skills and expertise - What skills and expertise are currently missing from your team? What skills and expertise do you need to achieve your business goals?
Timing - When do you need to have new employees in place? Do you need to hire immediately, or can you take your time to find the best possible candidates?

Once you clearly understand your hiring needs, you can start thinking about the financial implications of bringing on new employees.

Step 2: Understand the financial impact of hiring

When it comes to hiring, there are a lot of financial considerations to keep in mind. These could vary depending on role and department. Here are some key factors to consider:

Cost of hiring - This includes the salary and benefits for the new employee and recruiting costs, training expenses, and other associated expenses.
Revenue projections - Consider the potential revenue that the new hires could generate. Will they be able to contribute to the bottom line meaningfully?
Impact on the existing team - Consider how the new hires will impact the current team. Will they increase productivity, or will they create additional overhead?

By considering these factors, you can better understand the financial impact of hiring and make informed decisions about when and how to grow your team.

Step 3: Develop your hiring model

With a clear understanding of your hiring needs and the associated financial costs, it's time to develop a hiring model. This model should consider the salaries, benefits, and other ongoing or one-time expenses like learning and development stipends or new equipment purchases.

When developing your model, it's essential to be realistic and consider your startup's financial constraints. Take the time to define your different hiring variables to create the most accurate model possible. Remember that some of these expenses will be ongoing while others may only occur during the onboarding process, so make sure to factor in these differences.

With the right FP&A software, you can create multiple hiring plans and quickly compare the differences to your bottom line. FP&A software can be instrumental in deciding on your hiring strategy.

Step 4: Monitor and adjust your hiring plan

Once you've implemented your hiring plan, monitoring its progress and making adjustments as needed is vital. Monitoring performance to plan is where FP&A comes into play. Reviewing your financial data helps you see how your hiring plan impacts your cash flow and runway. You may need to adjust your plan if you are exceeding your budget or falling short of your expected return on investment for new hires. Keep your hiring model updated by adding in new hires that officially joined the team or pushing back anticipated start dates for a role that hasn’t been filled yet.

How does Pry help with hiring plans?

With Pry, we make it easy to create your hiring plan by integrating with your existing HRIS system to bring in your current employees and departments. From there, you can plan for future hires, quickly adjusting their potential salary and start dates. We also make it simple to create new Scenarios so you can test out different hiring strategies and compare the financial impact of each plan.

By understanding the financial impact of hiring, developing a realistic budget, and monitoring your progress, you can make informed decisions that will help you build a strong team and grow your business.