One of the questions we most often hear from emerging growth companies and start-ups is about when they should hire executives.
It is much easier to identify hiring individuals to service specific client needs or support your product. But expanding the executive team can be a difficult and expensive proposition. You want a leader who understands and shares your vision.
You want the right level of industry knowledge and experience growing a company. And you must provide an attractive compensation package to sway a savvy business person who is either looking for a new challenge or needs to be wooed away from their current position.
Most of the company leaders in this situation do not have expendable time or money. Companies in rapid expansion and start-up mode need to utilize every resource carefully. So how do you know when it is the right time to bring on the next member of your executive team?
When you can’t afford not to.
If business moves waited on affordability, entrepreneurship would be a thing of the past. When something is a priority, you find a way to afford it. By holding off on other initiatives like a new product or service launch, bringing on an equity partner, or foregoing salaries for a time, priorities get funded. There will be a point that not having a strong executive will end up costing you business. And by the time you notice, you would be starting a search and a hiring process that could take months. This will tempt you to “fill a seat” instead of waiting for the best candidate, ultimately costing more time and money.
When the burn rate supports the hire.
Companies in high growth modes burn through cash. Funded start-ups may be able to afford an entire executive team from day one, but there are likely better uses for some of those funds. Bootstrapped start-ups may not think they can afford a qualified executive, but there is a tipping point when you can’t afford to have an empty seat at the table. Again, it isn’t about affordability but about need. And thinking ahead is the key to having the right person in that seat.
When the company scales beyond the founder.
We all have skill sets and things we’re better at than others. Start-up founders can often make the mistake of thinking that the best hands for their business to be in are their own. Structured management is absolutely essential to scale a business to viability and this cannot be done by a single individual or partners forever. The first stage of a company’s growth often looks like a wheel with the founder, owner or CEO as the hub. The next stage requires more integration and coordination from specialty leaders – an executive leadership team. To get out of stage one and into stage two, that team needs to be in place. As your team builds, so will your company.
When you have measurable success.
To attract executive level talent to your company, you must have a business that is predictable, repeatable, and scalable. Any executive that you would want on your team would be able to see whether your business is real and your clients find value in your products or services.
So when is the time right?
The short answer is that the time is right when the time is right. The key to success here is to create a strategic plan for these hires, including needed skill sets and salary projections, to start a search well before a person is needed. At Andcor, we have decades of experience working with emerging growth and start-up companies. We understand the unique challenges presented in creating a leadership team where none existed before and we have an equity model for those clients who need a team today and need a creative funding mechanism for the hire.
Stay tuned for Executive Hiring Plans for Start Ups, Part 2: The How.