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In the mid-2010s, the statistic that 90% of startups fail within the first year was terrifying young entrepreneurs everywhere. The definition of startup included ideas that didn’t get off the ground, amid the glut of frivolous apps nobody wanted and copycat concepts (remember when everything was the Uber of something?)
Fast forward to the end of the decade. According to a report by Small Business Trends in March 2019, the numbers aren’t quite that dire. In fact, they found that 80% of startups launched in 2014 made it to their second year, and 70% made it to year three. Just over half, or about 56%, made it to year five — which is still much better than the gloomy 90% failure rate.
If your startup is in that half that grows over its first five years, there are a lot of transitions that happen as the business scales.
One of the big ones is when the founder(s) of a growing startup realize that they have to start hiring employees. How do you know when you’re ready to hire? We asked a successful Delaware founders and a “first hire” for advice.
Mac Nagaswami Macleod cofounded Carvertise, then known as Penguin Ads, in 2012. The former Hen Hatch pitch competition winner and 1313 Innovation startup is now a national transportation advertising company that recently added its first international market.
“There are two critera,” said Nagaswami Macleod about first hires. “First, is the need real? Does the work exist? And are [those tasks] dire? Do they absolutely need to get done? The goal over time is you want to replace yourself, so once you understand the need for that role, and if the functions of the role is needed for the business to survive and thrive, [you’ve met] criteria one.”
But just having work that needs to get done doesn’t mean you’re ready to hire someone.
“The second criteria is, can you afford it?” he said. “Hire somebody when you can afford to hire them, and if you can’t afford to hire them, then you have to keep on doing that position yourself until you can generate enough cashflow and become profitable enough to fund that position.”
Being able to afford it doesn’t necessarily mean using startup funding to hire people.
“The lens by which I’m looking at is not through raising capital and funding those positions,” he said. “It’s, you know you can hire when the need is real, and you have the ability to afford it. You need both.”
For Carvertise, which has been self-sustaining for some time, there’s a process behind establishing both need and affordability.
“There’s been no large hiring burst,” he said. “It’s been a steady additional layering of employees as the company continues to grow. We’ll notice the organization feeling stretched.” Then they ask, “OK, how are we from a revenue standpoint? Where are we from a profitability standpoint? What are our forecasts? Is it something we can put the funds behind conservatively to fund this position? That’s been our outlook on that matter,” he said.
The first hire
Rebecca Parsons is Director of Operations for The Mill, the Wilmington coworking space that first launched in 2015 with a floor of the Nemours Building, and has since expanded to two floors and a second location, The Mill Concord, in North Wilmington. She was founder Robert Herrera’s very first hire.
“Being the first hire of a startup involves a lot more than what’s on paper, and what’s on paper is only a third of what you actually do,” said Parsons. “It’s an amazing experience for someone like me who can’t sit still, has a growth mindset and graduated from business school with a management degree.”
At what point was she brought on?
“The Mill was expanding faster than Rob expected — he found himself needing to be in three places at once,” Parsons said. “He couldn’t answer phones, monitor construction, respond to emails, advocate for funding and grants and make connections with the community all at the same time.”
So, it was time to delegate.
“Finding someone to cover the basics like calls and emails allowed him to be more hands on with the growth of The Mill,” she said.
Parsons is still an integral part of The Mill, with a strong presence and a position that, she says, has evolved and grown over the years.
“There’s always a new challenge,” she said.
Have a story about hiring your first employee or being a first hire? @ us on Twitter.-30-
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