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Exploring the current In an economic storm, startup founders need to focus on the key resource of early-stage startups to survive and thrive – people. The biggest difference between hiring in a healthy economy and hiring now is that there is no room for mistakes.
According to Harvard Business Review, the cost of a bad hire is 30%–50% of their salary, which could hit startup budgets by 2023. To make fewer mistakes, founders should take a more informed approach to hiring.
A good start is to track these three metrics:
In order to survive and thrive, startup founders must focus on the key resource of a startup in the first place – people.
Price per rent
Cost per hire is one of the most important business metrics, which should be included in a company’s profit and loss report. It helps a recruiting team test different strategies, as well as identify areas where they can cut costs and improve hiring.
This metric is used to calculate the total cost a company spends on attracting, hiring, and onboarding employees. To calculate cost per hire, add up all direct and indirect costs of the hiring process and divide by the number of hires hired in a given period of time.
First define the time. It can be a month, a quarter, half a year or a year. I track the cost every month to continuously streamline the process.
Second, line up all expenses. Consider internal costs such as recruiter salaries and bonuses, licenses for corporate email accounts, the cost of applicant tracking system software and LinkedIn Premium, and educational courses for new employees.
Also include external costs for job postings and referral programs, fees for staffing agencies, as well as background checks and relocation costs.
Cost per hire ($) = (Internal recruiting costs + External recruiting costs) / Number of hires made
If your company spends $10,000 a month on recruiting and hires four people, the cost per hire is $10,000 / 4 = $2,500.
A typical cost per hire for an early-stage startup is estimated at $3,000 to $5,000. The average benchmark in a recent survey is $4,700. If the cost is more than $6,000, it’s worth reviewing your strategy.
It is important to review each stage of recruitment to identify the most costly stages and find ways to reduce costs. If candidates don’t accept your offer, collect feedback on the reasons for rejection and conduct new research on market salaries – you may be offering too little.
When you don’t hire often, outsourcing recruitment can be more cost-effective than handling all operational costs internally. Compare your current recruitment costs with recruitment agencies’ pricing plans, which typically charge 15%-35% of a new hire’s annual salary.
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