In this episode Startups For The Rest Of Us Rob interviews Maren Kate of Avra Talent about her entrepreneurial journey. She talks about her first company that raised 5.5 million in funding, hit $1mil in MRR, had over 400 employees, but ultimately failed. She talks about how she recovered both mentally and professionally, and gives her system of hiring/vetting people for your company.
Items mentioned in this episode:
She got to about $1 million monthly run rate, so almost $12 million a year. In 2015, they were burning a couple hundred thousand dollars a month. At a certain point, they weren’t able to raise that next round of funding and finances were screwed up. You’ll hear us talk about it in this interview but it’s a fascinating and frankly it’s a devastating story to hear how Zirtual did implode and to hear Maren recount what that felt like, but she bounced back and we hear how she then went out to start her next company AVRA Talent just a year later.
We dig into Maren’s expertise and experience in hiring people. She’s had so much experience doing this. You can imagine having 400 employees, although you don’t hire everyone yourself, as a CEO, you certainly have a lot of influence on that process. Now, AVRA Talent is a recruiting agency in essence. They have a really refined system of how to do this and how to vet candidates. We dig into that towards the latter half of the interview. Without further ado, let’s dive into my conversation with Maren Kate.
Maren Kate, thanks so much for joining me on the show.
Maren Kate: Hi, thanks for having me.
Rob: Absolutely. You folks have heard in the intro about this amazing growth story of Zirtual, but I want to go back to when you decided to raise money, because you bootstrapped Zirtual for two years and then made the choice to raise money. A lot of listeners to this podcast, if I were to break it down, I’d say 90% want to bootstrap or self fund and there’s around 10% in this MicroConf, Startups For The Rest Of Us community that do raise funding and they don’t tend to want to go on the VC track, but they do raise $500,000, $250,000 from Angels or from TinySeed. It’s not binary in our space. The funding is good and not funding is bad or anything like that, but I’m curious how that decision came about for you and why you decided to go that route.
Maren Kate: Yeah, I wish I had a more thoughtful answer but the honest answer is I decided to go that route because we were in a place where we were growing, we were profitable but by a slim margin just because we were supporting our team, we had bootstrapped from day one, we didn’t take on any external funding. I didn’t self fund because I didn’t have any money, so every dollar in was all we had.
We were in Silicon Valley in San Francisco, me and my co-founders Collin and Eric. Especially at the time, I think it was and in 2012, it was just a really frothy time. Everyone that we knew raised money instead of asking what your business is. You tell them instead of saying, “What do you do you?” or “Blah, blah, blah,” they would say, “How much will you raise and from who?” It was the kind of ecosystem we were in.
We got really lucky. I got connected to someone through a client of Zirtual who really liked our culture and kind of the vision of the company, and pretty quickly offered to lead our series A. That happens once in a million. I didn’t realize that because it was my first time fundraising, so it was epic. That really made the rest of the deal really easy to close out because in fundraising, if you have a well known need, everybody else would just be like, “Awesome, sounds good.”
The reason we fundraised is because we could, it wasn’t super difficult. At the moment, it seemed like it would solve all our problems because going from kind of hand-to-mouth bootstrapping, all of a sudden we had $2 million in the bank.
Rob: And then you went on to raise a total of $5.5 million over a few years. Did you later regret that given that venture capital often makes us want to grow faster and makes us burn money, because it’s there and that’s what it’s used for. But given how things turned out, did you or do you have regrets? Did you think it was the right call?
Maren Kate: It’s hard. All of the mistakes that I’ve made have been incredible learning experiences. They’ve been incredibly hard learning experiences, but I wouldn’t trade the learning I have now for anything. That being said, if I could keep that learning and make better choices, obviously I would, but that’s not how the world works. I’d say if I was and I hopped on this, I talk to people that are starting similar businesses and they always want to know about raising money. What I’ve said is we were not a venture backable business. We got venture backing, which happens often, but we are a services business. We had no technology component. Even over the three-and-a-half years after raising money, we built very little technology.
We grew really fast because part of the raising money and we had a really awesome product and we had pretty good word of mouth and if we had not raised money, we would’ve had to really restrict that growth. In the short term, that would have been hard, but in the long term it would’ve made for a much more sustainable company.
Zirtual is still around, it’s run by startups.com. They kind of bought the assets and restarted it, it’s doing well and I think they have re-birthed it in the way that we originally did with, “Hey, we’re going to make this profitable. We’re going to make this focused on a service to the customer.” For that type of business, I think that is the right way to go.
If you’re building new technology, if you have to raise money because that’s the only way it’s going to get built, that makes total sense. But if you have a services business and people are paying you money for it, often you don’t need to raise money. It seems nice in the short term, but it has a lot of long term ramifications that people who are raising money for the first time often don’t realize.
Rob: You grew from essentially zero employees to 400 in the span of three or four years depending on how you count. What was that like being, because you’re pretty young at the time, were you like early to mid-20s?
Maren Kate: Yeah, I was super young and I was very green.
Rob: What was that like basically having a company with that many employees at that age?
Maren Kate: It felt exciting in vanity metric terms but it was exhausting, it was super overwhelming being the CEO of a fast growing company when you don’t have the experience. Also, I think just emotional maturity. I would say it was both really fun and gratifying and awesome experience in some ways and it was very overwhelming in other ways.
Rob: Yeah. Could you talk about, was there a time you can think of where you were overwhelmed as it was growing?
Maren Kate: It goes back to impostor syndrome, so we didn’t grow up in a family that had a lot of money, didn’t go to a fancy school, I wasn’t raised around businessmen where I learned all these things. When I came to San Francisco and especially as we raised money, and started growing, and started getting a lot of press, and kind of tech-darling status, I felt like a giant impostor. I say I have a blue collared chip on my shoulder that has lessened over the years, but at that time, when I was 25 was very intact. Instead of asking for help and being vulnerable and open and saying, “Hey, what’s going on here?” I felt like I had to figure everything out on my own.
I think that was because I felt like if I asked for help, people would be like, “Ha, we knew you didn’t know what you are doing,” like, “Get out of here, heck.” But that actually made for a very lonely experience, where as a 25 year old who didn’t have a lot of practical real world experience, I made a bunch of mistakes and so many of the mistakes, when I look back, were things that now more seasoned, it’s not reinventing the wheel, there are solutions for that. I think that’s kind of one of the biggest pain points, at least, that I experienced.
Rob: Yeah, I feel you. I resonate with that phrase, blue-collar chip on your shoulder, because I’m also—what’s funny is I grew up in the East Bay area, but I had nothing to do with the start up scene. My dad worked construction, my mom raised us with four kids and I like to say, solidly working class. I had no ins with people in Silicon Valley. When I started doing start ups, it really is a thing that that kind of weighs on you.
I’m curious, part of the story that’s come up, I have an assistant producer now and she did some research and read some articles and listened to interviews that you’ve done. It sounds like there was a turning point with Zirtual when you switched from contractors to employees and that things started turning there, can you talk us through that? Was that a decision you made? Did you have to make it and what were the ramifications of that?
Maren Kate: We thought we had to make it. This was during that time where a lot of the on demand gig work companies were starting to get fined or have lawsuits from the Department of Labor. We talked to some lawyers, and at this point we maybe 100 contractors and the fear was that someone was going to say, “Hey, you’re misclassifying your workers.” We didn’t think we were but there’s a 20-point test that you can do on the IRS website and it’s incredibly strict. We were like, “Maybe we should rethink the way we classify our workers and go from contractors to employees.”
Another driving thing behind this was we had amazing people on our team and they loved our mission, they loved the vision. They used to say they bleed Zirtual blue and they wanted to be part of the “team”. They wanted to have the option to get stock, they wanted to be employees, they wanted to have the option to get benefits. We made a call that was based a lot more on what we thought was the “right” thing to do. We did that without thoroughly thinking through the financial ramifications over the next few years.
We were using an outsourced CFO firm that one of our investors recommended to us, and I think that was one of the biggest mistakes we made at Zirtual. They were really, really bad, and again when you go to this impostor syndrome, I was working with a partner who was a CFO and had his MBA and yada-yada and I was an English literature drop out. He was like 27 at the time.
He would send over the P&L’s and I would go through them in my apartment and I’ll be like, “These don’t make sense. I’m no genius but…” and so again, same things like that. I would be like, “Well, he must know what he’s doing.” he has this firm, this fancy investor suggested him, but finally at some point, I went to our board, I was like, “These don’t make sense. These don’t add up.”
They looked at them and they were like, “Oh, yeah.” Literally, he’s doing math wrong. I’m like, “****. Well, what do I do?” They’re like, “Well, you should get rid of him.” Here’s another interim CMO firm. That was a huge mistake and I mean, at the end of the day, I’ll tell you one thing, it taught me a lot about finance. It also taught me just because I can balance my checkbook, I kind of thought, “Well, it’s cool. I’ll be able to keep all the numbers,” deal with them myself, and that is tragically untrue.
We wanted to do the right thing and make people employees and we didn’t really think through those repercussions. In retrospect, if I had to do it again, I would have changed our business model so we could keep people as contractors. It would have allowed us to actually pay them more as contractors and it would have made us be able to keep that kind of 50% margin we originally had.
Rob: Yeah, that’s really tough. I’ve been talking to startup founders for years as I was starting my own stuff and I always say, “If you’re going to start a tech company, you don’t have to learn to code, but learn just enough that you know when someone’s bullshitting you.” I feel the exact same way about finance. Finance is the same thing. I never took a finance class in college, but I’ve read enough books that I can hopefully spot something, just like you’re saying, you knew you had a Spidey sense that something was off. It’s like, “I got to trust that founder instinct on that.”
Maren Kate: Absolutely. I think in terms of those core competencies, I think the way our education system sets us up is woefully inadequate. Instead of taking calculus, you should be understanding how to manage a household budget, how to manage a business budget. I think the amazing part is now no matter what your income level is, if you can get online, you have access to all the knowledge in the world.
As founders or would be founders, it’s really important to educate ourselves on the building blocks of whatever business we’re in. If you’re going into the construction business, you should know the bolts, understand what’s going on there. If you’re going to be in tech, you should get a working understanding of exactly knowing someone’s bullshitting you. No matter what kind of business you’re in, you always need to keep an eye on that bottom line.
Rob: Unfortunately, we know how this story ends, ritualistically, you went under and you sold the assets to startups.com, but can you take me to that moment when you realize that you had run out of money and you needed to lay everyone off and shut the company down.
Maren Kate: Yeah, it was pretty horrible. We realized when we kicked out the one firm, finally brought in a director of finance internally, she was amazing. Within three weeks, she came back to me and she was like, “We’re running out of money.” I was like, “Oh no.” I went to my board, I went to all of our investors, told them and they were like, “Okay, well you guys need to raise the bridge,” I was like, alright.
Got that all set up, did the back of the napkin figuring out once we brought in the director of finance, she kind of was like, “Listen, 70% of the plans will never really make enough money to justify them,” but 30% of them will be calling Zirtual for business. They are the winners. We need to do a massive restructuring. We need to get rid of all the personal plans, we need to focus on business. We had everything built out.
We went to the board, we’re like, “Alright, we need $1.5 million to do this. Here’s the timeline.” Everybody said okay and then one of the VC’s, the same one that recommended the fantastic CFO firm, they said, “Actually, instead of giving you the $750,000 we said, we’re going to tranche it in three segments and we’re going to wait till everybody else’s money hits the bank before we put it in.” One thing about investors, and actually I’m realizing this as a lot of life that people tend to—they’re signaling, you are less likely to go in a restaurant if there’s no one there. If there’s a line, you’re more likely to stand in it.
Investors are very similar, if not even more, than the way we see that in the rest of the world. The moment someone kind of got cold feet, some other investors are like, “Well, we’re not going to put our money until this firm’s money is in first.” It was a catch 22 and I talked to one of our biggest shareholders, the person that was the representative on the board who had no business being there and later actually kind of came to me and apologized. He said, “Yeah, you know what, we have just enough in the bank to pay out this final payroll, pay off the taxes. I think you should just shut everything down.”
At this point, I was so kind of shell shocked and just absolutely emotionally, mentally, spiritually exhausted. I was like, “Okay, well, again, he knows more than me, so this is what we’ll do,” and trying to do right by the people by making sure that we didn’t keep open any longer because if we did, we might not be able to pay them everything. That’s when I know we spent four days trying to figure something out, nothing came through and that’s when I had to send the layoff email at 11:00 PM Sunday or 01:00 AM, I forgot when it was. I remember being in the office.
We look back and if I had it to do over, I would tell the guy who gave me that suggestion that that was the stupidest thing I’ve ever heard. I probably still would have to lay most people off, but I want to spend that week actually going around to a bunch of different firms saying, “Here’s our number. Here’s our business, let’s do a down round and we’re going to fix the company and focus on business.”
Rob: Wow, that sounds devastating. It sounds like one of the low points of your life perhaps.
Maren Kate: Yeah, absolutely.
Rob: That sounds incredible and you had to lay off, you mentioned it somewhere, that you had to lay off your mom and brother? Is that true?
Maren Kate: Yeah, they worked with me. Luckily, we are a close knit family and got through that but it was super bad..
Rob: There was obviously a lot of negativity coming at you after that. I’m sure from employees and I even think more direct articles on TechCrunch and other places that were talking about the big flame out. How did you handle that? Obviously, that sucks, and it’s people dragging you through the mud or whatever, but did you just black out, go offline for months, did you fight it? What was that like?
Maren Kate: No. I definitely went offline, because my whole thing was it doesn’t benefit me to hear a bunch of people tell me I’m ******, I already feel that so I’m covered there. I think honestly, probably, it was just like self preservation kicked in. I went offline for several months after we laid everybody off. Me, my co founders, and my brother wasn’t getting paid, and a few other awesome OGs in the company spent the next few months trying to make the transference to startups.com as simple as possible.
We kept working, cleaning things up and doing the best we could, and that was how I handled it. After the three months were up, I laid on the floor of my house at the time and just didn’t do much. After a few months of that, I didn’t have any money and I was like, “Crap, I really have to get back to work,” so I peeled myself up and got back on the saddle so to speak, but it was very devastating. It was absolutely hands down one of the low points of my life.
I think the reason was because I knew how many people it impacted and that’s what just crushed me, the investors, everybody else. We were such a tight knit group, and the people that were part of Zirtual were like an extension of our family, that was the hardest part.
Rob: I can only imagine. I’m speechless because like I’ve gone through hard things, but I’ve never had to do that. So many people will never have to in their entire entrepreneurial career. You go offline, how do you even recover from that? Mentally, it sounds like you were just, even before it was happening, there were just loads and loads of stress, because you’re growing this company, loads of stress as it’s kind of going down, and then this whole big thing happens, you go offline, but there has to be a healing process of taking a year off. In off, I mean I know you’re working and stuff, but what did you do to try to heal yourself to be able to get back on that horse and start what you’re working on now which is AVRA?
Maren Kate: I did kind of a deep dive. I started reading a lot which is kind of how I approach most things. I knew that this was either going to break me or I was going to figure out a way through it. I didn’t want it to break me. I think one of the things that actually kept me going was the sense of I have to make this right at some point in the future, in my life, and I still actually feel that very strongly.
There were definitely times where I would be in the shower and I was just like I can just slit my wrist and then not have to deal with this anymore, but that good old Presbyterian guilt I was like, “Yeah, but then that would really hurt my family, and my friends, and some employees, so that wouldn’t be fair to do it to them. Let’s try to get through this, let’s try to figure out a way to make this up to people at some point.” It sounds very morbid, but I actually think it was helpful. I always tell myself, I’ve never lived abroad and I was like, “Just figure out how to pay the bills, figure out how to maybe make this up to some people, and then you never lived abroad, so you’ve got it going,” at least try those three things.
Worst case scenario, if you can’t do either of those, then you can always kill yourself after you lived abroad. That actually got me through the first few months. After the really dark part passes, then you start to see through the mist. After the news cycle passed, after whatever else happened, I don’t know who the next target was in Silicon Valley, I was super lucky. I went through a really bad break up a few months later which was amazing especially since we live together. I was like, “Awesome,” that point was almost funny. I literally laughed. I said, “This could not be any…” I kind of took it as a sign. I was like, “Alright, I don’t have a house anymore.”
San Francisco has been really good to me in some ways and also been terrible. I was like, “Well, I want to live abroad,” and I got super lucky. I randomly got an offer from this company called Roam to head up their operations and they had co living locations all over the country. They’re like, “Part of this, Maren, is you’ll have to go and live with these different co living places and improve their operational efficiency,” I was like, “Literally, I’m on the next flight.”
I paired all my belongings down to suitcases, flip San Francisco off as I was flying out, and went and lived abroad for about a year which was wonderful. I also think just getting to see that the world is a lot bigger than the place you’re in was pretty ground breaking to me. I didn’t travel a lot as a kid outside of the states. To actually see how big the world is, and see how different people are, and to see what real struggle looks like, I was like, “Oh my gosh, you snooty bee, how dare you complain about this stuff. Don’t feel sorry for yourself, you’ve got nothing to complain about.”
I think that was one of the most transformational parts of my life. It was actually shaking myself out a bit by being able to see how big the world is, and how much opportunity, and then also how much suffering, and it really puts your own drama into a contrast.
Rob: It sounds like a really powerful way to reset. I think that travel can be such a therapeutic thing in that respect.
Maren Kate: Absolutely.
Rob: You took this time to recover, and then you got back on the horse, and you started AVRA Talent. Folks can check it out avratalent.com. Hire the best talent, regardless of geography. We connect employers with the top 5% of remote professionals tested and vetted for your specific needs. When I read that, I think of it as a contingency recruiting service. I’ve used those at previous places that I’ve worked. Can you talk to me about how you’re different?
Maren Kate: Yes. After I kind of did a post mortem on what happened at Zirtual, one of the biggest things that came back was that we had, and I had made some poor hiring choices along the way. When I think of hiring or recruiting, I actually think it has to do with anyone that is on the bus with you. That includes investors, that includes advisors, that includes employees. Just out of greenness, we had brought on some people that weren’t working great.
One of the biggest reasons I went back thinking that was, we didn’t want a thorough process. We were really good at recruiting our virtual assistants with this incredibly thorough process I think only half a percent got through and were hired, but when it came to our COO, or the outsourced CFO firm, or some people in our tech team, the process I ran was nonexistent. After Zirtual, I talked to some people, some founders while I was traveling abroad. I did a head of operations stint at Calm, the meditation app. I talked to the guys there. I was like, “Yeah, I just must be an idiot. I don’t know how to hire,” and they were like, “No, everybody actually has the same problem, we did a bunch of bad hires too.”
I was like, “I wonder if I could take the process, the structure that we did with recruiting our virtual assistants and apply that across different rules.” I started doing that as a consultant and then I decided to spin up an agency which is AVRA Talent. The way we differ I would say from the contingency recruiter is kind of 2-fold. We’re very focused on alignment, we only work with startups and companies whose culture and mission we can get behind. We charge a percentage of a placement fee, but we also charge an upfront $5000 retainer.
I started this from day one because one of the biggest problems I’ve realized in contingency recruiting is incentives are misaligned. Contingent recruiters incentive is to get you someone who’s the highest paid as fast as possible, because if they don’t get you that person before you hire them somewhere else, then they don’t make any money. That’s kind of one of the reasons that industry was so fractured and can have such a negative connotation, versus the way I talked to when I talk to founders.
I was like, “Listen, we’re going to do the work. We’re going to act kind of like your internal recruiting team. Each search we put several hundred human hours into. We’re going to put this retainer down. If we need to find you the person that you hire, then you’re going to pay us let’s say 15% of their base, and that $5000 will roll into that. If we don’t, if you bump into the next hire on the subway, that’s amazing. We want you to find the right person. It doesn’t matter how you come about them, but you’re still going to pay us for the time we spent,” and that model has worked really well for us.
We have four core values and alignment being the first one. In the last three years as AVRA has grown, we’ve actually gotten more and more focused on helping companies recruit fully remote talent. These are fully remote employees from engineering, to digital marketing, to operations, to product, to customer support. I think that is where we are the best in the world. That’s really where our focus is.
Rob: You’ve talked a lot about hiring and you obviously had to hire a lot of people. You mentioned somewhere that you kind of have this system and way of thinking about building a great company and it’s to bring on the best people, connect them to something bigger than themselves, empower them to do their thing, hire and fire according to company values. I wanted to get into that first piece which is bring on the best people. How do you do that? People listening to this podcast, there’s a lot of founders out there who maybe are hiring their first ever salesperson, their first customer support rep, or maybe they’re hiring their 10th or 20th employee, what’s that the CliffsNotes version of how do you bring on the best people.
Maren Kate: This is one of the reasons that I love remote recruiting so much, because if you’re trying to bring on the best person in say, San Francisco, you are competing with some of the well best funded, highest paying companies in the world, you’re kind of fighting a war. Versus if you are hiring in Boise, it’s a little bit easier, but there’s not as much talent that you’re looking for maybe with specific skills, and obviously technology companies and startups.
With remote recruiting, and this goes with anything, you can run this whether you’re hiring in an office in San Francisco or remote. At the end of the day, you just have to think of it the exact same way you think of a sales funnel. You need to get enough at the top of the funnel, and you need to filter them effectively through several steps to get down to the 5-7 candidates who really matter, who then you run through a more detailed process which would include test projects, references, cultural interviews, yada-yada. My favorite way of hiring is casting a really, really wide net and then setting up 5-7 steps in that funnel, so that the best people can shine through.
An example would be in my new startup that I’m spinning out, I’ve been recruiting for a founding product person, and a founding growth person. I would say at the top of the funnel, we’ve probably gotten 5-600 applicants on both sides. We’ve set different tests so to speak at different parts of the funnel and these cover the core values that we hold important. They cover the skills both soft and hard skills that are important for this role. As people go through different stages, and the funnel gets smaller and smaller, the best people start to really shine through.
Rob: Can you give an example of one or two of those stages? Is it like a 90-second video of yourself taking that exam or something?
Maren Kate: The way I like to think about it is just thinking what hiring normally is and then doing the exact opposite. Most companies approach hiring, they post a role and people submit their resume, and then it’s up to the hiring manager to go through all these resumes, and resumes are literally a terrible way of assessing fit. It goes back a stage. You want to figure out what is the role, what matters the most. You don’t say, “I want to hire a digital marketing manager,” you say, “This is the job or jobs I want this person to do. I want them to own our ad spend, I want them to be able to write great copy. I want them to be able to hire and manage designers, and I want them to be very analytical and be able to create reports.”
You can actually test that in different stages of the funnel. One example would be we have people submit resumes, but we don’t even look at them until maybe stage five. Instead, we would have three paragraph style questions that would be the first stage of the recruitment process. The very first one which we include in all hiring is, “What are you looking for in a role and what honestly draws you to this company and this role?” If people don’t fill that out in a meaningful way, in an honest way, we immediately disqualify them. Because if you want people that actually care about your product and your vision, then they should be able to articulate that.
We also ask them a few other questions and then we actually look at their writing and their communication which is incredibly important for most roles, especially ones that are remote. But going back to the digital marketing example, you want someone who can write well. It doesn’t matter if I look at their resume and they used to work for Apple, or Postmates, or one of these darlings, I’m not like, “Oh, they worked at Airbnb, they must be good,” that is not an indicator of success.
Instead, I actually look at the work they do. After that, we would yay or nay then someone on interview, or just glance and push through the top 20%, and then they would go on to another question, and we test the responsiveness as a really big one, and then we’ll get them into a phone screen where we’re talking about specific examples to understand, do they actually understand the role? How have they performed in their previous roles? A lot of those open ended like, “Tell me about a time,” questions. After that, there’s another longer test project.
We always suggest to clients to do this themselves. Setup a paid test project, something that you actually need done. Be sure to pay for a person’s time, that’s really important. Nothing is more powerful than seeing how people work with you and how they engage with you. If they do well through that, we usually do a second layer of interviews which have to do with your team, with who would be their supervisor. After that, we always highly recommend references. Checking references both given references and back channel references. That’s the one thing I tell founders. “If you do anything, just check references,” that’s the only take away.
Some of the worst hires I ever made, years later talking to people who maybe have worked with them, there’s always a pattern where it was like, maybe they’ve gotten lucky and gotten some good jobs that had high name worth at the company, and they had floated on other people’s success, or maybe didn’t have the skills but they were great talkers.
If I haven’t just spoken to a few references, and the way we do references as we think of are people you worked for, people you worked with, and people who worked for you, because somebody can trick one of those subsets. Maybe your boss thinks you’re great, but the people who work with you and work under you think you’re terrible, and vice versa. It’s really important to get all three of those categories. From there, we usually start to get our preview of a good holistic view of a candidate.
Rob: Very cool. That’s kind of a mini clinic in the hiring process. I really like that. I like most of the stuff you said there, but the write well piece is something that I really focus on. Even when hiring developers, that was the thing I was super picky about.
Maren Kate: And following instructions, that’s a huge one too. It’s amazing how few people follow instructions. Also just somebody who really vibes with your company and your culture. This is why I say when you’re writing your job description, let your company, let your culture, let your flavor of weird shine through. The right job description, it will scare most people off, but it will really attract the people that are like minds, and that’s what you want, versus a generic, bland job description.
Rob: Awesome. You’re talking about this topic in a couple months in MicroConf Minneapolis. If you’re listening to this and you’re not coming to MicroConf Growth yet, you should think about getting a ticket to hear a 40-minute talk for Maren on this topic. If folks want to keep up with you in the meantime over the next couple of months, you’re MarenKate on Twitter, and AVRA Talent everywhere, avratalent.com.
Maren Kate: Yeah, absolutely.
Rob: Sounds great. Thanks again Maren. Thanks so much for joining me on the show.
Maren Kate: Absolutely.
Rob: If after listening to that you have a question for me, or you have a question for Maren Kate, I could invite her back on the show if you wanted to learn more about how she hires, thinks about hiring, really anything from her experience, you can email questions at startupsfortherestofus.com. We also have a voicemail line 888-801-9690, subscribe to us by searching for Startups in any Podcatcher, and of course, we have a full transcript of each episode available within a few weeks of the episode going live. Thanks so much for listening again this week. It’s great to have you here, see you next time.
In this episode of Startups For The Rest Of Us, Rob and Mike give updates on Blutick and Drip. Mike talks about some progress he’s made as well as his current MRR with Bluetick. Rob gives his update on Drip continuing to scale and fill new positions.
Items mentioned in this episode:
Mike: In this episode of Startups for The Rest of Us Rob and I are going to be talking about updates on Bluetick, Drip and other madness. This is Startups for The Rest of Us episode 339. Welcome to Startups for The Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products whether you’ve built your 1st product or you’re just thinking about it, I’m Mike.
Rob: And I’m Rob.
Mike: And we’re here to share experiences to help you avoid the same mistakes we’ve made, what’s going on this week Rob?
Rob: Well I’m back to feeling really good about Drip because for the last maybe month, prior to last week, which I talked a little bit about it. We just had you know scaling issues right, it’s like stuff comes up, you don’t know if it’s database, you don’t know if you can add more horsepower to it, code implementation, you know what it is. So, different times of day certain ques would back up and it’s like we’re shipping a lot of features, the team is kind of firing on all cylinders right now and I feel like we’re the most productive we’ve been in ages perhaps ever,
Rob: I mean just given that the time size is so much larger, we’re able to just ship stuff faster and yet, like every week was ruined for me because there would be this delay or whatever, this page load is slower, just whatever that like makes me feel like we’re aren’t living up to the promise that we make to our customers, but we turned like a big corner last week with it and I just feel great about everything. So that’s my week.
Mike: Yeah, I know what you’re saying. I think the best analogy, I might have heard this someplace but I kind of feel like I thought of it on my own at 1 point, is like when you’re working on a SaaS app like everything is in motion while you’re working on it, so it’s almost like being a heart surgeon like you have to make sure everything stays up and running while you’re still working on it.
Rob: Totally, that’s right, Reid Hoffman the founder of LinkedIn said building a startup is like jumping out of an airplane and assembling the parachute on the way down right, because you kind of in free fall and you’re burning through cash and the analogy works really well for running a SaaS app and having to do kind of performance improvements, refactors, anything like that that impacts a lot of things and this is where unit testing is such
Rob: a nice scaffold right, unit testing is like having good test coverage, it’s kind of like jumping out with the parachutes already half made or maybe the parachute is, I’ll just stop there because that was a really dumb analogy anyway.
Mike: I was going to point out, I wasn’t sure where you were going to go with that.
Rob: You’re like you’re really taking this too far, let’s ditch the parachute thing.
Mike: That’s almost like my analogy against a heart surgeon.
Rob: How about you, what’s going on this week?
Mike: Well minor champagne moment, I’ve recently crossed the 1,000 dollar a month MMR with Bluetick, so things are going in the right direction. Of course, because it’s the beginning of the month you look at the statistics for growth and stuff like that and they’re just tanked at the bottom which because it’s the beginning of the month instead of the end.
Rob: I know you’ve got preorders up front but this is active customers right, these are people that are actually using it and not people who have paid you and are planning to use it.
Mike: Yes, these are people who have paid me and are currently using it.
Rob: Sounds good.
Mike: Yeah, most of the people I had who had come in as preorders and then converted over into paying customers, a lot of them I had essentially applied credits to their account to give them credit for that preorder to some extent, mostly to kind of boost them over from being a preorder and kind of having an indefinite beta period over to like being a paid customer and those payments are I think going to be starting to kick in this month but even with all of that it’s still over 1,000 dollars a month and my goal for this month is to double it but we’ll see how that goes.
Rob: Wahoo, a 1,000 bucks a month man.
Rob: Are you going to Disneyland, are you going to go out and buy a new car?
Mike: No, I had a beer last night, that was about it.
Rob: Nice, that was your champagne moment, was to drink a beer.
Mike: Yeah, champagne, beer, I’m sure somebody’s going to have a coronary over that analogy.
Rob: Nice, do you feel like the pace is picking up in terms of how quickly you’re adding customers?
Mike: It is and that’s both intentional but also as a byproduct of people talking about it because they are
Mike: using it and they’re having good experiences so they’re turning around and referring other people to it and saying hey I’ve been using this and it’s been working really well for me, that and coupled with some of my outreach efforts, they’re either going on podcasts or talking to people who are on mail lists. It’s a combination of things but I’m definitely pursuing things a lot more in that regard as well and it’s unfortunately a juggling act too because there are things that come in and people say hey, can it do this or can this be modified, can we add a feature or a function over here that does X, Y or Z and it’s prioritizing those against all of the other things that are going on, it’s really pretty hard.
Rob: Yeah, that’s how it always is right, especially in the early days man, it’s tough. That’s why starting on your own and really being the single founder is such a hard road to go if you’re going to build an app like this that’s not in a small niche market where you can move slow and there’s no competition and you can kind of trudge along but building something like this, where there is competition and you’re going to have to be keeping up, you need to get to the place where you’re keeping up enough revenue to basically hire somebody
Rob: soon and essentially, Justin Calcian says hire your cofounders, right that’s what he does now. He doesn’t have cofounders but he hires really early because he races around and he has a little he can back it with and he’s able to give our less equity but he brings people in very early, you don’t see him building something solo or alone because there’s just too much to do when you’re launching something that you want to see grow pretty quickly and it’s in a big market.
Mike: Yeah, I meant there is definitely things that are kind of falling on the floor right now, I mean 1 thing that’s been sitting on my to do list for well over like a couple of months at this point has been working on the sales website and even people who come through the sales funnel when I start talking to them, the biggest chuck of questions that they have is kind of what does this actually do, because the website doesn’t explain it very well and really the website is just 1 page, so there’s not a whole lot of explaining that it can do on that 1 page, it doesn’t provide use cases or examples or screenshots really, I mean there is very little there to go off. Most people are really reliant on what they’ve been told by other people or what they’ve heard about either from me or from other places where I’ve
Mike: done like a podcast interview or something like that.
Rob: You know it’s really cool when you say that some of your new customers are coming from other people using like word of mouth was a big driver in the early days of Drip, not as much with hit tail but there was some but if you have that already, like if you have that when you only have low double digit number of customers, that’s a good sign, right it’s a really good sign because as you grow that’s just a snow ball that allows you to continue kind of leveling up and when you add 100 or a1,000 if you still get that same percentage of people, you’ll always be lower as time goes on right but if you can get folks talking about it, it’s a really nice way to be involved in every conversation right, you always want people to say remember how like infusionsoft and Ontraport, it was always just the 2 of them and just by nature of that fact Ontraport which is nowhere near the product that infusionsoft is, you know had all of this growth and then I remember when Drip started to be part of those conversations when they would say of infusionsoft or Drip and I would like see it, I would say it’s
Rob: not in every conversation about it, but I would see it in these online forms, these threads and then get thrown out and I remember when that started happening and it was gaming changing because you just become another viable option rather than a tool that no one has heard about.
Mike: Yeah, 1 of the things I do, I think it was 1 of the 1st questions that I ask in the survey when you go to Bluetick’s website and ask for an invitation code, 1 of the questions in there is where did you hear about this, so from that I’m finding out exactly who people heard about the product from, so it’s nice to be able to track it back to people who either placed preorders or are current customers, I even have 1 customer who like has a bunch of customers that he works with and he’s going to start recommending it to them because he’s had such a good experience with it and they wanted to use it internally 1st and things have gone well in that respect, so now they’re turning it around and going back to their customer base and say hey let’s get you on boarded with this so that we can help you more. So, what about you, what else is new?
Rob: Well, you know as I talk about most weeks most of my updates involve scaling
Rob: Drip and hiring people, right. That’s kind of a big focus of mine now, there is some other stuff, I might get into it later depending on how much time we have today but I feel you know we have been pretty consistently, just we’ve had an open job, at least 1 job opening since we got acquired and most times we have either 2 or 3, so we’re constantly, we’re hiring other new front end like IUIUX, new rails folks or new people to help with scaling and I feel like I’m kind of in the groove of hiring at this point, like I’ve gotten pretty good. You know it’s kind of this skill that you go in and out of because when you’re not hiring you forget how to skim through a resume really quick, how to do a quick phone interview, how to do a quick phone interview but we’ve just been doing so many recently that I feel like I’m kind of in the groove of it which I don’t know that I necessarily want to be, hiring people is not an aspiration of mine, like I think we’ve always talked about like my book start small stay small, the small was about head count, not about revenue right. I always want to grow revenue but it’s like I want to keep head count down, but
Rob: in this case it’s even just looking ahead as we’re Xing, 2 Xing, 3 Xing every so often it’s pretty frequent that we’re doubling our customer base, we just have to hire a little bit ahead of where we actually are, as well as like I said earlier, being in a competitive space we need to continue delivering features, which as we’ve talked about in the past is harder and harder to do the bigger you get because you spend so much time just maintaining what you already have right, making sure the database is ahead of everybody’s need and the code base and the ques and just all of the stuff that you’re running. So yeah, I guess to summarize we’ve been hiring a lot, I’m hoping we can slow down here pretty soon, we’ve found some really good candidates and I guess it’s getting in the groove of it. I do like doing a bunch of hiring and stopping so that I don’t have to constantly you know being doing it and can kind of focus on other things.
Mike: So, is that going to be the focus of your next book is how to hire people at scale?
Rob: Oh, my gosh seriously. No, it will
Rob: definitely not, and like I say it’s super cool when you get a new person on board and you get them up to speed and they start contributing and like Derek and I looked at each other and we’re like we are shipping a lot of features and it’s because there’s all these people you know doing things that used to be either in our lap or we just pull, hey we have a scaling issue so we’d pull 1 developer off of something and now we don’t have too, like we have dedicated people who that’s all they’re doing and I keep saying we’ve hit our stride. I hate to keep using that analogy but it really does feel like we’re getting the right people in the right roles and it’s kind of a good feeling when you do slot somebody in and you see them start shipping things, you’re like man I’m really proud of what we’re putting out even we’re not doing all of the work anymore because you think back when you’re crafting this software or you’re crafting the UI, with Drip that was really all Derek right, it was he and I deciding what to build and me handling everything else but for so long it was all bottle necked by 1 or 2 people’s bandwidth but now with the growing team it’s neat to see that
Rob: we’re able to maintain the efficiency and still continue that hiring more people actually means we can push out more software rather than in other companies I worked at where hiring more people actually makes things worse, you know it like slows everybody down.
Mike: Yeah, I definitely hear what you’re saying. Do you find that as you are adding more features that like the individual features that you’re adding tend to be more invasive throughout the entire course of the apps, so it’s not like a little surface thing that you can toggle here or add over there, it’s like you’re adding this feature that needs to be added throughout a large part of the pipeline of the applications?
Rob: You know that doesn’t come up too much to be honest. I think in the early days it did because you’re just trying to get to that point where you built something that people want, but I think these days our product is so much more mature that there are things we add now and again that impact everything but our architecture is really solid, so things are broken out into their own subsystems and such. While there certainly are some that come through for
Rob: the most part a lot of these things seem to be more self contained I’ll say, I mean it may impact 5 files or worst case 10 files and you have to go through all of these layers of something and those are the ones that get a little scary right because you’ve got to make sure you have unit test coverage like crazy on that but yeah, I would imagine you’re probably in that boat though right where kind of everything you add it’s like oh gosh I have to go rearchitect this thing in order to do it.
Mike: Yeah, and that’s kind of why I was asking because I find that a lot of the changes that I’m making tend to be stuff that have to be tracked down or tracked all the way through from the front end all the way through the API and then into the service layer and the security layer and then into the database and it gets to be, I don’t want to say frustrating but it takes a lot longer to get some of those things done than I would like especially because of all of the maintenance and ongoing requests or butt fixes and things like that, there are just tweaks and adjustments that kind of invade into that space while I’m trying to get those things done, it’s
Mike: just, it’s honestly like the juggling act right now is really pretty hard, so I was just kind of curious of whether or not you still ran into those things, so maybe there’s light at the end of the tunnel for me.
Rob: Yeah, yeah there is but it takes a while. I remember we refactored Drip, like major database refractor probably twice before we got to launch right, so Derek broke ground on code December of 2012 and we really launched to the world in November of 2013 but we had kind of our 1st group of 10, 20 customers coming on as early as June of 2013, so that was 7 months in and I think within that 1st 6 months before we really had people he had to do a massive rip apart of things we just had made decision to couple and they shouldn’t have been coupled and then there was another 1 when we launched, automation right so that was early 2014 as he was building automation that was just painful, it was like 2 months of standing still and then he built automation, once he had it done the automation stuff was actually not so hard to build but it was like we have to rip
Rob: separate these 2 database tables and you know as you’re falling down making your parachute and it was gnarly but after that like once we hit there, we’ve had limited need to do that because I think the building blocks got in place and the product was solidified. Now us marking automation and we’re not going to add on shipping cart landing page, affiliate marketing management, you know what whatever else, that would all I think impact some of this other stuff where as you’re still figuring out, like where I would guess at your stage, we were still figuring out I should say, so really trying to figure out should I build this feature, what is this product going to become, what is the vision for the product and is my vision still aligning with what the market is asking for and that makes things very fluid, I think is probably a good word for it.
Mike: Yeah, I’m having the same types of general conversations with most people when it comes to either features that they want implemented, like the road map that I have in my head, it’s obviously different than I originally started out with but over the past several months it really hasn’t changed a lot and most of my time is spent trying to
Mike: get those things done, so that’s more of the challenge, it’s not trying to figure out what to do, it’s figuring out what order to do it in and how to get it out as quickly as possible without wrecking things along the way because like you said, there’s that issue where if you go to roll out a new feature or a new piece of the code, if it touches a bunch of different pieces of the application and you don’t have as many unit test around it as you would like than it’s a little scary to hit that deploy button. So most of the time what I do is I deploy it out to my development server and I just try to beat on it a little bit to see like can I break this or is there any obvious things that I might have missed that may not be covered by unit tests because the front of the UI, like there’s very little unit tests are on the front end stuff, like the services and all of the back end stuff, like there is unit tests there but the front end is not tested well but that’s also because I know that the front end is changing a lot, so it’s much harder to put something in place where I’m just going to have to change all of those things anyway.
Rob: Right, and
Rob: you know the front end unit testing, which I guess now becomes what integration or system testing, there’s like a different name for it when you’re going all the way from the top down, that’s stuff runs super slow right and I consider it a more advanced method of testing, not a bad thing to have for some critical paths, I think it’s just my opinion, others may disagree with me but it’s like your sign up flow yeah you should probably have, it would be nice to have a nice UI test for that and maybe sending a broadcast in the sense of marketing, I mean it’s your basically fundamental things but A I would not be testing settings pages or like little corners of the apple out that people don’t use and I’ve heard of folks who separate those front end tests that hit that UI into a completely different test sweep because they can take 30 minutes to run or an hour to run, because they are so slow because they have to speed up browser instances and click on things. So, I don’t know, I would say at this point you will be better off annually QA your stuff and then just having unit tests below the surface, that’s probably what I would have. I don’t think I would spend a bunch of time doing UI tests yet. I actually don’t think the UI
Rob: testing suites are that still, they’re still not that great.
Mike: Oh, they’re terrible.
Rob: I know, I was using Selenium in 2008 maybe, 2007 to 2009 in there to test on an invoice and it was horrendous and I’ve heard there’s like another layer now built on top of Selenium and I heard it’s still not that great.
Mike: Yeah, I poked around it a little bit but realized that there was just too many things changes to really make any sort of difference and it wasn’t worth going down that road. I mean the API and stuff gets tested and some of the different layers but you know once it’s passed that, I mean the front end of the app, it’s all this massive Java script application because it’s all written in angular so there’s not much there other than the smoke tests in that if I make a change on the front end UI I can be reasonably assured that the APIs and stuff underneath are working but that’s no guarantee that if you click on a button it’s still going to do what it’s supposed to do.
Rob: Sure, and that’s where I think about having code that doesn’t have a bunch of side effects on it or places on it so if you’re working in a
Rob: certain part of code you know that you don’t have to go test all of these other things right, that you can test this 1 thing and be fairly confident that you’re not going to break something in the UI and do a cursory test as you deploy it and then just let your customer finds your bugs, no I’m only kidding. That’s like the worst, some of our competitors do that and it has tarnished their reputation.
Mike: Yeah if I can find and fix a bug before the customer ever sees it or knows that it was an issue than that’s the probably ideal scenario but it’s still hard, I mean I’m just constrained on resources and time and speaking of time, things have gotten even worse for me because as of 3 days ago my wife acquired a larger fitness studio here in town, so commence schedule craziness at this point. It’s just her schedule is all over the place and obviously, mine is pretty swamped as it is, so just kind of trying to overlap enough so that we make sure that the kids are taking care of and dinner is ready and all of the other stuff that needs to be taken care of
Mike: is done and out of the way is really been super challenging in the past couple of days.
Rob: 2 people running business in the house, that is tough. I can imagine that is really complicated and having flexible schedules sounds great until you realize that like 2 people with flexible schedules is chaos, like Sherry and I have run into that in the past where it’s like I think I have a flexible scheduled but like you said, you actually have kids and you have like some other responsibilities to get kids picked up and get dinner made and this kind of stuff, so I totally get it.
Mike: Plus our youngest was sick yesterday, so it was either yesterday or the day before, 1 of the days this week he ended up staying home from school and then last night he had a fever and we thought he was going to be home again from school today and it turned out he was fine, but it’s hard to juggle all of that stuff and then plus with her new business, I mean it’s a larger business so she’s got multiple contractors that she didn’t have before and there are scheduling issues, and moving to a new space
Mike: and new software and all of this other stuff that goes with it, it’s a pretty large learning curve is what it comes down too.
Rob: Yeah, I bet man. Well good for her, big congratulations to the both you I guess for her acquiring that studio, sounds kind of cool. I bet that’s a good move for her to kind of up her game, she’s leveling up, stair stepping up if you will, boom.
Rob: how involved are you in her business?
Mike: You know I help look at the business financials and stuff early on but beyond that stuff and just kind of verifying hey is this a good move to make, I really try to kind of stay out of it. Just kind of point out here’s something that you might run into or here’s something else that could be an issue or just don’t worry about this over here, but just kind of try and stay aways from it. I mean that’s kind of her thing so I’m not trying to get in the way, is really what it comes down too, trying to stay out of the way.
Rob: Yeah, that makes a lot of sense. So, speaking of all of the scheduling madness and how to juggle that, Sherry and I made the decision early in the year actually, we were talking to
Rob: someone who said they had an au pair and an au pair is someone who is typically young woman who comes from oversees and wants to come to America and is basically like a live in nanny. So, we were talking to someone who had an au pair and said it was life changing and said it was the best decision ever and so I started noodling on it and we realized that we were both going to MicroConf and I was going to be gone for a week or like 6 days and Sherry was going to be gone for like 4 or 5 and every time we go away for overnights A, it’s expensive, really expensive to hire someone to watch your kids overnight and then there’s always they don’t know your routine and they don’t know your house and there’s just so much to communicate that it’s super stressful. So, we’re just like let’s hire a live in nanny, like let’s see if we can find essentially a local au pair, you know, someone who Sherry was like a young college student would be prefect right, and so we did. So, I interviewed, I don’t even know a dozen people here in Minneapolis and right before MicroConf, like the week before she moved in and she lives in, we have like a basement living suite, it has everything except
Rob: for a kitchen right, so it has a full bath or a 3 quarter bath and then it has laundry and a bedroom and then we share the kitchen but it has been game changing man and for exactly the reason you said, it’s like sometimes Sherry and I just are 30 minutes off of where we’re not going to be there and the kids are going to be there or sometimes we need to be in 2 places at once or Sherry goes out of town, she went out of town for like 4 or 5 days to Austin for a yoga, some training in aero yoga and it’s like during that time I could handle the kids but they get on the bus at 9 15 in the morning and so that would put me to work at 9 40 and now it’s like you don’t need to be around that much to watch the kids because they’re both in school but I can leave at 8 30 or whatever and someone is just kind of hanging out with them for 45 minutes, so it has been game changing for us.
Mike: Yeah, I can imagine. I mean that’s something that we’re kind of struggling with right now is just trying to manage schedules and it’s just really so early on, but you know hopefully that will straighten itself out but I would love to have a nanny.
Rob: I know, it’s something to think about long term
Rob: man, I mean especially 2 people running businesses right, the idea is your schedules are going to be gnarly and in the long run the business should generate a lot of cash, right. I mean it should turn out more money than you would make with a salaried employee and with those 2 things in mind it’s like all right, then we outsource as much as we can and that’s you know, if you’re still mowing your own lawn or snow blowing your own snow I think that honestly, I think that’s not a good use of our time as entrepreneurs. We moved to Minneapolis and 1 of the 1st things that I did, we already had a lawn service but I was thinking like I’m not shoveling walks and it’s not because I’m above it, I used to do it but now the time versus money trade off is insane. So anyway, that’s kind of my soap box about outsourcing stuff and of course I’m not talking about outsourcing someone raising my children of course, I know that’s probably the joke or what folks are thinking, but it is like outsourcing driving them from school to the house, or outsourcing our live in nanny like the kids go to bed at 8 or 8 30 and so she’s hanging out in her room reading and
Rob: Sherry and I are like it’s 8 30, we’re just going to go out for 2 hours and like have a late dinner and have drinks and talk and you don’t have to hire somebody, there’s no clock running where you’re paying somebody 15 bucks an hour while you’re sitting down the street at a restaurant. I think that about wraps us up for the day, if you have a question for us call our voice mail number at 1 888 801 9690. No one ever calls us anymore.
Mike: They don’t love us.
Rob: I know, we get like 1 call every 2 months. I tell you what if you want us to answer like go to the top of the queue of questions, just call it in because we get so few of them and they’re fun because you get to hear the person’s voice, you can remain anonymous, you don’t have to say your name or your URL if you don’t want too but it’s kind of nice to get those every now and then. You can also email us questions at questions at startups for the rest of us dot com. Our theme music is an exert from We’re Out of Control by Moot and it’s used under creative comments. Subscribe to us in iTunes by searching for Startups and visit Startups for The Rest of Us dot com for a full transcript of each and every episode.
Rob: Although you know what Mike, did you hear that our transcription service again, this is like the 5th 1 we’ve used, they just like disappeared. I know, this happens like probably once a year. I seriously think, we’ll we’ve been doing the podcast for 6 years maybe, 5 or 6.
Mike: Something like that.
Rob: And I literally think we’ve gone through more than a half of dozen of these.
Mike: Are we at 7 now, 7 years?
Rob: Are we? Was it 2010?
Mike: I think so, yeah it was.
Rob: Gosh, dude we are old.
Mike: I know, our podcast is older than most businesses who listen to us.
Rob: Yeah, I know our podcast is older than a lot of children. All right, so anyway transcription service I think Josh, our editor is looking for 1 right now, but it’s just funny how these things just come and go. I guess it’s just such a commodity you know, it’s tough to stand out.
Mike: Well I think that’s the issue with all of them and I think that’s why they come and go because you get the transcriptions and they go for a while and they have a really hard time raising the price because most of them tier their pricing
Mike: in terms of how quickly you get it, like oh if you need it in 24 hours this is what it will cost and it’ll be some outrageous number and then it goes down if you don’t need it for like a week or so and that’s the issues is that there’s that race to the bottom in terms of getting it transcribed and I think that most of them just can’t make ends meet and it’s not just because they don’t have enough business but it’s because they’re not able to pay enough for those people and the business just kinds of implodes at some point.
Rob: All right, back to the outro here. Visit Startups for The Rest of Us dot com for a full transcript of each episode. Thank you for listening and we’ll see you next time.
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to make your first hire. They discuss how to decide if you need to hire full-time or part-time, the pros and cons of each, and some tips on the hiring process.
Items mentioned in this episode:
Mike [00:00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to be talking about how to make your first hire. This is “Startups for the Rest of Us,” episode 285.
Mike [00:00:16]: Welcome to “Startups for the Rest of Us,” the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike –
Rob [00:00:24]: And I’m Rob.
Mike [00:00:25]: – and we’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you doing this week, Rob?
Rob [00:00:28]: You know, I’m pretty good. It’s nice to be a week away from MicroConf and kind of get my feet back under me. It feels like … you know, we’re done with queue one of 2016 already and heading into the midyear, so I’ve been looking out: what’s the next 90 days, what’s the next six months looking like, and revisiting the goals and the direction and the vision that I set out in my retreat, which was at the very beginning of January. There was both some personal stuff and some work and Drip-oriented growth stuff that I’m just revisiting and figuring out: am I on track for those? Do I need to adjust them? Are we ahead of schedule, or behind, or whatever? So, that’s been kind of fun, just to go back and review. I think that’s important to do, whether you do it monthly, or quarterly is to review those goals and figure out where you are with them.
And with that in mind, we’re trying to find new growth channels and starting to make some progress on a few fronts. Finally starting to get a little bit of traction with paid traffic, which has been something we’ve been working on on and off for a while with Drip, and seems like we’ve got our foot in the door with a couple avenues that I’m pretty excited about.
Mike [00:01:28]: Very cool.
Rob [00:01:29]: How about you?
Mike [00:01:29]: Recently, I kind of did the same thing. I looked back over quarterly progress because, as you said, it’s the end of the quarter. I look at that, and say it almost sucks because the last three months have just flown by, and it feels like my head is down almost the entire time. But at the same time, things are moving forward. I looked back at some of my annual goals for this year, and for revenue on Bluetick, already I’m to 17 percent of my goal. It’s, obviously, about 25 percent of the way through the year; but I also haven’t really got the product out the door to anyone beyond the people who are doing preorders. The fact that I don’t have the product out the door, really, and I’m still at that point, it’s not like I’m very far behind is really what it comes down to.
Rob [00:02:08]: Right. It’s not atypical. I think most of our goals are ambitious. Do you feel like your Bluetick goal was ambitious?
Mike [00:02:14]: Oh, yeah. It was one of those big, fat, hairy, audacious goals.
Rob [00:02:17]: Yeah. You don’t want to shrug it off and be like, “Oh, well, I just missed it.” I think now it’s like, “Okay, how can I make up that eight percent over the next month or two?” “How can I get to the point where I am actually back on track?”
Mike [00:02:29]: Yeah, and I think that that’ll come with actually launching the product publicly and getting it out there and making it available for people to sign up for; because right now, it’s just based off of what’s going to my mailing list and the little things that I’m doing there. Longer term, obviously, there’s a lot that goes into it.
Rob [00:02:44]: Yeah, and that’s the hard part. When you’re setting these goals, sometimes they are a shot in the dark, especially if you just have revenue goals. If you have milestones of like getting a launch by this date, then it’s a little more easy to quantify. But it’s like do you really know what your revenue is going to be until you’re at a sustainable, repeatable process where you know how many trials are coming in, you know what your conversion rates are? At that point, then you can project it out, but before then it is a bit more of a guessing game. So, I’ve always taken it if I’m ahead of my projected, then I figured I guessed too low. If I’m behind it, then I’m trying to figure out how to get there without letting it destroy me. You can’t let it beat you up or make you feel like a failure. It needs to be motivation rather than making you feel like you’ve dropped the ball.
Mike [00:03:28]: Yeah. The fact that I’m only eight percent behind a quarter of the way through the year, and the product’s just not out the doorm that, to me, bodes really well; because I didn’t expect to have it out there for public consumption until about halfway through the year. In some ways, I almost feel like I’m ahead. You could almost kind of fast-forward to say, “That revenue goal was really for the last six months of the year.”
That said, right now we’re going through, and we’re plugging away at trying to onboard people who’ve placed preorders. I have to be honest, some of the stuff that we’re running into is just flat-out embarrassing. The earliest thing that we tried to do when onboarding – the signup itself was just completely fundamentally broken. I had to do some things on the fly to get somebody on there. It’s generally working at this point. We’re just trying to work through any of the UI and UX issues with people. It’s coming along, but it’s obviously slower than I’d like. One of my developers is getting married on Monday, so he’s out of commission for at least the next week or two.
Rob [00:04:23]: Yeah, that’s always a bummer when you’re pushing hard and something comes up for anyone. Obviously, very important and worth doing, but it’s tough. I think we’re impatient as founders, and we want to hit the goals.
So, what are we talking about this week?
Mike [00:04:35]: This week, we’re going to be talking about how to make your first hire. This is a question that was asked by somebody inside of Founder Café. We’ve mentioned Founder Café before. It’s our online membership site. The question was really geared towards how do you decide whether you need somebody for part-time or full-time, and how do you approach those two, different scenarios; because, obviously, that’s going to be dictated by what your revenue is and what your strengths and weaknesses are in both your skill set and in the business itself in terms of the revenue that’s coming in.
Rob [00:05:07]: Yeah. In your early days, the advice I would give is stay with part-time and contractors for as long as you possibly can. There’s no reason to jump to W-2 employees until you absolutely need to, because it brings complexity. I think in our circles that’s probably pretty well known, but I think if you’re in doubt, part-time contractors give you the flexibility of being able to only pay hourly and flex up and down as you need. There are some pros and cons to doing it that we’ll get into in this episode, but that’s probably a thought that I would start the episode with in terms of thinking about your first hire.
Mike [00:05:40]: To start off with, I know that we’re going to talk about some of the differences and pros and cons for hiring part-time and full-time; but I think what we want to do first is to talk about some of the things that are applicable to both, because I think that there’s definitely a lot of overlap between hiring for part-time versus hiring for full-time.
The first one is to look for self-starters who can dive in and are going to find ways to improve the business and the products that you’re working on. I think this is really important, because you don’t want to hire somebody who is going to come to you and every time they complete a task, they come back to you and say, “What do you want me to work on next?” Then it turns you into more of a micromanager, and it’s very difficult to get away from that. There’s going to be a little bit of that, I think, up front; because they’re going to want to know what the general direction of the business is and the product and everything else, but you don’t want to be in the position where every, single time they finish something you have to find something else for them to do. You really want them to be essentially generating their own tasks and having some sort of awareness of what your overreaching goals are, and then be able to just go do those things without you telling them, “You need to do X, Y and Z.”
Rob [00:06:50]: Well, I think, in an ideal world, you would do this; but I think in the early days when your budget is tight, it’s hard to find people like this. These are the people that everybody wants. I think that there is, perhaps, an approach you can take, even if you can’t find self-starters, that can still work. This is what I did in the early days, and a lot of people who are cash-strapped in the early days do. It’s to find people are really good at a single skill and then slowly basically fire yourself from the jobs that you are doing. The example that I often give is to hire that first tier-one email support person. They may not be that much of a self-starter. They may not figure out ways to improve stuff, but just getting that email support off your plate in the early days with someone who is good at that single skill – there’s a focus lift. There’s a time benefit, and it’s a recurring task that happens every day, or every week. I think if you’ve never hired before and you’ve never even hired a contractor, that would probably be the simplest, little baby step that I would take.
This actually may speak to a point I was going to bring up, which is that hiring is a learned skill. The more you do it, the better you get. When you start, you’re going to be pretty bad at it, and you’re going to have a bunch of missteps. I don’t know anyone who goes out of the gate and hires really well the first time. In the early days, when I was first trying to figure out who to hire and what to hire for – you want to look at your recurring tasks, the ones that are going to be relatively simple to outsource, and then you work way up to the more complex tasks; and this is all based on your budget. The more budget you have, the better people, in general, you can hire; but in the early days, if you really are bootstrapping, then you have to cobble it together and limp along for a while, even if you’re not as efficient.
[00:08:26] That’s one of the reasons some people raise funding. If you did raise an angel round of a quarter million or a half million bucks, it can make this part easier, because then you do have the budget to hire better people from the start. But if you truly are bootstrapping, you want to self-fund this, that’s okay, too. Just know that you’re going to have some limitations in the early days in terms of the quality and the effectiveness of people you can hire.
Mike [00:08:47]: I think kind of a subtext to what you just said is that for something like support, it’s time-consuming, but doesn’t necessarily add a huge amount of topline revenue value to the business. It needs to be done, but it isn’t necessarily you that needs to do it. Because it’s time-consuming, it’s best to start with something like that for you to outsource.
Rob [00:09:07]: Yeah, that’s exactly right. Time-consuming and attention-grabbing. Email support is a bummer because it’s interruptive, and it’s really hard to just batch that because you can’t just do that once a week. Even doing it once a day is not ideal. In a perfect world, you would check every couple hours and take care of that stuff. So, I think there’s the time, and then there’s that focus or attention element. If you have recurring things that take time and attention, those are the first ones you want to look at hiring for.
Mike [00:09:36]: The next thing that’s applicable to both part-time and full-time hiring is that you should always be interviewing multiple candidates. Any time I’ve gone through and hired somebody and whittled it down to just one or two people and then only interviewed one person, it seems to never work out. I feel like that’s because you don’t necessarily have a good basis for comparison of gauging that person’s skills or abilities against the other people who, obviously, you haven’t interviewed. I think that’s one of those recommendations – that you have to interview multiple candidates. If you’re at a point where you don’t have multiple candidates, then that should be a red flag. You need to go find more, or there’s something broken in your hiring process.
Rob [00:10:17]: Yeah, absolutely. It’s pretty rare. I think in all the hiring I’ve done over the years, there’s probably been one or two hires where we knew the perfect person for the job, and it was someone we already knew or were acquainted with. We knew that they’d be fit and all that stuff, so we didn’t interview multiple candidates. But far and wide, the literally dozens of positions I’ve hired for, including – I used to be a development lead and a tech lead and a manager for some companies down in L.A. when I was still doing salary work. It’s got to be approaching, like, a hundred people that I was involved in the hiring process of. With all those, you just have to get a lot of candidates through the door, or at least on the phone. We used to do a lot of phone screenings in advance. Nowadays, you’d just do it via Skype, and you would never actually meet with people in person anyways. But interviewing multiple candidates is absolutely the way to go, and it’s the only way you’re going to get an idea of the skill level and what’s really available on the market at that time.
Mike [00:11:13]: The next thing that’s applicable to both is that a bad hire is orders of magnitude worse than no hire. If you hire somebody who is not a good fit for either the position or for the company culture – and you can have a company culture even if it’s just you and one other person – in those situations, if you’re not able to hire somebody, you’re better off than if you make a mistake in hiring, because those early mistakes are so incredibly time-consuming to deal with and difficult on the business, both in terms of revenue and time spent and opportunity lost.
Rob [00:11:46]: Yeah. The way that I used to combat this – I think over time, I’ve gotten better, naturally, at hiring just because you do it more. You get picker and know what to look for. In the early days, I would recommend that when you hire those first few people, you do all the training via screencast and/or in writing; because you want to have it repeatable. We had multiple situations where we’d hire a VA to help with support and setup and this other stuff, and then that VA wouldn’t work out. Sometimes it was them. They just flaked. Sometimes found out they didn’t have the skills, and having to repeat the training if you had just done it live on Skype or something would be such a pain in the butt, right? Makes it really time-consuming. So, try to make your training as repeatable as possible, especially in the early days; because you’re probably going to have to take a few swings at bat and get a few people through the door, get them trained up before you find that right fit.
[00:12:37] Another thing to keep in mind is that entry-level people are the least expensive, and you can find some pretty good deals, but you have to spend the time to train them on the tasks. Experienced people who already know how to do something – let’s say you’re hiring for email support, and they’ve already done it; or, you’re hiring to manage Facebook ads; or, you’re hiring to help handle integrations and help with stuff. Experienced people are a lot more expensive. If they actually have experience in what you’re doing, they tend to be two times, four times more expensive for the same task; but they can hit the ground running. So, it’s very important to keep in mind “how much budget do I have?” and realizing that trying to find a competent person at a highly sought-after skill set is going to cost a lot of money. You have to think through at what level can you hire.
This is a reason in the early days when you’re bootstrapping, you may need to invest more time, because you don’t have as much money. You may need to work more hours in the early days to get this thing going. That doesn’t mean you have to work the crazy, 80-hour startup weeks forever, but if you’re hiring people and you’re having to train them from scratch, you’re putting in your sweat equity because you don’t have the cash to put up. I see it as exchanging value there, and you have to weigh that out in your own mind.
Mike [00:13:41]: I think the next thing you have to remember is that going from zero to one employees is the hardest. I think this is applicable whether you are a solo founder, or whether you have co-founders. The fact of the matter is that you’re bringing somebody else into the mix that is not familiar with your company, or where it came from, or the roots, or maybe not even the problem space itself. Especially if you’re hiring a new developer and they don’t know the problems that you have been working on and are intimately familiar with, they’re going to have to learn some of those things. They may know their job very well, and they may be an expert in the things that they do, but they’re not necessarily an expert in not just your systems themselves, but also how your business operates and what your customer base looks like.
Rob [00:14:24]: The other thing to think about is as your budget grows, you can hire better people. I do think that you should stair-step your way up as you’re able to because, in general, when you have more money, you can hire better people, like I’ve already said. The other thing that I’ve realized is that in the early days, as a founder, you’re probably going to be the best at any given task because you don’t have the budget to hire subject matter experts. You’re going to have to hire entry-level people, and so if you’ve learned Facebook ads, you’re then going to have to train them. If you know how to do the email support, you’re going to have to train them. At a certain point, that flips. Then you’ll be able to hire people who are actually better than you at a given task, and that’s when things definitely get more expensive; but it becomes so much easier, because you can go out and pay a Facebook ad consultant, or someone who has experience doing this. Or, you can pay a professional senior developer who’s been building and writing code for years and is on par with you. Long-term, that’s the ultimate goal. That’s not your first hire – right – but think about that over the course of several years as your business grows, that you probably want to go from being able to train people and hire people where you’re the subject matter expert; but as soon as you can, get to the other one, because it’ll allow you to move faster.
Mike [00:15:39]: With those things in mind, let’s move on and talk a little bit about the differences between the part-time hires and full-time hires. I think that, generally speaking, as you said before, when you’re looking to hire and you’re first starting to do that in your business, you should probably start with a part-time person. When you’re doing that, if you’re looking specifically at people who are doing contracting, that’s probably the best place to start. I don’t think that you want to go out and look for people who are currently working full-time and then just picking up something on the side. I think there’s a big difference between those types of people versus people who are doing contracting full-time; because they might only work for you four or ten hours a week or something like that, but they’re used to that mode of working. They’re experienced at working remotely. They’re experienced at dealing with people over the phone, or via Skype, or Slack and email; and that’s just their primary mode of operation versus those people who are in an office environment, and that’s what they’re used to. For lack of a better way to put it, that’s how they’ve been conditioned to work. I think that it’s easier to bring on those people on a part-time basis who are doing contracting full-time, because they’re used to being treated like a contractor.
Rob [00:16:52]: Yeah, I can’t underscore this enough: a) someone who’s used to working remotely, and b) who’s not working around another full-time job, or a full-time job and contracting a few nights and weekends. I’ve never had that work out – ever. Every time, their job takes precedent, and they only have a few hours a week to do it, and they get behind on stuff, and they’re just trying to fit you in around other things. It doesn’t work, so I would never – that’s one of the early things I ask now when I go to hire: “Are you currently doing this full-time,” or, “Do you have a full-time job?” because it’s an absolute nonstarter. I think at this point, if I were to find someone who was really good and I wanted to hire and they had a full-time job, I would consider trying to have them leave the job and come on with us; but in the early days you can’t do that, because they might only have three, four, five hours a week where they can work for you. So, try to find people who are a full-time contracting. Upwork is a decent place to do this, because there are a lot of people that are taking that stance.
Mike [00:17:43]: The other advantage of hiring people part-time is that you can generally afford them a little bit better. You can hire experts, and you can get them for a few hours of their time. As Rob said earlier, you may not be able to get the best person in the world, but you may be able to get somebody who has comparable skills to yours or even better, and at a price that isn’t going to break the bank. If you try to hire those people full-time, chances are really good you just simply can’t afford them, and it’s because of your budget.
The other thing that hiring part-time allows you to do is it allows you to practice being a manager. Just like hiring, being a manager is a learned skill, and you need to be able to practice that in order to get better at it, because if you’re not a good manager, then the results that you’re getting out of people that you hire are probably also not going to be good; and it’s going to be due to miscommunication issues.
Rob [00:18:31]: Yeah, and there are pros and cons to hiring part-time contractors where their hours can flex up and down. Obviously, the pros are that you don’t need to have a fixed budget. So, if work slows down or whatever, you’re not paying out of pocket a fixed amount every month, when you may not have that because you’re bootstrapping. Then there’s also the flexibility that, as more work comes in, you can ramp them up pretty quickly. In the early days, you don’t have to worry, necessarily, about career advancement and annual reviews and all the stuff dealing with taxes and healthcare. There’s a time for that. There’s a time where that’s worth it, but in the early days when you’re just trying to get a business off the ground, it’s just so much to worry about.
Now, the cons of this are that – it depends on the specifics, but if you can actually find someone comparable who is willing to work for you as a full-time employee – in the U.S., it’s called “W-2” – there are some advantages to that. One is that, overall, it’ll probably be less expensive if you actually keep them busy full-time, because contractors tend to have a premium that they put on their pricing. Another advantage is there’s a loyalty thing. People who work for you tend to get more involved, tend to care more about the outcome, and they’re going to tend to stick around longer.
Those are the major things to think about when you’re comparing, “Should I hire contractors, or should I hire W-2 employees?” I think that, as we said, in the early days, by necessity, you’re going to want to stick with contractors as long as you can. Long-term, it is tough to grow a huge business solely with contractors. I know a few people have done it, but most of the time, getting that loyalty and that team camaraderie really only comes with a group of full-time employees.
Mike [00:20:06]: To kick us off on the side of full-time employees, I think that one of the important things is that you need to hire before you have a particular need for something. If you wait until the last second – let’s say that you’re working on something and you need a Facebook ads expert, and you say, “Okay. I want to kick that off in a couple of weeks,” and you wait around, and you don’t go through a hiring process. Then it comes time, and you say, “Now I need to hire somebody, because I need somebody by the end of this week.” It can be really challenging to get those people lined up for interviews in advance and go through the hiring process if you don’t do that in advance. Make sure that you are hiring before you actually need somebody to get started on that work. It sounds obvious, but I also think that it’s very easy to underestimate how long that hiring process can take in some cases.
Rob [00:20:55]: Yeah. I think there’s a balance here. If you have a lot of money in the bank, if you’re funded, then hiring well ahead of the need is what people do. They hire months ahead, because they know they’re going to be scaling up. If you’re tighter on cash, I think hiring before the need, like you said, which is really just weeks in advance – it’s kind of like looking out 30 days and realizing it’s going to take you a month to hire. I think that’s perfectly acceptable; but I think that, as a cash-constrained startup or a business, I don’t know if it’s as much as hiring before the need, or it’s as much as hire when it’s really painful. As a founder, you’re going to be taking up the slack with anything, and so as you feel stuff start to just get piled and piled on top of you, hire before it breaks you. Hire before it completely derails what you’re doing. I think looking out two to four weeks on what is going to breaking you soon is probably the way that I think you have to do it in the early days.
Mike [00:21:48]: Yeah, I think Peldi ran his business, Balsamiq, to the point where – he decided to hire when he felt like he was going to die because of all the work. That was really kind of the main point, but making sure that you have things lined up so that you can put a full-time offer in front of somebody if they’re the right fit? I think that it’s important to always be looking. It doesn’t necessarily mean that you need to make an offer to everybody, but at the same time, you also need to be aware that that process can take a while. If it’s a full-time hire, then chances are really good that they’re probably going to give two weeks’ notice to their existing employer, and you may need to not necessarily coach them, but be cognizant of the fact that they may use that as a negotiating tactic, or their existing company may use that to say, “Let me give you more money to keep you.”
Rob [00:22:34]: Yeah. To give you an idea, I think some of the fastest hires that we’ve done in the past couple years have been about two weeks from posting a job to having someone start working, and that’s when they didn’t already have another job already going on. The longest one was probably three months, maybe four, from the time we posted; and we had to post it multiple times. That was for a senior Rails developer, and we were very picky about that. We wanted some very specific skill sets. We actually looked local first, and when we couldn’t find anyone, then we went remote. It was a drawn-out process. That was actually over the Christmas and, I think, the Thanksgiving holidays as well, so that extended it even further. But that gives you an idea of the range when looking for someone.
Another point that we want to talk about is not to rule out remote workers. Obviously, there’s a movement of working remotely, and “37 Signals” talks about this in their book and all that. There’s definitely value in being able to find the best people anywhere in the world, no matter where they live. So, I think there’s a balancing act here, because what we found – I was totally remote for years when I had all the contractors. No one ever lived in the same city. Then as soon as Derek and I started working together in the same city, here in Fresno, it made me realize just how valuable that face-time can be and the advantages of it. So, I don’t think that either one is the best. Everyone going into an office five days a week is not optimal either because of the interruptions and just all the overhead involved with that. I don’t think being totally remote is the best either. The optimal approach, we’ve found, is to actually have an office where all of us are in it two days a week. So we tend to go in Tuesday, Thursdays; and then other people go in as needed, and they have a space where they can work.
All that said, I think the hybrid approach, personally, is something that I would love to have. I’d love to have everybody local, but only meet a couple days a week so that you can go into your home office and actually get all the work done that you need to; because we stuff the meetings, and there’s a lot of interruption and discussion on the other days, but that’s super valuable. That’s when we get a lot of the hard work done.
Mike [00:24:27]: Something else to look at when you’re hiring for full-time employees is to hire for the most time-consuming tasks that you’re already doing first. This is an effort to offload those things. It kind of goes back to what we had talked about earlier, and you pointed out that one of your recommendations for people is to hire for support first. It’s because it’s so time-consuming. If there are other things that are time-consuming for you, regardless of whether they’re really driving the business forward a lot or just a little bit, the fact of the matter is that if they’re taking up a lot of your time, chances are good that there’s probably other areas of the business that you could be spending that valuable time on. It’s probably best to be hiring for those positions first, assuming that you can afford it.
Rob [00:25:10]: Another thing when you’re hiring for full-time is, if you can, like I said earlier, try to hire people who are experienced, especially if you have the budget. It’s tough to burden yourself with intense training, like hiring interns, in the early days. I know they can work out. I’ve heard of them working out. I’ve never been able to justify spending the time to train someone who truly is intern-level. It’s just so much work, and in the early days of your business, you don’t have a lot of time. Time is such a limited factor. With that in mind, you want to look for people who can actually show accomplishments. They’re not just talking about experience. You don’t just read it on a resumé, but in what way can they show you? If they’re a developer, can they show you a source code? If they’re a designer, can they show you past designs? If they’re going to do email support, can you do a short test where you send them three questions about your app? You have them look through and figure out how they would respond to it. You want to be able to see what people have done in the past, not just who they have worked for and for how long.
Mike [00:26:04]: That’s one of the dangers of hiring – is just, in general, that usually their previous experience and the things that they’ve done on a day-to-day basis – your ability to see into that can be somewhat limited. You essentially have elevated the risk by not being able to see their work, and that’s why I think a lot of companies like the fact that there are developers out there who have public GitHub repositories, and they can go take a look at their source code. Then you have Stack Overflow, where you’ve got people’s reputation on there, and you can see questions they’ve answered and how they talk to people and how they answer deeply technical questions. That’s extremely valuable from a hiring standpoint, because you get that visibility. You get to see stuff versus you get a resumé, and everything looks great. There’s no red flags, but you don’t necessarily see any really good strengths either. That’s one of the downsides of going through a hiring process and not being able to see any specific work that they’ve done.
[00:27:00] That brings me to another point about when you are hiring, look specifically for the strengths of people, not just a lack of weaknesses. That’s, I think, a very easy trap to fall into.
Rob [00:27:11]: Another thing to keep in mind is finding really good hires. They typically aren’t looking for jobs. They’re hard to find, and so typically when we’re going to hire, I think through, “Who do I know who knows someone who would be a perfect fit for this?” Referrals and recommendations using your network are the best channel, in my opinion, because: a) it’s going to shortcut the process, but b) that’s where you’re going to find the best people. You have to be careful. I rarely think of, “Who do I know who I could hire for this?” because I don’t like hiring close friends and family. I’ve seen it happen, and I’ve seen it just train-wreck businesses. I’ve seen it train-wreck relationships, so my personal stance is not to hire friends and family; but to hire friends of friends, or colleagues of friends, or folks that your network knows that you don’t have strong ties to. Having a dual relationship where you’re both a friend and a co-worker, or both family and a co-worker makes things way more complicated than I think they need to be.
Mike [00:28:07]: The last item on our list relates to paying for this. I think when you go to hire somebody and you make a full-time offer, you need to think about how you’re going to pay them and whether you’re going to use a payroll provider of some kind. If you have access to Gusto, which is formerly Zen Payroll, I would highly recommend that, but it does vary state to state or country to country. But any larger payroll provider should be able to provide those services for you. In addition to that, you’re probably going to need to offer some sort of benefits, like health insurance and dental and things like that. Those things add up. They can be really costly in addition to the cost of paying for the person’s payroll. Most people don’t realize this, but in the United States, you also end up paying employment taxes, which adds even more on top of that. You could count on adding anywhere from 25 to 50 percent of the cost of an employee on top of what it is that you make them an offer for. So, if you make somebody an offer for 40,000 a year, it could be up to 60,000 or potentially even more, depending on where you live and what sorts of benefits you’re offering.
So, again, this comes down to, in some senses, risk tolerance. Can you afford that? Can your business afford that? You need the business to be able to support those employees long-term, so the revenue has to be there as well. I think that’s where this hiring process becomes such a challenge, because until you get to that point where the business is making enough money to be able to, I’ll say, quote-unquote, “easily hire” somebody, or at least easily be able to afford to hire someone, you might be riding the business a little bit on a razor’s edge in some cases. If the economy goes through a downturn that you didn’t expect and your business starts to go down, you could be in a position where you hire somebody and then three months, six months later, you look at your finances and say, “You know what? We really can’t afford this anymore.” And firing somebody after they’ve only been working for you for a few weeks or a few months is very difficult to do, because it’s not like it was a performance issue. It’s just you made a wrong decision, and I think that that’s more difficult for most founders to accept because they’re the ones who are at fault. It’s not the employee. It’s not as if the employee made a mistake, or is not pulling their weight or doing the job. It’s you made a mistake in the business, and you’ve screwed up.
Rob [00:30:21]: Yeah. I think in terms of the benefits – you know, you mentioned that – that’d be something else. I know a lot of early-stage startups, when you’re below five employees, they don’t offer healthcare; because it is such an administrative – not only an expense; it’s just a big time suck to get that going. So, that’s something to think about. You obviously want to take care of your employees as soon as you can, but it’s something to think about – that it’s not necessarily a need, and it can negatively impact your business if you try to compete with the big boys and get a 401(k) out and you’re under ten employees, and get healthcare for everyone when you’re under five employees. It’s something to weigh and think about both in terms of the cost and the time. And I think what you just said about risk tolerance and having either the cash in the bank, or the MRR coming in to cover is something not to be taken lightly, because having to lay somebody off after you’ve done all the work of hiring them – it would feel terrible, and it would be a very stressful decision that you’d have to make. The nice part about if you do have a recurring revenue business, rather than one-time sales, is that that revenue tends to be more stable; so, definitely a plus of the SaaS or the membership model.
[00:31:24] I think that wraps us up for the day. If you have a question, you can call our voicemail number at: 888.801.9690. Or, email us at: firstname.lastname@example.org. Our theme music is “We’re Outta Control,” by MoOt, used under Creative Commons. Visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening, and we’ll see you next time.