Sour Challenge: Building a Startup Team Without Breaking the Bank
Company founders face a sour challenge: How do I build my startup team without neglecting my primary job of running the business?

To be sure, attracting top talent is a critical endeavor for your company. In the era of the knowledge worker, human capital is arguably a company’s most prized resource to achieve long-term success.

But what is the real cost of building the team?

Through my network, I conducted an informal survey of private tech companies to understand what percentage of their time was being spent on recruiting. I was shocked.

C-level Time Spent on Recruiting Startup Talent

Person% of time spentHours/weekCost/weekCost/year
Totals41.5% (average)83$6,640$345,280
CEO40%20$1,600$83,200
CTO46%23$1,840$95,680
COOAlmost 50%25$2,000$104,000
CMO30%15$1,200$62,400

Taking a conservative approach, we estimate an average salary of $200,000 per year and a 50 hour work week which equates to ~$80/hour. Therefore, we can extrapolate the C-suite is spending $345,280 per year on recruiting, or $6,640 per week.

Add in the cost of headhunters – typically 10-25% of the first-year salary – and recruiting can quickly become a massive expense on your income statement.

Furthermore, once hired, executives often require 2-3 months to train and assimilate into your company: learn the business, meet the team, start executing the strategy. This onboarding period, while certainly necessary, can materially delay your go-to-market deadlines by months if not quarters.

What’s worse, the $345K is just the tip of the iceberg. Companies are also negatively impacted by execution risk, time-to-market delays, competitive pressure, and funding risk. These costs can easily dwarf the $345K.

Can we do better?

So the question is: are there ways to do this better? Certainly. Founders have some high-leverage options at their disposal:

  • Delegate: Trust your front-line managers and directors (or agencies) to do the hiring. Invest less time in the recruiting process except for select finalists.
  • Leverage partners: Ask your board, venture capitalists, and professional groups, e.g. YPO, Executive Networks, to help you recruit for specific C-level roles.
  • C-Suite-as-a-Service: Engage a professional consulting firm to act as an extension of your C-Suite; hire an experienced executive on demand to propel your company to new heights; pay for results and accelerate time to market. Full disclosure: Advantary provides executive consulting services, including Advantary C-Suite™, and therefore a vested interest in this option.

The right option for you depends on your company and your goals. Whatever path you decide upon, make sure your team recognizes the substantial opportunity costs of building a startup team from scratch. An up-front investment may be more than worth the money and pay off in the long run.

Luke Diaz is Director, Strategic Partnerships at San Francisco-based startup Alto Pharmacy.


3 Comments

Miche Rayment · April 3, 2018 at 12:51 pm

I’m with you… it’s like walking a tightrope when you start to build a team. I’d be curious to see how you suggest that these startups hold culture as a critical piece in hiring especially if they employ C-Suite-as-a-Service.

I’ve seen all these tactics work (and not work) in growing a team. In my experience, it’s all being on the same page for vision and culture that makes the difference.

    Stephen Kuhn · April 3, 2018 at 1:37 pm

    Miche, that’s an insightful response – thanks. Culture is a critical element of a startup (any) company, and it’s been too long overlooked and underappreciated. Now, after some spectacular failures in high-profile companies, this issue is getting its rightful prominence. Fortunately for our clients, Advantary not only believes, lives, and breathes the mantra of culture internally – which is carried to the client in a C-Suite engagement – we also have partner firms that can work with clients to foster and develop strong culture. Happy to lean more about your practice.

Miche · April 3, 2018 at 2:24 pm

I’m familiar with at least one of your founders and I’d trust Advantary knows what they are doing in this regard. 🙂 I was just curious if you had a specific process for this or maybe just a clear distinction for business culture.

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