Recruitment at different stages of business growth

According to a UK government report this year, three of the top five SME concerns relate to recruitment and staff, with 35% directly concerned about recruitment and retention.

Recruitment does not present the same challenges each time you take someone on.

Your first hire or, it is sometimes said, your first five, will feel very different to subsequent ones.

Here’s a look at some of the considerations for recruitment at different stages of your business.

Your first hires
Many business owners often find making the first hires the most difficult. You may lack experience in the hiring process itself, and the impact on overheads can be much more pronounced. Whether it is successful or not, you may feel it more on your bottom line.

Common strategic dilemmas can include: timing – hiring too soon or too late; choosing the level of experience you wish to hire at; and understanding your culture.

It will vary for each business, but one way of answering some of these questions is to consider your hiring budget as a percentage of your turnover – between 30-40% is often a good guide.

So, if you are turning over £100,000, you may have approximately £35,000 to work with. If your turnover is much less, maybe it is too early to hire, much more and you could be throttling the business through lack of resources.

Working with the £35,000 figure, now think how you may spend it. Could you get most value for the business by recruiting someone with more experience on a part-time basis rather than someone cheaper but inexperienced full time? Don’t forget that you need to factor in pension, employer national insurance and other employment costs into your budget. This may increase the cost of the base salary by 20%-30%.

It can sometimes be a trap to fall into to target hiring someone inferior to you. If you find yourself micromanaging such an employee, it may be counterproductive – better to have chosen someone who can just get on with it bringing fresh creativity and application.

Growing your team
Once you get past five employees, you will feel much more experienced – you will have gone through some highs and lows and be in a stronger position to recruit going forwards.

You may have time and motivation to think about your culture if you have not done this already. Most business owners want their company to reflect their own values.

One way of implementing this is to write down your top values that you want your business to adopt and then live and breathe them each day. Get your current team’s buy-in. If some are unwilling, perhaps they are not a good long-term fit, but you will have new criteria for selecting staff who are better aligned in the future. You will create a strong, credible impression to attract like-minded candidates.

You can also think strategically about what roles to hire for. As your business becomes more complicated, it can make sense to outsource many non-core roles like finance, marketing, IT (and HR!) so that the people you employ in the business are focused on income generating activities.

Building a management team
With your business maturing, you will want to start thinking about a management team – the people who can run your business without you being present. This is a key part of attaining a freedom from your business and also developing your exit strategy.

You will probably have more sophisticated reporting systems by now, and data from management accounts will play a key role in your hiring decisions. It will take much of the emotion out of recruitment, and the sense of risk – the financial data will tell you what you can, can’t and need to do!

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