Hiring and firing your first SaaS employees, what to think about.
Reaching the point where you need to start hiring more people to help scale your startup is an exciting time. For many startups this is the time to set a company culture and decide if you want a remote team or an office with a beer fridge, but then reality can be crushing when you have to let them go.
When it comes to SaaS startups that happens a lot in the early days, and it can come down to a number of things:
Hiring the wrong person
Running out of work
Running out of money
Sometimes shit happens, you don’t get that capital in time, or you realise you need to pivot and that role you just filled is now redundant. These are times when you just need to bite the bullet and let that role go, and it can be an emotional thing on both sides - but there are methods you can use to try and reduce how often you have to ride that rollercoaster.
1. Hire for the stage your business is at
People can be broken down into some fairly typical working types, there are obviously shades to these which will determine is someone is a good or a poor employee, but generally you can start by breaking them into two categories:
These people are great at managing people and projects, they’ll get the most out of team and ensure projects run as smoothly as possible - but they are team builders and often expect to be able to start hiring their own team sooner rather than later.
These are the people that live to tick things off their list, they get their hands in and just get work done no matter what it takes or what new skills they need to learn. They will crank through your business todo list faster than anyone - but they are often control focused and find it hard to delegate to others.
If you are an early stage startup struggling to get things done then you want to focus on hiring Dooers. If your team has grown and your processes and communications are starting to break, or delivery timeframes for projects keep blowing out then you want to focus on hiring Managers.
2. Understand the Job to be Done
Forget the Job Description, or what roles others tell you you need. Focus first on clearly articulating the job you are hiring this person to do. Are you trying to hire someone to:
Bring in more leads
Convert leads to paying customers
Build better product
The list of jobs to choose from is pretty endless, so you need to get clear on what you are wanting that hire to achieve over everything else. If you can’t think of the Job to be Done then you can probably solve your staff pressure with a better process or a new system/tool.
If you have lots of Jobs to be Done you need to be practical about how much one person can do and how they fit together - if you pile too much on something will fall down, or if the jobs are too different one person won’t be able to do both of them well.
If you are early stage then budget is often the biggest factor in how many people you can hire, so get ruthless about what jobs you need doing and your current team skill set in the context of what your business needs to achieve.
Once you have the Job to be Done nutted out then work out what metrics you would measure that role on, these are important to work through with any potential hire so that both parties are really clear on what the priorities and expectations of the role are.
3. Understand what level of experience you need
While we would all love to hire highly-experienced people for our startup, the more experience - the higher the price tag. So understanding what level of experience you actually need will help you avoid overcooking the goose.
In SaaS experience levels look like this:
No SaaS Experience
If someone has never worked in SaaS before you will have a lot of training to do, you will need to not only train them on the job itself but on how the SaaS industry operates, from explaining what MRR is to how product development works.
Ideally you only want to fill very repetitive and scripted roles with this level of experience, for example a Telesales role with a set script would be fine with no SaaS experience which gives you more hiring options.
1 YR SaaS Experience
After 1 year in a SaaS role that person will have a solid understanding of the SaaS industry and a good working knowledge of the role they have been working in. While they will be unlikely to have a large amount of strategy experience in how best to drive results, they should have frameworks for working through how to validate and test their ideas.
2-3 YR’s Experience
After two years in a single SaaS role that person will have nailed what they are doing, and should have a good understanding of the strategy driving it. Two years is a long time in SaaS and often these people are keen to take on a challenge that allows them more freedom in determining strategy in their role.
4-6 YR’s SaaS Experience
At this level you would expect some solid time building, directly and executing on strategies to drive success in their area. They will likely have key skills in deep areas, and may have very defined opinions based on what they have seen work in their previous role. Sometimes this can be a con rather than a pro, as what worked for one SaaS company can’t easily be copied to another - you need to ensure this person is open to trying new methods to drive success.
7+ YR’s Experience
At this point if you’re still early stage you’re looking for a plank hire, someone at this level will be taking a big risk to move into early stage and could expect to be compensated accordingly with equity. If you can get someone with this level of experience to fill a senior position at a rate that is reasonable then make sure the role is going to be challenging enough for them and that they are truly aligned with the founding team as they will want to be involved at the business strategy level.
Experience is often where you end up having to compromise, and it can go either way; having to hire someone with less experience due to limited budget or lack of experienced people available, or having to pay more to hire someone with more experience than you originally wanted as you realise less experienced people can’t do the job you needed them to do.
The main thing to balance in regards to experience level is the distinction between ability and knowledge. Ability means they understand the why behind the how, and if they don’t have skills in a particular area they will find a way to gain those skills and deliver on the businesses needs. Whereas knowledge may include skill in a particular area, but it’s not easily transferrable and the person has no innate ability to adopt the new skills needed to adapt.
In my experience I will always take ability over knowledge. In SaaS you need people that can adapt.
4. Choosing Employment vs Contract
While times are slowly changing, most people prefer to be employed by a company as it gives them better job security and they have more benefits and protections under employment law (like sick leave).
However, as an early stage SaaS company you need to ask some hard questions before you go down that path:
Have you nailed product market fit?
The simply question here is how confident are you that you’re running in the right direction and you wont be looking to pivot. If you’re still finding your way to drive sales, haven’t progressed from MVP product stage or are losing customers as quickly as you get them then employing someone at this stage could be risky and result in you having to let them go.
In this case bringing someone in on a contract is a much safer option, as long as the contract is for a short period (like a month) on a rolling basis or you have a good back out clause - avoid longer contracts (like 6 months or a year) like the plague as the reality is you don’t know if you’ll still need this person then and if you’re contracted you will be legally responsible to uphold that contract.
Do you need full-time or only part time help?
Often we focus on the job to fill and don’t thing too hard about the time it might take. You don’t want to hire someone just to have them twiddling their thumbs, so make sure there’s enough work for a full-time role before you hire for it.
If you only need part-time then work out when you’re going to need them for - is it so many hours per week, so many hours per day, or certain days of the week. It’s important to understand what that would look like before looking to fill the role.
Part-time contracts can be easier than full-time as you can often use agencies or consultants to fill gaps like marketing or product UX. However these options can be most costly on an hourly basis, and if the person is juggling multiple contracts you need to bear in mind that yours won’t always be top of mind.
5. Letting people go
If you don’t have a relationship with a good lawyer then now is the time to do it. You don’t need to go for a big brand firm, but you will need a firm that manages employment law and it’s worth checking reviews and recommendations from others to pick someone you are going to be able to rely on and trust. If you’re unsure then feel free to interview a few different law firms to identify which one feels right for you.
If you don’t have any budget for a lawyer then you probably shouldn’t be hiring, but at a pinch you can find standard employment agreements and the employment law framework for your country online. Just keep in mind that if things go south the legal bill to fix the problem is often a lot larger than the initial fee to set things up correctly in the first place.
Get your head around employment law in your jurisdiction. Is there a trial period that you can exit out of easily? If so, how long is it?
Run through all of the worst case scenarios with your lawyer and get a good grip on what your options are for different scenarios such as:
Hiring the wrong person
Running out of work
Running out of money
Legal battles over employment are more common than you may think, and they are not only expensive surprises for you cash runway but they can be really distracting for the founding team and demoralising for the rest of the team.
Look past cultural fit and someone’s CV skill set. While these are important to finding someone who fits with your team, focusing on the job your business needs them to do and whether their experience, working style and ability are a good match for your startups stage and business needs will have a better success rate.