I’ve been working on an easy yet powerful financial model for startups, and one of the tabs is Headcount. Today I’m going to share my simple spreadsheet so you can plan your hiring for the next three years.
Here’s a quick video walkthrough:
Here’s what the hiring plan tool looks like, and you can click here or grab it at the bottom of this post:
Instructions for Creating Your Hiring Plan
- Only fill out the cells shaded in blue. Everything else is calculated for you.
- Change job titles as needed. You can also write people’s actual names in where appropriate.
- Enter the annual salary in thousands, so type 75 if you mean $75,000. Skipping the extra zeros keeps your hiring plan easier to read at a glance.
- Enter a start month between 1 and 36 (three years)—or leave the start month zero to not hire that position.
- You can change the Cost Type if needed (but don’t tell anyone I let you edit something that wasn’t blue).
You’ll see the monthly cost displayed as a green line for each filled position. This lets you scan your hiring plan at a glance like this:
Wow that’s tiny! I like to do my hiring plans on a large monitor, which makes it easier to zoom out. But you can see the green horizontal lines that show where you’re hiring people.
Scroll down to the bottom of the sheet and you’ll see totals for salary and headcount broken out by cost type (COGS = Cost of Goods Sold, S&M = Sales & Marketing, R&D = Research & Development, G&A = General & Administrative).
Then I can start doing sanity checks:
Are you trying to hire too many people at once?
If you’re two people and you’re trying to interview and onboard four new team members in a month, that’s simply not realistic. Use this opportunity to spread your hiring out over multiple months.
See how in the picture above I’m trying to hire four people in month 15 (month 3 of year 2)? That may be too aggressive, in which case I can move two of them to the following month.
Are you hiring enough people?
Many of the hiring plans I look at have too few hires. Yes, we’re entering the age of automation, but unless you’re Tim Ferriss you still need actual human beings in order to get most things done.
It’s definitely an option to use contractors instead of salaried employees, in which case your hiring plan will be more lean and your operating expenses will be higher. Just be prepared to explain if your plan relies on contractors.
Is your revenue per employee realistic?
Apple makes almost $2 million in revenue per employee, but PayPal “only” makes $600k per employee. Your startup will probably make much less than that, especially in year one.
I like feeding revenue numbers to my hiring plan in so I can keep an eye on this. Remember to annualize your monthly numbers, meaning multiply them by twelve (so if your revenue for the month is $20k then your annualized revenue for that month is $240k).
Here’s what my revenue per employee tracker looks like:
Bonus: Hiring Plan Assumptions
I left you a special treat at the bottom, where you can get a little more realistic with your startup hiring plan by adding:
- Payroll Load—defined as benefits plus employer payroll taxes.I find that 1.1 or 1.2 are good starting points in the USA (meaning that you’re adding an extra 10% to 20% to cover health insurance contribution + employer payroll taxes). I’ve started you at a Payroll Load of 1, meaning no additional costs are being added.
- Annual Salary Increase—You can set this at 3% in order to provide your salaried employees with the typical growth rate in the USA. Again I’ve started you at 0% so no salary increases are being added.
Both Payroll Load and Annual Salary Increase automatically show up in the monthly numbers that are part of the green horizontal lines for each position.
Grab the Hiring Plan tool and let me know how it goes! And email me with your questions.
And if you love this and want the rest of the simple yet powerful financial projections spreadsheet for your startup…
10xU is hosting a Financial Projections Bootcamp next week. You can attend online from anywhere, or in-person at our HQ in Miami. The cost is $199 and we’ll make it’s simple for you to pitch investors — as well as just plain old run your business with a responsible budget.