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Case Study: Going from cost-conscientious to profit-booster on HR
He was on hand, hiring operations and running his business. He wanted to start hiring new employees asap. He was scrolling down on LinkedIn when he saw one post about hiring vs. outsourcing and decided to request our outsourced services.
During the consultation, we spoke in depth about his business’ ins and outs and long-term goals. This allowed us to ask important questions and uncover hidden opportunities for his firm. His goal was simple: he wanted to grow his business to a specific revenue target and wanted to hire the best people to help him get there.
We followed a simple yet structured approach to assess the financial impact the additional hires would have on the company and put together a viable implementation plan:
1. We first classified roles that needed to be filled as either roles that were critical to the development of the product or as supporting roles. The critical roles would need to be filled with internal staff, and the non-critical roles could be outsourced, which could present saving opportunities.
2. The second step was to determine the cost of each role and how much of that could be funded by the capital raised as of that point and for how long. Since the company was not expected to break even for a couple of years, it was important to have a clear picture of whether and when the company would run out of cash if no additional capital was raised within two years.
3. We concluded that even if the company needed to raise a small round of funds or take out a small loan about 18 months later, it was necessary to take that risk and hire the resources needed to launch the new store timely and not slow down growth.
Cashflow Video Guide
Learn the simple steps to prepare cash flow projections to improve your business cash flows.
The moral of the story?
When making hiring decisions, simply looking at employee salaries will not give you the full picture of the costs.
Secondly, accounting for your long-term goals is important when making hiring decisions.
Lastly, investing in things that boost your business (most importantly, the right people) is vital rather than having a penny-pinching mindset.
Hiring is one of the most important steps when building and scaling your business, but it’s not an easy task because you need the right talent for your company.
If I can give you one piece of advice, determining whether to align your HR strategy to your business goals comes down to a risk assessment of your business needs and possibilities. If you opt for outsourcing, don’t always expect the delegated responsibilities to be done more effectively at a lower cost. That will depend on the function or role you are filling for.
If you are growing and unsure how to structure your hiring or what area of your business you should be investing in, we can help. We offer fractional CFO services to help you put the right financial strategy in place to support your growth plans. Let’s talk.
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