How to Build a Team for Your Startup Company
Know What Makes a Successful Startup Team
A few things to look for when building a startup team are candidates with startup and industry experience as well as product knowledge. But the reality is, even hiring the most qualified candidates doesn't guarantee success. The way your team works together will greatly impact your startup’s daily operations and, ultimately, its success.
A team with strong skills and industry experience can benefit a startup in several ways; it can bring forth new resources for the company, encourage more creative problem solving, and help identify ways to improve, pivot, or adapt the company. In addition to these helpful, practical skills, your team needs to have soft skills as well.
Soft skills are personal attributes that inform a person’s ability to engage well with others. In the context of startups, this is extremely helpful. Being able to communicate effectively and work well with others helps foster a positive work environment and encourages innovation — a hallmark of startup success.
Decide if You Need a Cofounder
Being a one-person team might seem like a great way to save money, avoid conflict, and stay true to your unique vision. However, research shows that entrepreneurs launching a startup without a cofounder take 3.6 times longer to see significant growth — enough to outgrow the startup stage. Additionally, startups with two founders are 19% less likely to scale prematurely than solo founders.
This doesn’t mean that your startup will fail if you don’t have a cofounder. In fact, some startups will benefit from only having one founder. Every company is different, and every company’s culture is different. The best decision is the right one for your startup and its unique needs.
Define Your Startup’s Values and Culture
Before you begin hiring employees, you should have a clear definition of your startup's values and the company culture you're hoping to cultivate. Job seekers that align with a company's values and culture may be less likely to introduce conflict and more likely to stay longer at your company if they feel they align with the mission you've established.
By defining your startup’s culture and its values prior to beginning the hiring process, you have a better chance of attracting the right people to build your team. In addition, you will have a guideline to keep in mind when vetting candidates, which can make your decision much easier.
Solidify Your Startup’s Mission Statement
Your startup’s mission statement is a brief description of your company’s intended purpose and the reason for its existence. If you don’t already have a mission statement for your startup, this is an important part of attracting top talent.
Here’s why: an effective mission statement can inspire employees and keep them committed to moving your company’s mission forward. You want your new employees to align with your company’s purpose, which you can accomplish by solidifying your startup’s mission statement prior to starting the hiring process. This will give you a better chance of attracting the right people for your company.
Identify Your Startup’s Needs
When it comes down to it, the most important factor in choosing the right team members is the needs of your startup. Identifying these needs will help you establish the type of employees you need and the role they will play in your company’s success. To get started, there are a couple of questions you should ask yourself:
What are your startup goals? Revisit the goals and milestones you established in your business plan, or take some time to establish new goals for your company that specifically involve your team. Your short-term and long-term goals should inform the type of person you hire, the experience you’re looking for in a candidate, and the role you will need them to fill within the company.
What roles does your company need to fill? It is important to know what roles you’re hiring for and, even more importantly, the roles that you need to support your startup’s success. A few of the common roles startups need to fill:
- Chief Executive Officer (CEO)
- Chief Operations Officer (COO)
- Chief Marketing Officer (CMO) or Marketing Director
- Head of Sales
- Product Developer or Engineer
- Customer Service Representative
Some of these roles will be filled by yourself or your co-founder(s) if you have them. Also, while your startup shouldn’t be a one-person team, you don’t need to hire every possible role right away. Focus on the crucial roles that will have the most impact on your startup, and go from there.
Determine a Budget
Establish how much of your budget will need to be spent on hiring costs. There are a few different costs you will need to consider when hiring your team:
Onboarding and training costs — This includes all of the expenses associated with bringing your new team member on board, including administrative costs, paperwork and processing, costs for instructional or welcome materials, and labor used for training purposes.
Salaries — Determine the salary ranges in your industry for each position that you will be hiring for based on the industry standards and your financial ability.
Unexpected vacancies — Employees will inevitably leave your company through its life span, and you will need to budget for expenses during unexpected vacancies such as overtime and recruiting costs. This can be challenging to budget for if you don’t have a history of turnover to refer back to, so you will have to potentially use industry data.
Recruitment costs — Utilizing job boards, hiring recruiters, recruiting software, and additional branding costs are all expenses you will need to budget for recruiting.
Write Effective Job Descriptions
A well-crafted job description is absolutely critical in finding the right team members for your company’s culture. An effective job description should include the following:
- A description of your startup’s values and culture
- Your startup’s mission statement
- A description of the position you’re hiring for — what their time will be spent doing and the role the candidate will take on if hired
- The requirements for application such as years of experience, type of degree, or specific skills applicable to the role and your startup
- The appropriate contact information and the deadline for applying
A helpful tip to writing an accurate and effective job description is to ask for feedback — ideally from someone who is familiar with the position. They can likely provide you with more accurate information about the day-to-day responsibilities and roles of the position that you might not be aware of.
Get an EIN
An Employer Identification Number (EIN) essentially represents a social security number for your business that the IRS uses to track your company’s taxes. In order to hire employees, you are required to obtain an EIN.
The good news is that getting an EIN for your startup is easy (and free!) through the IRS website. Furthermore, there are several benefits to getting an EIN, such as establishing a business bank account and maintaining your corporate veil.
Register for Employment Taxes
After you’ve obtained an EIN, the next step is to register for employment taxes. On the federal level, you will need to register for FICA Tax, commonly known as payroll taxes or withholding tax.
Additionally, every state has different tax requirements for employers, but many states require employers to pay some version of unemployment insurance (UI) tax as well as workers’ compensation insurance.
Registering for the appropriate taxes ensure your company isn’t at risk for fines and penalties. We recommend hiring an accountant to help you juggle all of your startup tax, accounting, and bookkeeping needs.
Create Employment Contracts
Employment contracts outline agreements that are being made between your company and a new hire. Depending on the type of hire (employee or independent contractor), you will need to have appropriate documentation to ensure you’re staying compliant and protecting both parties.
The employment contract is the legal document that outlines the agreement you are making with your new employee. Inside your employment contract, you will include agreements that are applicable to your company as well as applicable policies surrounding termination of the agreement, reimbursement of expenses, disputes, company clients, and anything else that pertains to your startup.
Here are a few agreements that you may want to consider including in your employment contract:
- Confidentiality Agreements
- Services Agreements
- Compensation Agreements
Independent Contractor Service Agreement
Many startups utilize the services of independent contractors, especially during the beginning stages of their operations. An independent contractor service agreement defines the job description and provides a level of risk management for employers. This document outlines the agreement between your company and the contractor you're rendering services from.
Typically, this document will include the scope of services, compensation terms, termination of agreement, and policies regarding taxes, benefits, and intellectual property assignment. However, you will need to consult with your attorney to draft a contract that outlines all of the pertinent provisions.
Intellectual Property Assignment Agreement
Under an Intellectual Property Assignment Agreement, you are agreeing to the other party's use of your intellectual property. You still maintain full ownership of the patent, copyright, or trademark — this is simply a legal document that states that your employee is allowed to utilize your intellectual property rights within your discretion.
Note: This is not legal advice. We strongly recommend that you consult with an attorney when drafting any legal documents for your startup.
Offer Stock Options If Applicable
Owning stock in a company represents having partial ownership of the company. If your startup is formed as a corporation (rather than a limited liability company), you have the option to offer stock options to employees as an incentive that creates a more attractive job offer.
Your company can benefit from offering stock options as well. Employees that have a stake in a company will likely be more invested in the success and wellbeing of the company. Therefore, not only have you provided employees with a financial incentive, you have generated a higher level of commitment from team members.
Set Up Payroll
How will you pay your employees? Setting up an effective payroll system or service for your company ensures that employees are paid on time and that the appropriate taxes are paid and documented for tax season.
Generally, we recommend startups utilize payroll software to streamline this process and get their employees paid worry-free. Services like ADP make issuing payroll easy and quick with tax preparation to match.
Once you’ve laid the groundwork for building your team, it is time to begin your search for the right team members for your startup.
Word-of-mouth recruiting occurs when an employee or someone else associated with your company recruits people they know to come work at your company. This is an effective way to hire employees that will be more likely to align with your company culture and gives you more insight into the candidate before you hire them.
Online Job Boards
Online job boards such as Indeed, Wavely, and ZipRecruiter make posting a job listing and finding the right candidate quick and easy. Simply post your job listing and sift through interested, already-vetted candidates.
Hiring a recruitment agency may be an additional expense; however, utilizing an agency can help ensure that you connect with the best-suited candidates for the role and for your company. Essentially, these services search, vet, and present possible candidates that you can choose from, saving you time and resources during the hiring process.
Internal hiring involves filling vacant positions with existing employees, whether that means promoting employees to higher positions or changing their role to a position that they are better suited for.
Create an Interviewing Strategy
If you go into the interview process without a strategy, you might not obtain the information you need in order to make an informed decision. An interviewing strategy could be a list of targeted questions; however, there are several ways to curate the interview process to give you more insight into how each candidate will perform.
For example, asking candidates to complete a task that relates to the role you’re hiring for, contacting references, and doing background checks can give you a better understanding of who they are and what their professional and personal history can tell you.
Plan an Onboarding Process
When you find a candidate you want to add to your team, a well-thought-out onboarding process can help you retain employees and makes for a happier, more productive work environment. Onboarding entails training, completing paperwork, and introducing new hires to the company culture.
While each of these onboarding processes is important, training should take priority. Inadequate training leads to higher turnover rates and ends up costing your company more in hiring costs. Therefore, it is important to develop an employee training program that gives new hires the tools they need to be successful in the workplace.
Hiring Mistakes to Avoid
Now that you’re ready to begin the hiring process, there are a few common hiring mistakes you need to be aware of in order to avoid wasting valuable time, money, and labor.
- Hiring your friends — You’ve most likely heard the phrase “don’t mix business with pleasure” before. Hiring friends to staff your startup can complicate your personal and professional relationships, which may negatively impact your company.
- Not hiring enough employees — Many entrepreneurs attempt to cut labor costs by only hiring a few employees to fill all the necessary positions. Unfortunately, this can lead to burnout, higher turnover rates, and ultimately hurt your business.
- Not knowing your mission before hiring — Your company’s purpose, mission statement, and values should be established before you begin the hiring process. Otherwise, you risk developing a toxic company culture or hiring a team that doesn’t have the same goals or values.
- Not knowing the type of candidate you’re looking for — If you aren’t sure what type of candidate you want or need to add to your team, you may end up hiring candidates that aren’t well suited to your company. Not only is this a disservice to both you and your new hire, but it may also end up costing your company money.
- Hiring too quickly or too slowly — There is a balance that needs to be struck when you’re hiring new employees. Hiring too quickly may mean that you aren’t vetting candidates thoroughly enough; however, if you wait too long to hire qualified candidates, they may accept a job offer from another company.