Human resources are an invaluable startup asset. Your product wouldn't exist without a team who brought it to life, right?
Commonly, startups begin with just several enthusiasts who are moved by a vision. But there often comes a time when you need to expand the workforce. Although this step might be inevitable for a product's growth, there are many obstacles and dangerous turns, so startup founders must stay sharp.
This article goes over what startup team scaling means, what you should keep in mind when expanding your team, and how to choose the right time. Plus, it shares the best practices on the hiring process and gives many tips on avoiding common pitfalls.
What Is Meant by Scaling the Team?
It's worth noting that if we overview startup scaling and growth in general, these two startup terms are not the same. In a broad sense, growth entails pouring in investment to achieve expansion, while scaling is more about the optimization or automation of existing processes.
However, in the case of startup team scaling, this will likely imply that you'll need to invest in obtaining a new workforce. So, giving you the definition of scaling a team, it is the process of making the startup team's size larger to meet the company's growth needs.
At what point do startups usually decide to enlarge their teams? Generally, this happens when they've already managed to achieve some desirable results or when they need an additional workforce to assist with building new features or serving a growing number of customers. The startup team expansion process involves:
- having a bold team scaling strategy that's well-aligned with the company's major goals, finance, and set milestones;
- identifying which people should join the team;
- employing the best-fit candidates;
- getting a hold of the right tools and systems that would ensure the enlarged team's effective work.
What Is Important for Successful Team Scaling?
While it might sound easy, the process of scaling your team isn't that simple. It's a step that has to be taken with full responsibility and using the best judgment of the current situation.
The thing is that startup founders often end up wasting resources and money when investing in scaling. Such uncalled-for expenses can jeopardize the startup's future and even lead it to failure. Actually, recent statistics suggest that 14% of startup failure cases are attributed to having the wrong team.
Yet, fair enough, there's usually more than one reason standing behind a company's downfall. When you think about it, what led these companies to run out of money? As such, employment-related expenses, as well as irrational budget spending on customer acquisition, marketing, or other things prior to finding product-market fit, might as well be among the chunks of the expenditure pie.
3 Fundamentals of the Scaling Team Process
What are the key considerations to make when scaling teams? It is crucial to find precise answers to these questions when you're planning an expansion:
- who and why (which roles you need, how many people you plan to hire, why you need them, etc.);
- when (whether now is the appropriate time for hiring);
- how (the hiring path you choose to take).
So let's go over these three pillars that form a startup's successful team scaling process.
Which Roles Are You Seeking and Why?
The term "scaling" implies positive business growth. Hence, your team expansion needs to be backed up by facts proving that there really is a necessity to hire extra people.
Otherwise, you have to ask yourself why you're rushing to get more employees on board. If your answer is "I'm tired of being a one-man-band and handling multiple roles", "I want to do whatever it takes to outperform competitors", or anything along these lines, it's very likely that the false expansion necessity idea is blinding you.
Remember that your resources aren't limitless; they tend to end sooner than expected. And going through the rounds of startup funding to get more money is very challenging. So you have to be smart about what you spend money on if you want the startup to survive. Sticking to a budget is crucial, therefore, you should:
- have solid reasons why taking on more people is necessary at the moment;
- be sure that you have enough funds to issue payrolls and for other expenses;
- have a clear understanding of what kind of people you're looking for.
Dwelling on the latter point, shortlist the specific team roles you're missing, how many people you're seeking, and the criteria that need to be met. Note that payrolls often account for more than 30% of a startup budget, so really give your priorities some thought.
Are you scaling a technical team, adding new marketers, UX/UI designers, sales representatives, or data scientists? Do you need them for a short-term collaboration, to meet a specific target, or to accomplish a long-term goal? Finalize the skills your team is looking for and the goals behind each recruitment decision.
When Is the Right Time for Startup Team Scaling?
Prematurely scaling the team definitely won't do you good. Therefore, ensuring that your startup team expansion is timely is a crucial factor to add to the mix.
If your team grows too quickly and too soon, it can be a recipe for disaster. This has to do with the fact that startups often need more time for market and idea validation than initially expected. Furthermore, you must have proven traction before you expand the team, not to mention that it is common for startups to pivot their seemingly perfect plan at least once. In fact, at times, you may discover that some iterations, automation, or reorganization of existing resources can solve the problem without additional hires.
Therefore, it is considered a best practice to start hiring when you have some proof that you're sturdily standing on the ground. You need clear goals and enough money to issue payrolls without breaking the bank, and be sure that this extra workforce is truly indispensable.
Here are several reasons why the time may be right to scale a startup team:
- You're sure that extra hires are affordable (i.e., you have steady customer retention and income, keep an eye on the burn rate that shows how fast your startup is spending its money and cash runway that indicates how long the money will last).
- You have more orders or work scope than your current team can handle (for instance, the product is gaining lots of traction, the customer base expanded visibly, and the incoming load is impossible to process with the existing team size).
- You have specific product performance metrics, KPIs (key performance indicators), and data to prove that team scaling is necessary.
- Your team is missing specific talent, so you need to augment it.
- You are certain that the investment in getting more employees will pay off.
How Are You Going to Hire People to Scale the Team?
If you're positive that you should opt for team expansion, you'll have to decide on another important point: how to employ people. You need to select an optimal hiring path that makes sense in your case and be certain about what expertise you're seeking.
For instance, you can scale the team by:
- hiring people in-house;
- looking for freelancers to form teams;
- opting for various outsourcing models.
The first option suggests that you'll go through the internal recruitment process with screenings, interviews, onboarding, and all the peculiarities of hiring someone to join your startup. This approach has its ups and downs that you should consider, including the time spent on finding suitable candidates and how long it'll take you to form a well-versed team. Plus, when estimating the required spend, you have to mind the extras that differentiate the overall in-house vs outsourcing software development costs (like taxes, paid time off, buying hardware, and other factors that add up atop the payrolls).
Alternatively, you can find people to augment your team externally. As such, this is reasonable if you need people for a short period or are still unsure about full-time hires. When you're in two minds about which path suits you better, freelance or outsourcing, note that although it's a way to save money, possible management complications may occur when working with freelancers due to the partial availability of individual contractors.
What's for outsourcing software development to a third-party provider, in the case of startups, such a collaboration may even turn out to be a cost-saving move when compared to hiring internally. You get quick access to a vendor's talent pool and form an agile team according to your needs. Hence, the dedicated team model and third-party team augmentation are also beneficial when you're short on time, don't have the resources to spare on recruiting and onboarding, and need to build a quality product quickly. Yet, don't neglect the importance of the vendor selection process and thoroughly evaluate companies when making your choice.
What Are the Key Challenges with Scaling Teams?
There are multiple things that complicate the scaling team process. Let's go over the key issues worth noting when scaling teams.
1. Premature Scaling
Once again, scaling earlier than needed is deadly for many startups. The product and culture must be ready for the team scale up before the hiring begins.
Preliminary team expansion can lead to unwanted consequences. As such, you might hurry to hire a sales team or double your marketing expenses when there could be better alternatives. For instance, instead, you could focus on improving the quality of your offering and aim at product-led growth (when the product becomes a self-selling asset).
2. Spending Too Much Money
Too much investment upfront may be unnecessary. This is often caused by one of the two extremes: when a startup spends more than it can afford while it hasn't raised enough money or when it raises a lot of money, and the expenses are waterfalling uncontrollably.
Either way, irrational expenses on things that aren't essential for business growth are a widespread team scaling fallacy, which can harm the company. Such expenses may include hiring personnel, renting office space, or other things that aren't needed at present.
The bottom line is that it is reasonable to hire people when the company has a more or less steady cash flow, visible client growth, and can preferably be capable of sustaining itself. Setting limits on hires and being disciplined when spending money can be a way out.
3. Forming the Team Takes Too Long
Recruitment is tough, especially for tech roles. Developers expect high salaries, and it may be challenging to convince qualified specialists to join the team. One of the options is offering equity to make up for the lack of social benefits that large firms have, yet not all startups are willing to do that.
In any event, forming a team when scaling through an internal recruiting team can be a time-consuming process; it's a risk business owners should be prepared for. This explains why startups often turn to outsourcing firms for staff augmentation services instead. It's a great way to fill in the role gaps and access experienced talent or even entire teams, including developers, designers, product managers, QA engineers, and others.
4. Hiring the Wrong Number of People
If the number of required employees isn't estimated correctly, this can lead to a mess. There are cases when startups fail to plan the work properly and end up with extra people on the bench or, on the contrary, with the constant need to hire more workforce. In fact, having a significantly larger team onboard can backpedal the progress.
Since neither approach is good, decisions on the number of people to hire have to be well-weighted when scaling a startup team. That's why "cleaning up" the clutter with tasks, clarifying priorities, and establishing rules can be a good starting point.
5. Chaos Due to Lack of Preparation for Team Scaling
When startups scale teams too quickly or hire too many people too soon, lots of issues form one big snowball effect. This brings a disappointing drop in overall effectiveness instead of the expected boost due to team scaling. Here are several common problems with rapidly scaling teams:
- management issues (improper team coordination and alignment, wrong delegation processes, or even micromanagement result in delays, missed deadlines, and frustration, especially if the teams or employees are in different locations);
- lack of proper tools (not having specific tools or using an illogical set can evolve into disorganized processes);
- communication gaps (absence of well-tuned communication processes, channels, feedback sharing, and rules leads to misunderstandings and wasted time);
- poor planning and prioritization (when the goals and priorities aren't clear, teams end up going back and forth and failing to achieve what was necessary).
10 Tips on How to Scale a Startup Team Effectively
Summarizing the above, here are some recommendations that can help you scale a team most efficiently.
1. Make certain that you aren't scaling the team prematurely. It is vital to make data-backed scaling decisions, thus, prove that every position is truly required and justified.
2. Double-check your budget. Ensuring that you can afford to employ more people is integral. Will hiring a team put your budget at risk?
3. Determine which roles you're seeking to fill. You'll avoid hiring the wrong number of people when you're certain about who you need.
4. Taking baby steps can be rational. Begin by hiring several people (say, up to six, as a small team will be more flexible) or hire people part-time.
5. Don't rush to hire more startup team members. Take the time to check each candidate thoroughly, especially when it comes to software development recruitment.
6. Get prepared for the expansion organization-wise. Decide on the optimal toolset; it's also the time to deliberate on which areas can get optimized and which manual operations can be automated.
7. Prep your managers and establish coordination rules. Moreover, figure out how you'll handle communication, clarify the responsibilities across different teams, and think through other vital processes.
8. Refine your company culture. You can motivate the existing team and newcomers by having a well-defined mission, values, and goals.
9. Choose the KPIs and OKRs, and indicate the deliverables. Remember that careful planning is a solid way to navigate the startup team in the right direction and put every effort to maximum use. And having a set of measurable goals helps realistically assess progress.
10. Browse alternative hiring options. As mentioned earlier, there are ways for startups to access sought-after talent, visibly cut costs, and save vital resources like months spent on recruiting internally or money on taxes, onboarding, and other things. This can be achieved if you scale a team by partnering up with an MVP development company or vendor that can provide you with experienced augmented staff. This is a smart move not only if you plan on scaling engineering teams but when you need to get other specialists onboard as well. And it's very beneficial if you need some roles temporarily or to fulfill short-term goals.
Major Takeaways on Scaling a Team
As you see, expanding the team is a crucial step that every startup founder or business owner should approach responsibly. There may not be a single algorithm or right answer to how to scale a startup team properly, yet not hurrying and being laser-focused when making your first key hires matters a lot. You need a broad vision and solid plan in this respect, and taking baby steps may be the best thing you can do.
Note that to allocate your funds wisely, you need to maintain a balance when thinking about employment. Never stop asking yourself why the hire is necessary, as there are cases when achieving more while using fewer resources is possible. Preparing your internal processes for the expansion is important, too; you have to reorganize your communication, boost management procedures, get the right tools, and so on.
Furthermore, prove that you've chosen the right team scaling time and the most reasonable and affordable employment path. Many startups are run by several people, there's always too much to do and not enough time. And when the need for team expansion comes up, outsourcing work may check all the boxes. It helps form the team or specific role gaps in short timeframes, get access to top experienced talent, frees you from lengthy recruitment and contracting hassle, and allows for getting things done fast.
Therefore, if you're in search of a trustworthy tech partner, Upsilon has a rich talent pool of various experienced specialists, from UX/UI designers and product managers to developers, QA engineers, and more. Startups are our specialty, so regardless of whether you need a full team or are missing a couple of roles, we can augment your team or help build your product. We work in 2-week sprints, have transparent dedicated team pricing, and offer flexible staff augmentation prices too. So feel free to contact us, we'll be glad to assist!