In our final post of our series "Dissecting Your Business Units From 0 To 5M," we discuss the importance of talent. In the preceding articles of this series, we explored the essential components of sales and marketing, delivery, and operations, emphasizing the journey from a startup to a thriving tech services company with a revenue of 5M.
Services Businesses Are People Businesses
The product of any tech services business is engineering hours implementing customer solutions. While talent is an integral part of any business, it is the core of a tech services business. An emerging tech business needs creative and capable engineers with hard-to-find skills. The right organizational culture and HR support are necessary to hire and retain this talent.
Similar to the article on delivery, we use the number of employees to discuss the size. While the revenue can vary wildly depending on positioning, IP, and location, the size of the HR team is more dependent on the company's size. Unlike the article on delivery, this article uses the number of employees in the company.
0 - 8 Employees, 0 - 500K
The team is small and lean. Your goal is to gain clients and better understand your customers and their needs while you find service market fit.
Contractor Relationships: The beginning is a chaotic and unpredictable time. You can easily have cash flow issues. You should create processes for finding contractors and build relationships with them. Using contractors lets you start servicing more customers while keeping fixed costs and risks low.
Basic Employee Agreements: Before onboarding anyone, even in a small team, ensure you have legally vetted paperwork to set clear terms. Some freelancing platforms may provide legal agreements sufficient to your starting needs. You can also use template agreements, but beware that many templated agreements are too strict, making them unusable.
Employment Agreement: This should clarify aspects related to work for hire and assign intellectual property rights to the company.
NDA (Non-Disclosure Agreement): Protect both company and client-sensitive information.
Targeted Non-Compete Agreement: Given that broad non-compete agreements are challenging to enforce, be specific. For instance, prevent employees from working directly with the clients they've been assigned to for a limited period after their tenure with you.
If you have an unfair advantage in employing global labor arbitrage, consider hiring full-time once you have signed contracts.
You should get full-time hires early if you have funding or large contracts.
9 - 20 Employees, 500K - 1.5M
As your team expands, the focus is stabilizing operations and ensuring consistent delivery. You've moved past the initial exploration and need a stable team to provide consistent results.
HR & Recruitment Processes: Engage contract HR to establish and refine critical operational processes. This includes hiring a contract recruiter to streamline and optimize your hiring process, ensuring you onboard the right talent.
Guidelines & Policies: Ensure that foundational documents such as an employee handbook, employee onboarding guide, code of conduct, and employee offboarding guide. These documents guide behavior, set company culture, and clarify expectations.
Legal Compliance: Set up legally mandated policies and training appropriate for your employee count. Staying compliant is critical as the organization grows.
Financial Systems: Establish a robust and compliant payroll system.
Quality Of Life Benefits: Provide essential quality-of-life benefits to ensure you can care for your team members. These include health, life, and disability (both short-term and long-term) insurance.
Employee Stock Ownership Plan: Consider introducing an ESOP (Employee Stock Ownership Plan) with a 4-year vesting period. An ESOP aligns key employees' interests with the company's long-term growth.
21 - 45 Employees, 1.5M - 3M
At this stage, you're gearing up for significant growth. You are no longer a tight-knit community held together by personal, close relationships. You need to be intentional to protect and scale your culture.
HR & Recruitment Infrastructure: A full-time HR professional becomes crucial, providing a dedicated resource to address employee concerns, ensure compliance, and manage organizational changes. Pair this with recruitment professionals to meet the hiring demands of your expanding team.
Career Development: Implement structured plans for employee career growth and provide learning and development initiatives to ensure skill enhancement and professional evolution.
Operational Systems: Deploy an HRIS (Human Resource Information System) and an ATS (Applicant Tracking System). These tools will streamline and automate key HR and recruitment processes, providing efficiencies as your team grows.
Cultural Engagement Platforms: Consider adopting platforms like OfficeVibe and HeyTaco. These tools can foster communication, celebrate achievements, and encourage a sense of camaraderie, further strengthening your evolving company culture.
46 - 75 Employees, 3M - 5M
By this phase, your business has firmly established its footing. The demand for standardized and robust structures becomes paramount as the company matures.
Competitive Benefits: You must offer a competitive benefits package at this size. This will not only retain but also attract top-tier talent.
Solidify Org structure: At this stage, it's essential to define roles, reporting relationships, and team hierarchies. This clarity aids decision-making, responsibility allocation, and avoids overlaps or gaps in duties.
Performance Review Structure: Implementing a regular feedback and performance review system ensures accountability and provides employees with a clear direction for growth.
Training and Development: Leadership programs and soft skills training become crucial as more employees move into managerial and client-facing roles. Equip them with the tools they need to succeed and lead effectively.
Culture-Driven Perks: These benefits may not be standard but reflect the company's values and culture. Examples include gym memberships, dedicated mental health days, recognizing Juneteenth, establishing a corporate book library, offering flex holidays, and more. Such perks help solidify the company's identity and boost employee morale and retention.
What This Means For Your Tech Services Startup:
Hiring and retaining talent is essential to growing your tech services business. This article outlines the capabilities you have to implement as your tech services startup grows. While every organization's culture is unique, the outlined stages guide balancing costs with needs with the organization's changing needs.
I want to thank Jana Tulloch of Tulloch Consulting for her input to this article. Her company provided fractional HR services to Flux7, and she was an essential partner when we went through this journey ourselves.