Should I Contract Or Hire My Next Employee?

Start-ups notoriously run on fumes. This is no secret, and because of this fact, a start-up whether bootstrapping or with outside investors, must always get the best “bang for the buck” in order to survive. To be successful, a startup must make it through the very difficult and even more often fatal – valley of death – the time between creating a product and selling it. My company, Efferent Labs, is no different.

Start-ups notoriously run on fumes. This is no secret, and because of this fact, a start-up whether bootstrapping or with outside investors, must always get the best “bang for the buck” in order to survive. To be successful, a startup must make it through the very difficult and even more often fatal – valley of death – the time between creating a product and selling it. My company, Efferent Labs, is no different.

In the different businesses I have founded and run over the years, I always sought the best employees and tried to get them locked in – as regular full time staff. To me, it was a requirement for success. A “real” employee tends to be a team player and is willing to go the extra mile for the success of the company, as their actions directly affect not only the company but also their own life. A great one has a lot of pride in their efforts and the company. Who wants to work for a crap company? The best not only want to work for the best, but promote it as well. Success breeds success!

 This scenario is great if you have a solid cash flow, but most start-ups are operating well within the red zone. The fact is, in a startup it can be foolish to lock in the life cycle costs associated with a regular W-2 employee when you can “rent” a person to solve short-term problems. However this is also a double edge sword: the Kobayashi Maru” of business. You want to hire that great, perfect person, but you don’t have the resources to pay for them for more than a project. If you hire too early you risk losing the perfect person due to cash shortfalls; too late and the success probability of the business could be greatly reduced. Not a good place to be and I know this from personal experience.

This Is My Current Reality

I am, right now, attempting to solve this very issue. At my company we have been using contractors to do a lot of the heavy lifting since inception. They have all the knowledge of technique, how-to and must-do… but we are a biotech company and must bring these skills in house. Contractors could kill us if they took off, or worse: hold me hostage with higher bill rates or other demands. This is a CEO’s nightmare – the exact issue that should keep every startup CEO in cold sweats each night.

Our contractors have been great, but this business model is not sustainable. I must hire. We are getting closer and closer to a MVP (minimum viable product) and the time is approaching like a speeding freight train where I must make important hires.   I need to flesh out our fledgling staff, and I need to start the process soon.

The best part of contracting help is that you are able to really look at their work product – as a client. When you hire a full time regular associate, you have gone through a process and you basically adopt, for lack of a better word, a “family” member. One thing for sure, you don’t want to admit that “Uncle Ned”  you just hired, is not what you thought. If you start by contracting an employee, you can watch for “Uncle Ned” with a different eye, and after some time, make an educated hire rather than an emotional hire.

Source:  forbes.com by Bill Rader

Image:  Shutterstock

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