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When to Add Headcount for Sustainable Growth
Episode 606th November 2024 • The Growth Pod • Angela Frank
00:00:00 00:07:36

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Many founders think adding headcount is the solution to their growth challenges. However, growing headcount doesn't always equate to business growth. In this episode, Angela discusses why adding headcount isn't the solution you've been looking for and how to know when it's the right time for a full-time hire.

Specifically, Angela shares:

  • Why hiring isn't the solution for growth.
  • The best way to grow your brand
  • How to avoid costly hiring mistakes.

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About Angela

Angela Frank is a fractional CMO with a decade-long track record of generating multimillion-dollar marketing revenue for clients. She is the founder of The Growth Directive, a marketing consultancy helping brands create sustainable marketing programs.

Her new book Your Marketing Ecosystem: How Brands Can Market Less and Sell More helps business owners, founders, and corporate leaders create straightforward and profitable marketing strategies.

Angela is the host of The Growth Pod podcast, where she shares actionable tips to help you build a profitable brand you love.

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Transcripts

Angela Frank:

Welcome to The Growth Pod. Today we're checking in one on one to set the record straight on all things headcount, specifically as it relates to growth strategy.

We'll be answering questions like when should you expand your team? How can you prioritize hires that actually contribute to your growth? How to avoid costly hiring mistakes, and more I'm your host, Angela Frank.

eting revenue for clients. In:

On The Growth Pod, I interview industry experts and share tips designed to help you build a profitable brand you love. So if you're like me and love learning about how to grow your business more efficiently, you've come to the right place.

One of the most common pitfalls I see business leaders fall into is that headcount equals growth.

And while that can certainly be true in some cases, I'm here to tell you that just because you're hiring and growing headcount doesn't necessarily mean you're doing the right thing. Sometimes adding headcount seems like the obvious solution to your growth problems. I mean, more hands on deck means more things get done, right?

Well, not necessarily. But before we get into that, I wanted to share some of the reasons why adding headcount seems like the right thing to do.

First, adding headcount signals growth to investors, which can be important if you're looking to show growth outside of revenue or or put funds from a recent round to use. Second, more hands on deck means your team has the capacity to get more done.

In addition to that, your managers and directors get more team members to manage, meaning they're able to grow in responsibility. Finally, there's the ego.

Sometimes it just feels good to say you've got a big team or knowing that you have someone dedicated to figuring out a problem. And there can be some peace of mind that comes with that as well. But all of these warm, fuzzy feelings I'm grouping in the ego category.

So those are the pros. But adding headcount is a serious decision when you're viewing it from a growth perspective.

When I create growth strategies for clients, I want to minimize the monthly cash requirements while maximizing revenue and profit. And generally, this means assessing who internally can support the growth and making very minimal, if any, full time hires.

Instead, I bridge the gap using a strategy that we'll discuss later in this episode. So with that in mind, let's look at the cons of adding headcount.

First, it's incredibly costly, not only from a salary perspective, but you have payroll, benefits, onboarding and training. And there are a lot of costs aside from just that salary that are used up when you're bringing on a full time hire.

Second, it's usually inefficient, meaning you're hiring someone for a full time role when you don't actually have full time work for that person to complete.

And usually this is justified because maybe you have team members with full plates who could use some additional bandwidth, but it's likely that those tasks don't contribute to your growth to begin with. And so hiring someone full time just to take on some of these tasks in addition to a role that you need is a waste of resources.

Third, it takes a lot of time to find the right talent, interview them, hire them, onboard them, train them, and manage them. And this is time that your team might not have. Hiring without taking the appropriate time to make sure they're a good fit can be a costly mistake.

So those are some of the cons, certainly not all. But this isn't a doom and gloom podcast. It's a get out there and make shit happen podcast. So what do you do instead if you're looking for growth?

Well, let me walk you through the strategy that I use when assessing hiring needs for clients. First things first, I dive into all of the acquisition data to identify where where more effort in means more results out.

When looking at results, I look not only at the revenue generated, but the efficiency of the channel in terms of qualified leads generated, closing rate and the average order or contract value and customer lifetime value.

It's important to look at all of these metrics for each channel because not all qualified leads are the same quality and you may find that one channel actually brings you only a few leads per month, but that contract value is significantly higher than from other channels. So looking at these down funnel quality metrics is really where you will find those hidden growth levers.

The next step is to identify how much support do you need to maximize your growth.

We chat a lot about diminishing returns on the podcast, which means that as your channels grow, there comes a point where more effort doesn't bring as good of results.

So the idea here isn't to say well our blog brings us lots of leads, so let's get 10 people working on the blog or our 100k a month ad spend is doing well, so let's scale that up to a million dollars per month. It seems counterintuitive, but growth doesn't work that way.

So for all marketing channels there will be a point where the math doesn't math any longer. One of your biggest keys to success when it comes to growth and hiring will be your perspective.

Specifically having an entrepreneurial growth mindset.

No matter the size of your company, when you run strong, lean teams, push decision making down as far as it can go and enable your team to solve growth challenges on their own. You set yourself up for success and for profitable growth now and in the long run.

When you adopt this kind of mindset, you force yourself to think differently and weigh your decisions with a bit more nuance. Sure, you could hire this person for 75,000 per year, but what is the revenue that they'll actually bring into your brand?

You shouldn't be satisfied with the industry standard either of like $43,000 revenue per employee.

Netflix, example, brings in almost two and a half million dollars per employee and other companies like diversified financial firm Vici properties employs only 23 people and brings in over $133 million per employee each year, as reported by Ondeck. So clearly I'm not anti hiring, I'm just pro growth.

And growth means getting the absolute most out of your resources, scaling profitably, and setting your business up for success now and in the future. So let's chat all things hiring. You've got your growth plan, you know how much support you need, and now it's time to bring on that support.

I want to emphasize that bringing in the right team starts with the right strategy and any hiring decisions should stem from your actual growth needs. Once you have your strategy and have identified what type of help you need to bring on, you're ready to move on to hiring.

This is the step where you will find people who are absolute experts at the singular thing that you need to move the needle for growth. Is it ads? Bring on a pro Media buyer? Is it email? Hire someone who is a pro at email and Lifecycle Communications.

Your job is to find these super specialized individuals that support your growth strategy on a part time basis. Once you have them on board, let them do their job.

And once they've laid or improved your foundation, ask them where they see opportunities for your brand. Test minimally and then scale their involvement over time as they prove growth in that channel.

Once you've hit diminishing returns, cap their hours and maintain that channel. So now it's time to take action.

As you're creating your growth strategy, go out and identify your opportunities for growth and the type of support you need. It's likely that you don't need a full time hire or a marketing generalist.

Instead, you need a great strategy for growth and the talented part time support to help you get there. Thank you so much for listening to this episode of The Growth Pod. I look forward to seeing you in the next one.

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