At some point in your startup journey, you’ll need help from contractors, agencies, or employees.
But figuring out which type of help to invest in is hard.
Especially when comparing the costs for each option requires intense whiteboarding and excel acrobatics. Outlining the comparative cost of all 3 would take way more words than you want to read in any email 😅, but we can tackle one piece of the puzzle with our own data today:
How much does a technical team cost?
What’s it cost to run our team? 👀
Not including profit-sharing, the cumulative salary of 2 founders ($72k each), 1 partner ($84k), and 3 mid-level engineers ($68 to $77.7k) for us is $441,700.
But here’s the first of many caveats: this is just salary. The total above doesn’t include benefits, employment taxes, office space, rent, hardware and software, and other associated costs.
👉Want a comparison point? Check out Buffer’s publicly posted 2019 salaries. Their engineering salaries range from $78,030 to $242,995.
Yeah, but what would MY team cost? 👇
Assuming you’re early on in your startup journey, you don’t need a team as big as ours—and certainly not as big as Baremetrics.
While we can’t shake our Macs and tell you exactly what it’d cost to run the team you do need (your product and goals are unique to you) we can outline big factors that will impact the total.
How many people do you need? 👋
The more people you hire, the more expensive your team will be.* Our team of 5 costs $441,700 in salaries. If you need one app developer in Charleston, the low end ranges from $70k-120k depending on title and experience.
*Why are we making this obvious point? Unfortunately, some founders hire because “x employees” sounds impressive. That’s a toxic game. Hire because your business, not your vanity, needs help.
Where do your candidates live? 🌎
If a remote hire is an option, think about whether you’ll factor in the cost of living. Though not all software companies consider this (see ConvertKit), many employees expect it. One approach is to set base salary bands for wherever you’re headquartered and adjust from there. Check out numbeo for comparative costs of living.
What skills do your hires need? 🔮
Certain programming languages, like Ruby and Go, command higher salaries than other programming languages, like PHP.
Via Stack Overflow’s 2019 Developer Survey
Likewise, design, UX, UI, project management, and other specialties each command different rates. See Glassdoor for starting pay ranges. Experience*, too, is a big factor here. A CTO is much more expensive than a learn-on-the-job junior developer.
*Keep in mind experience goes beyond “years on the job.” An employee with one year in a high-responsibility and fast-paced environment may add more value than someone with 5 years in a siloed and micro-managed environment.
Are you offering equity? 💸
Some startups offer equity (partial ownership) to round out a low salary. Given the success rate of startups, not all candidates dig this. But it is an option. Check out Holloway’s guide to equity compensation to learn more.
Will you provide any benefits? 📚
Attracting the best candidates can mean caring for their diverse needs. Providing healthcare, 401k matching, education assistance, or childcare benefits will have varying costs (cash and time-wise) depending on what you offer. We use a PEO called Justworks to offer competitive benefits to our employees, but that adds a $100 per employee fee.
What software and hardware do employees require? 🖥
Your employees need hardware and software to build your product, and they’ll expect you to foot the bill. Our software subscriptions come in around $1,500/mo and include Google, Heroku, Github, and Slack. And we offer employees a $2500 hardware budget when they join the team.
What do taxes look like in your area? 💰
Employment taxes can be one of the largest hidden costs of running a team. Do some research and make sure you understand how much federal and state employment taxes will cost you, on top of your base salaries.
Plus, all the other stuff that’s hard to quantify 🤔
Mental, emotional, and physical strain 😅
It’s no small fry to take on responsibility for someone’s career and income. Honestly, it’s enough to keep a person up at night. Depending on your personality (some of us are big people pleasers) managing employees can be both rewarding and hit-by-a-bus exhausting.
Everything leading up to the hire 😓
There’s so much that goes into the hiring process before a resume even lands in your email: writing a job description that doesn’t suck, posting it, promoting it, sifting applicants, doing interviews and assessing candidates. We’re talking weeks or months of your time.
Overhead and infrastructure 💰
In addition to paying your employees, you’ll want to provide the infrastructure that facilitates healthy work. That may include:
- HR or payroll software
- An accountant to help you track trickier finances and taxes
- A bigger office if your team is in-person
- Retreats if your team is remote
Bottom line: Hiring is hard and expensive. Don’t rush into it. 🏃
We wouldn’t trade our employees for anything. But at the same time, we recommend you don’t hire until you need to. The costs, complexity, and overhead of doing so are things you don’t want to underestimate. Not to mention, the cost of hiring the wrong person can be $100,000...or more.
That’s not to scare you away from hiring—many things worth doing are hard and risky. And you’ll need a lot of help, from friends, mentors, and employees, to build a successful product.
But first, get creative and do what you can, with what you have, until you really need the full-time help.