When do you hire and expand?

When should you get funding?

When should you consider having business partners?

Here’s my thoughts.

Phase 1: Your Business Catches Up To You

A startup / business is an extension of you as a founder.

The revenue generated is an extension of your skills to:

  • Create / procure a great product
  • Finding a suitable avatar for your product
  • Marketing and selling your product to that avatar

In this phase, branding doesn’t matter that much. You should brand enough to make yourself seem trustworthy, but you don’t have to have an insanely perfect brand at the beginning. Instead of working on your brand message, work on your direct response marketing message and inject it into your prospects’ veins.

A brand-new company isn’t going to have any revenue, because you haven’t had time to apply your skills to it.

In this phase, there’s no reason to hire anybody because your company isn’t even good enough to reflect your skills yet. So, let the business catch up to you. Apply all your skills to your business and let your business grow to the point where your “best self” cannot generate any more revenue.

At this point, the business is bottlenecked by your abilities and can’t grow further.

This is when you should hire.

Phase 2: Expanding Your Business Beyond Your Skills

Keep in mind that the months / years working as a solo founder, you will grow in your skills. Thus, the potential for your business to fill out is going to grow larger and larger.

That’s fine.

But once you feel your skills are plateauing and you have no more idea how to improve, and your company’s caught up to you, that’s when you should hire.

Delaying hiring as long as possible is good because it saves you money. But when you do hire, you should:

  • Know what your weakest points are.
  • Of those weakest points, filter out the ones that’ll actually make a significant impact to your business’s bottom line. Being bad at marketing and hiring someone great at marketing will help. Being terrible at accounting probably doesn’t justify a first hire if your company’s struggling to even get enough business to create a tons more rows in your accounts receivable.
  • Then hire someone that’s 10X better than you in your weakest points. If they’re only slightly better than you, they can save you time if you hire them. But that’s about it. Your business won’t grow significantly beyond your potential.
    • You may hire someone that’s weaker in skill as you company grows a lot bigger and it becomes more important to save time than it is to improve your company’s inherent skill level.

Different If You Already Have One Good One Under Your Belt

If you’re a seasoned entrepreneur and have run successful businesses, you can hire right away to save time. You would already have an eye for good talent and know when to hire/fire.

In Dennis Felix’s How To Get Rich, one of the most important things you can do to get rich is to hire someone smarter than you. So know that while I’d delay hiring, I understand that hiring great talent is paramount if you want to get filthy rich.

But hiring is expensive and can kill your runway. Which is why I’d like to delay it until you’re good enough to build a business to bring in enough money to have more or less an indefinite runway. But if you’re good and you have tons of other profitable businesses / experience and don’t mind the risk of acquiring bad hires and having them waste your money + time, and you’re at no risk of going bankrupt from bad hires, then you should just hire right off the bat for quicker results.

That is, the higher your skill level is, the quicker you should hire. I suck, so I delay my hiring.

Speaking of runway, you can also hire more people if you get funding.

When Funding?

You should do funding when your company has reached some traction. The less traction your company has = the more risk it is for the investor = more equity you’ll give up.

You’ll also save time and have an easier time raising money if your business model’s already proven in some sense, and you just need money to expand.

If you make only $200/mo like Wraith Scribe does, you’re going to have to give up a lot of equity. By the time the company grows to $1 million/mo, you could be only raking in $200k/mo as an example (losing out on most of your effort and letting someone else reap the benefits of your hard work).

If you make $100K/mo with a high margin (as most SaaS will have), you should have a ton of investors willing to pay you money to scale. As the risk is lower and there’s more investor demand, you can command much lower equity. By the time you scale it to $1 million/mo, you can probably keep the lion’s share of it.

TLDR:

Getting funding should be a way to scale an already successful business. It’s not to get some ‘seed money’ to baby sit you if you’re completely incompetent.

If you’re incompetent and can’t raise your initial money from customers, get competent first. Because if you’re incompetent and you’re given money to scale, you’ll just burn all the money and you’ll still be bankrupt at the end.

The skills should come before the funding.

Business Partners

You shouldn’t have business partners if you’re starting out. Business partners are bad because:

  • They take away from your ability to level up your skills. If they do X, Y, Z work for you, you will not get better at X, Y, and Z. You should outsource eventually, but if you’re very new to business, you should get your hands dirty in all aspects. You’re not above the learning process.
  • It’s very hard to get a good business partner. A bad business partner will break your business. You’ll feel they aren’t working hard at all, and vice versa. I did e-commerce with a business partner where I literally did everything from the ads to the landing page / website to building and automating the supply chain, and all he had to do is respond to like 5 emails a week. He feels he did more work than me. Most people aren’t at your level, and you shouldn’t partner with them. If you’re the entrepreneur, chances are you’ll have more work ethic, more vision, more everything than some other person you meet.
    • The only time where you should get a business partner in the beginning is if they’ve got tons more experience than you and have a public track record (something you can do due diligence on and verify, like public legal documents showing a sale of a company).

Most times, we want business partners ‘to take the burden off.’ But if you’re an entrepreneur, you should already know that you need to carry all the burden if you want all the rewards.

We want business partners because we want someone to do some set of work for us, and it’s cheaper because you don’t have to pay them. Getting a business partner results in short-term gains, and mostly heavy losses in the long term. Either from equity or incompetency.

If you want someone to do some work for you, just bite the bullet and spend the money to hire someone. It’s cheaper in the long term and “working” isn’t what a business partner is for.

When in doubt, don’t get a business partner. They are very expensive and unlikely to be useful to you in any way at all.

Only get one if they are absolutely required to get your business to the next level, at least 10X faster. And even then, you should ‘trial’ them and see their work ethic / abilities before you take them on officially.