When rounding out your startup team, the question almost inevitably comes up: Should we hire an in-house developer? Looking at the budget, it can be difficult to tell whether or not a full-time developer should be brought on. And while much of the decision relies on where your startup is at the time, there are many considerations startups forget before vetting potential hires.
You Don’t Only Pay a Person’s Salary
There are many additional costs when it comes to hiring an in-house person.
- Recruitment: The hours your team and you spend looking for someone to hire are hours you could be working on your startup. Even if you only post on free listing sites, the time you spent going through resumes, having interviews, and filtering out poorly qualified candidates takes away from other work. Remember, time is money.
- Benefits & Perks: If you’re offering healthcare or any additional benefits (even vacation days), those are going to cost you. Even if your company isn’t ready to offer benefits, you may be offering perks to the new employee such as free lunch, snacks, etc. No matter what you offer, it takes funds away from your startup that could go to other areas.
- Taxes: This is probably the biggest financial strain, next to salary, if hiring a full-time person in the United States or Europe. Your company will have to pay social security, medicare, payroll, federal, and state taxes for this new employee. These taxes add up quickly, so if you don’t account for them early on, you could find yourself with a huge bill come April 15th.
- Training & Development: Of course you’ll need to train your new employee. Even if he or she is a stellar programmer, they’ll need time to understand your project, possibly adjust to a new programming language, and get to know your team. All of that is money. The time the new in-house person takes not working on your project is again taking finances away from other areas of your startup.
Salaries in the US are Really, Really High
We know programmers in San Francisco are expensive, but so are many in other parts of the country. According to GlassDoor, these are the average salaries for a “mobile application developer” across the country.
Your startup must be prepared to pay this salary, and some really great programmers will require a bonus and moving costs, so make sure your budget can handle that as well.
Deciding Your Startup is Ready for an In-House Developer
So, after reading everything your company needs to be prepared for, and you think you can hire someone in-house, here is how to talk it over as a team (and especially with your financial officer).
- Calculate Burn Rate and Future Sales: You need to have a realistic idea about how much money you’re spending and how much money you’ll potentially make. Don’t over-estimate sales, if anything, underestimate them so you don’t run out of cash.
- Calculate Revenue Brought in by Developer: How much money will your in-house developer make the company? How much faster can you go with a person in-house? How much better can your product be and how does that turn into a number?
- Understand your Profit Margin: What if funding is delayed? What if your number of users begins to decline? Anticipate what can happen before it happens to understand what your true profit will be.
