Timestamps:

Overview Content

What "Shaping" People Means / Requires Intro 0:00 - 1:45

Adjusting Your Modeled Hires

Understanding and Adjusting your Modeled Hires 1:46- 7:46

Slowing Down or Speeding Up Hiring in the Later Years 7:47- 10:04

When Adding in Annual Raises is Most Appropriate from a Modeling Perspective

Should I Add In Annual Raises? When / How We Recommend Doing This 10:05- 11:44


Overview Content

What does it mean to "shape" the People Section?

  • You want your "Total Personnel Cost" to be growing over time. This is accomplished in two ways:

    • 1) You want to make sure you have individual hires with start dates that are spread out beyond the immediate month. Hiring more people at later dates will work to increase your personnel cost over time.

    • 2) Your model very likely has "modeled" hires that automatically grow / react to events within the model (such as revenue growth). Adjusting the assumptions / metric values for each of these to ensure you are continuing to "grow" the team / expand the cost of these hires over time is the only other task you have to do when shaping the people section.


Adjusting Your Modeled Hires

What am I looking for when adjusting my Modeled Hires?

  • No matter which modeled hire type you have, and you can reference this article to see which ones you have within your model, we're primarily focusing on two lines of data.

    • 1) The "Total Hires Needed" metric to determine if your team becomes too big or doesn't get big enough.

    • 2) If you have an automatic / event driven hire: The "Hire 1 _____" metric to determine how quickly / slowly your team is adding new hires. The SMALLER this value is the MORE people you will hire. The LARGER this value is, the FEWER people you'll hire.

      OR

    • 2a) If you have a hire that lets you place new hires in manually: The "New Hire" metric to see if you're adding enough hires over time to continuously increase costs over the life of the model.

How do I slow down or speed up hiring in the later years?

  • In an automatic / event driven hire you'll need to apply an "Optimize Metric Value" assumption to the "Hire 1 ___" metric that either makes the value SMALLER over time for ACCELERATED hiring or makes the value LARGER over time for DECELERATED hiring.

  • In a manually controlled (V.2) modeled hire you'll need to make sure you have manual edits placed for the "New Hire" metric that properly accelerate or decelerate your hiring intentions.


When Adding in Annual Raises is Most Appropriate from a Modeling Perspective

Should I Add In Annual Raises? When / How We Recommend Doing This?

  • At the moment, we only recommend adding in annual raises for the most essential hires when the raise amounts are significant.

    • This means that if you're currently not paying your founders (or paying them very little) it would be appropriate to add a one time change assumption to their salary to reflect it increasing significantly after a fundraise (for example) but we wouldn't recommend attempting to add this in for every employee.

  • Your investors are mainly going to care about the impact of "team expansion" (or hiring more people) to your margins and operationally you're going to care about the same thing as it pertains to your usable cash flow so adding in every salary increase (which is comparatively miniscule compared to the cost of hiring additional people if you compare a 3k annual raise with the cost of hiring an additional 60k annual salary person) isn't the most efficient use of time here. Instead, it's a much more interesting / common practice to capture the additional costs you expect for your team expanding by following the steps above to adjust your modeled hire assumptions since this represents "hiring multiple people" in the relevant positions to your company.

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