Why Adding People Makes Your Business Worse

Let me start with a question.
How many people are on your team now?
How did that question feel to you?
Fantastic.
Were you proud to say the number, or did you feel awkward?
Because actually, you’re still small and you don’t want to admit that hiring has weirdly become some kind of status symbol.
We’ve just hired 3 new people.
We’re growing, we’re scaling, we’re building out the team.
It all sounds impressive, right?
Because somewhere along the way, headcount became related to success.
But what if I told you the hiring is often the very thing making your business worse?
Not better, but worse.
So if you’re addicted to growing because you think everyone else is, then you better stay tuned to help sniff out the hiring bullshit.
Hello and welcome to Sniffing Out the Bullshit, a podcast for ambitious entrepreneurs who want help wading their way through the bullshit jungle of entrepreneurship and then the tools, skills, and mindset that actually required for success.
I’m your host Sabrina Chevannes-Denman, the no bullshit entrepreneur.
There’s this weird culture and entrepreneurship where hiving is treated like some really cool milestone.
It’s like you’re not serious until you have staff or you’re not scaling until you’re growing your headcount and you’re not legit if you’re still solo.
And don’t get me started on all of the LinkedIn announcements surrounding this.
Like, I think that’s what makes it so much worse.
The whole oh, we’re delighted to welcome 4 new team members or we are thrilled to be expanding or like the classic.
I’m so proud to now be this team of 12.
And it’s like it’s rubbing in the faces on everyone else who can’t really afford to keep the lights on.
And the comment section is just filled with people going congratulations because they’ve also just paid for some ridiculously expensive PR PS on hiring a new team member.
Like it’s this great thing to do, but actually, if we look at the books, the company is bleeding money and it was probably the most stupid thing they could have done financially to hire those people.
But no one knows that.
And the congratulatory posts all frame it as a massive success, obviously.
So then this basically tells all the founders that they then need to do the same so they can get all that congratulations and and you know the the images of success.
And do you know what?
It’s even worse when investors involved because if you get investors in the mix, they all look out for growth too.
Like companies who are adding more people to the team, they do genuinely get looked upon more fondly as if they’re going in the right direction.
And look, I’m not saying that growth is bad, but I am saying this hiring feels like momentum and every founder seems to put momentum extremely high on their want list.
But often hiring is just increased burn.
Now, I’m not the only one saying this, because there were reports like the Startup Geno report that found that 70% of start-ups actually scale prematurely.
And premature scaling is one of the biggest causes of failures in start-ups.
They don’t have the operations in place to handle that scale that they’re culturally aspiring to, and they haven’t got a robust enough strategy to then support that growth.
And their cash flow, well, they assumed that every month they’ll be the same as their best month.
And well, we know that certainly ain’t true.
So things go South very quickly.
And CB Insights, for example, they consistently list running out of cash as a top reason that businesses fail.
Now, I was recently on Richard Farley’s podcast, The Boardroom.
He’s a former Dragon on BB, CS Dragon Den, and he’s invested in over 120 businesses.
And on that podcast, he also stated that he believes cash flow is the biggest reason that businesses fail.

Now let us just think about this for a second.
What do we reckon is the fastest way to burn cash?
Payroll.
Like those two bits of stats I just told you are not a coincidence.
Hiring can really kill a business.
Now think about those bits of research I just gave you.
They clearly show that hiring is not growth, despite what social media has LED us to believe.
Now revenue is more like growth.
Profit is the thing that’s growth.
I mean, how even strong positioning is better growth headcount?
Well, that’s just cost unless it’s strategically earned.
So I want to talk about some real numbers because this is where founders kind of get delusional.
Like I’ve had so many people tell me, oh, I’ll just hire someone for 40K and they’ve got a budget for 40K to hire this person.
And I’m thinking, no, you won’t, because in the UK, when you hire someone on a 40K salary, you’re not paying 40K out of your business.
You’re paying the National Insurance, which is like I think 13.8% above the threshold from the last time I looked.
And then you’ve got this minimum 3% pension contribution that you have to put in there too.
And of course you’ve got your statutory stuff like the 28 days of holiday, your sick pay, your maternity or paternity liabilities.
And then on top of that, you have to pay for their equipment, the software they use.
And of course there’s payroll admin that gets processed when you have to do all that stuff.
And, and what about the, the recruitment costs to get them in the first place?
Like this?
There’s a crazy amount of expenses when it comes to hiring people.
And I’m just listing the standard things when it comes to employees because since COVID things have kind of changed as well.
People expect a lot more than statutory benefits.
They expect things like flexible working and you know, lots of other additional benefits, whether that’s Wellness things.
And you know, they plus expect a four day work week these days.
We’re getting paid for five days obviously.
And of course, the classic unlimited holidays, because all these big tech firms are offering these benefits, right?
At least from the outside, even though the reality under the hood is very different.
But candidates hear about all these glamorous benefits that apparently everyone else is offering.
And then they’re demanding the same from the small businesses.
And it’s really making businesses struggle.
Now, the CIPD estimates that the average cost per hire for small businesses is actually over 6 grand.
And remember that’s before the salary.
And I’ve seen like research that goes way beyond that.
Like I think Oxford Economics were the ones that they researched this and they suggested that replacing an employee can actually cost over 30 grand depending on the role.
So that 40 grand higher, well in real cost, it’s easily 5055 K.
And that’s before we factor in your time managing them and training them and supporting them, etcetera.
And your time is expensive, remember.
So let’s layer in something else.
I, I’m not one for politics, but I won’t bring it up.
The Labour Party’s proposed new deal for working people expands day one employment rights, right?
It strengthens protections around dismissal.
It increases compliance expectations and essentially it shifts way more power towards employees.
And whether you agree politically or not, you know that this is not about politics.
The reality is that employment your law in the UK is seriously tightening.
Like the IoD, the Institute of Directors and the CIPD have both flagged that SM ES will face increased compliance burden and much higher risk exposure.
And what does this translate to?
Well, it means that hiring is becoming less flexible, way more expensive, more legally complex, and pretty much harder to undo if you get it wrong.
And it’s all kind of terrifying if you’re a small business.
It’s way less attractive now to high employees, which is why the employment rate is increasing and so many large corporations are actually just laying off their people in the masses like it’s gone crazy.

And you know, I also want to bring up something that most people ignore because hiving doesn’t just cost money, it can play.
It creates way more complexity within your business.
Now, the Harvard Business of you has found that collaborative activities like meetings, emails, cost, teamwork.
They have all increased by more than 50% over the last two decades, right?
So every new person that you and your team is going to multiply communication loops and suddenly you need more meetings and then you have to get alignment and you definitely need more management.
And so many people assume management is easy.
I mean, they’re the founder, right?
They know what they want, so they’re just tell other people what to do that they need done, and that’s what management is.
After all, they’ve been writing leadership content on LinkedIn for months now, so they know how to lead.
But people don’t realize that leadership is hugely different from management, and this is what’s causing so many problems.
That Gallup research actually shows that managers account for 70% of the variance in team engagement.
So if you don’t know how to lead well, performance pretty much tanks.
And when this happens, founders then often try to hire more people to fix the chaos.
But unfortunately it doesn’t fix the chaos, it just multiplies it.
Because if you don’t have your systems in place, oh, you know, you know, we know who your target audience is and you’re unsure about your offer and you still haven’t written a strategic plan and you’re not sure about pricing in this economic climate and all the other things that founders are just constantly making the mistakes with.
Well, you’re going to, unfortunately, have just hired someone right into that mess.
And now you just have this extra person to look after and an extra payslip that you have to hustle harder to make money for each month.
Plus, if you want to get deeper, you pretty much set up that person to fail because everything is a mess.
And the mess they’ve been hired to fix is just made even messier by the bits of other mess.
I mean, hopefully you get what I mean.
It’s just a mess, right?
It’s total carnage.
And you know, I saying this from past experience, like I recently got hired into a business as a factual CMO where I saw this first hand.
They had absolutely nothing in place, but they expected me to just bring them in need immediately just like that.
But they were then changing their offer pretty much every week.
They constantly wanted to launch new things and they didn’t even stick to their own brand guidelines when they were posting on LinkedIn and they were just releasing contact without telling me at which was totally off from the brand’s tone of voice and overall strategy.
So it was really difficult to work with and I spent such a long time making strategy documents explain the process and the importance of positioning to the client, but they didn’t care.
They just wanted action.
They wanted to see posts out there and to see leads coming in regardless of what else is going on.
And so really sadly, I just couldn’t work with them.
Like I could see that I was put in this role but I was set up to fail.
So all I could do was explain the situation clearly and walk away as I felt it was better to invest my time in someone who wanted to do things properly.

And you know what?
The other mistake I see fans make all the time is that they believe they need to delegate as much as possible, so therefore they have to hire someone.
And yes, delegation is essential.
You cannot do everything forever, as much as I like to have believed that right at the beginning.
But The thing is, delegation doesn’t have to mean a payroll employee.
There are millions of ways to reduce your workload without hiring full time staff, for example, contractors or outcome based freelancers.
Or you’ve got your factual CM OS and factual Cos they there are lots of different options.
Plus you’ve got your automation, your systems, your AI tools or my favourite, removing unnecessary work entirely like that is one of the best ones because I think so many people just have this big To Do List and they assume all of them are essential.
But actually they’re not.
And I’m not the only one to kind of suggest factional route just because I’m a factional CMO and I understand the beauties of it.
But both McKinsey and Deloitte have been publishing things extensively on this on the rise of flexible talent models and the shift towards contingent workforces.
Like does the UK self-employed workforce is actually huge.
And why?
Because flexibility genuinely works.
See, when you hire full time, you’re committing to fixed costs, fixed responsibility and fixed legal obligations.
But when you use contractors or factual supports, you’re essentially buying outcomes and not time.
So that’s a very different risk profile.
And so I’m not just saying this because I think staying small is easier.
I’m saying this because I’ve made this the same mistakes.
Like at one point my agency had 14 people.
And again, depending on where you are, this could be small or this could be big.
But I was in the agency world.
I was very much constantly surrounded by other agency owners, and they were all congratulating me on this growth, saying it was amazing.
And I guess on paper, it did look impressive.
I mean, we had a healthy 7 figures in revenue, lots of clients under our belts, like a brand new personalized office space.
And of course, the most impressive bit, our team was growing.
And we were still hiring at that point, in fact.
But the reality was at this stage of my business was the most stressful.
I had the biggest payroll I’d ever had and it was still just me doing sales because it’s so high.
Hard to hire a salesperson when you’re a small business, right?
Because they don’t know the business like you do.
They’ll likely take six months to get up to speed and they’re never going to care about the business as much as you do, right?
It’s it’s ridiculous.
And I think like it’s so hard when they are like a non billable person.
You can’t, you can’t just directly take that plunge.
And also I think with small businesses, the most attractive thing about it is the ability to work directly with the founder of these big organizations.
You end up with a junior and so often clients don’t want to speak to a salesperson, they want to speak to the founder.
And so I at that time just had to do double the work.
I didn’t really sleep because I had to be on double the calls, right, Double the pitches and send double the emails.
It was heavy because I was payroll heavy, responsibility heavy, emotionally heavy.
Like every decision like affected someone’s mortgage.
That was a lot.
But I kept thinking that we were too small to be able to handle this.
But we weren’t.
We weren’t struggling because we were too small.
We were struggling because our operations weren’t tight enough for the scale that we were chasing.
So I had to make a drastic change and get rid of some people.
Sorry, let me let me rephrase that in a more positive way.
I made a deliberate shift.
I went lean, I went high margin, systems burst.
That is how I’m going to see it.
And so I got factual support where needed and strong contractors who were experts in their field.
And maybe they cost a bit more per hour, but because they didn’t require all the benefits that employees did, they ended up costing about the same to the business.
And guess what happened then?
Well, we became more profitable and I became way less stressed and we actually produced a better output for our clients, which then made it become way easier to bring in more sales.
And This is why I constantly talk about small teams, big profits on my YouTube channel now because I do genuinely think that this is a much better way to grow.
And people think that it’s all anti growth.
And it’s not really per SE, it’s anti growth for the sake of growth, but it’s pro sustainable growth.
It’s pro growth in profits, but it’s anti ego growth.

So let’s talk about when hiring does make sense because I want to be balanced here and not just say you should never hire anyone because obviously that’s not the case.
I’d say that hiring makes sense when revenue is predictable and consistent and you’ve also documented your processes and perhaps you’ve even tested the role by a contractor 1st and realizes a need for full time.
And I think it also makes sense when the bottleneck is execution and not, you know, strategic clarity and positioning and all that other stuff that the big picture thinking.
And probably most importantly, it makes sense when you can actually afford the higher.
Without them needing to like save you.
And what I mean by that is that you know, you are panic in a certain area and you feel like you need someone to come in and save you.
Because if you are the point where you need someone to save your business, you’re not ready to hire.
You absolutely need to fix your operations first.
So the real questions that you should be asking instead of who should I hire of actually things like what’s actually broken, what can be automated first or even outsourced or what can be simplified or even better, like I said, what can be eliminated?
Because sometimes I think the smartest move is an addition.
It’s actually subtraction.
So Please remember, hiring is not a flex.
It’s a financial commitment, it’s a legal commitment, It’s a leadership shift and it multiplies complexity.
So if your operations aren’t tight, then all you’re doing is multiplying dysfunction because headcount is absolutely not a strategy, but good operations are.
And if you build properly first, you might just realize that you don’t need a big team at all.
So if you’ve been wondering about whether you need to hire someone to help ease your workload, I really hope this episode and made you think a little bit differently about things.
Don’t get pressured by social media or your competitors who look like they are constantly growing.
They could be causing severe damage to their business by doing so, but you just have no idea.
I’d much rather stay lean and take home more profits any day.
So that’s it for me this week, but until next week, please keep sniffing out the bullshit.