With the recent wave of tech layoffs, often caused either due to scaling too fast during the pandemic, or because of a guy named Elon, there has been a lot of focus in the media on the size of teams in tech startups.
One central question is being asked: do these companies really need this many employees?
Co-founder of Basecamp Jason Fried wrote about how their team size compares of that of equal-sized competitors, and how it's about 5% of the number of employees Asana and Monday have, with the same number of customers.
At the scale of a company like Twitter, it's difficult to answer the question whether such a big workforce is actually justified.
As a small startup, that should be much easier. Yet, it seems like this is something that's hard for founders to get a grip on. As a founder, you're usually part of a founding team of one, two or three people, and hire your first employee based on need: "we really can't handle the support workload anymore with just the two of us", or based on missing skills: "we need a mobile developer to build a more versatile product".
Because those first few hires are made out of pure necessity, you get into a habit of hiring as a means to grow, without necessarily looking at the bigger picture. And hiring is difficult, but relatively repeatable once you get better at it, whereas building new processes to be more efficient and cutting out any excess (whether it be in product focus, promises to clients, etc.) takes much more effort and discipline.
That's how you end up with a thousand-person company that builds task management software. A company that, because of that thousand-person team, despite making millions in revenue, is operating at a loss of hundreds of millions per year.
How can you prevent this from happening as you build your own business?
Niche = net profit
The deeper you go into a niche (to a certain extent), the more money you can make. Don't try to serve the many, serve the few and do it extremely well.
A small audience of loyal, happy customers whose needs you understand in depth will allow you to minimise need for account management, marketing, sales and support staff.
Hire T-shaped personalities
So you got to the point where you really need to start hiring your first customer success or customer support person? Hire someone that cares for and understands the customer deeply, but maybe also has an interest in marketing or SEO.
You don't want full generalists without any deeper skills, but might prefer to initially hire people with broader interests versus the best of the best in a single field.
Be selective with your product roadmap
If you're like me and like to make things, you might tend to come up with 100 new features and enhancements before the basics of your product are even built. And it's easy to want to please your early customers by building any feature they suggest.
Initially, this might seem helpful and allow you to grow, but over time any new bit of your product will cause additional pain. This one feature you built for this one client now needs to exist for the next 5 years, because if you remove it the customer might leave. And that one feature will of course be the one that causes your engineers the biggest headaches.
And this doesn't only apply to tech products - as a consultancy firm, you might have decided to start offering a service that proved to be popular but hard to scale. Are you going to kill it and lose a lot of potential income? What will your shareholders say?
There are almost always ways to upscale, but downscaling becomes a lot harder once there are people (customers, employees, shareholders) that rely on you.
Go forth and scale, thoughtfully.