3 recruiting metrics that can help startups make more data-driven hiring decisions
Navigate the stream economic storm, startup founders need to focus on the key resource for their early-stage startup to survive and grow – people. However, the biggest difference between hiring in a healthy economy and hiring now is that there is no room for error.
According to Harvard Business Review, the price of a bad hire is 30-50% of their salary, which can hit startup budgets hard in 2023. To make fewer mistakes, founders should adopt a hiring approach more data driven.
A good start is to follow these three steps:
Startup founders need to focus on the key resource for their early-stage startup to survive and grow: people.
Cost per rental
Cost per rental is one of the most essential business metrics that should be included in a company’s profit and loss report. It helps a recruiting team test different strategies, as well as spot areas where they can cut costs and optimize hiring.
This metric is used to calculate the total expenses a company incurs to attract, recruit and onboard employees. To calculate the cost per hire, you need to add up all the direct and indirect costs of the hiring process and divide it by the number of hires made in a given time period.
First, set the period. It can be a month, a quarter, half a year or a year. I monitor the cost per rental monthly to continually optimize the process.
Second, count all expenses. Consider internal costs such as recruiter salaries and bonuses, licenses for corporate email accounts, the cost of applicant tracking software and LinkedIn Premium, and training courses for new hires.
Also include external costs for job offers and referral programs, recruitment agency fees, as well as background checks and relocation costs.
Cost per hire ($) = (Internal recruiting costs + External recruiting costs) / Number of hires made
If your company spends $10,000 on recruitment per month and hires four people, the cost per hire is $10,000 / 4 = $2,500.
For a start-up startup, a reasonable cost per hire is estimated to be between $3,000 and $5,000. A recent study indicates that the average benchmark is $4,700. If the cost is over $6,000, it makes sense to review your strategy.
To identify the most expensive steps and find ways to reduce expenses, it is essential to evaluate each stage of recruitment. If candidates decline your offer, collect feedback on the reasons for rejection and do further research on market salaries – you may be offering too little.
When you’re not hiring frequently, outsourcing recruitment can be more cost effective than managing all operational costs in-house. Compare your current recruiting expenses to the rate plans of recruiting agencies, which typically charge 15-35% of a new employee’s annual salary.