Plan Your Recruiting Budget

Budget is a major factor for startups in just about every area. You’re typically working with limited resources and a small team, finding ways to make a little go a long way and being careful to avoid any unnecessary expenses.

This is especially important when it comes to recruitment. Startups need to be strategic and diligent here, ensuring their recruiting dollars get maximum impact. Hiring can be expensive, with lots of hidden and unexpected costs, but with the right foresight and planning, you can run a successful recruitment strategy on just about any budget.

How to plan your recruiting budget

Work out how many people you need to hire

Start by establishing how many new people you want to bring on board. This isn’t as simple as it might sound at first, since hiring needs often change and fluctuate over time and are subject to a number of unpredictable factors. This is where creating a dynamic hiring plan is important.

For example, consider that some of your existing team members may leave the company and need to be replaced. Or you may find that your needs increase as time goes on and your business grows. It’s important to build some flexibility into your hiring estimates, and best to lean towards overestimating rather than underestimating how many people you’ll need to bring on board.

The best way to reach a roughly accurate figure is to spend time talking to various people in the company. Each department will have the best idea of how many new people they need — look at things like skills gaps, areas projected to grow, and your hiring history. You may also need to consider prioritizing the roles you need the most to use your budget as wisely as possible.

Work out major recruiting expenses

Once you have a good idea of how many people you’re aiming to hire, it’s time to look at where you will need to spend your money. Here are some of the most common expenses for recruiting teams:

Job boards and job postings on websites like LinkedIn, Indeed, and AngelList. Often, you’ll pay a fee to list your job vacancy on these platforms for a set amount of time. Costs here can range a lot, with some platforms being free and others charging commission-like rates, for example up to 15% of a hired employee’s first-year salary.

Recruitment events at places like college campuses, industry trade shows, job fairs, and conferences. Here you’ll need to consider things like transport, venue rental, materials, and possibly accommodation. Costs can run high here — if you decide to host your own career fair, for example, you could be paying upwards of $27,000.

Employee referral programs within your own company. Giving financial incentives like a referral bonus to employees when they refer a successful candidate is a great way to connect with high-value prospects, but costs can add up over time.

Interview costs. This can cover a wide range of expenses like hiring a venue, paying for candidates’ travel costs, refreshments, equipment, and accommodation.

Onboarding. The expenses don’t stop after the candidate is hired — you’ll also need to invest in an onboarding process to bring them into the company and give them all the information and support they need. According to one study by SHRM, the average cost of bringing a new employee on board is $4,100.

External recruiters. Often you’ll need to work with recruitment consultants and teams from recruiting agencies outside your company to make up for any gaps. External recruiters typically charge 20 - 50% of a new hire’s first-year salary in fees, on top of any agency fees.

Your own recruiters. In-house recruiters and hiring managers can be more cost-effective than using outside help, but you’ll need to pay their salaries which typically range between $35,000 and $75,000 according to Glassdoor averages.

Marketing costs — advertising your company across various platforms like social media, paid ads, and email all costs money and you may also choose to work with an external marketing agency

Factor in recruiting technology

One major recruiting cost for startups today is the money you need to spend on recruiting tools and other technology (LINK TO ARTICLE ON RECRUITING TECH). This covers a wide range of expenses from video interview software to AI tools and an applicant tracking system (ATS).

Depending on your needs, ATS costs can vary dramatically. Gem is free for teams of under 15; AshbyHQ starts at $250/month, and enterprise ATS solutions can cost thousands a month.

Calculate your cost-per-hire

Once you’ve landed on all of the costs above, divide them by the total number of roles you need to fill over the next year. This will help you predict exactly how much you’ll be spending on hiring.

Cost per hire = (Cost of job boards + in-house recruiters + external recruiters + technology costs) / Total # of hires

You can then use this cost-per-hire number to forecast costs for your hiring over the next year.

Wondering how your CPH stacks up? According to Workable CFO Lacey Brandt, companies can expect to spend an average of $3,000 - $5,000 per hire on recruiting costs.

Track and adjust as needed

Once you have taken the time to establish a rough hiring budget, it’s important to keep a close eye on the hiring process so you can make any changes needed, ensure everything is going as planned and avoid any unexpected surprises or setbacks.

Focus on metrics like cost-per-hire, time-to-hire, and interview-to-hire ratio. All these will give you a good idea of how your recruitment process is going, how much you’re spending, and how efficiently and effectively you’re using your current budget and resources. We’ve already covered cost-per-hire — here’s what the others mean:

• Time-to-hire measures the total time between the moment a candidate applies to the moment they accept a new job. Average time-to-hire varies a lot between industries — for example, the global average for logistics and supply chain roles is around 12 days, while for travel positions is 33. The global average for tech roles is 62 days.

• Interview-to-hire ratio refers to the percentage of interviewed candidates that end up working for your company. A good interview-to-hire ratio to aim for is 3:1, or 33%, but again this can vary greatly between positions and industries.

Use your recruiting budget to tap into your network

One valuable use of your budget is network recruiting technology like that provided by The Swarm. One advantage of our network-based approach to hiring is that it often works out significantly cheaper than other methods that focus on inbound and outbound recruiting. A small investment in the right technology can save you substantial amounts in other areas.

Harness the power of networks to make your recruiting more efficient. Start free at theswarm.com