This post is part of an exclusive session that I deliver monthly to our Zentrepreneur tribe – outstanding entrepreneurs that get together to share ideas and learnings from their businesses. So basically I collect questions and answer to these in a webinar. This post is a transcription of one of the topics we talked about last month.  (learn more about zentrepreneur here)

Very exclusive content that can easily be applied to your business.

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Mindvalley - Team

The first big question – and we got this several times from people:

How to know when to hire and how do I make hiring “safe”?

The way I like to teach is to create a process and system. I apply this in my life and in my businesses. The cool thing about processes and systems is they are easily replicable. So the method that I use to hire, because it’s a concrete system, it’s a thought process that any business can apply, and you’re going to get similar results.

Here’s how I started hiring when our business was about $500,000 in annual revenue. Right now, this method works so well for me that no matter what business I start, I use this model to hire. I call it the Fill in the Gap model.

Fill in the Gap model: How it Works

You start by identifying your talent gaps. You want to project yourself about 6 months down the road. So let’s say I just started out Mindvalley, right? I project myself 6 months down the road, or 1 year – whatever you feel you can conceivably visualize.

Let’s say you’re a solo entrepreneur right now and, 6 months down the road, you’re really bullish because sales are going well and you realize this is what your business structure might have to look like.

You’d have a CEO, which would probably be you, a Marketing Head; under the Marketing Head, you’d have a Traffic Buyer and a Launch Manager. You’d have a Customer Service Head, and under that Customer Service Head, you’d have a Customer Service Agent 1 and a Customer Service Agent 2. Then you’d have a Web Developer, who has a Designer under him.

org chart 1.2

For now, don’t worry about budget; don’t worry about how you’re going to find these people. Just ask yourself, if you had funding and you knew revenue was going to sustain itself, what would that ideal structure look like?

So that’s what I would’ve come up with when I was at about $500,000 and was doing this solo. Those were the different fields or the different roles that had to be filled.

When I first started, by the time we hit about $500k I still refused to hire. But when we hit $1 million, I realized I was wasting so much time doing customer support, I needed to start hiring.

Now the next thing you do is, based on your current team, you decide who’s going to be doing what.   Let’s say mine was a three person team.

So my first employee was – let’s say her name was Shelly. This is how my structure would have changed: I would still be the CEO, but I’m also filling in the role of Marketing Head, Traffic Buyer, and Launch Manager.

Org Chart 2

 

Shelly is Customer Service, and she’s also filling the role of the Agent. That means she’s managing the Customer Service department, but also doing the one-on-one communication. Maybe Agent 1 did email, Agent 2 did Facebook. She was doing both. Matt was our Web Developer, but he also did design, so he filled in both roles.

So by structuring a flowchart like this, an organizational plan, I knew exactly who to hire.

Now let’s say I had a little bit more money and I wanted to invest more in hiring. What happens next? Well, I would look at the positions and I would see which position I could fill would give the maximum leverage to the business. Now, that position is typically going to be the position that your highest paid employee is working on.

Guess what? Your highest paid employee in this scenario is probably you, because given what your time is worth, unless you were a genuine traffic expert, you don’t want to waste time figuring that out.

What I did next was I hired Tom, who, as you can see in the flowchart, Tom was the guy who was my traffic Buyer. I hired Tom to buy traffic because I didn’t want to have to figure out Google and Facebook advertising on my own.

Org Chart 3

 

So you start with a make-believe structure and you recognize that when you first start filling in the gaps, it’s okay for one person to be filling in multiple roles, but you need to grow by asking yourself:

“What is the position that if I could replace, would create maximum leverage for my business?”

Now, to know this, you must know your hourly rate. Like I said, typically the circle you’re going to be replacing is you.

Defining Your Hourly Rate

Here’s an example. When I first started out, I was doing customer support. As our business exceeded about $500,000, I logged my hours and figured out that I was doing customer support for about 4 hours a day. I knew my hourly rate; I was making, at that time, $50 bucks an hour on the business. That was my profit. $50 bucks an hour. It doesn’t sound like much, but look, when you’re starting out in Starbucks, that’s some pretty good money.

So I was doing $50 bucks an hour on average if I was doing marketing or managing our ad campaigns or doing customer support. But I asked myself, “What am I genuinely good at?” And to me, that was business growth and marketing.

The second question I asked myself was, “which of these things could I replace at way less than $50 bucks an hour so I create a marginal saving?” I did some research and I found that I could hire a customer support person for about $20 bucks an hour, and that’s what I did. I hired Shelly for $20 bucks an hour.

Now, before, I was actually doing customer support myself, but it was costing me something. It was costing me $50 an hour. I could’ve been spending that time on marketing. By hiring Shelly, as you can see, I got to save up my time, which I could then put into marketing, which grew the business, and thus grew my hourly rate from $50 to $100 bucks.

What do you think I did next? I looked at what task I could do that I was doing right now for $100 bucks an hour that I could give on to someone who would be at a marginally lower rate. Well, that was traffic buying. My time I knew was worth $100 bucks an hour; I knew I could hire a good, competent traffic buyer for $40 bucks an hour. Great, I just saved $60 bucks per hour. I put that back in my business, and my hourly rate goes up.

Do you see how it works?

That’s really all I’ve been doing, and now I have 170 employees. But the same philosophy, the same model applies. I look at opportunities where I’m wasting time doing stuff that I know I can outsource for lower than my hourly rate, and then I find that person.

My hourly rate right now is in the thousands. I will not take an interview, I will not do lunch with someone, unless I know that it’s going to create a relationship that’s going to generate my hourly rate.  My hourly rate right now, if I had to peg it down – like I wouldn’t give an hour-long speech for anything less than $10k. I wouldn’t get on a consultation call unless I was paid about $3 grant an hour. That’s about my hourly rate.

I learned this technique, by the way, from Alex Mandossian, so I want to give him credit for that. It has served me for a long, long, long time.

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