Recruitment Unit Economics for a Startup
When you are running a company, especially a growing startup, you have to think about a budget and a way to save money. Founders are usually doing things outside of their direct scope of work to reduce marketing or sales costs or use freelancers’ help.
Recruitment is not an exception. Free job boards such as Indeed, lead generation platforms (Workable, Angel.co) or even social media (LinkedIn, Facebook) are the most common tools that startups use when searching for talent. As those lead generators can bring applicants for free, they are viewed as the most affordable tools for staffing. But the true cost of hiring using a lead generation platform and screening candidates internally can exceed £11.000 per hire.
We have calculated unit economics of recruitment costs for companies using Angel.co, Linkedin and Work In Startup as those are the tools our startups-respondents were typically using. Every startup should have those numbers in mind when making a decision about what hiring strategy to choose.
Recruitment Process Timeline
First, it would be beneficial to understand how many steps each hire will take. The recruitment process can be broken down into seven key stages, all of which take more than four days, on average to complete when using in-house resources to manage.
|Recruitment step||Average amount of time spent (days)||Cost per each step at PitchMe + hiring manager||Cost per each step for lead generation platform|
|1. Writing job description||0.5||£0 (3 minutes with our Job Description Generator)||£202|
|2. Screening CVs and applications||4.77||£0 (done by PitchMe algorithm)||£1,927|
|3. Checking references||5.19||£0 (PitchMe validates skills through analysing multiple sources)||£2,096|
|4. Candidate skill testing||4.18||£0 (PitchMe validates skills through analysing multiple sources)||£1,688|
|5. Interviewing applicant||4.75||£1,919||£1,919|
|6. Selecting the candidate for hire||4.40||£1,777||£1,777|
|7. Negotiating/ job offer||4.30||£1,737||£1,737|
|Total recruitment process||28.09 days||£5,433||£11,346|
The hiring process is usually led by a CEO, CTO or a Product Owner whose salary on average is £97.000 per year (£404/day). We assumed that all 7 steps are managed internally and therefore a total cost is £11.353 and will take 28 days of time.
Calculating Recruitment Unit Economics for a Startup
Founders usually rely only on their network and ask for a referral when they need to make a hire. But it can be a long and unpredictable process, especially when time is limited or a position is too complex. Therefore external sources of leads are usually used to get more applications flow. The most common are Angel.co, Linkedin and Work In Startups. We assume that a position is going to be staffed within 1 month and 50 candidates will be screened to make 1 hire (numbers are average and based on the survey of tech startups hiring online). How would a cost per hire look for each of the tools used?
|Cost per position||External source,££||Internal process, ££||Total cost|
Package: 300 clicks required to generate 50 applicants Price: 1.50/click
Package: ‘Source’ package’ with discovery/search/filter toolsPrice: $250/month
|Work In Startups|
Package: ‘Unicorn’ with a spotlight, variety of ads and social media promotion
Package: ‘Pro’ annual subscription with boosting, sourcing, performance insights and hiring guarantee
Silver pack – £90 for 10 profiles
Bronze pack – £50 for 5 profiles
As you can see, the average cost of using an external lead generator and screening candidates internally can total £11.720 per hire. As a startup ourselves, we understand what this money means for a growing business: more money for marketing or extra few months of a runway.
How PitchMe saves 50% of the recruitment costs
When we asked startup founders how would an ideal recruitment process look for them, the majority responded that they wanted:
- good quality leads
- at least 10 pre-screened, verified and tested candidates
- dashboard easy to use and all-in-one place.
And this is why, startups hiring with PitchMe benefit from having steps 1-4 covered by the platform, so founders or hiring managers to get involved only from step 5 “Interview”. Here is a breakdown of what PitchMe saves to startups per hire:
|Time spent (days)||Cost/hire|
|Process managed internally + lead generation platform||28||£11.726|
|Process managed by PitchMe + hiring manager||14||£5.573|
|Time saved||14 days|
The overall business model of PitchMe was determined by the need of our customers in converting a volume of leads into good-quality, right-fit candidates, who are verified, tested and ranked. On average each position receives 200 applications and 1 in 14 candidates gets a job offer.
The pricing model also gives startups flexible plans to choose from. They are based on a fixed fee per position, without hidden costs and staffing guaranteed. Therefore employers save 50% of the time and 50% of the budget they would normally spend on hiring.
P.S. If you are new here, let us tell you a bit about PitchMe. We are an AI-based platform that helps candidates get matched with the best-fit job, for free. We capture a variety of skills, measure them and pitch them to employers.
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