Recruitment Unit Economics for a Startup

When you are running a company especially a growing startup, you have to think about 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 freelancer’s 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 most common tools that startups use when searching a talent. As those lead generators can bring applicants for free, they are viewed as the most affordable tools for staffing. But a true cost of hiring using a lead generation platform and screening candidates internally can reach £11.720 per hire.

We have calculated a unit economics of recruitment costs for companies using Workable, Angel.co, Linkedin and Co-Hire as those are the tools our startups-respondents were typically using.  Every startup should have those numbers in mind when making a decision 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 own in-house resources to manage.

Recruitment step	Average amount of time spent (days)
1. Writing job description	0.5
2. Screening CVs and applications	4.77
3. Checking references	5.19
4. Candidate skill testing	4.18
5. Interviewing applicant	4.75
6. Selecting the candidate for hire	4.40
7. Negotiating/ job offer	4.30
Total recruitment process	28.09 days

Hiring process is usually led by a CEO, CTO or a Product Owner whose salary is 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 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, Workable, Co-Hire and Linkedin. 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
LinkedIn Package: 300 clicks required to generate 50 applicants Price: 1.50/click	450	11.353	£11.803
Angel.co  Package: ‘Source’ package’ with discovery/search/filter tools)Price: $200/month	154	11.353	£11.507
Workable  Price: $99/month	76.23	11.353	£11.429
Co-Hire  Package: £789/month	789	11.353	£12.142

As you can see, an average cost of using an external lead generator and screening candidates internally will total in £11.720 per hire. As a startup ourselves, we understand what these money mean 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, 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 get involved only from the 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	£11.720
Process managed by PitchMe + hiring manager	14	£5.638
Time saved	14 days
Money saved		£5.714

Overall business model of PitchMe was determined by the need of our customers in converting a volume of leads into a 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 a flexible plans to choose from. But 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 to get matched with the best-fit job, for free. We capture variety of skills, measure them and pitch to employers.