Many startups -- especially those that hope to attract investment capital -- track, report, and hope to show progress through data, metrics, and numbers. Customer acquisition costs. Churn rate. Margins. Inventory levels and costs. The list goes on and on.
Which, of course, makes sense: increased profits, increased revenues, an expanding customer base are all numbers that tell the underlying story of the health and growth of a business.
But one number does not, even though plenty of small businesses report it as a way to tell the story of their startup's success:
While people matter -- ideas are great, but people are everything in a startup -- the trend is to hire tons of people as quickly as possible, often well in advance of need, under the assumption that the prospects of a startup can be judged by the rate of employee hiring.
Rising headcount? Your startup must be doing well. Rapidly rising headcount? Your startup must be on track for unicorn status.
I know of at least one startup that proudly posted charts showing the increase in employee headcount on a monthly basis. But while having more employees may be correlated with business success, having more employees does not cause business success.
Instagram had 13 employees when it was bought by Facebook for $1 billion. WhatsApp had 55 employees when it was acquired by Facebook for around $19 billion. Clearly having a huge number of employees was no impediment to those company's success.
That's generally true for many tech companies. Apple generates around $1.8 million in revenue per employee. Alphabet generates around $1.4 million in revenue per employee. Automation allows many companies to keep headcounts low while still providing outstanding products and services to their customers.
And generating massive revenues.
How many people you have signals nothing about the health, and prospects, of your business. Satisfied customers matter. Innovation matters. Keeping costs low and revenues high matters. Profit matters.
Only hire people when you need them -- in fact, a little past when you need them. Smaller teams are much more nimble. Smaller teams feel much greater ownership. Smaller teams allow employees to branch out, to take on a variety of responsibilities, to learn and grow and drive innovation and create new products and find creative ways to overcome challenges and solve customer problems.
Don't judge your company -- or yourself -- based on how many employees you have. Judge your company -- and your ability to spot talent -- on the quality of employees you have. Get the right people on your bus, and then work to get them in the right seats.
And when you think you need more help, instead of hiring, look hard for ways to automate certain functions instead of adding people.
Once you have key systems in place, increased sales usually result in greater workload, especially for service functions. Work hard to determine why customers need help and fix those issues. Streamline processes. Make systems more intuitive.
It's tempting to throw money at problems. It's also easy to hire employees to throw at problems. Before you add employees, determine the return on that investment. It doesn't matter how many employees you have.
What does matter is building a business that generates revenues and profits and gives the employees you have plenty of opportunities learn, to solve challenging problems, to feel engaged and fulfilled, and to grow their careers. That's what will ensure that your business grows, too.