By Jared Weitz, founder & CEO of United Capital Source Inc.

You hear the story all the time: A company started with nothing and is now a multi-million dollar sensation. This has happened to many successful tech startups that, just a few years or months prior, seemed to be going nowhere and taking their employees with them. But not every company that starts this way ends up achieving this level of success. The CEOs might be incredibly driven and intelligent. But one major obstacle stands in their way: failure to recruit and maintain loyal team members.

In my opinion, one of the worst side effects of the startup wave is the normalization of insufficient employee resources. The success of the aforementioned companies gave aspiring entrepreneurs the impression that early employees would be content with meager accommodations. But this is no longer the case. Here are three common characteristics of early-stage startups that employees have ceased putting up with:

1. Lack of Legitimacy

It’s hard to put all of your effort into a company that doesn’t feel like a “real” company. Early employees might tolerate a lack of benefits, business cards or up-to-date equipment, but only for so long. It doesn’t matter how much money the company is making or how big your clients are. Until the company attains true legitimacy, its days will be numbered.

For many employees, this is a personal matter. Odds are, their friends’ companies have all the components of a legitimate operation. Why weren’t they as lucky? The first answer that comes to mind might be that their boss just doesn’t care about employees as much as the company’s revenue.

As the CEO of an alternative business financing firm, I sometimes work with companies that are just six months old. Though my primary goal is helping clients grow their operations, revenue is far from the only factor I consider. I might advise the leader of a young business to ask vital team members if they feel secure in their positions; their responses might be a surprise. Some leaders of young businesses might even benefit from prioritizing legitimacy over financial gains once a solid, revenue-generating foundation has been established.

2. Lack of Mobility

Early employees of small businesses are typically given high positions -- and rightfully so. They aren’t concerned about being promoted anytime soon because they can’t go much higher in rank. But this poses a danger to company culture as the company expands. These early employees might assume that because they weren’t concerned about being promoted, new employees will feel the same way.

This is not an excuse to take employee mobility out of the equation. Another characteristic of legitimate companies is the knowledge that after a certain period of time, employees are eligible for a promotion or raise. Before scouting for new employees, young businesses should consider how they will reward those who stay with the company.

3. Lack of Proper Training Programs

It’s common for employees of young businesses to wear a number of hats. When a new employee is brought on board, for example, high-level employees decide which one of them has enough time to wear the “training” hat. The company does not have an official staff member whose primary responsibility is training new employees.

In reality, however, no one has enough time on his or her hands to devote sufficient effort to this crucial process. As a result, the new employee does not feel comfortable asking too many questions at the risk of annoying superiors. In the new employee’s eyes, the only way to succeed at this company is to learn everything themselves.

My clients are often advised to seek small business loans before increasing staff. This is because the time it takes to train new employees has the potential to put a decent dent in productivity, and having to pay off debt for a couple of months is nowhere near as burdensome as paying salaries for new employees who are unable to do their jobs effectively.

Not every young business should take out a small business loan whenever they increase staff, but they should be realistic about the amount of time that needs to be devoted to training. If the company is unable to sacrifice that amount, then maybe it isn’t the right time to hire.

Even the most loyal workers need security.

While new employees have likely heard their fair share of rags-to-riches stories, they are also aware that there’s no guarantee that the latter part of that equation will be achieved. They need more security to believe that they are in for the long haul at their new company.

Jared Weitz is founder & CEO of United Capital Source Inc.

Published on: Dec 6, 2018