The Hidden Costs of Building a Team

Hey there, Welcome back to the Agency Finance Letters!

This week we’re going to talk hiring - a topic we’ve been discussing a lot over the past few months at AgenCFO. It seems so easy until you’re sat there in your tenth interview and start questioning if you’ll ever find the right fit.

After scaling our team and working with dozens of agencies, here's what we've learned:

An Agency is built on people. That's why hiring mistakes are so expensive. We had two clients spend tens of thousands in trial hires - this is not uncommon. 

Most owners only think about salary when hiring. The reality is different.

Here's what actually impacts your bottom line:

1. The Training Period Real costs include:

• 3-6 months of negative ROI

• Your billable hours spent training

• Mistakes and rework

• Reduced productivity while training

• Project delays during onboarding

2. Infrastructure Costs Per person expenses:

• Software licenses ($50-200/month)

• Training tools and resources

3. Management Layer The expensive necessity:

• Hiring managers/team leads

• Management training

• Performance tracking tools

• Team development resources

4. Revenue Impact Short-term hits:

• Reduced client capacity during training

• Lower utilization rates

• Project timeline extensions

• Delayed new business focus

• Temporary efficiency drop

Here's the thing - you will hire the wrong person at some point in your agency. You should be able to spot the mistakes before you make them by figuring out your non-negotiables.

I've found Leila Hormozi's framework incredibly useful:

1. Competence - Don't confuse this with experience. Do they have the skills to handle daily tasks? Test this with a case study. Be strict.

2. Character - Team fit and motivation matter more than you think.

3. Communication - Do they listen? Absorb information? Can they handle deadlines or do they just say yes? Include scenario questions in interviews.

We all have to make expensive mistakes to grow, but make sure you’re avoiding easy mistakes.

Until next week,

Joey