Headcount Planning for Startups: Hiring Budget Guide
People are your biggest expense and your most important investment. Here's how to plan headcount strategically without blowing your runway.
The 60-80% Rule
People costs typically account for 60-80% of a startup's total expenses. Get headcount planning wrong, and your entire budget is off track.
Every hire you make affects your runway. At a typical startup, a single engineering hire costs $15-20K per month fully loaded. That's 2-3 months of runway for every year you employ them.
Yet most founders wing it on headcount planning. They hire when they feel pain, without modeling the financial impact. This leads to either:
- Hiring too fast: Burning through runway with a bloated team
- Hiring too slow: Missing growth opportunities because you're understaffed
This guide will help you build a headcount plan that balances growth ambition with financial discipline. For broader budgeting context, see our complete guide to startup budgeting.
Why Headcount Planning Matters
Headcount planning isn't just about budgeting—it's about strategic resource allocation. A good plan helps you:
Protect Runway
Know exactly how each hire affects your cash position. Avoid the "surprise" of running out of money.
Hire Strategically
Prioritize roles that drive the most impact. Sequence hires to match business needs.
Communicate to Investors
Board members expect to see your hiring plan. A clear plan builds confidence.
Prepare for Recruiting
Know what roles you're hiring for and when, so recruiting starts on time.
Understanding Fully-Loaded Cost
The biggest mistake in headcount planning is confusing salary with total cost. The true cost of an employee includes much more than their base pay.
Fully-Loaded Cost Calculator
Example: Senior Software Engineer ($150,000 base salary)
The Cost Multiplier
As a rule of thumb, multiply base salary by 1.25-1.35 to get ongoing fully-loaded cost. Add recruiting fees and equipment for first-year cost.
Key Insight: A $150K salary hire actually costs $175-190K per year ongoing, and $200-220K in the first year with recruiting fees. Many founders underestimate this by 30%+.
The Headcount Planning Process
Here's a systematic approach to building your headcount plan:
Document Current State
List every current employee with:
- • Name and role
- • Department/team
- • Base salary
- • Start date
- • Fully-loaded monthly cost
Identify Gaps and Needs
Work with department heads to identify:
- • Roles needed to hit goals
- • Backfills for expected departures
- • Contractor-to-FTE conversions
- • Stretch roles (nice-to-have)
Stack Rank Priorities
Not all hires are equally important. Force rank them:
- • Critical: Can't achieve goals without this role
- • Important: Significantly accelerates progress
- • Nice-to-have: Would be helpful but not essential
Cost Each Role
For each planned hire, estimate:
- • Target salary (use market data)
- • Fully-loaded cost multiplier
- • Recruiting costs
- • Equipment and setup costs
Set Target Start Dates
For each hire, set a realistic start date considering:
- • When you need them (business need)
- • When you can afford them (budget)
- • How long it will take to hire (recruiting timeline)
Test Against Runway
Model the plan against your runway target. If it doesn't fit:
- • Delay lower-priority hires
- • Reduce target compensation
- • Cut from other budget areas
- • Plan to raise additional capital
Salary Benchmarking
You need market data to set competitive salaries without overpaying. Here are resources for startup salary benchmarking:
Free Resources
- • Levels.fyi (tech roles)
- • Glassdoor salary data
- • LinkedIn salary insights
- • Pave (startup compensation)
Paid Resources
- • Carta Total Comp
- • Radford surveys
- • Option Impact
- • Compensation consultants
Startup Salary Reality Check
Startups typically pay 10-20% below big tech for base salary, but make up for it with equity. Your total compensation package matters more than base alone.
Sample Salary Ranges (2024, US)
| Role | Low | Mid | High |
|---|---|---|---|
| Software Engineer | $120K | $150K | $180K |
| Senior Engineer | $150K | $180K | $220K |
| Product Manager | $130K | $160K | $200K |
| Account Executive | $70K | $90K | $120K |
| Designer | $100K | $130K | $160K |
| Customer Success | $60K | $80K | $100K |
Base salary only. Ranges vary significantly by location, company stage, and funding.
Realistic Hiring Timelines
One of the most common budgeting mistakes is assuming you can hire faster than reality allows. Here's what hiring actually takes:
| Role Type | Optimistic | Realistic | Pessimistic |
|---|---|---|---|
| Junior role | 6 weeks | 8-10 weeks | 12 weeks |
| Mid-level role | 8 weeks | 10-14 weeks | 16 weeks |
| Senior IC | 10 weeks | 12-16 weeks | 20 weeks |
| Manager | 12 weeks | 14-18 weeks | 24 weeks |
| Executive | 16 weeks | 20-26 weeks | 32+ weeks |
Time from "decision to hire" to "start date". Includes JD writing, sourcing, interviewing, offer negotiation, and notice period.
Planning Implication
If you need someone to start in Q2, you should begin recruiting in Q4 of the prior year. Back-calculate from your target start date to determine when to begin the search.
Contingency Planning
Your headcount plan won't execute perfectly. Build in contingencies:
Departure Buffer
Plan for 10-15% annual turnover. If you have 10 employees, expect 1-2 departures per year. Budget for backfill recruiting costs and the productivity gap during transitions.
Hiring Slip Buffer
If a hire slips by 2 months, your burn is lower than planned for those months. This can actually help runway, but may hurt execution. Track slip as a metric.
Contingent Roles
Identify "stretch" hires that you'll make if revenue exceeds plan or you raise additional funding. Keep these ready to pull the trigger if conditions allow.
Pro Tip: Build your plan with some slack. If you budget for 6 hires and only make 5, you've extended runway. If you budget for 5 and need 6, you're scrambling.
Common Headcount Planning Mistakes
Using Salary Instead of Fully-Loaded Cost
A $150K hire costs $185-210K. Using salary alone means you'll be 20-30% over budget.
Unrealistic Hiring Timelines
"We'll hire 3 engineers by March" sounds great in January. Reality: most roles take 3-4 months to fill.
Not Planning for Departures
People leave. A surprise departure means unplanned recruiting costs and productivity loss.
Hiring Ahead of Revenue
"We'll need this role when we scale" often leads to overhead before you can afford it. Hire just-in-time, not just-in-case.
Not Aligning With Budget Constraints
The wish list of hires often exceeds what runway allows. Prioritize ruthlessly based on impact.
Key Takeaways
- 1People costs are 60-80% of your budget—get this right
- 2Use fully-loaded cost (salary × 1.25-1.35), not base salary
- 3Senior roles take 3-6 months to fill—plan accordingly
- 4Stack rank hires and cut from the bottom to fit runway
- 5Build in buffers for departures and hiring slips
Need Help With Headcount Planning?
Eagle Rock CFO helps seed and Series A startups build hiring plans that balance growth ambitions with financial discipline. Get the clarity you need to hire confidently.
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