How Hiring Employees Impacts Unit Economics

When considering unit economics, Customer Acquisition Cost (CAC) and Customer Lifetime Value (LTV) should be considered first and foremost. But there's still one important factor that often gets overlooked: hiring employees. Every unfilled position, every rushed hire, and every poor fit can undermine team dynamics and the company’s financial model.

In this article, we'll look at how hiring mistakes affect team performance, the cost of hiring, and the product's profitability.

hy Hiring Shouldn’t Be Considered a Support Function

Some companies still treat hiring as a secondary function. They think, “We’ll hire when we need to; meanwhile, marketing and sales will improve unit economics.” In reality, poorly timed or ad-hoc hiring almost always hurts both the numbers and the processes.

Let's say a company has a job opening. Here's what might happen:

- The job opening remains unfilled for months, with tasks being redistributed within the team in the meantime. This results in the pace of work slowing down, employees' workloads increasing, and errors and downtime appearing.

- A decision's made to fill a job opening as quickly as possible by hiring someone who's "fine". Six months later, that employee leaves, and the turnover starts to harm the brand.

- The company makes a generous offer to a candidate without understanding the new hire's motivation. Three months later, the employee gets burned out and stops delivering results. The team has to shift to cover the employee's area of ​​responsibility.

Hiring costs include more than just the recruiter's salary. They also include the team's time, downtime, declines in product quality, and lost opportunities.

What the Numbers Say: Real Losses from Hiring Mistakes

While reports usually calculate salaries and bonuses, real losses often remain under the surface. However, research shows that mistakes in hiring directly affect the budget and the team. The specifics are below:

On average, companies lose 30% of an annual salary on a single bad hire. This includes onboarding costs, lost productivity, and reputational risks. (Source: U.S. Department of Labor)

Accounting for lost productivity, time, and customers, replacing one employee can cost up to two annual salaries. When a person leaves, the team loses time redistributing tasks and training a new hire, while the business loses focus and customers. (Source: SHRM)

Poor recruiting costs businesses $550 billion a year. This includes losses from toxic hires, decreased engagement, turnover, and project failures. (Source: Gallup)

All these losses can be avoided by including hiring in unit economics calculations, just as is done with marketing, product, or sales.

How to Integrate Hiring into Unit Economics: Tips from match

At match, we work with digital and tech teams and see real-world cases of businesses operating more stably when hiring is considered at the planning stage of the growth strategy. Here's what you should do:

Calculate CAC and LTV while including real hiring costs. Include the costs of looking for candidates, onboarding new hires, and potential severance pay in the formula to get more accurate unit economics.

Calculate the cost of downtime. Every unfilled position means delays in tasks, team overload, and lost revenue. Sometimes, it's more profitable to invest in quick hiring through partners than to waste months searching.

Add an HR line to key products' growth models. If you're expanding your team, consider both the costs of development and finding the right people.

Factor in salaries, as well as downtime, training, and personnel risks. Mistakes in hiring, demotivation, and turnover are also important numbers. They just don't make it into reports.

Involve HR partners at the planning stage for new products and scaling teams. This will save a lot of time and money.

Write to us if you want to integrate hiring into product growth and unit economics so you can do more than just "fill an opening". At match, we hire specialists for business tasks and help you grow without personnel losses.