So, the next thing we're going to talk about is the staffing plan.
So, usually, when I ask people what the most expensive part of a start-up is.
People will say,
well it’s gotta to be the equipment you buy, or the building that you lease.
But the reality is most of the cost that you are going to be
encountering in your start up are actually in the form of people.
so, coming up with an accurate staffing plan is critical.
So the most important thing you need to know before you start building your
staffing plan is what your operating plan is.
So understanding what work you're going to need to do when,
and who is going to need to do that work, is the key input to a staffing plan.
At the end of it, you're going to have a table that outlines when to hire employees
and roughly how big your company will actually be.
Let's take a look at a sample company plan here.
So this is an example of a catheter company plan.
The employee plan and basically you can see that in the, on the left,
we have broken the organization up into various different types of employees.
Across the top, we have the quarters or
the time period in which we would need to hire those employees.
So, what you want to do is, I like to put my catheter, you know,
my operating plan and my employee plan on the same page
because that way I can very quickly look up and say.
Let me see.
I was planning in doing initial catheter prototyping in queue one.
Well I better have some catheter engineers in queue one, and
you can imagine going all the way through the entire plan and
figuring out exactly when all of those people need to be involved.
So, in this sample model the blue numbers represent assumptions,
things that can be changed, and the black represents just basic
modeling information, things that we don't change.
So, what you want to do is construct your operating plan, and go through, and
build your employee staffing plan as a result of that.
So, if you look at our example company here in the beginning
this company is mostly technical people
right if you look here in the first couple of years what you see is
you got a lot of engineers floating around you've got a clinical advisers over here.
You've got a manager that kind of manages the whole thing that's sort
of the early phase of this company if you look
out in later years what you see and this is very common is that the commercial team
whether that's the marketing folks, or the sales force.
Those guys really start to take over the business.
They become a much more integral part of the business as you get further out.
[COUGH] When we create these plans we look for something called comps, comparables,
and to, and we often construct ratios to get a sense of how often or
how things are lining up in our plan.
So for example,
I've created this analysis section down here at the bottom of the plan.
One of the multiples that I always like to look
at is the SGNA to RND multiple and what that means is I'm basically dividing.
The number of RND guys into the number of SG&A or selling general administrative
resources, and in the beginning, not surprisingly, this ratio is less than one.
This is, this makes a lot of sense,
because the company is mostly technical folks.
Out at the end, what you can see is the ratio gets up above three, and a good
rule of thumb that many people use when they look at medical device startups is,
the number of SG&A to R&D, team members.
When the company is fully commercial.
Should be in the two and a half to three and a half range.
So when you build your models, you should be shooting for a similar ratio.
You can construct all sorts of other ratios along the way,
like the number of units per assembler.
So on this particular model we've decided to that we will be actually
building our own product, and to do that we have this group,
we have this group called Manufacturing Assemblers.
So as our revenue goes up.
We would expect the number of manufacturing assemblers that
we need to scale appropriately.
What you want to do is construct a ratio that says here's the number of products
that I believe I will sell and divide the number of assemblers into that product
to see, to give yourself the confidence that your assumptions make sense.
So, that's how I construct a staffing plan in a particular startup company.
So, when you look at this sample model I've coded this in
a particular way to help you understand how the model works.
The black cells are either formulas or data that is not meant to be changed.
The blue cells all represent inputs.
So, when you create your own particular model, you can vary the inputs,
based on your particular business, by changing the cells in blue.
So people often ask me where I get these particular ratios, and
what I would say is the most helpful person to talk to about a financial model
is somebody like a Chief Financial Officer of a startup company, and so
the idea if I were building this and trying to be as accurate as possible.
I would want to go ahead and find somebody that’s built one of these before.
They’re going to have all of their own rules and tips and
tricks to make sure that your plain is realistic, because again at the end of
the day, you’re going to to be using this information of figure out how
much money you need to raise, and we want that to be as accurate as possible.