When you start a company, it's just you, maybe another founder, and a few close employees. You do all the work, and projects aren't so complex that you need a project manager.
But once you start having bigger projects and hiring more people, at what point do you need a dedicated project manager? When it hurts is too late (at least when it comes to hiring a project manager).
For instance, Matt Weinberg from Vector Media Group, one of the fastest-growing consultancies for 4 years in a row, mentions in the Bootstrapped podcast (episode 72) that his company hired their first project manager when they had more than 10 employees but wish they’d done it earlier:
“We hired our first dedicated project manager when we were like 12-13 people or something. Looking back now, it was way too late, super late. We should've done it way before. We did it because, honestly, we were dropping the ball on a lot of projects as we didn't have good project management.” - Matt Weinberg, President at Vector Media Group Inc.
At what stage is your company?
As your company starts to grow, the processes and the way you run the company completely change. Before you can grow, you need to anticipate what comes next and the challenges that each new stage brings. Then you know how to prepare, what new job positions to open, what new type of clients to pitch to, and how to handle resources.
Companies usually start out as a partnership (one or two founders) with a few employees - up to 5 people all put together. The company is specialized in one thing, like developing e-commerce websites in Magento. Hiring a project manager this early isn't profitable, taking into account a project manager costs $60/hour, doesn't generate profit, and there aren't that many clients to manage.
The company starts to have more work than it can handle, so the founders hire more developers to help with the billable hours. The number of employees is 5-9. This is the time to start looking for a project manager, so you're prepared for the next stage, where having a dedicated project manager is critical. This is your chance to learn how to work with a project manager and let go of micromanaging everything yourself.
The company gets bigger clients who keep coming back. In order to win more big projects, the company diversifies its services and starts doing other things than developing Magento websites. It becomes a full-service agency that does everything (development, design, branding, digital marketing, etc). This means more hires, a new middle management layer, and robust processes. The number of employees ranges from 10-20. If you don't have a project manager by this point, you're suffering more than you should.
By now, you have 20–50 employees, at least two project managers, an HR manager, and maybe a few more managers (account, art director, technical lead, etc.). There are more hierarchical layers, more services you provide, and a big list of clients that keep you on their retainer. Founders hardly ever code anymore; instead, they focus more time on management, finance, company brand, and participating in client pitches.
Once you're over 50 employees, you're a big consultancy that does everything and has multiple offices. By this stage, the company’s number one concern is hiring and keeping employees happy. Founders no longer deal with employees but work on company culture, strategy, market positioning, nurturing a relationship with big clients, etc.
Why it’s good to hire a project manager early
The best time to hire your first project manager is at late stage 2 when you have around 7 employees.
Maybe the project manager you hire won’t be utilized 100% but don’t worry about that. Even if paying a full-time project manager hurts your profit margin, it's worth it.
You'll successfully finish projects on time and within budget, clients will trust you more, and you’ll have a portfolio you can point to. This will all lead to more projects, more repeat businesses, and more productive employees.
You’ll also be able to give better estimates. You can estimate how many hours the project will take and multiply that with your hourly rate:
“We [Vector Media Group] can do that because we have a really strong project management, a dedicated project manager that's constantly keeping an eye on the budget, constantly keeping eye on the time and if we're going over, we can catch it early. If you don't have the ability to catch this stuff early, then it can be dangerous because then you go way over and the client isn't gonna want to pay for that.” - Matt Weinberg
Project managers are often treated as cost centers, meaning they don't directly add revenue - but that's a bad way to think about them. Yes, they cost, but they keep clients happy, which in turn leads to more projects. Plus, if you want to grow, you'll need them at some point, like it or not.
The first project manager is difficult to hire because you don't know what you're looking for, and you don't know how to delegate. But once you work it out, you can safely hire more employees and have a greater pool of billable hours.
Once you have a project manager, in order to have a maximum utilization rate, you'll start thinking about how you can hire more people, so you can justify having a project manager and keep them busy.
You'll also be more productive as you won't have to spend so much time handling clients. It will be the project manager's job to act as a shield between the team and the clients. They will play politics, so you don't have to.
If the team is behind schedule, they're the ones in the client meeting explaining why and trying to buy more time for the team. They will sit in a client meeting for 3 hours and be grilled on why a, b, and c aren't working, so the team can spend those 3 hours getting a, b, and c to work.
The right time to hire your first project manager is when you have 6-8 people on your team. Then you can first learn how to work with one and then hire more people without worrying how you’’ manage them.
Hiring a project manager a bit earlier will cost but it’s an investment you need to make if you plan on growing your company. Plus, a project manager will work on keeping your clients happy, thus getting you more projects in the long run.