Should Your Marketing Team Be W2 Employees or Contractors?

Strategizing Your Team Structure

Author

Nate Smoyer
June 27, 2024

Choosing between Hiring W2 Employees and Contractors in Early-Stage Startups

A few of my previous articles discuss the structure of your marketing team. Specifically, my piece, “Hire Builders Not Task Doers” focuses exclusively on this topic. I make the argument in that article primarily to build an internal team (and I still believe that to be the best, long-term solution for your marketing needs), but at the same time, I am now working with startups as a contract, fractional head of strategy or head of marketing.

This article will focus on some of the important aspects when hiring marketing talent early on.

Comparison: W2 Employees vs. Contractors

An important decision for you’ll make for your startup is whether to build your marketing team with W2 employees or to rely on contracted talent. This decision is more than a simple matter of human resources and cost issue—it's a strategic choice that impacts your company’s culture, speed to growth, and agility.

1. Implications of Hiring W2 Employees

Choosing to hire W2 employees early on is a significant commitment. It requires a thorough hiring process designed not only to attract talent but also to filter out candidates who may not align with your startup’s vision and pace. Personally, I think your earliest marketing hires must be made correctly or you’ll burn valuable time. Here’s why getting these hires correct is crucial:

  • Long-term investment: W2 employees are part of your core team and their success is intertwined with the company’s success. It's essential to hire individuals who are more than just skilled; they need to be versatile, adaptable, and ready to take on the challenges of a dynamic startup environment.

  • Cultural fit: Early employees and contractors are alike in that they’ll both likely hop from one project to another. However, your early employees will also shape your company's culture. You’ll need to find talent who are builders at heart—those who can contribute to multiple areas of the business and drive it forward.

2. Considering Employee Tenure and Turnover

It's important to recognize that employee tenure at startups, particularly those that are VC-backed or pre-IPO, can be relatively short. Statistics show that early employees often transition as the company grows and evolves, which can lead to significant turnover.

Consider the following:

  • Anticipating turnover: The decision to hire W2 employees early should account for potential turnover. This doesn’t just involve the cost of recruiting and training but also managing the turnover without losing momentum.

3. Balancing Contractors and W2 Employees

Even if you lean toward contracting to keep costs flexible, some roles within your startup will still need to be filled by W2 employees, particularly those in management or core functions. Here are key considerations:

  • Management needs: Contractors might bring specific skills for short-term projects, but managing them effectively usually requires dedicated oversight from W2 employees who understand your company's bigger picture.

  • Investment in success: Contractors may not have as much vested interest in your company’s long-term success as W2 employees. Ensuring that those managing contractors are invested in and aligned with your startup's goals is crucial.

4. Building an Effective Marketing Team

As a fractional strategist and head of marketing, I advocate for a mixed approach when it comes to assembling a marketing team. The blend of W2 employees and contractors can optimize both operational efficiency and market responsiveness:

  • Core vs. Peripheral: Identify which roles are core to your marketing strategy—these are ideally your W2 hires. They will maintain continuity and brand consistency. For specialized or peak-period projects, supplementing with contractors can bring in fresh expertise and agility without the long-term overhead.

  • Speed vs. Stability: Contractors can rapidly scale up their capabilities without the long-term commitment, providing flexibility to pivot as market demands change. However, the stability and deep market understanding of W2 employees can be invaluable, especially in navigating the complex and competitive landscape of real estate technology. I advise that once you determine an area of focus is worth more investment or multiple dedicated people, to bring the management and strategy of those roles in-house and build around those key hires.

The decision between hiring W2 employees and using contractors is not a one-size-fits-all and varies significantly based on your startup's current stage, funding, strategic goals, and industry conditions. You will need to be flexible with your team’s structure and may have to make big changes from time to time.

While contracting offers flexibility and specialized expertise without long-term commitments, hiring W2 employees fosters stability, culture, and a dedicated team aligned with your startup’s long-term vision.

For further reading on hiring, I highly recommend Chapter 3 of High Growth Playbook by Elad Gil.

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