lean start up
Perhaps the economy is partially to blame, perhaps its people becoming more conservative in their business policies or maybe it’s just that business owners want to start small and expand accordingly so they don’t go out of business as soon as they’ve started; for whatever the reason, there’s a growing trend among today’s start-up companies to start small and expand slowly. According to the U.S. Bureau of Labor Statistics, the average size of start-up companies was about 7.6 employees in the 1990s, which decreased slightly to 6.8 employees at the turn of the century. As of 2011, the bureau estimates that the average start-up only employs about 4.7 people. Start-up companies are much leaner, due to several factors.
Perhaps the most important factor behind start-ups starting small is the significant changes in technology that have occurred over the past 20 years. The Internet has made acquiring information fast, easy and convenient, while reducing the need for employees that were specific to certain roles before. For example, many companies have turned to cloud computing, which is the pooling of physical resources offered as a utility or service rather than a specific good. Cloud computing is fast, easy and low-maintenance, reducing the need for IT professionals to continually install software and updates on computers, as well as troubleshooting computer hardware.
That’s not to say that start-ups still won’t need IT services at some point in their tenure. In some cases, they might hire an IT professional part time. In other cases, they might outsource a professional, which leads us to our second aspect of why many start-ups are starting smaller than they ever have before. Outsourcing is where you hire a professional or a company to do a specific service for your company. It’s a much more frugal option than hiring a full-time professional, because you don’t have to pay for that employee’s health care, retirement savings or any other benefits, and you only have to use that professional, and pay them, when you need them. Chances are, you won’t need them very much, so it makes sense to outsource as opposed to hiring full-time employees and essentially paying someone to do nothing much of the time. Companies can outsource other business aspects too, such as payroll, to specialized companies.
Another reason for smaller start-ups is freelance and contract workers. Freelance workers are those who only complete work on an as-needed basis, while contract workers are typically hired to work for a company for a specified period of time, usually when a big project needs to be completed. For example, a start-up magazine might hire freelance writers to produce its content, rather than hire a professional staff. That same magazine might also contract with a design firm for a three-month or a six-month period as it determines its layout and weighs its design options.
Regardless of the reasons as to why businesses are starting small, being lean is a good thing. The fewer employees you have working for you, the more you save on taxes, medical and retirement benefits, disability benefits, not to mention the payroll itself. All of this comes out of your bottom line, which affects profit margins. Starting small speaks to the responsibility of a business. And a responsible start-up is one that takes everything into consideration to ensure that it won’t fail out of the gate.