Even amid the COVID-19 pandemic Americans embrace their entrepreneurial spirit with a half million new business applications taken out in May 2021.
The reality is that many of these startup ideas will never get off the drawing board with less than 10 percent of those applications resulting in businesses with paid employees.
“The Census Bureau is projecting that 35,578 new business startups with payroll tax liabilities will form within four quarters of application from all the business applications filed during May 2021,” says the U.S. Census Bureau Business Formation Statistics, May 2021, release.
The startup game is tough and not for everyone.
"If you like the comfort and safety of going to work and doing your piece of the puzzle," Elaina Herber, Ascend Hospitality Group CEO told SHRM, then launching a startup is not for you. "But if you are the type to say, 'I want to call the shots,' and you think you know how to do something better and quicker, and you have that never-satisfied feeling; if you are scrappy and find money under a rock, and people believe in your ideas," that is how you know your startup could succeed, she said.
1 in 5 Startups Will Fail Within 2 Years
For those May 2021 business applications that make it to the startup stage, it is likely that one in five will fail within the first two years according to the U.S. Bureau of Labor Statistics.
“Most entrepreneurs think they’re building the next big thing,” wrote Bram Krommenhoek in Medium. “In reality over 90 percent of them fail.”
Many startup founders have ideas, but maybe not the business know-how on how to execute them.
“Looking back, when I started my startup fresh out of university, I was extremely ignorant and had no idea what I was doing. All I knew was that I wanted to solve the problem I personally ran into: I have a brain full of ideas but no way to turn them into reality,” Krommehoek wrote.
Outsourcing to a PEO Could Save Precious Time
Alex Turnbull in “7 No-Nonsense Pieces of Startup Advice I Wish I Got When I Started” says that nothing is more precious to startup founders than time.
“You have a finite amount, and a seemingly infinite amount of tasks to accomplish in that time,” writes Turnbull.
Turnbull’s No. 5 piece of advice for startups is to “Invest in things that give you more time”. He says that startups should not be afraid to outsource services and tasks.
“It may seem “scrappy” to do all of these things rather than outsource them, but it’s not; it’s penny-wise and pound-foolish, as it robs you, your team and your customers of the time you could be spending on the more important work of improving your business,” writes Turnbull.
One smart move for startups is to rely on a Professional Employer Organization (PEO) to assist with HR, benefits, payroll, regulatory compliance, and workers’ comp.
Startups that partner with PEOs “have a significantly higher rate of survival than businesses that do not use PEOs”, according to a National Association of Professional Employer Organizations study released in May 2021.
PEOs Can Help Your Startup Attract, Retain Top Talent
Startups naturally keep a tight eye on their cash flow, but it may pay for them to use a PEO as the partnership can help attract and retain top talent.
Among the benefits of using a PEO at the startup stage:
Employee Benefits: The ability to offer employee benefits that can be found at larger companies. PEOs such as Employer Flexible can partner with top benefits carriers to give small and medium size enterprises employee benefit options that can compete with Fortune 500 companies. Compete for top talent by offering everything from:
- Life Insurance
- Long/Short Term Disability
- Medical Insurance
- Vision Coverage
- Dental Coverage
- Limited Medical Plan
- Identity Protection
- Worksite Products
- 401(k) Retirement Plans
Compensation Analysis: PEOs can help startups to determine a true market value for specific jobs including variables for industry and job location. Compensation analysis can include benchmark salary ranges for specific jobs and give hiring managers an equitable salary range when hiring. PEOs can make sure your company’s salaries and incentive packages are competitive in your marketplace.
Hiring Process: Outsourcing the hiring process can save startups on time and resources. PEOs can work with your startup every step of the way including job postings and different levels of candidate screening. PEOs can help your startup draft the right job descriptions that attract the talent you seek.
Employee Onboarding: Startups without a track record of onboarding employees may underestimate the importance. PEOs know that successful onboarding new hires can have a significant impact with Gartner research showing:
- Discretionary employee effort improved by 20 percent.
- Employee performance improved by 15 percent.
- Employees nine times less likely to leave.
HR Compliance: There are many rules and regulations that startups must understand and follow. A PEO can help make sure that your startup is not subjected to lawsuits and regulatory action. Guidance for HR compliance can be in the following areas:
- Employee Relations - handbooks and policies
- Hiring and Termination
- Risks and Safety
- Payroll and Benefits
- Talent Management
Startups that fail to outsource services and tasks in the early stages risk never fully developing to their full potential.
Contact Employer Flexible today to find out how we can bring all the services together to develop a comprehensive HR plan that is tailored to your startup’s unique needs.