20% of startups fail their first year. Almost a third of them fail for the same reason.
It’s not having no market for your idea. It’s not expanding too fast. It’s not even blowing your budget on a marketing campaign that doesn’t work.
It’s because they run out of cash.
When it comes to startups, cash is king. Ready access to cash is essential to keeping you head above water in that first challenging year.
Payroll and HR processes are one of the biggest overheads all startups face, regardless of their industry or type of business.
From paying staff to raising invoices from suppliers to paying taxes, good payroll allows your money to work for your allowing your startup to thrive.
Bad payroll management is a black hole for cash, costing more money the longer it is mismanaged. From fines to missed invoices to payroll mistakes, poorly managed costs much more than your time and effort.
At the centre of any successful business, large or small, is a successful and efficient payroll function. You need the right skills, you need to keep the owners of those skills engaged, and you need to structure your business in a way that is prepared for growth.
Startups face a number of external pressures from the market, the government and consumers. Any one of these pressures can easily break a startups that isn’t internally strong. That’s why it’s so important to have your house in order first, before taking on the world.
So, if you don’t want to end up as just another failed startup statistic, get your house in order. And that starts with people.
Get the right skills
The Directors of most startups end up being jacks of all trades, managing payroll, HR, marketing and sales all at once. According to a study, multitasking decreases productivity by 40%.
Recognizing your limits is what makes the difference between a startup succeeding or failing. No man is an island and no one can be an expert in everything.
Startups need to shore up their weaknesses across all departments of their business, including payroll and HR. Whether that’s through hiring a professional, seeking out software or reaching out to a dedicated third party.
Having someone on your staff who can “do the books”, process the payroll and have knowledge of your tax obligations frees up time for others to focus on running the business.
Small operations don’t always have their money working at its hardest. Effective management of payroll can ease cash flow problems and ensure long-term viability.
With so many payroll regulations and tax laws, you want to minimize the margin for error as much as possible. Improper filing and payroll entry omissions will result in tax audits, which penalize companies with hefty fines.
Keep those skills
Once you have the skills, you need to keep them. As an employee, choosing to move from an established business to a startup comes with certain risks.
Startups offer new opportunities for talented people to explore new ventures. But, if you want to retain your experts, you need to make sure that their basic employment expectations are met.
Employees trust large corporations and established brands to get payroll done right. They are businesses that employ hundreds, even thousands of people on a regular basis. They have people who know their payroll.
But startups are different. Like it or not, it’s hard to shake off the one-man-band, “this is my first day”, vibe. That’s why it’s so important to show the top talent that you have the fundamentals under control.
Employee retention begins with onboarding and is reinforced with accurate payroll. The cost of employee turnover is huge. Some recent estimates putting the price at $45,000 to $150,000 to replace an employee.
When you hire a few more employees, you might not be able to keep them if you can’t reliably and accurately pay them on time.
In the U.S. 82 million employees have experienced paycheck errors. Of those, 49% will start job hunting if they experience just two payroll errors.
Organizations with a strong onboarding process have an 82% higher new hire retention rate. The most effective onboarding programs take advantage of technology, emphasize assimilation and foster new-hire socializing.
Advanced HR tools provide on-demand training that goes beyond traditional “classroom” learning. They also provide proactive structures for learning, so employees and managers can track and record internal training success.
Combining technology with a dedicated mentor or coaching program helps further development and increase new starter assimilation into your business culture.
Assimilation means that your new hire has bought into your company culture. They feel welcome, wanted and part of something that matters. This is further emphasized through the use of social networking during the onboarding process.
Build with growth in mind
Successful startups grow fast. Real fast. Even if its unsustainable, fast growth is what startup investors want to see. From distribution to sales and HR, your internal structure needs to be flexible and scalable.
Growth leads to more growth, but if you can’t support that growth, you’ll start to run into trouble and you may end up a few squares back from Square One.
In order to manage successful sudden growth, your back office functions need to be scalable. Make sure you have internal structures and tools that allow for expansive growth, and that your outsourced providers can scale with you.
People say that startups need to focus on what they’re best that: “building their business”. But that’s not what they’re best at. Entrepreneurs have a single driving focus towards their vision. They excel at one thing and sometimes that results in something that transforms the world.
But, for every one of those starrtups who changed the world are thousand that failed. They didn’t get the right skills, keep their best talent or weren’t prepared for growth.
Don’t become another startup statistic.
Gary Webb is Marketing and Communications Director at FMP Global, the leading global provider of payroll and HR services.