Why Startups Inevitably Cut Corners In The Long Term

business

One of the biggest challenges a brand-new startup faces is understanding the sheer extent of all your fixed and variable costs to maintain your operations. And, regardless if you’ve done your due research beforehand, any aspiring entrepreneur will always struggle to manage and handle all the upfront costs of owning a business, which inevitably leads to cutting corners just to stay buoyant.

However, most people have the misconception that cutting corners is inherently a bad thing, but it’s actually a necessary step moving forward in the business landscape. Of course, there will be cases where cutting corners isn’t excusable, but this doesn’t apply to all cases. So, today we’ll be going over some of the areas in your business where it’s relatively safe to be more flexible and lenient with cutting back.

The Positive: Your Resilience Guarantees Survival

Firstly, you need to be realistic with your business objectives and the capacity of your operations. And, while we’d all like to invest more of the budget toward research, development, and innovation projects, everyone starts out small. Consequently, this means you have a small capital that will still need some work to do, and in this case, you can’t afford to splurge on every little detail because that will lead to bankruptcy.

  • Physical Space Is Expensive: Number one, physical business locations are expensive, and not everyone can afford an office building on their first day of operations. Sure, there’s a sense of accomplishment and fulfillment stepping inside your office building, but you don’t need that right now. You can opt to rent out an area, use remote operations, or utilize the trending coworking spaces.
  • Building Your Team: Number two, hiring experienced and professional employees comes at a high-price, and it’s a recurring payment every single month. Despite years of experience being a reliable benchmark for competence, these employees will require a higher base salary. So, we recommend building your team from the ground-up with a mix of fresh graduates looking to prove themselves and experienced ones.
  • Creative Tactics: Number three, while effective marketing and advertising are necessary to improve brand image, they also come at a price premium. With factors such as SEO and content creation, these variable costs can stack up over time and put you on the losing end. So, you might want to stick with creative guerilla tactics and build your own content in the meantime.

The Negative: Fixed Costs You Can’t Afford To Cheap Out

Secondly, there are just some aspects of a business that you can’t afford to cheap out and cut corners. In the long-term, this will only prove detrimental, and you will regret opting for the cheaper and inferior quality in the first place. So, before you decide to cut corners, weigh the potential opportunity costs of making that decision.

  • Quality Physical Assets: Number one, while certain equipment can come at a high price, it’s also for a good reason. Most of the time, the price can indicate quality, and it will guarantee a long useful life that won’t depreciate quickly. For example, company vehicles are a necessity, so you’ll need nano-ceramic paint protection and regular servicing to ensure that they stay in excellent condition.
  • Undefined System: Number two, while you can opt to cut costs in hiring and building your teams, sticking to guerilla tactics of marketing and sales can create undefined systems of inefficiency. As a result, the money you think your saving just balances out with productivity and inefficiency costs, which also prevents you from scaling that system and losing out on growth.

team of employees

Solution: Grit And Leverage

However, much like any other thing in business, it’s not all black and white. And, if you want to savor and utilize the best of both worlds, you’ll want to adhere to both grit and leverage when moving forward as a startup. For example, here are some areas in your business to reflect upon:

  • Consider Outsourcing: Outsourcing certain business operations remains an effective way of cutting costs while not jeopardizing quality. Plus, it also has the advantage of creating a diverse work culture with people from all across the world. Therefore, we don’t technically see outsourcing as cutting corners but as an alternative means of building your superstar team.
  • An Expert Accountant: In contrast, we recommend hiring an experienced and expert accountant to handle your finances and give you a run-down of your financial position. And, while their services come at a price premium, they make up for more than double that with how they can optimize costs, taxes, and forecasting the performance of your business.

Cutting Corners Isn’t Bad, Just Don’t Cut Too Much.

Overall, cutting corners in your business isn’t bad; in fact, there are plenty of cases where it’s much better to do so for startups. However, just don’t overdo it because you’ll end up damaging your future growth. Finding the golden median for your startup, and you can begin building your dream company from that point.

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