Startups Can Turn to PEOs to Survive and Thrive


Businesses fail for a long list of reasons, from not having the right people to simply running out of funding. But startups, and especially the more experimental/non-traditional startups, face a unique set of challenges that can make it tough to get through the early stages.


Lean, no-nonsense business practices should be the norm for startups, and that’s wise. Spending in the beginning needs to have well-defined risk and reward. Why, then, would a startup looking to stay lean consider outsourcing several of its core responsibilities to a professional employer organization (PEO)?


We know that PEOs give businesses more time to focus on what they do best or what they need to do next -- that’s an obvious draw for a new firm that wants to make sure it survives its infancy and matures. But let’s look at several other ways PEOs help startups avoid dying an untimely death.


You’re Serious from the Start


It’s hard to demonstrate credibility in the marketplace right at the beginning. You know you’re real, but does anyone else actually believe you? Giving yourself and your first few employees access to great benefits, solid payroll, and well-defined HR certainly help give the initial buzz some legitimacy. And best of all, you’ll avoid making the amateurish mistakes (like simple payroll problems) that often plague new companies.


It Helps Keep Spending in Check


This might seem counterintuitive, but it’s as real as it gets. First, the admin fee for your PEO adds a small expense -- and every expense, even the little ones, make you realize how important sticking to your budget really is. In a roundabout way, that’s a great thing.


But perhaps the most useful part of a startup using a PEO is that it eliminates several classes of surprises. We all know that financial surprises can severely disrupt any business, and a new business is even more vulnerable.


Working with a PEO offers cheap insurance against the possibility of an error that comes at a tremendous cost -- and that insurance comes with a host of benefits that keep your business running smoothly.


When You Hit the Jackpot, You’ll Be Ready


A significant number of startups fail not because they couldn’t succeed, but because they couldn’t take full advantage of their success. If your roster of clients tripled in the next month, what would you do?


If your orders jumped from 100 a week to 1,000, would you be able to staff that growth to take advantage of the new demand before it waned? If so, just how long would that take?


Having a PEO handle much of the hiring and onboarding process means that you can make the most out of your success right when it hits and do so efficiently -- not a month or two later when the window may be closing… or already closed. Working efficiently with a PEO means that you can strike while the iron is hot, which can make all the difference for your startup’s survival.


PEO Stability Creates the Conditions for Investment


Let’s recap: You’re totally focused on what you do -- refining it, growing it, and building a team around it. You offer stable benefits with no hiccups and your employees are happy. You were able to take advantage of new opportunities in the market and provide the labor to execute them, and your books looked solid the whole way.


Startups can wane because of a lack of investment. It’s tough to attract funding, so you’ve got to lay a foundation that appeals to investors. Having a handle on all those elements will demonstrate credibility to someone with a checkbook. Investors don’t have any shortage of opportunities to consider, so it’s important to give your firm every edge it can get.


PEOs are a solid option for most small and medium-sized businesses, but they can be especially useful to startups. Sprinting out of the gate comes with a host of challenges, and succeeding in the marketplace is hard enough. Don’t you want to create a partnership that gives you the best chance to survive and grow?

Rodney Steele