The official blog of Abacus Group — a place to share our knowledge and thoughts on trends in recruiting

April 17, 2018

Twenty-Three Percent of Startups Fail Due to Recruitment Shortcomings

According to findings made by CB Insights, 23% of startups fail based on recruitment shortcomings. Unsurprisingly, 42% of startups fail due to the lack of market demand for the product and 29% fail due to running out of money. What is concerning, however, is the preventability of closure due to recruitment issues.

As the co-founder and CEO of the now sold Standout Jobs, Ben Yoskovitz wrote in a postmortem analysis of the company, “No road to startup success is without big, massive road bumps. It’s called a rollercoaster for a reason.” There are risks and challenges in founding and growing a startup, but what should not be the problem that it has proven to be, is building the right team.

It is important for any company to have realistic expectations and understanding of their limitations. However, this is even more essential for startups given the lack of bandwidth and auxiliary budget to withstand failure and mistakes. The Bureau of Labor Statistics, in 2016, stated that startups had a 25% turnover rate leading to their first year anniversary. Granted high growth and the ever-pivoting nature of startups can cultivate this sort of activity, a high turnover rate can be avoided by hiring correctly and from the outset.

Hiring should intimately involve the attention of the CEO. There must be an agreeance on the ideal mix of people and a united vision of what the team will look like. What is the current culture of your startup and what do you want it to become by the end of the talent acquisition period? Be realistic about budgets and identify what it is your company may be able to propose in order to offset the deficiency in salary offerings. Budget and resources must be allocated in order to make the process work. It can be daunting spending money when budgets are tight but it will cost less down the line and certainly, can help your startup more effectively curb closure.

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