Startup crisis and mass layoffs: How outsourcing can be an alternative

Unfortunately, there are market moments when crises and mass layoffs shake many startups around the world. With that in mind, this article characterizes these events and points out how outsourcing can help to avoid this problematic situation.

Photo by Kaleidico on Unsplash.

Occurring simultaneously or at parallel times, crises and mass layoffs in startups tend to be triggered by similar factors such as:

  • Lack of resources;
  • Interpersonal tensions between team members;
  • Lack of qualified teams;
  • Management incompetence on the best way to achieve its goals;
  • And many other agents.

In this scenario, outsourcing can be a way for startups to overcome troubled moments with ease. After all, outsourced professionals are a valuable resource to get things done and don’t require long-term commitments or large sums of money to hire.

Overall, in addition to saving money, outsourcing allows you to focus your capital, time, and thoughts on solving your crisis and/or finding solutions to prevent or avoid mass layoffs.

How can outsourcing be an alternative to prevent crises from getting worse and help end mass layoffs?

When the situations are related, it is common that in times of crisis mass layoffs occur because startups often seek to cut costs. Therefore, outsourcing has become an alternative to help keep companies alive, preventing employee cuts from getting worse and sometimes stopping altogether.

It is important to conceptualize at this point that outsourcing is the transfer of production, manufacturing, or service activities from one country to another to save costs, such as labor costs and taxes. This practice can occur under various conditions, including an increase in production efficiency, a reduction in costs due to lower wages, as well as cheaper living expenses for employees in target countries.

In this sense, outsourcing also helps startups to save on corporate income tax when producing their products abroad, which ends up generating more profits instead of deducting everything with taxes.

The advantages of outsourcing are many and one of the main ones is that this type of work can lead to a more efficient production of goods and services, which ends up generating jobs in both countries, as well as saving time and money in labor costs. It can also lead to economies of scale where companies can use the same technology, equipment, and know-how that gives them an edge in the market.

Outsourcing became a very hot topic during the financial crisis when many companies were pressured by their creditors to lay off hundreds of thousands of workers. It was thought that outsourcing would help prevent layoffs from getting worse, thus preventing mass layoffs.

Photo by Kaleidico on Unsplash.

Final thoughts

Outsourcing can help you solve the problems that come with crises and mass layoffs. It is a business strategy that manages to bring benefits to both parties involved in the business. Keep in mind that finding reliable partners is essential and that, in most cases, not all outsourced professionals will be a good fit for your startup’s needs. So choose carefully!

Thanks to outsourcing, startups are better able to overcome the challenges that threaten their existence, while also avoiding mass layoffs.

Do you want to continue talking about outsourcing? Contact an expert from the BIX Tech team.

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