Startup leaders rarely make decisions without one eye on their burn rate. It’s no secret why: whether you’re in the early stages of Series A or plan to push into new markets ahead of your exit, prudently managing operating costs is the bedrock of a stable business model.
A global mobility strategy makes it easier for entrepreneurs to stabilize operating expenses and reduce overhead. In this post, we’ll outline how to build a global mobility strategy that helps reduce your startup’s burn rate — and make day-to-day operations less of a headache.
In simple terms, a burn rate represents how quickly startups spend — or “burn” through — capital. The less cash you burn, the more opportunities investors see to turn a profit, and the more likely your business will be able to afford its operating costs when your revenue, or the economy, dips.
To calculate your burn rate, begin with a period of time (say, a quarter). Then, note your startup’s cash at the end of that quarter, subtract it from the capital resources on hand at the beginning, and divide by three. If it helps, think back to the old maxim “time equals money.”
Metrics that impact your burn rate include:
Next, let’s look at the risks startups face when operating costs outstrip a leader’s ability to manage the factors above.
Unicorns notwithstanding, startups can’t afford to spend cash they don’t have. That’s why a high burn rate puts startup founders at risk of going into the red — a danger that comes with quickly cascading effects. Here are some of the greatest risks a high burn rate poses for startups:
The right global mobility strategy, however, offers a solution.
Adopting a global mobility strategy can reduce the burn rate for startups without overextending human resources to preserve the amount of money on hand. In fact, the right global mobility strategy may even enhance how you attract, hire, and retain talent.
As of January 2024, 89 percent of small business owners reported finding few or no qualified applicants for open positions. A well-formed global mobility strategy helps address this by offering employers access to a wider range of potential employees.
What’s more, a wider talent pool is mutually beneficial for businesses and talent: the remote work model that enables you to hire across borders is a location-neutral benefit that employees can appreciate no matter where they live.
The result forms a sort of virtuous circle. When you recruit globally, you offer an attractive benefit (remote work) to a wider range of prospective employees. This in turn strengthens recruiting efforts and offers the top talent you employ more incentive to stick around.
In addition to reducing overhead costs like office leases and utilities, global mobility empowers you to control line-item-level burn rates for your startup’s human resources budget.
Startups that want to expand into new markets, for example, may find it more cost-effective to hire remote talent in other countries. The average 3-year expatriate assignment costs an employer $1 million. Local employees can also help companies more efficiently:
Similarly, the diversity of perspectives that makes global employees uniquely qualified to help you navigate new markets is likely to broaden the perspective and success of your whole team.
Let’s say you’ve embraced global mobility and successfully recruited new talent. Now, your teams are distributed in locations ranging from Ecuador to Estonia, without the hassle and expenses associated with opening an office in each location where you’re hiring.
Now, if you need to scale, the already distributed nature of your workforce makes it easier to continue to recruit new talent as well as lean on and learn from the unique perspectives of your global employees.
Distributed teams can also effectively [work around the clock](https://www.atlassian.com/agile/teams/remote-teams#:~:text=Distributed teams can work on,t without some trade-offs.) without eating into individual team members’ free time. So if a customer issue arises in Europe when team members in North America are asleep, the European team can address the issue.
As efficient and cost-effective as a distributed, around-the-clock workforce may be, implementing a global mobility strategy does come with challenges.
Onboarding can be difficult to standardize. Tax requirements in the Netherlands are different than those in Mexico. Payroll processes aren’t globally standardized. And some employees may still require visas and work permits.
One way startups can easily navigate these challenges is to partner with an Employer of Record (EOR) like Remofirst. Remofirst can help companies hire employees and contractors in 180+ countries.
Book a demo today to learn more about how Remofirst helps mitigate legal risks and navigate the regulations necessary for building a successful global mobility strategy.