April 30, 2021
Digital Transformation

The Benefits of Variable Cost Structures for Early-Stage Companies and Technology Startups

Author: Samuel Millen-Cramer, Startup Consultant at Ciklum. Sam has spent the majority of his career in startups and scale-ups, in several early-stage teams in numerous sectors and markets. He’s worked primarily on growing platforms and marketplaces; focused on strategy and growth operations across the UK, EU, APAC the US.

Building great products and scaling technology is expensive, tiresome work. It’s also a prerequisite to having customers who love using your products.

Landing on the right technology strategy for your product isn’t an easy feat; having an early-stage product in the market and growing it requires robust, well-defined technology decision making that acts as the foundation for the next growth milestone. 

Committing to the wrong technology cost structure can saddle a startup with hardwired decisions that may need to change as growth commences. Remaining nimble is a crucial trait for any early-stage business, which makes avoiding expensive mistakes all the more important. 

Variable technology costs give startups the opportunity to invest in critical projects without the burden of long-term fixed costs.

Rather than large up-front investments in growing product teams and resources, variable cost structures allow startups to have full control over expenditures relating to new product development and technology.

Why variable costs matter

From software licenses to server capacity, the technology requirements of a startup can quickly rack up. Add in the cost of hiring full-time developers, and companies in the midst of their growth can be tied down by costly commitments and resources with waning utilisation.  

Variable-based pricing can help ensure that startups keep costs low without sacrificing resources.

Almost all product and technology resources can be obtained on demand, on an ongoing or one-off project basis – removing the long term salaried requirements that usually come with a high performing team. 

Startups that choose to commit to fixed technology costs may eventually regret the decision. Relying on permanent and fixed cost resources is no longer a requirement to building a product that customers love. Bringing on full-time staff may seem like a great choice for a growing business, but as business needs change and early-stage companies seek opportunities to pivot towards new lines of business, fixed investments can greatly complicate financial matters. 

How variable costs support remote teams

Remote – one of the many buzzwords we’ve embraced in 2020. However, remote teams being embedded within high growth startups is not a new idea; in fact, it’s something we’ve pioneered at Ciklum for some time. 

Many successful startups have utilised this model to establish the ultimate solution in variable technical costs that works for them and their goals. Including:

 Dacadoo, a Swiss digital health and well-being company, began scaling its development team as it grew from a small startup to a global platform. Needing to hire top talent quickly, Dacadoo turned to the local market but struggled to assemble the right team at the right price. Ciklum’s remote team arrangement allowed Dacadoo to scale its development needs at variable costs, making it possible to adjust resources as needed while the company continued to grow. 

Just Eat, an international food takeaway ordering service, wanted to supplement its London-based development team to assist in localizing apps. Concerned that scaling could negatively affect the focus of the site’s core platform, Just Eat sought a flexible solution that would provide the additional cost-effective talent. Turning to Ciklum, Just Eat brought on a small group of Ukraine-based staffers for low-risk projects for maximum flexibility. As the team structure and variable costs proved to be successful, Just Eat continues to trust Ciklum’s Kyiv-based teams as an essential digital partner.

eToro, a leading social trading network, serves millions of users around the globe thanks to its innovative fintech solutions. But in the highly competitive fintech space, eToro knew it needed technology assistance for its research and development team. Partnering with Ciklum, eToro took advantage of Ciklum’s scalable operations to support R&D projects on a need-by-need basis.

In each of these instances, startups effectively solved the complex challenge of recruiting talent for a particular role or project. And although the needs of each company differed, the flexibility offered by variable costs remained the same — enabling each early-stage startups and scale-ups to adjust their development requirements whenever necessary.

Save time and money with variable cost structures

Variable cost structures for technology and product resources can be beneficial to any company.  In the case of lean and high growth startups, they can help set the tone for long-term success; successful fundraising, robust product development and dynamism that enables continuous and rapid growth.  

By relying on affordable, scalable resources on-demand, startups can complete existing projects and explore new opportunities without the costly hassle of recruiting and staffing an entire engineering department. 

At Ciklum, we understand what it takes to build products and scale technology resources at all stages of growth. We have a dedicated startup team and they would love to speak with you. Contact us today!