Are jobs with start-ups risky? A careers expert lists the red flags

You’re looking for a job and you see a listing with a company you’ve not heard of. The role looks good, they encourage flexible and remote working and there are all sorts of perks, including early finish Fridays and plenty of annual leave. The only problem is that the business is a start-up – and you wonder if you’ll need to look for another job if the company doesn’t survive.

Startups are essential for innovation and economic growth. But these businesses are more vulnerable to economic fluctuations, more so than more established companies. And because of this, job seekers tend to avoid start-ups during unstable economic periods.

In fact, it will probably come as no surprise that during a recession, workers become more risk-averse and focus on job security.

“Job seekers often approach start-up job opportunities with a degree of caution for several valid reasons. Firstly, the perceived instability associated with start-ups can be a significant concern,” says Jasmine Navarro, a career coach and family and executive wellbeing expert.

“These companies, often in their infancy, lack the financial robustness and market presence of larger corporations. Job seekers may worry about the risk of sudden layoffs or the company facing financial troubles.”

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As start-ups often operate on tighter budgets, the pay and benefits offered may not match that of larger, more established firms. “Also, the demanding nature of start-up roles – long hours and a strong emphasis on dedication – might also raise concerns about work-life balance,” adds Navarro.

However, there are many benefits to working for a start-up. There’s also every chance that a new, small company could turn into a larger, established organisation. And if you’re there from the beginning, the pay-off – both financially and in terms of career progression – may be huge.

So how can you tell if a start-up company has longevity? And are there any red flags to look out for when applying for a job with a new company?

Unclear business plan

A start-up should have a clear business plan, which should be outlined in their job adverts. Without a plan, nobody will know what they should be doing and how they can measure the efficiency of their work.

Perhaps even more concerningly, a lack of focus may indicate that the founders don’t understand their market, clientele or the competition they face from other companies. “A lack of a clear and well-defined business strategy may suggest an unstable foundation,” says Navarro.

Cash flow issues

A start-up may receive a significant cash injection when they launch, but this doesn’t mean that they won’t experience financial issues later down the line – especially if they don’t have a long-term strategy.

“Cash flow problems could signal financial instability that affects job security,” says Navarro. “Moreover, a toxic or unprofessional work environment – or unrealistic promises of rapid promotions and financial incentives without a clear plan to achieve them – should be viewed sceptically.”

Ultimately, if a company’s promises seem too good to be true, they probably are. “Being vigilant about these red flags can help job seekers make more informed decisions when evaluating start-up job offers,” she adds.

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Changes in leadership

While restructuring is common in larger organisations, a revolving door when it comes to managers and leaders may be a bad sign.

“When considering a job with a start-up, job seekers should keep an eye out for specific red flags. Frequent changes in leadership positions may indicate internal instability and potential issues with the company’s direction,” says Navarro.

Consider the benefits

But this isn’t to say that job seekers should avoid roles with start-ups. Despite the potential drawbacks, working with a new company can come with a range of unique benefits – it just depends on what you want from a job.

“One of the most significant advantages is the opportunity for rapid professional growth and learning. Start-up employees often wear multiple hats, gaining diverse skills and experiences that can accelerate their development,” says Navarro.

“Equity or stock options are often part of the compensation package, providing employees with a chance to share in the company’s growth and financial success,” she adds. “Additionally, start-ups often offer a more flexible work environment, allowing for better work-life balance, and provide exposure to a valuable network of entrepreneurs, investors, and industry experts, which can be beneficial for future career opportunities.”

Ultimately, though, job seekers may have to take a risk in order to reap the rewards of working for a start-up. For people who like solving problems and overcoming hurdles, it may well pay off.

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