Sep 262013
 

Job search site Staff.com has an infographic showing the cost of setting up a startup business in selected cities around the world.

Staff.com founder Rob Dawson looked at the cost of hiring two developers and one designer and paying rent on an office in eight cities around the world.

Of the six Zurich came in the most expensive followed by Sydney, New York, San Francisco, London and Paris. Manila and Mumbai were obviously the cheapest.

What Does It Cost to Run a Startup? Infographic
Staff.com – Connecting Great Companies with Global Talent

While the wages are the headline in this admittedly unscientific survey, the rents are a factor worth examining. If we arrange those cities by rents, then London jumps to the highest spot while Sydney remains second.

Cost of renting in each city

London 63,984
Sydney 47,616
New York 45,600
Paris 38,400
Zurich 36,000
Mumbai 29,184
San Francisco 22,080
Manila 9,984

 

This table illustrates a number of things; that Mumbai is a very uncompetitive location by Indian standards, being an app developer with a London startup is a miserable existence and that Australia is a very expensive place to do business.

Last week at The Hub Sydney discussing the global workforce with O-Desk’s Matt Cooper, expatriate Aussie and founder of The Fetch Kate Kendall emphasised the high cost of doing business in Australia.

“You don’t realise how expensive Australia has become until you get off the plane,” said Kate who pointed out the burden of massive mortgages mean labour rates have to be high so people can afford to meet their bank repayments.

I’ve argued in the past that those high property prices are a form of economic cholesterol that sap Australia’s economic strength and these discussion illustrate that point.

The bizarre thing is that Australian property prices are expected to go higher and, most worrying of all, the consensus among mainstream economists and business writers is that current levels are not overpriced at all.

If we accept that the current high property prices are the long term normal for Australia, then the Aussie economy has a major adjustment to make.

The problem for any industry that is internationally exposed, which is almost the entire service economy, is that Australian producers are hopelessly uncompetitive at current wage and cost levels.

For startups the question is what value are they actually getting from being based in Australia and that is a question being asked by many businesses.

Those deciding to stay in Australia are going to have to figure out how they can deliver high quality value from a cost base equal to Switzerland’s.

At present most Aussie businesses are not prepared to deal with the problem and it’s a question that’s going to be faced by the nation’s workers, retirees and governments.

Leave a Reply

%d bloggers like this: