Small Business Hiring is Slow: Cash flow Concerns Partly to Blame
Across the country, local journals and National news sites alike are publishing articles on the reticence to hire new employees among small business owners. Some of the reasons hiring freeze include a lack of sufficient cash flow caused by a need for more clients or by market share taken up by tough competition. In an article from the Associated Press, both the pressures to attract new business and the fear of losing current income streams are stopping small business owners from adding jobs more aggressively. Both of these concerns ultimately come down to the problem of not having steady cash flows, which can be hard to predict with both fast changing market conditions and the looming memory of the recent Government shutdown and the shadow of the great recession.
Business owners should finance strategically to maintain productivity. Offering overtime programs to employees willing to work longer hours is one of the techniques the business owners in the AP article used in order to get things done while short-staffed. This technique is useful because business owners can pay for more productivity from their employees while avoiding the major cost of another full time worker. However, if employees begin to be overworked, the limitations of this measure can quickly become apparent. An infusion of liquid capital that allows a business to expand though acquiring more clientele, new equipment or inventory can potential lay the framework for supporting a new hire.
A lack of traditional bank financing has some business owners holding back expansion. The credit crunch that has seem many national banks move away from small business lending has put many business expansion plans on hold, including hiring. Especially for bad credit applicants, traditional banking is not approving enough loans to allow them to grow as aggressively. These bad credit business owners either have to wait until their cash flows grow strong enough to allow for organic expansion, or seek out reliable providers of alternative capital who are able to overlook their credit issues.
Stronger planning and adaptability should be a key part of business strategies. Where larger corporations and more established business are able to weather changes in local and national economies better, small business owners can use their ability to adapt and quickly implement new policies and marketing strategies to their advantage. That said, the best complement to this is market research, leadership and planning for multiple possibilities.
Photo Credit to bpsusf on Flickr