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Growth as a Bad Thing? 5 Growth-Related Funding Problems Staffing Businesses Face

You run your business hoping for growth. More than that, you expect it. Strive for it. But when it comes, expansion often creates unexpected challenges. That’s why it’s essential to prepare for the funding problems your staffing business could face during periods of growth.

We all know 2020 was a bad year. One estimate showed that the temporary staffing industry saw a 17% retraction compared to 2019. Given COVID and the surrounding economic dislocation, that decline doesn’t come as a surprise.

However, that statistic doesn’t represent the overall prospects within the industry. A bounce-back year is likely in 2021, and the long-term outlook for the industry is good. You have every reason to expect expansion in the coming years.

That means you need to prepare for what this growth could mean. You need to look ahead and anticipate the financing issues you could encounter. Here are five growth-related funding problems staffing businesses often face:

5 Growing Pains Staffing Firms Face

Growing without a Plan

Growth presents its own kind of emergency. A good type of emergency…but still. It often comes quickly and unexpectedly, forcing you to deal with it in an improvised way.

This can create problems for your long-term financial structure. Your carefully considered funding plan suddenly goes out the window as you try to deal with your sudden expansion. Your decisions lack the consideration you’d prefer.

As you grow, routinely pause to think about your priorities. Review your current situation and devise a program to maximize your long-term business health.

Stretching Your Expense Base

Often, the term “growth” takes on several meanings at once. Yes, it refers to the added revenue you bring in. But it also touches on the expansion that takes place in your expense base.

New clients mean you need fresh staff to service them. You might even need to open additional locations. Whatever the specifics, you’re facing higher costs.

This doesn’t matter if you bring in sufficient revenue to pay for it. But growth in income and increase in expenses rarely move in lockstep. You’ll likely need to fund a cost expansion first as a way to capture the opportunity for an enlarged customer base.

Taking on Too Much Debt

As you set yourself up for future growth, you might take on debt to fund the process. If you read the market correctly and get your timing right, this can spark dramatic success. You’ll have no trouble managing the debt load.

However, get ahead of yourself, and you could run into a significant problem. You’ll squander resources by maintaining your debt instead of using it for operational priorities. It can hamper you in the long term if you misjudge the situation.

Expecting Predictable Growth

Sure, 2021 might turn out to be a good year. Coming out of the trauma of 2020, some slingshot growth might be expected. However, don’t assume this will become the new normal.

Growth comes in bursts. You want to position your staffing business to take advantage of these expansions when they happen. However, you don’t want to overextend yourself, assuming the good times will continue forever.

As you craft your funding plan, understand that you’ll likely grow in fits and starts. Have ambitious goals. But stay cautious and organized in your approach.

Cash Crunches

Even the most well-run businesses face the occasional cash crunch. Just think about the pandemic. Events like the COVID outbreak can easily spark an unexpected shift in the market. As an example, one study showed that the early stages of the coronavirus crisis left 80% of small businesses under pressure.

You don’t even need a worldwide pandemic. A sudden emergency or an unforeseen client departure can leave you short at a vulnerable time.

To minimize these traumas, have contingency plans in place. Build up an emergency fund. Having this cushion allows you to make vital deadlines (like payrolls) even in the wake of a negative surprise.

Does Your Growing Staffing Business Need Help? Get In Touch!

At the same time, have an emergency funding plan in mind. By building a relationship with a top industry player, like Frontline Funding, you’ll have a trusted partner ready to back you up in times of crisis.

Contact Frontline Funding today to learn more.