Too much debt can kill your staffing firm. Statistics compiled by the U.S. Small Business Administration show that 50% of small businesses fail in the first five years, with excess debt providing one of the key contributors to decline. With that in mind, it’s important to discover ways to grow your staffing business without expanding your borrowing.
This problem has become even more pronounced recently. Many firms, including recruiters, took on debt to stay afloat during the pandemic. In 2020, non-financial companies issued a record $1.7 trillion in bonds, with total corporate debt skyrocketing to more than $11 trillion.
So what can you do to stem the problem without choking your growth potential?
Four Ways to Expand Your Staffing Firm Without Expanding Costs
Reinvest Cash Flows
You don’t need to borrow to find the money you need to fund expansion. Rather than add debt, you could turn to your current cash flows as a source of investment. Take the excess cash generated from your operations and leverage that for your growth projects.
Your options here depend on your market position and the size of your investable cash flows. However, just to give a taste of the possibilities, here are some potential projects to consider:
- Expanding your staff
- Funding marketing efforts
- Geographic expansion
- M&A activity
- Adding new services
Growing your business with funds generated from operations requires a bootstrapping approach to development. Borrowing gives you a deep well of resources to fund new projects. On the other hand, using cash flow usually requires more patience and a commitment to a slow-but-steady approach.
However, this can pay off in the long term. You’ll accrue less debt along the way, keep your financing costs low, minimize your risks (and your potential sleepless nights), while still driving your staffing firm forward.
Okay, you’ve decided to fund growth through your extra cash. How do you secure enough of that to make a real investment in your expansion plans?
Optimizing this strategy means maximizing your profit. As you grow revenue, you’ll also want to make your organization as lean as possible. Getting the most out of your resources will ensure that you have as much investable cash as possible. At the same time, you’ll minimize the need to add debt.
Here are some steps you can take to improve efficiency:
- Upgrade Your Tech
- Improve Your Training
- Review your processes
Most expansion plans require a sizable chunk of cash. Opening new offices, making an acquisition, adding staff — these situations fit the old expression “it takes money to make money.”
However, there are ways to build revenues that don’t require a large investment. By building partnerships with other staffing firms, you can broaden your footprint without having to spend your limited resources.
Find Alternative Funding Options
There are ways to find extra cash without adding to your debt load. These alternative funding options let you pay for the expansion projects you need, without ruining your balance sheet.
Choices like invoice factoring let you maximize your financial potential. This will give you the fuel you need to drive growth. Combine these programs with some of the other options on this list and you’ll be ready to take your staffing firm to the next level.
Looking for Financing Options for Your Unique Needs?
Ready to learn more about your financing choices? Turn to Frontline Funding to discover what you can do for your staffing firm.
Contact Frontline Funding today to learn more.