What is the scariest part of opening a new temporary staffing or contract staffing company? In a word, I would say PAYROLL. Once you have gotten to the point of getting the business set up, contracts in place, and are at the point of sending out your first employees, the first major business hurdle hits you immediately: paying your employees for that first week’s work. Then, with the realization that your clients will not be paying your invoices for 30-60 days, the next reality sets in – how do I come up with the cash to pay my employees and other expenses including advertising, rent, telephone, etc. without sufficient working capital? You mean to tell me I may have to “float” my own payroll for 4 – 8 weeks before I start seeing dime one from my efforts? That can create some stress in your life.
Now let’s take the more established firm that has been plugging along with one to three small clients, and the clients are paying their invoices for services provided in 2-3 weeks. The staffing owner started with enough up front capital to ensure payroll would be met for that amount of business, and didn’t need to worry about a funding source to run their business. Then the staffing owner gets a call back from a client he or she has been pursuing for quite some time that is now ready to utilize their staffing services. The only “problem” (if you want to call it that) is the client needs 20 new employees from you in the next 2 months, and their payment terms are net 45 days. In reality, you won’t see your first invoice payment in your hands until probably 50 days, which means that you have to “float” your own payroll for over 7 weeks for 20 new employees! Anybody see where we are going here? This could create a small cash flow / working capital crunch.
So what are your options? You could continue to service your smaller clients as usual, then try to take on one to two additional employees per week for your new prospective client, if they are willing to wait several months for the new employees. The chances of that client waiting on you are like waiting to win the lottery – probably a pretty slim chance of that happening. If you can’t supply the employees within their time frame, they will certainly be on the phone with your competitor to fill those open positions. I suppose you could turn down the business all together, but what sense would that make? You are trying to grow your business, and can ill afford to turn down new business.
A fairly easy solution would be to find a funding source to partner with that understands your business and allow you to pick up the additional business without having to worry about meeting payroll. As a matter of fact, one that would let you pick up any amount of additional business so long as your clients were credit worthy. The opportunity cost of turning down additional business due to lack of cash flow can be very damaging to your business. Hopefully you got in to the staffing business to grow, not to maintain status quo. If you have to pass up business, then your company will not reach its full potential.
Having an unlimited funding source that truly understands the staffing industry, and wants to work in partnership with your business to ensure your growth can make all the difference in the success (or lack thereof) of your business. Whether in a start-up or expansion mode, staying ahead of your payroll is essential in the staffing industry.
|
If you would like to discuss your situation, please contact Dale Busbee, Business Development Executive, Sterling Resource Funding Corp via email at dbusbee@sterlingresourcefunding.com |
