How to Keep Your Staff When Money is Tight

How to Keep Your Staff When Money is Tight

Your options when you need to pay salaries but cash is low.

By Marcia Smith

If you’re struggling to find the finance to keep an employee on the payroll, there are several options to consider:

Re-evaluate their role

Sit down with the employee, explain the situation and ask them if they’d consider a pay cut, or perhaps reduced hours. Depending on their role, you could involve them more in sales and marketing activity and set them targets to bring in new business to earn their keep.

Reduce other overheads

You can reduce your overheads by downsizing your office or other assets like company cars. This could free up extra funds for the payroll.

Help your cash flow

Consider measures such as invoice financing to free up cash to pay the wages.

Grant them equity

It’s a big call to make, but giving employees a piece of your business can potentially be an excellent way of aligning their interests with yours, while protecting your cash flow. Additionally, if they’re really crucial to your business, the cost in giving up a share may be smaller than the value that they bring.

What are the alternatives to lending?

Starting up a business is difficult; there is no doubt. On top of this, getting the funding required makes life almost impossible. There are, however, several alternatives to taking out a traditional business loan to fund a start-up.

Bootstrapping – This refers to the process of self-financing a business by re-investing only the profits generated by it. Business loan alternatives like this mean you need to have some savings to initially invest.

Investors – Looking for investors such as business angels is a common funding route for startups. It’s certainly not easy as you’ll usually need to give away a considerable amount of equity and have a detailed business plan, while not getting much in return.

Friends and family – Loans from friends or family members are a great way to raise funds, but be careful, as there is always the possibility that putting money between friends and or family will strain a good relationship.

Crowdfunding – Crowdfunding involves preparing an investment proposal that’s usually offered up to a large number of potential investors via websites such as Kickstarter.