Between the recent wave of mass layoffs in the tech space, the looming threat of a recession, inflation concerns, and Federal Reserve interest rate hikes, many business owners are on edge. And while larger companies are the ones making headlines for their layoffs, small businesses are also being faced with the need to make job cuts due to lack of financial resources to continue operations. Although reducing your team may seem like the only way to go when cash is tight, it’s not always the best move. Here are a few of the drawbacks of downsizing:
- It lowers company morale
- Fewer salespeople can result in lost business
- It has negative impacts on company reputation
- Remaining staff members may become overworked and stressed
- Once the economy rebounds and business picks up again, you’ll lack loyal, trained team members.
While downsizing may not always be avoidable, it should always be a last resort after you’ve exhausted all other avenues. If your business is struggling financially, consider the following ideas that may help you avoid layoffs:
Rethink Your Marketing Strategy
Generating new leads can help you increase sales and avoid having to let people go. If you are low on capital, you can employ some low cost or free marketing techniques to increase sales. Try ramping up your social media posts, writing additional blog posts, or sending new email marketing blasts. Or consider attending networking events, getting involved in the community, and joining your local chamber of commerce to help you gain valuable referrals.
Optimize Your Business’s Invoicing Practices
If your company is struggling with cash flow, you should review your invoicing practices. Make sure to send invoices out immediately and follow up with payment reminders in a timely manner. Consider automating some of your invoicing processes to help you collect outstanding payments easier and quicker. In addition, you may want to incentivize early payments with a discount and implement a late fee for overdue invoices.
Look for Ways to Cut Expenses
When money is tight, review your expenses and see if there are areas you can cut back. Some ideas for trimming costs are:
- cancel any unnecessary subscriptions and maintenance contracts
- purchase generic brand office supplies
- try to renegotiate your lease with your landlord or your terms with your vendors
- downsize your office space
- implement more remote workdays to save on utility costs.
Secure a Financial Cushion
There are always going to be ups and downs when running a business. That’s why it’s a good idea to secure a line of credit in order to give yourself a good financial cushion. With our lines of credit, your business gets ongoing access to capital to use whenever you need it. Plus, you can draw any amount that you need up to your approval limit. You only pay interest on what you draw, and you can pay it back early without penalty. A business line of credit can strengthen your cash flow and allow you to be prepared for emergency situations like struggling to make payroll or paying for sudden, unexpected expenses. CapFront offers many different financial solutions to help your business stay strong. Contact us today and one of our dedicated relationship managers will discuss your needs in order to determine the best product for your business.