Because of the uncertainty of top line sales growth, many companies both big and small are loathe to hire new employees. In addition, the legacy costs once you add a new employee and the high cost if that employee does not work out are even larger negatives to hiring.
Even though it was recently downgraded from 12%, staffingindustry.com recently forecasted 2011 U.S. staffing growth projection at 10%. IT is the hottest temporary staffing market with 13% growth projected for 2011 and 12% for 2012.
Staffing in all its forms (IT, telecom, temp, security guard, healthcare, etc) is and will continue to grow. Many Entrepreneurs see this growth and start or go to work for Staffing companies. And many of those that go to work do so to "learn the ropes" to hopefully start their own.
What is the biggest impediment to starting a staffing company? Working Capital…
Banks are not interested in lending to:
- High Client Concentration
- Less than 2 years in business
- Less than stellar personal credit
- No history of Profits
What can a startup or young staffing company do? Payroll Funding through Factoring…
Factoring or the purchasing of your accounts receivable primarily looks at the credit worthiness of your client. Most Factors looks at your business in a way that:
- Startups are no problem
- Personal credit issues can be mitigated
- Client Concentration can be managed
- The Factor becomes your defacto Credit Manager
- Funding can happen very fast
- Your ability to grow the business in not hampered
The fourth point, the Factor becomes your credit manager is critical. Since your working capital is precious, you can not afford any bad debt. There is only one thing worse than no sales, that's selling it and not getting paid. A good Factor will help you pre-qualify potential clients and also offer insurance against a client filing bankruptcy. Even if Factoring costs you 1-2% per month, you save the expense of a Credit manager. Also, you typically decide how much money you need to cover payroll so not all invoices need to be funded.
When it comes to approaching a Factor about your funding needs, keep these points in mind:
- Have good books and record-the cleaner the invoicing and accounts receivable, the easier it is for the Factor to get you funded.
- Have your workman's comp policy and other insurance readily available.
- Talk to the Factor about potential client's so they can pre-approve a dollar amount of credit.