Questions

There is that vicious and endless cycle whereby you need money to hire employees and pay their salary but you need the work to feed them and your business. Sometimes you can't get the work without having the employees in place. Is the best way to break the chain taking a loan (as well as a risk that having the employees won't call forth the work)? Perhaps it's most strategic to first take a smaller financial risk hiring one very strong salesperson who solicits projects that feed the business. Does anyone have experience with this problem, perhaps specifically in the creative and digital agency sphere?

Though I don't have experience in that particular market sector - I DO have experience dealing with that challenge.

Every dollar you borrow increases your risk exposure so you have to factor that into your ROI. Pay careful attention to the terms of the loan (or LOC) and if at all possible your business should be the guarantor (versus you personally taking on that role).

That said - Here are my brief thoughts:

1. Unless you need a lump sum - go with a line of credit versus a loan.

2. Consider hiring someone to do contract work versus bringing on a salaried employee.

3. Unless you already have adequate work for them (i.e. their efforts will be profitable) don't bring employees on. (I mention this because you state that "you need the work to feed them" - suggesting that you might be bringing them on FIRST... before there's a need).

4. In many markets - salespeople work on commission. Perhaps you can find someone that will work for 100% commission thereby eliminating your need for a loan to give them a paycheck.

Harsh Statement Warning... (don't read on if you are easily offended): The truth is that If you are currently unable to generate sufficient business (i.e. you need someone to do that for you) then you don't yet have a "business".

Note that I define a business as an entity that has discovered and successfully implemented a viable business model (and is therefore profitable) and fulfills the criteria of being both repeatable and scalable to the extent required by the owner to be worth moving forward with.

If you'd like a more detailed explanation and help deciding next steps, you know how to reach me.

Best of luck to you!


Answered 6 years ago

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