Four Key Components to Financial Sustainability

What is Financial Sustainability?

At Advance, we define financial sustainability as the ability to start, grow and maintain your staffing business with short- and long-term financial stability. It is amazing how many otherwise savvy staffing operators rely solely on their sales or HR skills to grow their business, and don’t really understand where they are or where they’re headed.

While temporary staffing entrepreneurs give a variety of reasons for starting their own venture – being their own boss, the satisfaction of getting people jobs, fulfilling a need in the marketplace – you won’t be in business long without healthy profits and sustainable growth.

1. Access to Capital

Trust us on this one, it takes money to make money, and you’ll need a lot of it to run a successful staffing business. Typically, you’ll need initial startup capital to get your staffing firm up and running, ongoing working capital to maintain your day-to-day operations and investment capital to put back into your company and support growth.

To access this capital, you can either self-finance (if your staffing firm is financially sustainable), fund through equity infusion (if you have the money to front the operations yourself), take a loan out at a bank (the most traditional form of lending) or work with a specialty finance agency (yep, that’s us).

2. Profitability

When it comes to profitability, balance counts (and there can be negatives on each side). If your profitability is too low, it may have a negative impact on your cash flow and increase stress throughout your organization. Low profits leave no room for revenue or expense fluctuations and limit your ability to reinvest, which can ultimately compromise your financial sustainability.

On the other side of the token, if your profitability is too high (yes, there is such a thing) it may open you up to undercutting by lower-priced competitors, especially MSPs. Sustained undercutting could lead to destructive price wars in the market and contribute to overall financial instability.

3. Reporting

Taking the time to assess your staffing business is critical to healthy, sustained growth. Creating a plan to review your finances on a regular basis allows you to adjust in time to reverse a negative trend or capture a unique positive opportunity. Whatever your method of secured capital, solid financial reporting will be required to secure increased levels of capital support. And when it’s time to sell your business or grow through mergers and acquisitions, solid financials are a must.

4. Planning

“If you don’t know where you are going, you’ll end up someplace else.” – Yogi Berra

It can be surprisingly easy to stray from your set path to sustainable growth if you do not have your own personal business plan to keep you on course. Your financial planning should be flexible enough to allow for market changes and unexpected opportunities, but strong enough to keep you from veering into dangerous, unsustainable territory.

Action Steps

For the long-term financial health of your staffing business, take these Action Steps today:

• Review your current and future capital needs and determine how you will address your anticipated growth
• Analyze and work to balance your profitability
• Assess and improve your reporting and planning capabilities
• Evaluate and understand the purchasing processes of your customers and key prospects