There’s a simple reality of entrepreneurship we all try to ignore: At one point or another, you’re likely to be strapped for cash.

Common advice is to have 6 months of salary set aside before you hire an employee, but I’ve known very few entrepreneurs who actually followed that good advice. Although it’s preferable to have large cash reserves before hiring people, it isn’t always possible.

But the simple reality is: if you aren’t making enough money to pay yourself a living wage, you shouldn’t be hiring any employees.

You either need to figure out a better business model, or figure out how to do the work yourself so you can keep your business afloat.

Too Late. You’ve already got the employee and are facing a payroll cash crunch. Now what?


First, is your employee performing at the level you need/expected? If the cash crunch is related to having an employee who isn’t saving you time and/or making you money. You probably need to end the employment relationship. However, if the employee is doing their job you have a few other things to consider.

Depending on the severity of the issue, you’ve got a few options that might allow you to keep your employees, and stay afloat.

3 Tips to Help Your Business Stay Afloat


1. Offer a shorter work week – fewer hours, less pay.
2. Close for a week around a holiday.
3. See what other overhead you can trim.

Keep Your Business Alive on Limited Budget

Most importantly, talk to your employee(s) about what’s going on. As painful and awkward as this conversation will be – it will look much, much worse if you wait for a payroll check to bounce before you address it. Ideally, you should be able to outline a few positive solutions and actions you are taking. Otherwise, you can create a full blown panic on your team. Use your best judgment when sharing confidential company information.

If you end up in a worst-case scenario, don’t forget that you can talk to your employee about converting to a freelance or project-based structure. This will allow you to keep them on board, just without the full-time salary. Should it come to it, you may also need to lay them off so that they can collect unemployment and get them off your payroll.

I know this is never an easy decision to make, but you have to put your pride aside in the interest of your employee, as much as your biz.

Now, I turn to you:


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