Washington Post: Commentary: Why my small business and many others aren’t hiring

(This post originally appeared on the Washington Post)

A new employment report came out Friday, and the numbers were better than expected. In fact, unemployment is now down to 5.5 percent, which is great news. But no, everything is not awesome.

Sure, optimism among business owners is high and the economy is stronger. My business is profitable and definitely faring better than it was a few years ago, thank goodness. But despite the better economic news and the positive surveys reported during the past few months by companies from The Hartford to Sage to Wells Fargo, I’m not planning to bring any new employees on board this year – or for the foreseeable future. 

And I know I’m not alone.

Most of our 600 clients that I have unscientifically polled are in the same state. I read reports like this one that says “small businesses are going on a hiring binge,” but then when I dig into the report’s details a little further I learn that “…an estimated 27 percent of small businesses increased full-time employment in the past 12 months.

That’s good news, but then again, what about the 73 percent of small businesses that didn’t? Yup, that’s me.

And even though some think that a recent slowdown in small business hiring isn’t anything to be alarmed about, I’m not sure I agree with that, either. I think it’s indicative of a longer term trend. Most small business like mine will not add as many employees as they did in years past. Here’s why.

1) For starters, my business isn’t growing a lot. I’m not located in China, where a a downward GDP forecast to 7 percent is considered “bad news.” I operate my business in the United States, where a forecasted 3 percent GDP growth is considered to be better than the norm. 

It’s undeniable that we have mostly recovered from the last big recession. The stock market is booming. Tech startups run by 20-year-olds out of their parents’ basements are receiving $100 million checks from Silicon Valley venture capital firms.

But most established small businesses like mine are hustling to find and keep customers. My clients, like me, are mostly profitable and growing – but not growing so quickly that we feel the need to add more employees. We are still gun-shy. We are still not sure if the work will be there 12 months from now.

And while it’s behind us, the Great Recession is still an unhealed sore. We’re loathe to commit more overhead and take more risks on people unless it’s really necessary. Too many of our friends went down the tubes by over-extending themselves.

2) Instead, I am outsourcing more than ever, and so are many other small businesses. Some surveys suggest that more than one in three workers – 53 million Americans – are now freelancing. Employers are taking advantage of this trend. The number of jobs posted to freelance worker portal Elance/oDesk has increased from approximately 3 million in early 2013 to close to 5 million by late 2014.

And why not? I can get someone to do my marketing, bookkeeping, database, research and social media work at an hourly rate instead of hiring them full time, paying their benefits, suffering through Obamacare and being subject to all the rules and regulations that have tortured employers for decades.  Moreover, the independent contractors I hire seem to enjoy their freedom, flexibility and newfound entrepreneurship too.

Outsourcing has become the new employment and I’ve managed to fully embrace its benefits over the past years.

3) I’m also leaning more heavily on technology. And by technology I am mostly referring to these two magic words: the cloud. Never in history have small businesses had so many inexpensive and powerful tools at our disposal to manage and collaborate with our people quickly and seamlessly.

My company is based near Philadelphia, but my Web site designer is in Berkeley California, our developers are in Ukraine, my marketing person is near New York City, one of my technicians lives in Syracuse, and everyone else working for me is, well, everywhere, anywhere, all the time. But that’s no matter.

We use a cloud-based customer relationship management system to share information about our clients and jobs. We Skype. We use a free conference call service. My clients are using new cloud-based services like Slack,DocuSign, Office 365, Basecamp, Asana, Google Apps and Box to communicate, manage documents, share important files, store data, run projects and get work done all for very affordable monthly fees. The cloud has enabled small businesses to operate more like big businesses and bring on people from anywhere in the world to accomplish tasks – without actually hiring them full-time.

4) Finally, I’m partnering more. Like many small business owners, I’m finding that I can’t do it all myself. It’s so easy to start up a company nowadays, to freelance, to be independent and even to run small organizations efficiently and with little overhead that specialists are popping up everywhere. So instead of hiring full-time people and venturing out into areas of expertise where, I get to focus on what I do well and then partner with other organizations.

The world continues to get more complex. Who can afford to train and educate and invest in the certifications needed to do it all? So we don’t do it all. We sell our software and we partner with hardware, networking, database and security firms to provide a full service. My clients are doing the same. I see roofers partner with masonry firms and electricians partner with plumbers and heating installer partner with air conditioner installers.

Today’s lean companies keep their overhead low and partner to remain flexible – and that cuts down on full-time staff. 

Of course, employees will never go away. Key people – managers, leaders and important-task-doers – will always be needed to grow a business, particularly a small business.  But perhaps not as many as before.

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