Barrett’s Briefing: Start-Ups Now Hiring?
by Richard BarrettMany economic pundits are predicting the end of this economic meltdown (see previous post). Chalk those predictions up to the optimism of springtime and the need to fill a news cycle.
While rates of decline for various economic indicators may be decreasing, the excesses that created this meltdown will take years to work through. The ham-handed responses by government and many businesses will only delay the eventual recovery. This is only a break in the winter weather.
But even as the economic meltdown is only now approaching its nadir, a few new businesses may find this to be a fertile time to set up shop.
Consider the single greatest expense and challenge of most new businesses – finding and attracting talented workers, trained and immediately available for interesting work.
Currently the US economy provides 155 million jobs. This meltdown has reduced employment through five distinct mechanisms shown in the table below:
|
Type of Employment Reduction |
Description |
Number of Workers (millions) |
Percent of the Workforce |
|
Unemployed |
Recent filers for unemployment |
13.2 |
8.5% |
|
Underemployed |
Working part-time while seeking full-time employment |
9 |
5.8% |
|
Reduced Hours (Furlough) |
Full-time workers working less than full-time |
2.7 |
1.7% |
|
Discouraged Workers (Marginally Attached) |
Unemployed for over one year. |
2.1 |
1.0% |
|
Non-starters |
Recent college graduates who have not found permanent employment |
0.18 |
0.1%
|
|
Totals |
|
27.18 |
17.1% |
Given that the measured statistics are usually undercounts and that these unemployment/underemployment numbers will grow in the next 12 months, likely over 32 million workers (over 20%) in the US will have talents and time available to participate in another business.
For many companies, payroll costs represent over 65% of total expenses. For new ventures, personnel costs can be much larger, up to 90% of expenses. In this environment, many workers are searching for work.
New ventures traditionally offer below-market compensation for their workers. However, they offer other significant benefits.
Typically, new ventures offer broader scope in each job, better growth opportunities, ability to make large, direct, measurable contributions to the organization, and the enthusiasm of working in a small, close-knit team. Some new ventures offer profit participation or stock options. For unemployed or underemployed workers, these benefits can be significant, even when the cash compensation is low.
Technology and the recession have dramatically reduced other business operating costs. The cost of computers, phone systems, and tele-conferencing have dropped. Office space is cheaper, and home-based employees can cut that cost even further. Travel, where necessary, is cheaper than any time in the past ten years.
Even without easy availability of capital for start-ups, this recession may offer fertile ground for new ventures and with the added benefit of retaining far more of the equity.
