In the face of a glooming recession, much of the business world has adopted a hang on mentality when it comes to their employees. Rather then having to go through the process of loosing and later replacing productive, experienced workers, many companies are doing whatever they can to keep their workforces intact. Currently, the most popular cost-cutting tactics include: establishing four-day workweeks, unpaid vacations, and flexible work schedules along with wage freezes and cuts in pensions and health care coverage.


But for many smaller businesses even these tactics are not enough to keep them from letting go of their workers, and that can put a tremendous amount of strain on the small business owner.

In a small business where connections to employees naturally tend to run deeper and are more personal, having to lay off workers can be a painful blow– both emotionally and psychologically. Moreover, having to loose employees can often signal the end of a small business (After all, wearing multiple hats can only happen when their are enough heads to wear them.)

If laying-off employees in your small business seems inevitable, then here are a few tips to help make the process less stressful- for you and your workers.

  • Be open with employees about the status of your business and their job security. It goes without saying that letting go of workers is not an easy situation, and you can expect that your employees may not take the news so well. But the openness will ultimately be appreciated because it gives everyone time to absorb the message and make other plans.

  • Create a game plan. By creating a strategy with clear cut goals and a process of reevaluation you will be left with a greater sense of control and well-being. Basically, you need to determine how your business will operate with a reduced workforce, including how you will spread out the responsibilities among the remaining workers, if your output change or be reduced, and how you plan on using the freed capital to cover expenses?

  • Improve cash flow to spread out or delay layoffs. In some cases, it may be a good idea to try to “comfortably” spread out your employee layoffs or even delay them outright. You could do this by altering your cash flow. If, for example, your business deals with receivables, you may be able access tied up capital by factoring your outstanding bills of sale or applying for a merchant cash advance.

  • Talk to other small business owners. Speaking to others who have experienced what you are going through or who are currently experiencing a similar situation can bring you fresh motivation, insight, and ideas. Either you can speak to any friends and family who own a small business, look up your local SCORE chapter, or join your local chamber of commerce to connect to other business owners. You could also join an online small business community, such as those moderated by the Bank of America,, or Cybershmooze.

Image credit: Notions Capital

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