Payroll is typically the largest single expense in most businesses. It is therefore also the greatest opportunity for cost savings.
I'm a firm believer in hiring great people and paying them well, when your budget allows it. But it doesn't always. And when it doesn't, there are several ways you can still get quality people to work for little, or deferred payment... or even free. And once you've tried them, you may find some of these practices beneficial even when you have more cash available.
Let's start with some of the more obvious options and then expand to some you might not have considered.
1. Commission-Only Salespeople
In some businesses, this is the norm, while in others, you'll have a very difficult time finding people to work on straight commission. Of course, this isn't free, but it is always cash-flow-positive (i.e., you only pay people when you get paid).
You're going to find that commission-only salespeople generally come in two types. The first are people who are desperate for a job and are willing to take a chance rather than do nothing. They'll probably leave if they don't start making whatever is a decent wage by their standard within a couple of months. The others are the master closers. You'll have to pay them better commissions, and they won't stay long if they can't sell your product. Make sure you're really ready before you hire a sales shark.
2. Affiliates and Referral Fees
You may not be able to find people to work for you full-time on a 100 percent risk basis, but you can almost certainly find related businesses, or happy customers, who will put in a little bit of extra effort for the chance to make a little extra income. Online, there are some businesses that make their money entirely from commissions from selling other companies' products. If you don't have a formal paid referral program in place, you might consider doing so. There are only a few industries (medical, legal) in which it's regulated or prohibited.
If you're in a position not to take a salary for a while, there are others in your area who are as well. They'll need equity — again, not cheap, but also not cash. People have to be able to cover their living expenses, so you'll have to find people who are either independently wealthy, or who have very low living expenses and sufficient income (preferably passive) to cover them. Make sure your co-founders can last at least as long as you can without income. Disparity over income requirements is one of the most common problems among co-founders.
4. Deferred Compensation
Employees have to make a living. In some cases, though, fair market salary may be higher than their living expense requirements. In these cases, you may be able to negotiate a deal to defer part of their salary to a later date, or perhaps be paid in equity or stock options. You must pay them at least minimum wage, but anything over and above that should be able to be deferred.
5. Micro-Outsourcing Offshore
Developing nations around the world have a rich supply of cheap, well-educated, skilled labor available for projects small and large. In case you're worried about taking jobs away from your city/state/country, let me ease your conscience. Your company's success will enable you to hire more people for higher-skilled jobs. Your partners and employees who have equity or stock options will make more money, and you'll all have more money to inject into the local economy as consumers.
Sites like Elance, Guru and oDesk open up the world's labor market to you. Best advice: Start with a small, low-risk project, divide the work up between a few providers, and see who does the best work. Then hire them for a larger project or ongoing work.
6. The Lowball
Let's say you find a freelancer whose work you really like — say, a writer to ghostwrite a book for you. Get a bid from them. Then figure out what you'd really like to pay and tell them, "I know that's low for you right now, because you're busy. If at some point you're short of work and willing to do it at that price, call me up and let me know. If I don't have this project still, I'll have some other work for you." This only works if you're not in a hurry, but if that's the case, you can get some excellent work done at a substantial discount. Supply and demand in action.
Thousands of high school and college students are looking for internship opportunities. They typically work for a little over minimum wage, or a flat stipend at the end of the internship, or in some cases for free (you'd better be prepared to spend a lot of time training them and probably be able to provide them some job leads).
Check with your local university, community college, etc., and find out the requirements for listing an internship with them. There are also online sites like Internships.com, InternshipPrograms.com, and Experience.com that can help you publicize your internship program and find qualified candidates.
It's a controversial topic in the freelancing community, but it's a huge boon to small businesses on a budget. The way it works is this: You post a crowdsourcing opportunity on a site like 99designs.com for a fixed monetary award. Multiple freelancers submit their ideas. You choose the best one and award them the money. Multiple people do the work, and you only pay one of them — the one that does the best job.
If you think you can't afford help, think again. There are many ways to find people to work for you without committing cash you don't have. Be creative — think outside the box. If one of the ideas above doesn't exactly work for you, come up with a hybrid that does. The sooner you get that help, the sooner you can focus more of your attention on your high-value activities.
Scott “Social Media” Allen is a 25-year veteran technology entrepreneur, executive and consultant. He’s coauthor of The Virtual Handshake: Opening Doors and Closing Deals Online, the first book on the business use of social media, and The Emergence of The Relationship Economy. His latest venture, NFN8 Media, maintains a growing portfolio of niche content and community sites. He enjoys working with entrepreneurs and serves on the advisory board of several startups.