Can You Afford to Hire?

By Diana Ransom WSJonline

Many small businesses got lean over the last few months. They scrapped fruitless projects, renegotiated costly contracts, introduced more efficient policies and laid off workers. But after the latest employment report revealed that job losses moderated in July, some owners may be thinking about hiring.

“Thanks to layoffs, there are some real talented people out there,” says Ken Esch, a partner with PricewaterhouseCoopers’ private company services practice in Chicago. “A lot of small-to-medium-sized businesses see this as an opportunity to trade up and make additional investments to help the business move forward.”

And although many business owners are deferring their hiring plans — aiming to squeeze more productivity out of their existing staffs — aggressive companies attempting to position themselves for future success are bolstering their work forces now, Esch says.

The decision to add staff should be weighed seriously because overall economic activity is expected to continue to decline, albeit modestly, for next several months, says Joel Prakken, chairman of Macroeconomic Advisers, an economic forecasting and advisory firm in St. Louis.

Here’s how to calculate whether or not you can afford to add workers:

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