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Debt Is Not the Death of Your Business

Business Debt

“Debt” and “business” are two words you don’t want to see in the same sentence. Unfortunately, it is not always a smooth ride for every business owner. High hopes can often make business owners get carried away. That’s why experts want you to be realistic with your expectations as a business owner. It does not matter how unique your product is or how differently you have planned to serve your target audience. You cannot expect too much unless you have tested the waters beforehand. Perhaps, you set your hopes too high at some point and dug your way into the debt trap.

Good news is that debt is not the death of your business – at least not always. Some proper planning, persevere attitude, and calculated strategies can help you dig your way out of debt too.

Free up the Money That belongs to You

The first thing you ever want to do is free up the money that belongs to you. Perhaps, you are in a business where credit transactions are common. The problem with this format is that customers can delay your payments more than the specified period quite often. They have received the product, and they have consumed it too. Not clearing your invoices does not really hurt them as much as it hurts you. Consequently, you will have to get in touch with these customers and remind them of the pending invoices.

You can ask these customers to pay you sooner. Set a deadline and ask every customer to pay by that time. It won’t be easy but do not forget that you are fighting for the survival of your business. You can boost your cash flow significantly even if half of the customers agree to pay you on your set deadline.

Boost Your Revenue

This is an area where business owners have an advantage over people who do nine to five jobs. Salaried individuals don’t have any control over their salaries. It is a fixed amount that they will receive at the end of the month. On the other hand, you as a business owner have your revenues under your control. You can decide what your business earns at the end of the month. You can change prices, launch promotions, and cut your costs significantly to increase your revenue and profit.

One of the ways to get your customers’ attention is to launch promotions. However, you have to design your promotions carefully. You don’t want to shrink your profit margins until you know your promotion will increase your customer count considerably. If you have a loyal and repeating customer base, take advantage of that. Increase the prices a little to generate more revenue.

Slash Your Costs

Cost-cutting can be a huge step for a business. You have a hundred different costs that you can cut down. First, talk to the vendors that supply you the materials for your products. Quit the marketing campaigns that are not generating any returns. Reduce your operational costs as well. If possible, ask your workers to work from home to save yourself some money on office space. In fact, you can cut down your computer, internet connection, utility, etc. costs if you can make your employees work from home. Reduce office hours if your calculation tells you that certain hours are not as productive as much as they cost you.

Pay Your Debts First

A common mistake that business owners often make is treating debts as a secondary concern. You might feel tempted to buy more inventory, fulfill some orders, and pay the overhead expenses first, and then worry about your debts. However, this strategy can go against you. You will never be able to pay your debts if you make other business expenses first. The thought of repaying the debt is stressful. You can’t make great decisions when you are stressed. You will see a huge improvement in how you tackle your business related matters once you have paid off your debt.

Consider Consolidation

You can consolidate your loans to make things easier for you. What makes debts scary and stressful for business owners is that there can be many of them. Even if you pay one debt, you then have another to worry about. This format can be mentally devastating for the business. Moreover, you might be paying different interest rates on different debts. Consolidation helps you simplify your debt repayments.

First, it combines all the debts that you have to pay into one. As a result, you have to make just one payment every month that serves as the repayment of all your debts. Secondly, it helps you take advantage of a more affordable interest rate. The fact that you don’t have a bunch of different credits knocking on your door every day can be quite relieving too.

Find a New Partner

You want to take this step only as a last resort. Of course, the sight of seeing your business shut down is more painful than anything else. That’s why you can make a new partner in business by offering some equity rather than letting your business sink to the bottom. You can ask your new partner to finance your business for the chunk of equity you are offering him/her. A crucial consideration here is not to offer too much equity. You don’t want to lose control of your business as a result of this deal. Offer only enough equity that keeps the new partner interested but does not make you lose your control over your company.

Concluding Thoughts

You must not forget that these are only the extreme measures to dig out of debt. The first cure for avoiding debt is care. Make sure you start with a solid business plan wherein you have sorted out your expenses and loans already. Sometimes, venture capitalists are not the best option to fund a business. In that case, you have crowdfunding options available. Using the latter option, you can fund your business amply without necessarily giving up equity too much equity, if any at all.

 

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What the Right Team Means for a Business

TeamJust because you have a small business today does not mean it is going to remain small forever. Of course, you have to work to expand your business team and turn it into a company that serves a worldwide audience. Whenever it comes to the expansion of a project, the first few things that you mostly think about are costs, taxes, cash flow, etc. What many small business owners often ignore is the right team that is crucial not only during the process of expansion but to keep the business afloat for many years to come.

The Need for a Team

The first thing that one wants to understand is why they need a team in the first place. If you have a small business and you never want to grow it, you might never need a team. However, for any businessman who has the mission of expanding with the passage of time, they need a team. First of all, you cannot act as the one-man-army. As you expand your operations, add more branches to your business and get more clients to work with, you will have to distribute those responsibilities. You can manage some of them with great efficiency, but if you think you can manage them all perfectly, you might be wrong.

You might not have paid attention to this particular piece of detail but when you try to manage everything on your own, you turn your own employees against you. They feel as though you do not trust them with the responsibilities of your business. Furthermore, they don’t see any chances of growth and this is why they do not plan to stay with you for a long time. This reduces the retention rate at your company to a low level.

Not just that, your core team is even more important when you are in a startup stage. When you present your business idea to the potential investors, they will consider several metrics to find out how successful their investments will be with you. One of the indicators for them to identify a successful startup is its core team. If your idea is unique, you have everything else in place, but your team seems to lack confidence or is missing important persons, there is a big chance you will not get any investments.

What to Consider When Building a Team

There are quite a few things that you have to consider when building your core team. Here are some of the most important ones.

  • Be Personally Involved

The first and foremost requirement of building the right team is for you to involve yourself in the process personally. No one knows your business better than you, and the many requirements to run it successfully. You can talk to an individual and know if he/she is the right person for your team. You will have to talk to everyone in person to know how they will fit or not fit. Convince yourself that this is an important process and manage enough time from your schedule to interview the potential candidates.

  • Consider Vision Alignment

When it comes to adding people to your core business team, it will be wrong to focus solely on their qualification and experience. The most important factor to look at is their vision. Do you think they are comfortable with your vision of your business? Do you think they are not just comfortable but also passionate about the same vision? It did not matter how talented, qualified and experienced they are because if their thoughts do not align with yours, they will always remain a misfit. Hiring the person who does not agree with your scope of the business is a huge mistake. Your and their position in the company will be like two people pushing a vehicle from the opposite sides.

  • Look for Leaders

You must realize that you are building a core team for your business; not hiring employees to fill certain positions at the company. Do not think of your team members as tires in a vehicle which you can replace when one goes flat. Every individual you make a part of your team should have leadership qualities—the qualities to lead the team in your absence or the absence of the appointed leader. What’s even more important is that these are the individuals who will act as your right hand. You cannot expect your business to keep on elevating and not experience any hiccups.

It is the people with leadership qualities that help you pull the business out of hard times with their will to lead and the undying attitude.

  • Involve Other Team Members

If you already have a small team, but you are looking for more people, you will have to make the existing members a part of the hiring process. When you do this, it will make them feel like a valuable part of the company. Secondly, it will also show you whether you and your existing partners are on the same page or not. They should also know what type of talent is lacking in the team just like you do. On the flip side, it will also show the potential candidates how unified your approach is. They will know they are becoming a part of a strong team and prepare mentally to fit in.

  • Consider All the Options

You have to wait before you can make the hiring decision just like consumer surveys the market before making a purchase. Some candidate might seem like a perfect fit, but you can’t reach a final decision unless you have talked to all the remaining candidates.

Creating the perfect team is only one step in the right direction. The more important part is to keep the team united and in unison. Do not forget that a melody only sounds good when all the instruments are playing in harmony. So, if you are a startup or a small business, be sure to start delegating responsibilities to the right people and hiring the ones that are missing.

 

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How to Identify Your Small Business Differentiator and Why

differentiator

When you are the owner of a small business, there are times when the scale of bigger companies can overwhelm you. At these times, you may wonder what you have that will make potential customers pick your brand over another. This particular factor is a business differentiator, and it helps consumers in the market identify you and set you apart from other brands.

Differentiating your company from the rest is an integral part in developing a brand, and it’s become even more difficult in recent years since it’s not merely enough to be just better than others; you need to be different. You may not have realized it yet, but being a small business is a differentiator on its own, you need to leverage it and market it enough. Here’s how you can identify your small business’ differentiators.

Analyze Your Competition

Finding your differentiator starts by learning what makes your competitors different. You need to maintain a neutral position and evaluate your competitor to know what their strengths and weaknesses are. What do they offer? What do they do better than you? How do they treat their customers?

Once you answer these questions, you discover their weak and strong points, as well as your own. At this point, you can decide whether you want to change the direction of your business to make it better than your competitors or market an aspect of your brand that’s already there.

Be Familiar with the Customer Experience

A benefit of being a small business owner is personally having experienced the life of an average consumer. By knowing the shortcomings of a large-scale company customer experience, you know what to develop in your own company. However, when working on differentiators, it’s time to start by scratch so you should map the various aspects of being a customer. What do they value? What dissuades them from buying?

You need to work on ways to build a consumer’s awareness of a need that your company can fulfill. It’s only after a consumer realizes that they need something that they will look towards brands that can provide them with a solution. You need to assess how your target demographic makes buying decisions, and whether your brand aligns with that thought process or not.

Another factor you should consider is how your customer will use your product and whether they will require any help with it after their purchase. Look towards your competitors and see what they offer, and see what you can provide when compared to them.

Assess Whether You Meet Customer Expectations

Once you’ve mapped out different points in a customer’s overall experience with your brand, you need to assess whether you meet expectations at each point. For instance, the first time a customer interacts with your brand, they expect a friendly approach that tries to understand their problem. Now you need to know if you come for your customer’s wallet at every encounter, or if there’s an empathetic side to you.

If you step into their shoes and see things from their point of view, you can ask yourself ‘do I want to be sold a product this way?’, ‘does this item have everything I need?’ and ‘has the brand tried to understand me and my problem?’ You need to learn whether your product motivates them to buy it.

The wrong approach is to focus solely on your product because that’s not what customers emphasize on when buying a product. The best way is to address different aspects of the customer experience and develop all of them.

Know Your Strengths

The first and foremost strength of being a small business is giving customers the attention they need. Since you’re not managing branches everywhere, you can afford to look after a minimal customer base.

Other than that, each business has its strengths when compared to other brands. It could be your amazing marketing, your customer loyalty programs, or your approach to customer service. Also, a small business operates on values, so they understand the needs and requirements of the average person.

Get Involved in the Community

The community you operate in should be your focus when expanding your reach. By making an impact on your community, your brand automatically earns a reputation among the other brands in the area. The people in your district will be in favor of supporting your brand since it will have a positive influence on their community.

The Importance of Having Differentiators

It’s true that ever brand needs differentiators that give them a competitive edge for business rivals, but your brand needs it more as a small business. That’s because large companies can already offer better prices due to cheaper manufacturing practices and access to raw materials at lower costs.

Hence, having a fixed market differentiator will help consumers pick your brand despite the difference between what you and larger brands can offer. However, having a differentiator isn’t only necessary for setting your brand apart from the rest. By knowing what you can do better than other companies can, you’ll have a clear view of what you should focus on when planning a marketing campaign.

A well-planned and targeted marketing effort will help you retain customers and increase your rates of promotion among people outside your community. Without a strong differentiator, you won’t be able to compete with others head-on.

At the same time, you need to uphold the values of honesty and transparency by refraining from overloading your brand profile. By attesting to being better than competitors at ‘everything,’ you risk losing precious customers. That’s why; you need to test all of your differentiators to see if they’re true, provable and relevant.

Only market things about your brands that you believe to be true, and to gain the audience’s trust, you have to prove it; whether through ‘look inside our workshop’ schemes or quality tests. Lastly, your differentiators need to be relevant. Customers won’t consider an aspect of your brand that they don’t care about or if it doesn’t benefit them. To conclude, you need to reflect upon your band’s personality and find something about your small business that differentiates it from the rest.

 

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The Benefits of Advanced Technology to Small Business Lending

Lending

Small business lending is just one of the markets that greatly benefits from the technological advances that we are experiencing in this day and age. Because of the accessibility to larger scope information about the potential lenders, banks and other lending institutions are now able to make more detailed assessments of the risks involved in a possible agreement.

Here are some of the advantages of having an advanced technology in the small business lending markets:

  • The possibility of broadening the risks to a larger geographical and industrial market
  • Cheaper acquisition costs despite wider geographic reach
  • Lesser necessity of opening new branches
  • Paperless application of loans, improved underwriting, and faster processing of applications
  • Develop new products that will focus on providing services to smaller businesses and those that have been declined by larger lending firms.
  • Significantly lower capital, especially for non-bank lenders

Since the start of the credit crisis – or the period of reduction in the general availability of loans – small companies and business that have been operating for not more than two years started to have a hard time applying for financial support from the traditional banks. But because of the advances in technology, smaller lending companies that were able to get large amounts of information about the borrowers were able to provide loans for these small businesses.

Because of the availability of information, even people who have very low credit scores can secure loans as long as they have positive credit history and the industry and economic status in the area where they live in show optimistic figures.

Nowadays, banks and other lending institutions can check not just the basic information included on loan application documents but also wider range of data that come from credit ratings agencies such as D&B and Equifax. The availability of large information about the potential borrowers allows lenders to develop and offer special financial packages designed for small companies and startups.

This phenomenon became more common among non-bank lenders, especially after 2008 when the credit market started stringent loan application processes. In fact, Biz2Credit Small Business Lending Index noted that the so-called “alternative lenders” or those that are not affiliated with large financial institutions approve around six out of ten loan applications, significantly higher than the approval rate of banks and other large financial institutions.

Aside from these benefits, the use of technology in assessing loan applications made it easier for companies owned by women or members of the minority to secure financial support. Moreover, as small business lending markets start to integrate technology in their operations, entrepreneurs save a lot of time and encounter less problems in their bid to get financial support to start or expand their businesses. This proves how technology truly transformed for the better the market of small business lending.

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Just Because Your Small Business Is Failing Does not Mean It Has to Shut Down

small

Everyone who starts a business starts it with great passion, strong ambition, and a clear vision. However, things don’t always go the way the founder of a business wants them to. When people see a failing small business, they can wrap up the whole discussion within a second by saying something along the lines of, “Just shut it down.” What they don’t realize is that shutting down a business is a much more difficult decision than starting one. No matter how unadvisable, there is an undying emotional attachment of a business owner with his/her business. So, what can you do if your small business is not performing well?

Pinpoint the Reasons for Failure

What do the doctors do when patients go to them with an illness? They don’t hand over a bunch pills, and tablets straight away do they? The first step, of course, is the diagnosis of the issue. Once the doctor knows the problem, he/she can prescribe the right medicine. This is exactly what you have to do with your business. The first thing you have to do is make efforts to pinpoint the reasons and problems that are causing your business to fail. If you don’t have the expertise, you should hire a professional accountant to look into your profits, losses, incomes, and expenses. Maybe you are doing business perfectly, and it is just your tax calculation that is causing the damage.

Don’t be the Business

Many times it is the owner who causes the failure of a business. When you think you are the business, this is the recipe for a business’ failure. You must learn to delegate responsibilities and become comfortable with the idea of taking help from others. Don’t act like an owner when it comes to using the money that your business making. Keep yourself on a salary, and this salary should be based on the current condition of the business. Make the team and involve some of your best employees in deciding what the solution to the problems should be. You are in the business, and so you will see everything from your perspective. A neutral person will tell you what they find lacking in your business strategy.

You have to be very patient and understanding when you ask others to help you. They might point out factors that you might not like. They might even raise questions about your strategy, and that’s when you have to show real patience.

Use the Funding Options

Sometimes, you just start on the wrong foot. You are so eager to start your own business that you don’t even arrange the proper capital to support it. You might spend too much on arranging your office furniture and be left with nothing to spend on marketing. In this particular situation, you want to arrange funds to meet the needs of your business. Whether it’s marketing, the lack of staff or the wrong location, you can fix any of those issues when you have the money. If you think your business is built on a unique idea and that more people need to know about it, you should look for ways to arrange the funds.

Look around, and you might come across friends or family members who could help you arrange some funds. If you don’t have any contacts that can help you with business funding, you should consider online crowdfunding. You always have options like Funded.com available to arrange the right funds to support your unique business ideas. The thing about online funding is that you can always find people who understand your idea no matter how unique it is.

Set Goals and Measure Their Progress

No matter how hard the times are for your business, there is always going to be a way out. However, the emotional setback and mental stress that come with business failure can eat up your positivity and optimism. Despite such hardships, you have to know how to set realistic goals and achieve them. Set defined realistic and achievable goals and measured the progress. When you are facing hard times, you have to set small goals. It is important at this point that your goals are defined in the form of numbers. The ambiguity of goals makes them less achievable. If you are losing customers and you want to retain them, you must first know the rate at which you are losing them.

Now, the example of a weak goal at this point will be setting something like, “I will not lose customers in the coming month.” That’s an ambiguous goal, and no set point will define how badly you have failed or how tremendously you have succeeded. Instead, you should set the goal by first defining a period during which you will calculate customer retention or attrition. Secondly, you will calculate the customers acquired during that period. Thirdly, you must know how many customers you had at the start of that period. You will now set your goal regarding retention percentage during that period.

Reconsider Your Pricing Strategy

More often than not, businesses fail because the owners don’t set the right price for their product or services. You might be pricing your products too low or too high. What if you have already started charging your customers for the value you haven’t provided them? A business must price its products/services to cover their expenses. Later, the business can start making a profit. The third and last stage is to charge for the business value. You have to be constantly looking into your customer data to know how much value your customers find in your services/products before you charge them for it.

As mentioned earlier, it much more difficult to shut a business down than it is to start it. Furthermore, you cannot let go of the mission and vision that’s associated with your business that easily. For this reason, you have to show tremendous perseverance, patience, and determination, and try all your options before deciding to shut down your business

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Signs of a Successful Small Business Owner

Successful BusinessWhen starting a new successful business, there are numerous signs that can indicate whether you’re succeeding as an entrepreneur or aren’t. A small business can be risky. This is particularly true if you specialize in a niche that bigger companies already excel in. However, if you display some particular qualities, it’s a sign that you’re doing a good job to stay afloat.

That’s because small business owner who have a positive attitude towards success are the most likely to get a taste of it than his counterparts. Their counterparts focus only on stability and nothing more. While business success has a lot to do with your initial idea and how you build upon that idea, it still depends on your personality and capabilities. Here are the few signs of a successful small business owner that you should develop as part of your personality.

You Like To Form Collaborations

Most successful entrepreneurs display this common trait. They understand the importance of having a well-connected network in the business world. Nevertheless, just like in every other change, collaboration needs to start from within your business. This means you’ll need to start delegating tasks effectively. Another crucial part of this is building good relationships with everyone on your team. This includes your employees and suppliers.

Of course, you also need to establish a position in the network of small businesses. It’s unwise to act alone without any partners. You needn’t form friendly relationships with your competitors. However, at the least, you should be on good terms with other small businesses that complement yours. By obtaining a position in the community of other businesses, you’ll be able to create new opportunities that can benefit others. Moreover, others can do the same for you. What results is a beneficial support system that allows all members to rely on one another.

You Have Your Eyes Set on the Future

You never know what the future holds, especially if it’s for something as volatile as a new startup business. That’s why successful entrepreneurs share a common characteristic of looking towards long-term future goals.

Some struggle to stay afloat amidst a rocky economic climate, and such desperate conditions can lead to business owners not looking farther than the near future. Such thoughts are understandable, but think of it this way; acting upon well-structured long-term goals at the same time as day-to-day tasks can ensure far more than financial stability and simple peace of mind.

Your Leverage the Benefit of Technology

Nowadays, when it comes to operating a small business, it all comes down to incorporating the use of technology, whether in marketing, management, or everything else. Technology and software have made it easier for entrepreneurs and small business owner to meet their goals, and now with services like Google AdWords and personal assistants, functions have become much more streamlined than ever before.

Take websites, for instance, they’re a business’ online identity and that’s where most potential customers will go to check whether your brand is legitimate or not. Then comes social media, which is a useful marketing tactic that produces results without requiring you to spend too much of your ad revenue. Then there are other business-related applications like customer support live chat software, fixed responses for keywords and budgeting tools that boost your productivity so you can focus on product quality.

You Love to Learn

You’re never ready to run a business until you’re prepared to improve yourself by learning from others. You may be determined to make it through with a method involving trial and error, but that costs precious resources; you need to start learning from others’ success and failures. Data is the most powerful weapon that a business can possess because it helps you discover trends and important details.

If you aim to learn about what strategies lead to profitable ideas and which ones are just downright terrible, you’ll be able to devise a solution of your own. The best way to fulfill your curiosity is to read and look into insights regarding management, marketing, customer satisfaction, and product quality. Archives can provide you with numerous researches and surveys conducted by different companies. While it isn’t necessary that the results apply to your business, you’re still bound to learn something.

You Don’t Just Think; You Act

While we’re at it, we might as well establish that being a smart business owner doesn’t mean that you’ll never have to take risks; it’s merely the ability to take risks with confidence. One sign that your business will soon see the light of success is that you don’t just think, you also act when the time is right. This sign is associated with the confident ability to make good decisions, even if they’re risky.

It’s true that before you put any plan into action, you need to examine it carefully all the way through. However, if you become stuck on the evaluating stage, you’ll miss your chance to implement your idea. That’s why you should have some faith in yourself and build confidence in your abilities to make a good decision.

You Seek Fulfillment

There are many small businesses operating in the market, but very few businesses owner seek fulfillment. The rest of them, however, only look at it as a means to make ends meet. Success-oriented entrepreneurs always chase after their goal of doing something fulfilling for a living. Your ability to see value in everything you create is contributory to success because you’ll want to build upon ideas to increase that value.

If you realize these traits in yourself, then congratulations; you have what it takes to turn your small business into a success! However, even if you don’t, do not fear! Owning a small business can change you as a person. But, it depends on you whether you take something positive from the experience. All these above-mentioned aspects will greatly improve not just the quality of business, but your life as well. If you can learn to find a hint of success-oriented personality within yourself, then you’ve hit the jackpot.

 

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Importance of Location for Your Small Business

Location

If you are thinking of starting a business that benefits from walk-in foot traffic, you have to pay attention to the location you choose. Whether it is a retail store, a motel, a restaurant or a spa, the right or wrong location of the business can decide its fate. Yes, some businesses reach the heights of their success at the oddest locations possible, but it is not very wise to keep exceptional cases in mind while starting a business. So, what role does a location play in the success of a business? Here are some important points for your understanding.

The Foot Traffic Matters

Now, the area you choose must have ample foot traffic for you to take advantage of. Of course, you are a business that benefits from the foot traffic, so you need a lot of it. For this purpose, you first have to look for commercial areas where people normally go for shopping. If there is no place available in the commercial area, you want to explore further to look for locations from where a lot of people pass. Think about your marketing as well. If you are going to use billboards, neon signs or vinyl for marketing purposes, you want them in places where people can see them. The more people there are at the location of your business the more they will notice your marketing signs.

There aren’t a lot of people at the location that you are considering for your business, you are already at a disadvantage. It shows that people don’t naturally walk in that direction when they are looking to do business. It is the same way on the internet. You bid for keywords that have the highest number of searches. You want to put your banner ads on websites that have a lot of traffic. In short, foot traffic matters.

The Buying Power of the Community

Before you choose the location, you must know the type of audience your business attracts. Are you a fine dining restaurant? Will you be selling low-cost meat burgers? You have to decide your location based on the type of business. If you are opening a fine dining restaurant, you want to open it at someplace where people have the buying power to afford expensive foods. It requires a lot of research for you to be able to find such locations, but the time you spend researching will always pay off in terms of a good return on investment.

Businesses in Proximity

A lot of businesses try to avoid having their competitors located close to them. But believe it or not, it is extremely beneficial for small businesses to be located near other big businesses. By doing this, your business benefits from the traffic of other businesses. It solves a lot of problems that can be detrimental to businesses at locations where there are no other businesses. The first benefit is that you already have foot traffic, so you can already move on to the next step of pulling those potential customers into your premises. Secondly, you don’t have to force people to walk away from their daily routes to come and do business with you.

If you already have a lot of similar businesses located around you, people already come there for that type of business. So, if you are opening a boutique in an area where there are many boutiques already, you can rest assured that people already come to this market for buying clothes.

The Expenses of Operation

This item has to be on your checklist of choosing the right location for your business, otherwise, you are going to regret your decision. Sometimes, you find a place that has high foot traffic volume and lots of other similar businesses in the vicinity, but the operating expenses are through the roof. The businesses that have already established might have adjusted according to those expenses, but things will not be the same for a starting business like yours. You want to keep your operating costs as low as possible. What if the area you are going to has private companies providing electricity?

What if the availability of clean water is a challenge at your desired location? What is the rent of the building if you are considering renting a place for the business? A starting business already has very thin profit margins. Add high operating costs to the equation and even those little profits will be gone.

The History of the Location

The location you have chosen has proven to be ominous for many businesses in the past, you have to dig deeper even if everything sounds right. When a lot of businesses have opened and closed at the same location, it is an indication of something wrong but not visible with a casual survey. You will have to be very careful in finalizing such a location. If nothing, it could be the owner of that building that might be an issue for its renters.

Some landlords are overly interested in their profits and do not care how much damage they are doing to a starting business with their demands.

Many small businesses need some favors and flexibilities from their landlords for them to be in a stable position. Some building owners will even lower your rent to allow you to establish first. If the landlord’s reputation is okay, check to see that the place is not a frequent picnic point for robbers.

Final Word

Many of the things mentioned above might sound basic or understood to you, but you will be surprised to know that many new businesses shut down because they fail to realize the importance of these same points. Believe it or not, you cannot take any of the points given above for granted. And while they might sound very understood and intuitive, lack of time and capital can often push you in a direction that you don’t want to go in. Stay tenacious to this checklist because a compromise at this point will give birth to several compromises in the months to come.

 

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How to Do Valuation of Your Small Business

Valuation

When you are looking forward to starting your own small business, you will have to familiarize yourself with a lot of new ideas. One of the important concepts that every business owner must be aware of is business valuation. So, what is business valuation, what is its importance and how do you do the valuation of a business? Read on to know.

Business Valuation

As the name clearly suggests, business valuation is the act of finding the value of your business in the market. It is just like finding the value of a house when you are about to sell it. You can use multiple methods to find the value of your business. However, it is always in your best interest that you hire a professional valuator to do it for you. They know multiple methods of valuation and will make sure that the final valuation is error-free.

The Importance of Business Valuation

The first thing you should know is that it is imperative to do the valuation of your business not for one but many reasons. The first reason that comes to mind is the selling of a business. When you want to sell your business to someone, you have to set a price for it. Sometimes, the owner of a business would want to plan succession i.e. the transferring of shares to an heir. The buy sell-agreement that they use for transferring the shares to their heirs requires them to know the value of the business.

If you have ever pitched your business to an investor, you must be aware of the fact that they always ask for business valuation. They are trying to assess a few different things based on the valuation you give them. First, they want to know how much their investment is worth. Secondly, they want to know whether or not you are fair with your investment demand if you are offering them equity for their contribution.

The Three Business Valuation Methods

Even though there are other business valuation methods as well, you will be reading about the three most common ones.

1. Valuation Based on Market Value

You also call this method the relative valuation method. It is a fairly straightforward way of knowing how much your business is worth. The valuators have to look at other businesses in the market that are similar to yours. They look at their selling prices and determine the value of your business based on those prices. Now, as simple and plain as this method sounds, it does not always work. For example, you don’t find the records of sole proprietorships that easily. So, when it comes to the valuation of a sole proprietorship business, finding records of similar businesses can pose quite a challenge.

2. Valuation Based on Business Future Earning Potential

This is an ingenious way to know the value of a business and one that helps you a great deal when it comes to obtaining investments from interested investors. This is quite a realistic approach but pitching it to investors can be a daring task.

First, you have to make sure that you have done proper calculations based on your current and past records to come up with the future earning potential of the business.

Secondly, you have to stand confidently with your decision because investors would often question you and your integrity a lot when they deem that you have valued your business much higher than you should have.

Capitalization of past earning is quite a frequently used approach to do this type of valuation wherein you look into the past financial reports of your business, smooth out any extraordinary earnings or expenses, and find the product of the normalized cash flow with a number referred to as capitalizing factor. It is not the only method used for determining the value of the business under this category. Another frequently used method is based on discounted future earnings.

3. Valuation Based on Assets

It is clear from the name that in this type of valuation you find the worth of the business based on the assets it owns. Once again, there are multiple ways to approach this valuation too. A common way to do this type of valuation takes liquidation of the business into account i.e. calculate how much money you would have if you sold every asset that your business owns and then subtract every liability from that sum. The other way is based on the ongoing status of the business wherein you look at the total value of your assets on the balance sheet and subtract your existing liabilities from them.

Once again, it is the sole proprietorship that poses challenges when it comes to doing the valuation of a business using this approach. Why the valuation of sole proprietorships is difficult using this method is because the owner in this case does not use the assets for business purposes only but personal as well.

You now know from the information given above that it is imperative for you to complete the valuation of your business. Whether it is for legal purposes or to sell your company at the right price, knowing the right value of your business is crucial. In the end, you should prepare your business financial documents regularly to help you find its value with convenience.

Who we are:  Funded.com is a platform that is A+ BBB rated over 10+ years. Access our network of Investors, get instantly matched with a Lender, or get a business plan by visiting us Funded.com

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Common Spending Mistakes in Small Businesses

easy way

There is no denying that running a business is not always easy. There are plenty of challenges that reverse growth or halt progress. Precisely, if these challenges have a direct impact on business finances, it may cause several other risks that your business needs to face. In other words, managing finances is pivotal to stay on top. And if you’re a startup, finance management becomes as important as serving existing customers or finding new leads.

But, if you are like business owners who find managing money or bookkeeping a daunting task, you must know your common spending mistakes to stay ahead in the business domain. This is one way you can mitigate not only financial risks but also monitor the cash flow of your business. In other words, by controlling your spending and cash flows, you improve success chances and your profitability also.

We have enumerated a few common spending mistakes to help you steer clear of the financial management of your business.

Common Spending Mistakes in Small Business

1.     Failure in Keeping Personal and Business Expenses Separate

This might sound trivial to you, but many business owners when entering the business world make this mistake. Remember that you are in the early phases of your business, it is vital to keep the expenses separate. Although sometimes you need to rely on the personal finances to support business expenditures, you need to ensure that you h have a separate budget for your business.  Also, relying on the personal expense to fund business may cause problems in the long-term.

Once your business is operational and starts serving the customers, separate finances by making a separate business credit card. Make sure you have a separate bank account for your business. Doing so can be extremely helpful in managing tax problems and avoiding bookkeeping confusion subsequently.   It will also empower you to evaluate potential or existing cash flow issues and overall business finances before they turn into a major problem.

2.     Not Creating a Budget

You might find easy budgeting, but you cannot deny its long-term value that outweighs all initial stress and effort.

Creating a budget means analyzing how much have you earned and how much you can invest. An organized budget helps you make informed decisions about all business matters that include everything from supplies purchasing, staffing, and training to inventory. Conversely, when you work without a budget, all these tasks become challenging and may cause you significant cash flow problems. This particularly affects your business if it works with seasonal shifts, and you need this cash flow to maintain business operations during the slow months.

Fortunately, there is a wide variety of apps such as Scoro, Centage, and Adaptive insights that can help entrepreneurs not only create but also maintain a budget. Not to mention how these budgeting apps keep track of your business expenses and send you a handy report at the end of the month or year. This allows you to do preparations for tax seasons and review performance.

3.     Failure to do Financing at the Right Time

All business owners know that working capital is an essential thing to operate the business and increase its growth. If working capital runs low, your business might face a lot of issues that not easy to resolve it right away, and that may vary from unpaid bills, mounting fees to lower credit scores.  Not only that but making payrolls also become a challenge while tackling such issues. The situation may create problems when it comes to retaining your potential employees. The problems like staff shortage, inventory, and supply management lead to decreased revenues and unsatisfactory customer services.

Ultimately, the failure to meet your business financial obligations can impact different areas of business. That is why it is important not only to identify but also address the cash flow issues and to prevent poor working capital in a easy way. It is better if you seek assistance about taking control of financial matters before they become problematic for your business.

4.     Ignoring Poor Credit Scores

Recognizing the right time to consider alternative financing options like a line of credit or loan is important. However, your due diligence will not benefit you if you fail to qualify as a borrower. That means, it is essential to be vigilant about both your personal and business credit scores.

It is also important because your credit scores impact your ability to use financing solutions with suppliers or vendors. The arrangements often help business owners easy fill the gaps in their cash flow.  Moreover, with a good business score, you can reduce the insurance premium and interest rate on your loan.

Sometimes, your credit scores contribute to secure many affordable financing terms; particularly when you opt for loans, credit cards, and line of credit.  The phenomenon is confusing for many people since they are advised to keep their personal and business financing separate as an ideal practice.  

However, it is important to understand that when you sign a lending agreement as a primary applicant,  banks use your credits to determine your eligibility, repayment terms, and interest rates.  Customers are sent an annual credit report, and it is good to use it for your advantage.  Although the business credit report is hard to obtain, you can get them through various platforms.

5.     Overspending on Startup

When starting a startup, you are naturally optimistic that your business will produce good revenues if you invest a large amount in it. This optimism sometimes leads to overspending, which is another common spending mistake. To avoid overspending, research carefully about how much inventory or staff you need to take a good start.

Final Thoughts

When running a business, you may face many financial issues, and to plan for all potential scenarios is not easy. However, when it comes to cash flow, various things can be done to avoid cash flow issues. The most important thing is to be proactive in whatever approach you use to manage your business finance.  Besides this, budgeting and healthy credit scores play an important role in keeping business finance issues at bay.

Thus, the given spending mistakes are very common when a business is in establishing phase. However, you can avoid them by planning and evaluating everything in advance.

Who we are:  Funded.com is a platform that is A+ BBB rated over 10+ years. Access our network of Investors, get instantly matched with a Lender, or get a business plan by visiting us Funded.com

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7 Tech Trends To Add To Your Small Business Startup To Attract An Angel Investor

Angel Investor

Angel investment is on the rise,and your small business startup needs to capitalize on all the opportunities at hand. Venture capitalists are on the hunt for business startups to invest in that are currently at the cutting edge of technology and taking risks with these advancements’ trends. You find that investors are eager to sink their investment dollars in these technologies so that they can reap the future returns. While the payoff might be big for an angel investor, these tech trends will also help your business startup to attract those funding dollars.

Artificial Intelligence

AI is not new to the scene, but for 2018, it is making a significant headway. By allowing companies to do more with less, AI will turn out to be a fundamental change in the way a company does business today and tomorrow. Startups that integrate AI into the fold will experience a shift in how they are able to perform routine tasks, freeing them up to focus on their customers. Angel investors see this as a win-win as they are able to invest in an advancing technology as well as a startup that is leading the way with its use. Your business startup will do well by having AI as a part of your repertoire and see more funding interest come your way in 2018.

Social Media

The uses of social media to enhance your consumer game is a boon for investors looking to find business startups that are succeeding in their customer engagement. While social media isn’t a newcomer technology, those that have a strong endgame will win big in terms of revenue sales. Social media is proving to be the technology platform that links us all together and gives business startups the recognition they need early on. Venture capitalists are enamored with its use by business startup as they see the power it offers and the benefits a business startup can take advantage of. Using social media to boost your business in 2018 will be key to gaining funding from an investor as they recognize the strengths it offers to your consumers.

Blockchain

Blockchain is another technology on the fringe waiting to bust on to the scene in a fury in 2018. It’s ability to provide a real-time ledger of transactions can give your business startup the transparency it needs to garner the nod of a venture capitalist waiting in the wings. Your business startup will benefit from Blockchain’s ability provide stable and error-free operations while angel investors gain by investing in a technology that has proven its worth. You’ll see funding offers from a series of investors if your business startup utilizes Blockchain to its full advantage within your organization.

Internet of Things

The Internet of Things is advancing at a steady clip for the New Year,and you’ll see IoT virtually everywhere you look. With consumers becoming more connected than ever, IoT offers an opportunity for new products and services that enhance IoT’s capabilities in the home, business,and community. Angel investors are savvy to the draw of IoT and how it is changing the way consumers interact and live their lives. They want to get in with business startups that are using this technology to move their business forward, engage with consumers, and improve their business operations. Count on IoT as a way to entice venture capitalists and secure funding in 2018.

Big Data

Data is everywhere these days,and it will only get bigger this coming year. Business startups such as yours will be able to use big data to understand every aspect, detail,and nuance of your customers, so you can create products and services they desire. With big data changing the way that business startups engage with their clients and provide unique customer experiences, it means plenty of evolution is on the horizon. Angel investors are keen on the possibilities all this available data can provide and know that companies that take advantage of the information can lead their industry in leaps and bounds. Use big data to enhance your business startup operations and stay tuned for venture capitalists to come calling with much interest and fanfare about your company this year.

Cyber-Security

While 2017 was a year that many will remember for its security breaches, this year provides a turn of events as business startup integrate or offer cybersecurity services to better protect their customer data. This cybersecurity will change how companies in all sectors operate and provide the level of security that is needed to protect that confidential information from getting into the wrong hands. Business startups that use cyber-security to protect their company or create products and services for others that help them secure their information will do well in the following year. Angel investors will show interest in these endeavors as the need for secure data protocol is growing without hesitation.

Virtual Reality

Also, on the fringe in 2018 is VR. This technology gives you the ability to engage with your customers in a new and exciting way. Through a more desirable customer experience, VR can help your business startupto increase its customer numbers as well as its revenue as VR improves workflow and access to customers all over your niche. Angel investors want in on AR as an investment opportunity, and your business startup will attract their attention now and into future with this technology at your helm.

Integrating any of these technologies in your business startup shows a strong sense of understanding and initiative to increase your customer base and profits this year and the coming year. Angel investors want to be able to get their hands wet with these new technologies so that they can be where the growth is with these trends. Think about how these technologies can help your business startup succeed in 2018 and secure the funding you need to get off the ground. You’ll be surprised at how much attention you receive by taking the first step with any of these technology trends and reap the rewards of investment into your company by an investor.

 

Who we are:  Funded.com is a platform that is A+ BBB rated over 10+ years. Access our network of Investors, get instantly matched with a Lender, or get a business plan by visiting us Funded.com

You can review our featured partners to help your success with your business or project.