Good news for women-owned businesses in the year 2013: The government is continuing to support women in business, as evidenced by a couple recent initiatives to encourage them to pursue federal contracts. These women-owned businesses are nothing to sneeze at, either. According to research conducted by American Express OPEN, 42% of women-owned small business government contractors generate revenues in excess of $1 million, representing a force to be recognized, reckoned with - and encouraged.
The new government-backed initiatives give women-owned businesses (WOBs) an even greater level support in their endeavors toward winning lucrative government contracts. Contracting to provide goods and services to the government allows women to grow their businesses to new markets and to greater heights while creating bigger profits and jobs. Why is it important that women-owned businesses prosper? The answer: Because women-owned businesses are one of the fastest-growing segments of new business in our economy. To support their success is to help the economy thrive.
"Participation in federal contracting can be a lucrative revenue booster and a way for women entrepreneurs to create a high-growth business, explained Susan Sobbot, president of the American Express OPEN, which supports business owners with products and services to help them run and grow their businesses.
Recent Initiatives are a Boon to Women-Owned Businesses Competing for Government Contracts
In February, 2011, the Small Business Association's Women-Owned Small Business (WOSB) Federal Contracting program enabled federal agencies to set aside contracts specifically for women-owned small businesses. This program originally placed a $4 million and a $6.5 million cap on awards to women-owned businesses. Early in 2013, however, these caps were removed. According to Barbara Kasoff, President of Women Impacting Public Policy (WIPP), "The removal of the caps is good news not just for women business owners, but also for government agencies aiming to boost their procurement to women-owned small businesses. She goes on to characterize 2013 as "the year for women contractors."
In conjunction with the aforementioned changes to the WOSB Federal Contracting program, in April, 2013, American Express OPEN, WIPP and the SBA have joined forces to launch ChallengeHER, which is an initiative toward expanding government contracting opportunities for women-owned small businesses and increasing the success of WOSB program itself.
The ChallengeHER initiative will provide more extensive support in the form of:
free events and workshops across the nation
online curriculum and resources pertaining to government contracting topics
mentoring opportunities with women who are experienced at navigating the government contracting marketplace
access to government buyers and contractors
Supporting the development and prosperity of women-owned businesses represents a winning scenario for everyone concerned. Not only will women themselves be empowered to enter and succeed in a potentially lucrative business arena, but by creating a field with an increased number of bidders, and more diverse and better-qualified competition, the government will procure higher quality goods and services.
Whether you're a federal contractor or not, it's gratifying to know that it's a priority of the government to partner with those who are likewise dedicated to supporting the growth of this important demographic, whose success will resonate throughout the economy.
How will you take advantage of "The Year for Women Contractors?"
“Venture capital” is a term you hear bandied about among small businesses and startups. The word “venture” conjures up images of a dynamic, even romantic escapade - an exciting adventure, pursuit or endeavor. In the case of venture capital, however, the word, “venture” refers to an alternate definition of the word, having to do with “speculation,” “risk” and “chance.” As I delve into the topic of venture capital, several questions spring to mind. The answering of these questions will provide an informative overview of the subject; a “Venture Capital 101,” if you will.
Who are Venture Capitalists?
Venture capitalists are the risk-takers of the business investment world. They offer a means of financing when other, more traditional, options are unfeasible due to the nature of the business or the fact that earnings and profit aren’t yet bankable.
Venture capital investment firms are comprised of experts in numerous areas of business, finance, and management, as well as specialty professions, to serve as advisors in fields in which the firm is interested in investing.
What is Venture Capital?
Wikipedia explains that, whereas a traditional loan is repaid in full plus a predetermined rate of interest, venture capital is invested in exchange for an equity stake in the business, irrespective of the success or failure of a business. It states that, “As a shareholder, the venture capitalist's return is dependent on the growth and profitability of the business. This return is generally earned when the venture capitalist "exits" by selling its shareholdings when the business is sold to another owner.”
What can Venture Capital do for a business?
While venture capital can be a shot in the arm for your company, once you accept it, you have a business partner who stands to make a hefty profit from their association with you. As such, they will dedicate resources to help ensure your success. Venture Capitalists are willing to act as your business’ “Godfather;” providing the operating cash you need to move forward - with the understanding that they will receive a hefty slice of your profit “pie” in return.
What businesses are Venture Capital firms looking for?
Because Venture Capital firms embrace risk rather than avoid it, they seek out those unique opportunities to back companies that may not look traditionally profitable, and therefore may be considered too high-risk to receive conventional forms of financing. Wikipedia says that, “Venture capitalists are typically very selective in deciding what to invest in; looking for the extremely rare, yet sought after, qualities, such as innovative technology, potential for rapid growth, a well-developed business model, and an impressive management team. Of these qualities, funds are most interested in ventures with exceptionally high growth potential, as only such opportunities are likely capable of providing the financial returns and successful exit event within the required timeframe (typically 3–7 years) that venture capitalists expect.”
While venture capital investors accept a higher level of risk, they’re still cautious businesspeople who will expect that your business is ripe for making the most of the opportunity presented. The ideal candidate for venture financing has an extremely well laid out business plan, solid management, its financial statements in order and invested, passionate founders. Because investing in your business is essentially a gamble for them, everything must be transparent in order for them to see what's in it for them.
In his article, Targeting & Timing, published in the San Diego Business Journal, Mike Allen quotes David Titus, president of the San Diego Venture Group as saying, “To increase the odds of investing in successful companies that either go public or are acquired for fat multiples on the stake, venture firms try to limit the risk by considering later stage and more mature companies. But that doesn’t mean younger companies can’t find new capital. Early stage companies are getting it, but it’s difficult. You have to have a very solid business plan, a good management team and good execution.”
Where do businesses and venture capitalists meet?
According to Wikipedia, private companies meet venture capital firms and other private equity investors in several ways, including warm referrals from the investors' trusted sources and other business contacts; investor conferences and symposia; summits where companies pitch directly to investor groups in face-to-face meetings; and private online networks which provide additional opportunities to meet investors.
The fact is, many a business would never have gotten off the ground without the backing of a forward-thinking venture capital firm behind them. They represent a rare and exciting opportunity for the right company. When Venture Capitalists come knocking, will your business be ready - and/or willing - to accept the challenges and benefits of this creative financing opportunity?
How could the backing of a venture capital firm take your business to the next level?
As a small business, it's not enough to be competent in your field of expertise. To be a successful small business in every sense of the word, you must manage your money carefully and effectively. Your cash flow is your business' lifeblood and the subject must be taken seriously, lest you lose control of the resource that will run your operation day-to-day and ensure growth into the future.
Kelly Springs-Kelley, is the Manager of Corporate Solutions and Communications for EventPro Strategies (EPS), an event staffing agency that partners with marketing agencies and fortune 500 brands to staff and execute experiential marketing events throughout the US and Canada.
Kelley compiled some best practices on small business money management, budgeting and forecasting knowledge from her colleagues at EventPro, CFO, John Anderson, and Founder and CEO, Jessica Browder-Stackpoole. Kelley says, "Having been in business for over thirteen years, our company has seen, and overcome, many challenges. Our executive team has some great insight that can help any small business owner stay ahead of the curve and navigate their financial challenges effectively.
John Anderson, Chief Financial Officer, offers the following wisdom:
First and foremost, understand that cash is king. Collect your cash (receivables) before you spend it.
Accuracy and timeliness are critical in terms of the information you are utilizing. Don't assume your costs are XY and Z. Employ a professional to create an accurate financial picture of your business (financial statements).
Make sure all of your pricing tools are accurate, from sales to accounting. If your sales team uses an excel spreadsheet for building an RFP, develop checks and balances to ensure the formulas and other sales information are accurate. A small error can make a huge difference in mispricing an RFP, which in turn can cost you financially, or even prevent you from landing the sale in the first place.
Build a bottom-up forecast, forecasting sales and expenses as far out as feasible. Some businesses can forecast a year in advance, some only a month. Start with what sales you know you are going to have, and then layer in what you believe will happen, discounting those items as their probabilities decline. Build cost models that meet your sales levels, along with best and worst case scenarios for your forecasts and budgets. When allocating finances, use the worst-case scenario.
Create a Pareto analysis that lists your opportunities for reducing costs in the order in which you will execute those reductions. This list can be done for personnel, services, materials, and other variable costs.
Anderson sums up his financial mindset by saying, "By understanding your costs and developing contingency plans for your best and worst case revenue scenarios you will be well prepared to navigate the ups and downs of your business."
Jessica Browder-Stackpoole, Founder and CEO offers the following advice:
Adjusting weekly, as opposed to monthly or quarterly, will help you be better poised to meeting your financial goals without any surprises. Making changes within your organization based on financials that are 30+ days closed is like trying to drive by looking through the rear-view mirror. Every single week, you should:
Update your monthly projections, three months out, based on what you learn each week.
Review your forecasts and finances against your financial goals, then make small adjustments to your strategic plan and expenses based on this information. Always be conservative so there aren't any surprises other than positive ones.
Close out the books each week within 1-2 business days, and then close out the month within 3-5 business days of end of month. Getting accurate financials timely and on a weekly basis is the key to success.
Three points that indicate whether your finances are under control and that your planning is effective:
You know before and during the month if you are going to be profitable.
If you are NOT profitable that month, it is a conscious and strategic decision to take a loss or to make an investment.
If you thought you were going to make money in a month, and you did not, your process needs to be re-tooled.
Pre-approve and track all expenses and credit card transactions (we do this through an online database). When people know their expenses are being examined, it's amazing how much less people spend.
Overall, companies can't be blinded by success. Stay disciplined and always work to raise the bar. Even when things are running smoothly, peel back the layers of the onion and look through each line item for trends.
Set a goal, and once it's achieved, set an even higher goal. Never be satisfied!
Money management, budgeting and forecasting are critical ways of keeping a handle on the financial health of your company. Take the advice of these seasoned professionals to stay on top of finances so you can survive the struggles it may experience as it grows and take full advantage of the opportunities it will encounter.
What are your best practices for money management, budgeting and financial forecasting?
Little else is as important to the economic health of a small business than its financial record-keeping. Each year when tax time comes around, small businesses are confronted with a record-keeping report card, so to speak. We quickly learn what we did well and where we need improvement moving forward. No matter how diligently we track every expense and record every account payable, there always seems to be another piece of data we should have collected and recorded.
Even if you’re just starting out in business, it’s a prudent idea to hire an accountant to do your business’ taxes. While there are many services and products that promise to make the task easy and the results correct, there’s no substitute for professional advice and expertise. There is a lot you can do yourself, however, to make your tax time go more smoothly and hopefully cost you less by keeping your accountant’s billable hours to a minimum.
Some of those things you can do to ease your tax-preparation experience are:
Learn from previous experience - Once the “ordeal” of tax preparation is over, it’s human nature to want to put it behind us and go back to “business as usual.” Don’t do that! When you meet with your accountant, he or she will most likely make suggestions as to additional information that you didn’t have available or better ways to track the things you did. Take notes and follow through immediately on those suggestions while your accountant’s suggestions are fresh in your mind. Make any changes right away so that they become habit. The more you do throughout the year toward keeping the best records possible, the better-prepared you’ll be come next April 15.
Reevaluate your process - Keep an open mind as to how you keep your financial records. Solid habits are important but periodically, do a reality check with your bookkeeper and accountant to make sure your process is effective and efficient to avoid getting stuck in an unproductive rut. Discuss with everyone involved how processes can become more accurate and streamlined.
Keep your tools current - Like all software and services, accounting products are frequently updated and improved upon. Don’t become so entrenched in one system that you fall behind technologically. The best accounting services and products make information easy to collect, comprehend, report upon and share with your accountant. It’s important that you find one that provides what your business needs in terms of record-keeping and ease of use.
One particularly effective accounting service is outright.com. Outright connects with your financial accounts and updates your transactions according to your categories, automatically, on a daily basis. In addition to being able to check your financial situation (profit, loss, influx and outflow of your cash) you can check at any time of the year where you stand on quarterly tax payments or sales tax owed. It also easily interfaces seamlessly with tax preparation software your accountant uses. Outright is an outstanding example of a full-service accounting service with which you can interact each and every day.
Listen to your accountant - You trust your account, so be sure to heed his or her advice. Keep the lines of communication open so that he or she will feel comfortable making suggestions to improve your record-keeping practices for the benefit of your overall financial situation. Then, implement those suggestions to demonstrate your respect for their input.
Accountants, accounting software and bookkeepers are a cost of doing business. A good accountant is worth every penny for the knowledge and experience they provide and the peace-of-mind and financial fortitude they impart. Do all you can to facilitate their responsibilities by doing you part. Remember, any improvements you can make to your record-keeping process is an investment in your business as a whole.
In which areas could your record-keeping stand improvement?
Each year as the holidays approach, employers consider the topic of holiday bonuses and/or gifts for their employees. Even though the economy is still suffering, ‘tis the season to spread cheer among your employees via a token of your appreciation, known as the holiday bonus.
A true holiday bonus - as opposed to a bonus based upon performance - is a gift from the employer, in recognition of his or her employees valuable efforts. It seems so simple and straightforward - but that’s exactly where the issue can get complicated. There’s a lot of emotional capital tied up in holiday bonuses. While employees generally appreciate the acknowledgement and good wishes a holiday bonus conveys, the form of that bonus and its value - real or perceived - is worth careful consideration by the employer. How can the appropriate level of appreciation be demonstrated in a monetary value or gift?
Take these things into account when giving holiday bonuses and gifts to your employees:
A gift or bonus should match the level of your relationship with your employees - When your business is small, you’re more likely to be on personal terms with your employees.The more personal the relationship, the more personalized the gift should be. To give your bonus a more personal touch, whether you give a physical gift or money, deliver it personally to each employee and include a thoughtful note expressing your appreciation. That sense of “family” you share with your employees may urge you to be extra generous with holiday bonuses and/or gifts.
The gift should convey your appreciation - Without a doubt, a generous cash bonus would be greatly appreciated by your employees, whereas a small monetary bonus could be downright insulting. If your bonus budget is tight but you still want to convey your appreciation at the holidays, a modest amount spent on a well-considered gift with a thoughtfully written personal note will serve to sincerely communicate your sentiments - without making you look unappreciative or cheap.
Revenue may fluctuate from year to year - bonuses should not - Employees (rightfully so) expect at least the same bonus you gave in previous years, so don’t set a precedent by being overly generous in a particularly profitable year that you may not be able to live up to next year. It’s better to keep performance bonuses separate from holiday bonuses so that the true message of appreciation remains consistent.
Holiday bonuses come in many shapes and sizes - As with all gifts, the best ones are those that are given with the recipient in mind. Holiday bonus time is a good time to consider what would truly make your employees feel appreciated. While you can (almost) never go wrong with cash, if your budget is tight or if you just want to give creatively, think outside the box. Some ideas could include gift certificates for luxury items or activities they may not indulge in themselves, a lovely gift basket full of specialty foods, tickets to a special event or anything that will bring them joy. If you can’t decide, ask your employees to vote on a few choices so you can gauge their tastes. It will also demonstrate that you value their input and want to please them at bonus time.
Your employees - you couldn’t run your business without them - so show them just how much you appreciate their contributions with a thoughtful holiday bonus. It’s an investment that will return to you in employee satisfaction and loyalty.
One of the biggest expenses involved in running a small business is acquiring a suitable place in which to actually conduct business. If you’re among the many businesses that lease commercial space from which to operate, there’s some good news for your bottom line. Whether you’re looking for more affordable space, a more desirable location or bigger digs from which to operate, this is a good time to do so, financially speaking. Due to the still-struggling economy, commercial property is currently a bargain for business tenants.
That fact gives you a certain advantage when negotiating with the landlord. According to the Small Business Administration, consider these additional factors in order to negotiate the best commercial lease:
Terms - It’s recommended that you commit to no more than two years at a time. Don’t be tempted to agree to longer terms than that, even if the landlord offers enticing incentives. Make certain you have an option to renew, however, should you desire to at the end of your lease. Also be sure that you are fully aware of and consent to any rent increases that will occur during the term of your lease.
Additional Expenses - When determining the total costs involved with leasing commercial space, remember to account for the extra charges, like for maintenance and utilities. It’s common practice for landlords to charge maintenance fees on top of the rent payment, to be used for upkeep of common areas. Be aware that as far as repair and maintenance of heating and plumbing systems, for example, it’s not necessarily the property owner’s financial responsibility - it may fall on you, the tenant. Make sure you are aware of exactly what is the landlord’s responsibility and for what (and how much) you may be responsible.
As far as utilities, they are usually the responsibility of the commercial tenant but do confirm with management as to how they are calculated. Are your utility charges based upon your actual use or upon the square footage you lease? Being aware of the expected and potential additional expenses involved in leasing will help you calculate the actual cost of the space and avoid unexpected operating costs.
Beneficial Clauses - In the event that circumstances change during the course of your lease, consider negotiating some clauses that will help your business maintain an even keel. Clauses addressing these issues may save you from experiencing significant losses:
Sublease - Ensure that you are able to sublease your space to another business should you for some reason become unable to remain at that location or pay your rent.
Exclusivity clause - This will ensure that during the term of your lease, the landlord doesn’t rent to another business who is in direct competition to yours.
Co-tenancy - This provides assurance that you will have the option of breaking your lease in the event that a major (anchor) tenant vacates the property and is not readily replaced with another, jeopardizing your ability to draw in customers.
Worst Case Scenario - Another important issue to discover is the actions that the landlord will take if you are late with or miss a rent payment. Will you be immediately locked out, face eviction or penalties? You should go into the lease fully informed about these consequences.
Finally, read the lease thoroughly so you can negotiate with the landlord on any issues that are unsatisfactory. Doing so will also help you avoid being surprised by anything contained in the lease of which you were unaware.
These considerations will help you to negotiate a lease that will serve your operational and financial requirements to your greatest benefit. Regardless of how prepared you are to negotiate a new commercial lease, however, consultations with a real estate lawyer and broker may be advised to help navigate your local real estate market.
Consider the struggling economy as a financial blessing for your business. Negotiating a more affordable rate for your commercial lease can help you reallocate funds now to prepare your business for the inevitable more profitable marketplace to come.
What are your best tips for negotiating a commercial lease?
As we Americans have recently discovered, finances are a sticky subject, even for a powerful nation. It’s never graceful to confront as volatile a subject as money, whether you’re a country or a small business. Discussing and debating money brings out neither the best nor the most charitable in anyone. While it’s easy to advise a country or a business to:
Be responsible with your money
Have an overall financial plan
Pay your debts before they become overwhelming
Realize that money represents power - personal, business-wise, politically, nationally and internationally
there’s much more to be learned than those obvious fiscally responsible lessons from this dire situation. Now that we’re on the other side of the debt crisis (at least for the time being) perhaps we as small businesses can learn from the challenges that faced our country. Can we glean any day-to-day wisdom from America’s financial woes?
Bill Corbett, Jr., of Corbett Public Relations, Inc., has over 20 years experience in PR marketing and political consulting which has familiarized him with some in the Administration who were working on this seemingly unsolvable financial conundrum. Bill has identified several components of the bigger issue that arose during the debt crisis and shares some lessons we can learn to help us weather our own operational storms and come out a winner, financially and with our good reputation in tact:
Negotiation - First, Bill recognizes that the U.S. Government works based upon - and sometimes in spite of - a complex system of negotiation and compromise.
Lesson to learn - Especially when multiple parties are involved, a small business must passionately champion their own cause in any negotiation, presenting the most convincing arguments possible. Even if you don’t get 100% what you want today, Bill assures us that movement in the right direction often represents a victory, which is, after all, what compromise is all about.
Communication - Bill says that this crisis presented an opportunity for politicians to come out from behind their talking points and really communicate with fellow politicians and their constituents. Those who were the most effective communicators saw their reputations enhanced.
Lesson to learn - Entrepreneurs should recognize the importance of strong communication skills with their coworkers as well as customers. It increases their reputation as a trusted, capable businessperson.
Positivity - Bill mentions how things got rather nasty between the political parties, resorting to name-calling and unfair accusations. In addition, many unnecessary “scare tactics” were employed to give credence to one side or another.
Lesson to learn - Instead of focusing on the negatives of your opponent, Bill suggests sending a clear and positive message about your own business. Rather than forecasting doom and sensationalizing a crisis to strengthen your contention, give an unbiased assessment of the gravity of the situation. Taking the high road is more productive and keeps you from rolling around in the mud instead of solving the problem at hand.
Relationships - Bill says that Vice President Biden played a key role in the debt deal by bringing his personal relationships to the table to help keep lines of communication open. Although he may not have been involved in the specific negotiations, it was clear that he was able to facilitate conversations and meetings that lead to compromises.
Lesson to learn - In business, relationships matter because people work best with those they trust and like. Those in business should always be building and enhancing relationships so that, should such negotiations become necessary, there is an existing relationship on which to work.
Damage control - Negative publicity may not even be completely true, Bill says, but it proved damaging as the parties attempted to negotiate and reach a compromise.
Lesson to learn - Businesses should have a damage control plan in place before it is needed to help keep the company’s message consistent, positive and not reactionary. A thoughtfully prepared plan puts you at an advantage at the negotiation table, should the unexpected come up.
Proactive measures - Finally, Bill contends that this crisis did not have to happen; that negotiations and proactive steps should have been taken to fend off this problem months ago.
Lesson to learn - Businesses need to take action now to resolve issues that may impact their operations. Procrastination can kill a business and or damage its reputation.
Talking about and debating financial issues is never easy. Money is not only a powerful resource but a heavily-loaded subject. Keeping your wits about you, staying focused and sticking to your plan when discussing financial issues is the way to negotiate and compromise while maintaining your integrity. While financial negotiations are a fact of life for nations and businesses alike, ultimately, you’ve won any negotiation that you come out of with your integrity in tact.
What methods have you employed when negotiating over finances?
With the arrival of Spring we think of rebirth and renewal. The very world around us seems new and refreshed following months spent maintaining the status quo. In response to that rejuvenated feeling, we clean out our closets and garages, plant our gardens and vow to get our Winter-weary bodies in shape - symbolic gestures of that “fresh start” that Spring represents.
As in our lives, our business’ finances can get bogged-down with the same-old same-old routines. It’s a wise idea to take a fresh look at them from time to time - and Spring seems like an appropriate time to adopt that refreshed frame of mind. What if we apply that “out with the old and in with the new” attitude to our business finances? Surely there’s some pruning we can do now to freshen up our financial outlook in preparation for robust growth ahead. What seeds should we plant in that fertile financial soil to reap the greatest gains in the months ahead?
Vanessa Troyer, CEO of Architectural Mailboxes, LLC says, “When you are in a growth spurt you can easily be so focused on the growth of the business you can lose control over expenses. Take time off the field to review these expenses - it will save you money. I hope my advice helps out another business.” Vanessa suggests the following tactics for Spring Cleaning our business’ financial life:
Keep your accounts receivables clean. This is something that is very important to your bank if you are working off any lines of credit or inventory financing. If you have old balances hanging out in the 90+ days column, research them to find out if they need to be written off. If you find a customer short paid an invoice a few dollars - write it off! Clean up the loose stragglers - we all have them from time to time. A clean AR is very important to your bank and shows that you have a good handle on your AR which is key to paying the bank back on time.
Pay down your debt. If you have any debt - which most of us do in today's world especially if you are in a growth spurt - be sure to pay down the debt with the highest interest rates first. This is a no-brainer. When you have a surplus of cash be sure to reduce your interest payments to get rid of the highest interest.
Review your annual budget. Seek out ways to reduce your expenses. We review our Profit and Loss report each year and starting hacking away at the biggest expenses first, looking for ways to reduce this expense. A few years ago we reviewed our Professional Employers Organization service provider who prepared our payroll, managed our health benefits and also provided HR services to us with their in house legal team. When we ran the numbers we realized this added service cost us $40,000 a year. We looked back to the time before we had this all inclusive service and had spent only $3,000 in legal fees. We also found that our health benefits were no bargain. In a period of about 15 minutes we learned how we could cut out $40,000 out of the next year's operating expenses.
Incentify your staff. Ask the people in your company what in their daily tasks don't make sense to them to come up with an idea that will save the company money. The prize could be a simple as a $50 gift card or for really big savings a $250 one. We had an employee come up with printing packing slips on the same label machine we use for our UPS shipments. This not only saved money on paper because the labels are free but it printed out with the shipping labels at the same time. This alone saved the company close to $2,000 a year!
These ideas represent the kind of “fresh thinking” that can revitalize a tired, stale financial plan. Whether it pertains to how you spend or how you save, as Vanessa points out, it only takes a few good ideas to make a big difference in your bottom line. Reevaluate your current actions (and inactions) and take steps to shake out the cobwebs from the way you approach them. You’ll be rewarded with a lean, mean financial machine.
What are your best ideas for Spring Cleaning your business’ finances?
Advertising your business is easily one of your biggest professional expenses. You probably spend more than you want to each year marketing your business in the quest for more customers and greater opportunities. Traditional promotional methods such as television, radio and print advertising are the popular - and pricey - choices most businesses use to spread word of their offerings. Technology, however, has brought about a sea change in advertising, changing both the method - and costs - associated with business marketing.
Advertising: cost vs effectiveness
It doesn’t matter if you spend thousands or millions of dollars on advertising if the return doesn’t justify the expense. It’s the equivalent of throwing money at a wall to see what sticks. Certainly there is market research and carefully-crafted marketing strategies employed but on the whole, traditional advertising methods leave a lot to be desired where cost-effectiveness and overall results are concerned.
Technology meets advertising: less cost, greater exposure
Social media are the websites where people meet, chat and share information, such as Facebook and Twitter. Marketers have realized the effectiveness of having people interact this way in relation to products and services. The practice of “social media marketing” is taking the advertising world by storm. Businesses can use these social websites to promote their offerings, share news and interact with their customers.
Here’s how Kelly Cutler, CEO of Marcel Media, an interactive, marketing firm in Chicago, expresses the financial benefits of social media marketing:
“Social media has changed the face of advertising most prominently in that it has almost eradicated the need for print advertising. Social media provides very targeted channels that are much more cost effective. For instance, LinkedIn, Facebook or even promoted YouTube videos. Organizations can determine what demographic they want to target, if they want their ad campaign to be local/national/international and also utilize day parting (determine what hours of the day they want the ad to run.)”
Explaining the cost-effectiveness of social media marketing for her insurance business, State Farm Agent, Deborah Becker, proclaims, “I love, love, love the way social media (specifically Facebook) allows me to personalize advertising for my small business. In my town of 65,000, there are literally hundreds of insurance agents, seven of whom are also State Farm representatives. State Farm does a good enough job of making its brand known to the public; I use social media to show how I / we / our business fits into and benefits the community.”
Debra goes on to say, “As an experiment, our office cut out all radio, print, and other extraneous marketing a year ago, substituting Facebook in its stead. Our business is up! Hits to my website are the envy of State Farm agents nationwide...”
“We’ve been so pleased with the social media results that we’ve now taken the further step of eliminating most of our direct mail,” Debra reports. “We can divert a fraction of the cost of direct mail into social media / online advertising and achieve the same results with funds left available to divert to other ventures.”
The major financial advantages to using social media marketing include:
Cost - The costs involved with social media marketing are related to the time it will take to plan out your strategy and implement it by contributing and engaging with your audience on social media channels. These costs are far less than traditional advertising, such as mass media and print.
Engagement with customers - The personal connection and interaction with customers on social media enables you to be more aware of their interests and impressions of your products and/or services. This relationship can also serve as an inexpensive extension of your customer service offerings, as you reply personally to their issues and questions.
Measurability - You can review the analytics reports which detail the who, what, where and when of your marketing efforts. Putting this data to use will help you make the most of your social media marketing efforts and dollars.
Targeting for maximum effectiveness - By utilizing this analytical intel, you can target your marketing to your customers with precision so that more of your advertising dollars are falling on interested eyes, and yield business.
These factors combine to make social media advertising one of your most effective means of advertising. Even if you implement social media marketing as a way to enhance your traditional advertising or augment your social media marketing campaign with traditional advertising, it is an effective and affordable new tool in your promotional toolbox.
To sum up social media marketing, here’s what Ken Rapko, EVP, Cronmiller Marketing thinks: “So, if you're trying to get the most bang for your buck, look hip and relevant with your clients and aren't afraid to try a little new technology, jump into the social media pool. You'll be glad you did.
How can you more effectively allocate advertising dollars with social media marketing?
Sometimes, no matter how well you plan for and operate your business, unforeseen factors can take you by surprise, knocking your company off its financial footing. That’s what happened to Lisa Merriam of Merriam Associates, a boutique-branding agency based in New York City.
Lisa explains what happened: “I started my company in 2003 and coasted along until the bottom dropped out on me over night in 2008. Having survived since, my company is thriving again, but is utterly, utterly different.”
According to Lisa, it took some changes in attitude as well as in actions to turn her fortune around. Here are four things Lisa says she learned from the brink of business disaster:
Take the helm. My old way of doing business development was to wait for the phone to ring with exciting and lucrative projects. That utterly stopped September 2008. Now I network like crazy and promote in social media like crazy. if I hear a rumor of a project, I am on it. Regarding networking, I used to rely on highly placed people who knew me well and shot me work. Those folks were the first to get the axe in a down economy. Now I network at every level. I have a bigger and more diverse network and keep it constantly refreshed. Regarding social media--I didn't even have a Web site before. Now I am an expert at LinkedIn, Facebook, Twitter, Wikipedia and key industry social sites. My Web site has over 100 pages of highly linkable and current copy. I am in the driver's seat now and am not the least bit shy about promotion.
Be humbly billable, no matter what. In the darkest days at the end of 2008 as I faced another zero billings month, I sat myself down and said "I'm going to work no matter what. And if i just bill a penny, well that is better than zero." I do branding work for Fortune 500 Multinational organizations, but I humbled myself that very day. I found a project that--no joke--appeared to be writing and designing a flier to raise money for a group of cheerleaders in some high school in a Seattle suburb--a far cry from my old lofty clients! I took it and it turned out the client was doing a stealth project. The project ended up being doing the franchise non-profit promotion program for Jamba Juice--a great client and great piece of business. I would have missed it if I hadn't humbled myself.
Be highly focused. I used to focus on developing multinational brand strategies. Now I focus on whatever pays. My agency expertise has broadened considerably. I am still a branding expert, but now I do so much more. My clients turn to me for broader expertise. I concentrate on applying brand expertise to cutting edge/fast growing corporate needs like understanding social media and making use of Web video, etc.
No credit cards. I pay as I go. If I can't pay, I don't buy. I want to be a nimble and debt free company. I have some big deferred capital investments to make, but I am not making them on Visa or Mastercard.
The key to Merriam Associates’ survival was Lisa’s attitude. When faced with serious financial challenges, Lisa was able to adjust her approach toward her business. It was the changes in her attitude that fueled her actions, which ultimately kept her business moving forward throughout the financial crisis. The lessons Lisa was able to take away from her business’ financial challenges have helped Merriam Associates to thrive once again. They are a wiser and better company for the insights gained.
These lessons can be a powerful strategy for any business, whether struggling or soaring. Even when your business is flourishing, don’t let complacency gain the upper hand. Instead of being defeated by a challenging financial climate, it’s important to recognize where you can take action. In either case, agility is king. Merriam Associates is living proof that challenge can be a strong motivator for spurring on great success.
The adage goes, “Desperate times call for desperate measures.” When your business is faced with difficult financial times, you are presented the opportunity to either lay down and take it or take action to adapt, survive and maybe even learn some beneficial strategies.
Whatever the cause of your business’ hard times - a down economy, changes in the marketplace or any of a multitude of reasons, financial hurdles are a fact of doing business. It’s how you tackle them that makes the difference between sinking and swimming.
Karen Schaefer, Founder and Creator; APSD; The Association of Property Scene Designers says, “We are a home staging training and real estate marketing company with clients currently in seven countries. When we started our business five years ago, we had a big following with real estate investors. Today, hardly any of our clients are real estate investors but rather people that wanted to run their own home staging company or add an additional income stream to their existing business, such as a real estate agent.”
Karen goes on to explain how the economic climate impacted her company and how they reacted to the situation: “Initially, when the speaking engagements and big buyers dried up, which seemed like overnight, we had to look at our expenses and figure out what we needed and what we didn’t.”
Karen’s company came to the conclusion that it was time to make some fundamental changes in the way they managed their finances. Here are some of the ways they reacted to the financial crunch:
We realized that we subscribed to multiple publications with much of the same information. We evaluated which were the best and canceled the rest.
Next we implemented a 100% employee performance requirement. What that meant was that the employee was responsible for either saving the company 100% of their salary or making the company at least 100% of their salary. This was an eye-opening experience as to their actual level of performance as well as their skill level.
Another cost saving measure for us was evaluating our outsourced services such as phone services, web hosting and posting sites. We had to track which ones actually yielded a return and which did not. The interesting thing is that this, along with the other items, should have been done all along. Even when the economy is abundant again, we will continue our practice of frugality in all these areas.
We also put our entry level training program into an online six-week training which allowed us to sell it at a lower cost and of course, then eliminated travel expense for our clients so our sales actually increased by 300%.
Next, we implemented several "early bird" payment incentives along with multi-pay plans that were interest free in many cases in order to make it more affordable for our clients.
“Overall,” Karen reveals, “because of this we actually "save" over $7000 a month of previously wasted income, have high performing employees and are able to launch new programs and trainings because of greater awareness we achieved by having to go through the process.”
Through implementing a strategy of reevaluating and cutting back on expenses that proved to be unnecessary, expecting more of their existing resources (aka employees) and finding more cost-effective ways to provide their services, APSD not only weathered a financial storm, they came out of it with a leaner and meaner operation.
The key to maintaining a financially sound business is remaining aware of your sources of income and expense. Are your income sources bringing in all they can? Where can you cut back? Those two questions hold the answers to running an efficient orgainzation; that’s why they need to be constantly revisited and adjusted according to the current needs of your operation.
APSD took exactly the right course of action to make sure that their income potential was maximized while their costs were minimized. Not only did they discover that their business could survive an economic crunch but that they had options and more resources at their disposal than they might have imagined. With a bit of determination, they were able to accomplish exactly what was necessary - increase revenue, cut expenses and keep their business moving forward. These are valuable lessons that can and should be implemented as a matter of course - fortunately APSD recognized them and implemented them when it was necessary. Because of that, they as a company are stronger and wiser for the experience.
What has your business learned from its financial challenges?
A simple fact of business is that you can’t operate without funding. Whether it’s at start up or when expanding your operations down the road - or both - there will come a time when an influx of capital is necessary to get and keep the ball rolling.
Traditional loans are all well and good but the fact is, lending institutions are tight with the money these days. Alternative financing may be more worth your time and effort to investigate than you might think. Finding investors and venture capitalists interested in financing your enterprise may just the ticket to get the money you need to build your business.
Where can potential investors be located? The answer is provided in the wisdom and experience of those who have successfully navigated the terrain.
Healy Jones is head of marketing for OfficeDrop, a digital filing system and document scanning service, and is also a former venture capitalist. Healy says, “We raised equity capital about a year ago. I have some pretty strong opinions on what works when trying to finance a small business, since Ive been on both sides of the table.”
Healy provided some tips for businesses looking to raise venture capital:
Build relationships before you need funding. Get to know the lay of the land in your area. Early stage investing tends to be quite geographically local business, so networking can really help you a) figure out what types of financing are available and b) get into the right networks so that you can get warm introductions to investors.
Venture capitalists really, really prefer introductions to new companies from people they trust - much more than the "cold" business plan submitted via the web. The best introductions to investors come from successful entrepreneurs (especially ones that have worked with the VC before).
Understand the "metrics" side of your business - what you measure and what it means. Having a great instinctive feel for your business is not enough. Venture capitalists will pick apart everything - projections, operations, sales strategy and vision. VCs are financiers and you will need to be able to speak their language. The ability to talk about your operations, growth, etc using numbers is critical to impressing venture professionals.
Lowell Bike who launched myautotips.com earlier this year applied some valuable advice while creating his business plan for possible investors:
Do not overpromise. This applies to not only the return investors can expect, but when they can expect it.
Let them dip their toes in the water. To turn a smaller investor into a larger investor you can show her all the projections you want, but until she sees actual results to back up the projections she will not be comfortable making a larger investment.
Do not give up any of your decision-making ability. The investor might have a stake in the company, but the person who runs the small business is the expert on what it takes to make money. Do not sacrifice any control of day-to-day activities to secure investors.
It isn’t surprising that cultivating relationships with potential investors is a crucial element of obtaining financing from them. Forging those relationships early on before approaching with your hand out will establish you as a reputable businessperson from the get-go. As opposed to a lending “institution” an investor is a person whose trust you need to secure before they will be interested in funding your enterprise. That trust can be further enhanced by providing solid information, golden references from mutual acquaintances, reliable data and realistic expectations about your business. All those factors figure into the total package in which the investor is staking his or her money.
Once your track record is established, your investors may be persuaded to increase their investment in your business. The more they know about you, your business and its success, the more easily they’ll be convinced that you are a safe and beneficial investment.
Investors and venture capitalists are looking for novel and profitable ways to put their money to work. You can reap the benefits of what they offer by following the advice of those who have successfully secured such investments for their businesses.
Who do you know who would invest in your business?
Financing of any kind is hard to come by these days as we slowly rebound from a significant economic downturn. No one is bending over backwards to loan money to anyone but the economy needs to keep forging ahead and that means, among other things, new business development. What are some avenues to explore to get your small start-up business the financing it needs to hit the ground running?
According to John Reddish of Advent Management International, Ltd., who provides financial consulting, coaching/mentoring, speaking, capital formation, and training, “Most small start-ups don’t hold much interest for venture capitalists, angel investors or, frankly, most banks - who will steer you to a home equity loan or often offer their low-end personal loan option which is usually limited to $10K.” John provided some suggestions for traditional financing options (and a few exotic ones) which include:
1. The usual suspects - The most obvious places you may have money available to you without jumping through a lot of hoops:
Your home equity
401k and retirement funds
Your credit cards (Beware of high interest rates and "sin" fees if you go over your credit limit. Even if the bank reduces your credit limit arbitrarily this can be expensive money.)
Your relatives and friends (Be certain to keep the relationship on a professional level - execute loan documents that detail how much interest will be earned and when they get paid, just like any other lender would receive.)
With the exception of the 401k and the home equity, the other resources are relatively easy and fast to obtain.
2. Local and regional micro-loan funds - These are available to stimulate local business formation. Some women-directed funds exist and amounts for loans usually range from $35K to as much as $50K. An Internet search will identify many such sources.
3. Customer funding - This is a form of pre-selling. If you have a key customer (or non-competing customers) targeted and a really unique, one-of-a-kind business, you can often negotiate with the customer to "float" part of their initial and ongoing purchase price as an advance (or series of advances/deposits). That may be enough to get you up and running.
If you are starting a service business, a long-term contract from a customer can be enough to get you started if you can set your bare-bones budget within the limits of the contract. The potential danger is if the customer sees a decline in sales and cuts your contract back - or cancels it - you are without income. While not always possible in actual practice, John recommends as the safest arrangement that no client represent more than your gross profit margin.
4. Licensing - John suggests the following when your product/idea is at least at the "prototype" stage where you can identify customers/markets: Identify a supplier who makes similar products and instead of approaching them as your manufacturing source, propose a licensing arrangement. If they are already marketing similar products, they have both manufacturing and distribution. If you have pre-sales or targeted customers, (see #2 above) so much the better. A royalty with only ongoing administrative costs costs less to operate than a full-blown business - and you can get on to your next product. Bear in mind, however, with royalty rates ranging from 3% to 15% on most products, you have to make sure there is enough potential for both you and the supplier to make it worth while.
5. State and Local government, SBDCs and private foundations - Often there is money available as grants and/or loans available from a variety of governmental or NGO sources for start-ups. These could include SBIR (Small Business Innovation & Research) grants tied to State Funds or policy initiatives that will make money available for training, operations and other costs. Small business incubators and some Enterprise Zone funding are tied to these sources. This is a fertile source of funding and definitely worth investigating.
In these times when financing is tight, you may have to look outside the box to find the capital you need to get your business off the ground. It’s out there - it’s just a matter of doing the necessary legwork to secure it. Research, resourcefulness and creativity will serve you well as you seek the money you need to set your start-up off on a strong financial footing.
What are your best suggestions for financing a start-up in the current economic climate?
Starting you own business is an enormous undertaking, which takes and enormous amount of time, effort - and money. One of the most crucial elements to setting sail on your own enterprise is getting your start-up funded. Your ship won’t sail far without the capital it needs to purchase equipment, market itself, open the doors and get established.
But you’re an expert in your business - not necessarily at funding your business. How do you go about securing the money you need to get your business afloat? Securing funding for your operation is your first order of business.
According to Nathan Heerdt, CEO at Go Big Network, LLC, "Raising capital is very much like finding a new job. He suggests you approach the search for start-up monies in the same way you would approach a job search. Here are the key points to Nathan’s start-up funding strategy:
Your resume is your business plan. Take your time, think through your business idea and clearly communicate your thoughts. If you don't have a good business plan (much like a good resume), you're fighting uphill from the start. You need something an investor can review and understand. It helps you get in the door.
Pinpoint your funding opportunities. If you blindly apply to every job you find on a job board you're not going to have much luck in getting a response. However, if you take your time and connect with job openings that are a match to your background, your response rate will be better. Fundraising is the same way. All investors are not alike. Some invest only in technology, some only in manufacturing, some with established companies only, some with pure start-ups. It's up to you to find and pinpoint the right type of investor for your idea/start-up.
Networking to find the right contact. Again, if you simply apply to a job posting and sit back and wait, you're likely to be waiting for that reply for a good long time. Instead, when you find the right fit for your funding needs, begin researching your network to find a contact that is somehow, some way connected to the investor. Reach out to that person to help make the introduction. If you don't have anyone in your network to help you make the introduction, use websites that are geared for this type of communication.
Have realistic aspirations for your job search...I mean your funding efforts. They say it normally takes 6-12 months to find a job in good job market. Well, I can promise you it can take just as long to find the right investors for your start-up as well. Take the approach that you will be looking for investors for 6+ months and settle in for a sustained effort.
Looking at the raising of capital like a job search is an effective way to approach this arduous challenge. By taking it on as a serious endeavor - like a job search - which will take drive, focus, research, determination and abundant patience, you will remain aware that funding your business is indeed a job in itself. This way of thinking about fundraising also helps keep the process in perspective - you have to “sell” your business idea to potential investors in the same way you have to “sell” yourself to potential employers. Like in a job interview, maintain the mindset that this is your first opportunity to present your company. Once you land the “job “ of getting the funding from your investors, you’ll be rewarded with many more opportunities to present your company to your customers.
On raising capital for your start-up, Nathan says, “It's tough but rewarding. Good luck!”
What approach to financing your business did you take?
Does your business have inventory to sell? Then you are well aware that it is in your best interest to keep track of that inventory - to know when and where it came from and when and where it goes. Obviously you want to make certain that you have what you need to sell but not so much that you are sitting on a warehouse full of unsold merchandise.
Why is it so important to keep tabs on your inventory?
The goal of efficient inventory management is keeping it moving. Generally speaking, the less inventory you have on hand at any given time, the less costs are involved in its purchase, its storage and in insuring its safety. There's no sense tying up capital in a warehouse!
May Maihien, Executive Assistant at San Francisco Bay Area clothing company, Fiftyseven-Thirtythree, explains, "As a small company, our main source of revenue is online sales. Tracking inventory is crucial when even a "small" loss of resources in truth is not small at all, and can be a major blow to our numbers."
John Krech, President/Founder/Inventor of ePhiphony Incorporated likens inventory to an investment. As an investment, its financial performance must be tracked for profitability. John suggests utilizing technology to help accomplish this goal: "According to a study by Aberdeen, the bottom 30% performing businesses have nine times more inventory than their top 20% performing peers. This is a huge variation in performance and a significant disadvantage when it comes to cash flow. It is best to use technologies than can use business intelligence to analyze demand patterns to not only order materials when you need it but also highlight which items are in surplus."
What is important to track?
John Williams, Partner, B2B CFOÂ® says:
Date/Expiration of Products. If a person is dealing in perishable items, tracking by date of manufacture or expiration date is critical. This not only insures that customers get high quality products and reduces or eliminates out of date inventory that must be thrown away.
Location of Products. Good locator systems are also critical if the inventory is of any significance. If one can tie in the sales order system to the locator system, it provides a smooth and efficient way to fill orders and improve customer satisfaction.
Sales/Billing of Products. An integration of sales orders, inventory tracking and then billing provides consistent information and insures accurate and complete billings to customers.
Changes in Products in Inventory. Flexibility of use is critical. Inventory adjustments are a way of life and making sure inventory can be corrected by authorized users (and no one else) makes life easier for business owners.
How can technology help keep track of inventory?
There are plenty of choices available for tracking your inventory that are more accurate than paper, pencil and a clipboard. Among the more popular are systems that scan using UPC (Universal Product Code) and RFID (Radio Frequency Identification) technology. These systems capture information from the product and store it on a computer. Software applications interpret this data into reports that enhance your ability to manage your merchandise. These reports offer not only accurate numbers of what you've bought and sold but can also make suggestions for future purchases based on your inventory's history.
Regardless of the type of system your business employs, technology can help you keep a keen eye on your inventory to maximize your profit and minimize your headaches.
Are you utilizing technology to help you keep tabs on your inventory costs?
Freelancers must take proactive measures to make certain they are paid for their services. In most cases, clients will respect your work, take your invoice seriously and pay up accordingly. But what if they don't? What if - for whatever reason - a client doesn't pay you for services rendered? What recourse does a freelancer have that won't create a myriad of other expenses in terms of time spent on collection efforts resulting in a loss of billable hours for paying clients?
It is a difficult situation for a freelancer; since you have a finite client base, every client is particularly precious. You can't afford to alienate someone who may simply be slow to pay by coming on too strong in your efforts to collect timely payment, implying they are a "deadbeat." On the other hand, you need to be paid in a timely manner for exactly the same reason: You have a limited number of clients from whom you earn your livelihood and when someone fails to come through with their share of your wages, you feel an acute financial sting.
Gwen Hoover, Director of Public Relations for Altitude Marketing, says that when a proactive approach including clear communication and contracting fail to compel the client to pay on time, she advises the following steps:
Re-bill overdue bills immediately. As soon as your first bill is past due, re-bill promptly as a gentle reminder. Alternatively, send a monthly statement with the amount that is outstanding clearly labeled as past due. The “aging” statement automatically generated by QuickBooks are difficult for the customer to understand. I recommend recapping in an email and attaching the aging report.
Call the client. Emails are easy to delete and can lead to misunderstanding, which is why for clients who make delinquent payments, it’s important to call them if you aren’t paid after two weeks – especially if they haven’t replied to your emails. There could be a completely valid reason behind this, but it’s important to hear it from your client directly. There are many reasons why a client may not be paying, and usually it’s not because they are dissatisfied, so don’t be afraid to ask.
Build Bridges. If a payment is past-due, make a point of seeking out and ask to be connected to Accounts Payable (call the client front desk or operator). Check whether the invoice was received and if you can help in any way. All the while maintain a positive relationship. Don’t hang up until you get a verbal agreement confirming when the payment will be made. Be willing to stretch out the payments if necessary. Follow-up with an e-mail confirming the conversation and ALWAYS maintain a paper trail.
Never apologize. Never apologize for chasing payment or even consider bargaining. No matter how much empathy you feel for a client who is struggling financially or otherwise.
Gwen advises, "If engaging a collection agency, hiring an attorney, or going to court aren't attractive or viable alternatives, you can always report the company to the Better Business Bureau. You may not get the money you are due, but at least it lessens the chances that they will do it to someone else." The key is striking a professional, no-nonsense stance that the client will respect and respond to. In reference to these methods of collecting what she was owed from her clients, Gwen says, "Good news--once their cash flow was back all but the one who went bankrupt have come back to do more business."
While it's uncomfortable for most freelancers to be in "collections mode," it is important to assume and maintain an assertive attitude when it comes to getting paid for services you provided in good faith. Consider it one of the "necessary evils" that come with being your own boss. You'll be rewarded with a sense of self-sufficiency when you gain control over your cashflow and professional relationships.
As a freelancer, you enjoy different freedoms - and shoulder different responsibilities - than those who are not self-employed. One of the most important differences is that, as a freelancer, you are solely responsible for making certain that you get paid. No one hands you a paycheck at the end of the week or month. You have to make the effort to ensure that you receive the compensation for your work.
It's vital to your livelihood to make sure that your clients pay you for the work your perform for them. What can you as a freelancer do to secure payment so that you don't end up in the uncomfortable and inconvenient situation of having to collect a debt from a client? Clear and assertive communication from the get-go is the answer.
Jody Shyllberg of JS Graphics, Inc. recommends having the "money talk" with clients and prospects early and often. "I talk about budget in the first meeting - some prospects say they don't know how much "X" should cost, but you get a sense of what they're willing to pay if you give them a range such as "This could cost as little as $000 or as much as $0000." Spending time chasing a prospect who can't afford you is a waste of everyone's time. I give every project a detailed proposal, budget and contract, which outlines everyone's responsibilities and timeline for deliverables as well as payments. All my projects require a deposit of 25-50% before starting - it helps with cash flow, but also weeds out those who aren't serious about their project, or who really don't have the money."
Gwen Hoover, Director of Public Relations at Altitude Marketing, says that, "Like many women I know, I tend to over-deliver, undercharge, don’t ask for money in advance and don’t like confrontation." Those factors can lead directly to finding yourself unpaid for your services. Gwen offers some well-considered tips on securing payment for your freelance work in a timely fashion. She says, "The best advice is to plan ahead so you minimize the damage if someone does not pay. Gwen recommends the following actions to protect yourself from being taken advantage of:
Have a signed contract and a clear schedule of deliverables. To ensure that the client will take the agreement seriously, it helps to have a mutually signed and legally binding agreement. It's also useful to include a list of deliverables for both you and your client – including the payment. This sets expectations and helps to decrease the chances that a client will use lack of clarity as a reason they aren't paying.
Find a way to make early payments beneficial to the client. Discounts can be powerful motivators. One example is to offer a certain percentage discount if they pay the invoice within 24 hours from the time it was sent. Another alternative is providing a discount or promo coupon for the client’s next order.
Maintain Leverage. Always keep in your back pocket one piece of leverage that you can hold back until payment is complete, a deliverable, taking down a website.
Learn from Lawyers. They don’t start work until you send them money. When they have burned through the initial fee they STOP working until you send them more money.
When you are negotiating a business agreement with a new client, there is often the concern that too many requirements will cause them to simply go elsewhere for the service. The important thing to remember that your clearly stated and reasonable requirements protect you from being cheated. A client who takes your work without paying is a liability - not an asset. Any client worth working with will understand and respect your needs as a businessperson when contracting for your professional services.
What do you do to ensure that your clients pay for your services?
In order for your business to fly, you have to alert people of your existence, which means you must advertise. While the actual cost varies from industry to industry and business to business, the bottom line remains: Advertising, while necessary, can be costly, regardless of the economic climate. When that business is a service business, without a pretty this or a practical that to show off to potential customers, advertising is especially challenging as well. While hiring a professional marketing firm and a spokesperson to extol the virtues of your particular service may seem to be the best way to spread the word, it simply is not in the budget for many solo entrepreneurs.
Do-It-Yourself marketing is probably the best solution for keeping the advertising dollars spent both affordable and effective. Not only does it cost the entrepreneur little to nothing (except his or her own time) but the personal touch proves particularly potent in getting your message across. Can your service business benefit from a dose of self-promotion?
Nicole Amsler, with fifteen years of experience in marketing, seems to have found the secret to growing a business when economic conditions are tight: "I have found business picking up in this economic downturn, rather than decreasing," Nicole declares. As a freelance marketing consultant and copywriter at Keylocke Services, Nicole suggests several ways you can become your own best advertising:
Learn to speak. I never envisioned myself as a public speaker but after a few gigs at local Chambers of Commerce, networking groups and universities, I have found I enjoy teaching and speaking in front of a small crowd. I offer seminars on social networking and marketing strategies to small businesses, which is my target market. I have received a tremendous amount of business and “buzz” by offering these seminars and other valuable free information.
Give it away. I clock several hours a month doing pro bono work for organizations and business groups to which I belong. Recently I did all the publicity for a leadership conference and in return was listed as a sponsor on all their materials. I also market a free office makeover with a small group of women entrepreneurs, which has garnered us all positive press and goodwill.
Make face time. It is easy to lock myself in my office and just work. But I find a lot of business comes from face to face networking events such as LinkedIn brunches, Chamber of Commerce breakfasts and TweetUps. There are several online social media groups I belong to and each one has their own in-person social event. I make sure to attend at least one a week, with business cards in hand.
Fake it before you make it. Before I even had one client, I made sure to have an attractive website, a professional logo and accompanying marketing collateral and a separate phone line. I have taken my business seriously from the beginning and made sure I gave off a professional image.
Nicole goes on to say that every interaction she has with her clients and potential clients is advertising in action. "I counsel all my clients on this same lesson. My clientele know I offer professional services because every interaction with them is professional. Most don’t know I work from home."
With some wise advice on representing your business yourself, advertising takes on less "spin" and greater authenticity. When it comes right down to it, there is no more passionate evangelist for your business than you. Implementing a strong blend of technology and handshaking can create an effective marketing campaign without breaking the bank.
How does your small service business advertise affordably?
It would be great if customers would simply peel off the benjamins when it was time to pay us for our product or service. These days a merchant or service provider has practically no choice but to accept credit cards as a common, ubiquitous form of payment. The fact is, the world runs on credit so it behooves us to receive payment of the plastic persuasion as well as the paper.
The process for processing credit cards has become easier too. No longer is bulky equipment necessary to "swipe" a credit card's magnetic strip. It can all be done securely on your computer. Everything you need can be accessed and processed as safely and effectively as if your customer were shopping at her local megamart.
While at first glance it may seem daunting, the process of accepting credit cards is fairly simple. According to Amy Hoy of Freckle Time Tracking and co-author of "The Jump Start Guide to Credit Card Processing," it goes something like this:
Collect billing information (card number and expiration date are technically all that is necessary).
Send through a processing Gateway which provides:
An interface between your credit card processing request and the merchant bank service, where the transaction is authorized and the funds are "captured."
Secure storage of customer credit card information
Receive a credit in your merchant account, which is the bank account which actually receives the funds from the credit card companies themselves.
Transfer the money from the merchant account into your business account.
While the process itself is straightforward, the user experience can vary from processing company to processing company. Accepting credit cards for payment of their products and/or services can be on the costly side, especially for a small or new business. LeAnn Ryan, Owner of Say It With a Sign Co. says, "Small businesses don't get a break on credit cards!" LeAnn has used three different credit card processing companies in a search for one that is affordable and which processes transactions reliably and rapidly. She says one company cost $30 per month, then took 1.9% of the total plus $.20 per transaction, while taking up to four days to transfer her money into her bank account. Another company gave her a difficult time processing one large transaction, informing her that the only way they could conduct the transaction would be to put a 90 day hold on her money, in case the payer should back out. Finally she found a more suitable processing company that charges only $9.98 per month, 1.9% of the charged amount and $.20 per transaction. LeAnn reports that with this company, her funds are available in just a couple of days. In addition, she says their customer support is friendly and prompt.
Remember, whichever company you choose to process your credit card, the inner workings of credit processing are all the same. It's good to know there are choices in the marketplace. Especially for a small business, it is worth the time to shop around for a company that doesn't cause you a pain in the wallet. After all, it's your money.
What is important to you in choosing a company to process credit card transactions?
Business owners often wear many hats but can rarely wear them all, even at a small firm. Finding the two requirements - competent and affordable - in one employee is challenging at best and at worst nearly impossible. Wouldn't it be nice if you could find the talent and skill you require in someone who would be satisfactorily compensated for her contributions by the experience she would gain working on the job for you?
Let's consider where the next generation of talented, educated employees is coming from...Universities, colleges and other institutes of specialized higher education, of course! Many students are eager and willing to get to work and gain some on-the-job training...why not for you? Utilizing interns as an alternative to hiring a professional may be a great solution for filling positions with competent workers without writing a check.
Dawn Lancaster, Vice President of Carved Solutions, a Vermont-based purveyor of hand-crafted and carved soaps and candles, explains, "As a business owner, I am constantly searching for ways to better our company and reduce costs. To that end we do utilize interns and have found it to be a huge benefit."
How did Carved Solutions begin utilizing interns? Dawn recounts, "I graduated from Champlain College and was an intern myself. When interns became internal discussions in our planning, I immediately contacted Champlain & St. Mike’s. Since then – impressed by the work we’ve done with students they seek us out."
Dawn describes how internships work at her company: "We create a job description that is reviewed by the professor and the student for match and interest." The schools stay apprised of the workplace experience the student is receiving by means such as site visits, student journals, weekly class, projects and updates. Dawn relates, "I, personally, want the interns to get the most out of their experience with us and work with them explaining what we are doing and why, how what they do effects the success of the whole project and how it applies to their major and future."
In an advertising campaign for interns, the company literature assures students, "You will not be filing!" As an example of the kinds of jobs Carved Solutions makes available to interns, Dawn says, "We currently have multiple interns including 3 who are working on an SEO project “in class." We are basically a guinea pig for their professors to show them how to apply real life skills now – see the cause & effect in real time. The students come to the office to interview, check in, report in and out – it’s a pretty amazing process."
Dawn recognizes several benefits to the interns she has utilized through the years:
Academic credit for real life experience in their field (opportunity to apply their “book smarts"
Increases value of resume
Increases their skill set and marketability to future employers
Increases their references
Potential career opportunities
She also describes numerous benefits interns provide to a business:
Opportunity to train future hiring pool
Academic credit allows for work to be performed in exchange for your guidance and training versus a financial investment/outlay
Increases exposure of business to local colleges and soon to be graduates
Opportunity to give back to the schools (we’re not big enough to offer scholarships or large donations but we can give real life value through training and educating interns. We also offer our time to speak/teach/share in the colleges our interns come from).
Fresh view on company, products, services, policies etc. (nothing like a young voice in a management meeting – yes we all “tweet” now!)
Dawn cautions that the "Downfalls to utilizing interns are the same as any “bad hire” and requires an immediate correction. With a student that requires too much hands on guidance you’ll find your cost savings lost in additional labor time in training and supervision." She continues, "Finding the right intern is just like finding the right employee – pick the superstars and they’ll impress you every time!"
Interns are clearly prepared and able to take on serious and important work. Why not give an enthusiastic newcomer some much-needed and appreciated hands-on experience in your business? It's a relationship that will benefit both of you in many ways.
Could interns provide your organization savings and fresh talent?