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Tips on Starting, Funding a New Business

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Small businesses are being created now more than ever, thanks to people being laid off or furloughed during the COVID-19 pandemic and the advent of online tools aimed at helping budding entrepreneurs. In April 2021, roughly 500,000 people in the U.S. applied for new business applications, compared to just 300,000 in the same month of 2020, according to the Bureau of Labor Statistics.

While the current climate may make the decision to start your own business easier than ever before, it certainly doesn’t mean that starting a new business is easy. While creating your small business from scratch does start with a dream, a great idea and some funding, you’ll probably also need online training, business acumen and an understanding of some basic financial and marketing principles to get going. 

Mapping Out Your Business

Whether you are launching a construction business, retail store, business services firm or an eCommerce site, before you even think about funding, you’ll need to produce a business plan. 

A business plan is a specific outline of your business, what it will entail and how it will make money. If you plan to seek initial investors for your business, be it angel or venture cap investors or through crowdsourcing, you’re going to need one. 

Source: Growthink

There are cost-effective online tools out there that can provide you with a template for a presentable business plan, such as this one from Growthink, that can make it easy for you – all you have to do is plug in the text and the program will do the rest for you. The basic ingredients of a plan for a new business are:

  • Executive Summary

The executive summary should clearly tell the reader what you want to accomplish as a business, and why your business is special. This is often referred to as a mission statement and is extremely important to potential investors. All too often, this is buried in the middle of the business plan but needs to be stated upfront.

  • Business Description 

The business description should include a clear description of your industry, as well as the products or services you are seeking to sell within it. This is your chance to describe why your product or service stands out in the industry and why you think customers will choose it over your competitors. 

  • Marketing Strategy

This part of the business plan requires a meticulous analysis of the market you are trying to sell your product in, and who you want to sell your product or services to. As an entrepreneur, you need to be familiar with all aspects of the market you’re looking to sell in, as well as carefully define your target market so that your company can be positioned to garner its share of sales.

  • Competitive Analysis

Present a description of what your competitors offer, what their strengths and weaknesses are, and how big the market is in which you are trying to sell. Then, clearly explain what gives your business a competitive advantage. Put simply, why do you think consumers will choose your products or services over your competitors? 

  • Design and Development Plan

The purpose of a design and development plan is to provide a description of the design of your products or services, chart their development within the context of production, marketing and the company itself, and create a development budget that will enable your company to reach its goals.

  • Operations and Management Plan

This plan describes how your business will function on a continuing basis. Who, if anyone, is going to be in charge besides yourself? Where will your business function and what kind of equipment and inventory will you need? Who will you need to hire and for what functions? 

Put simply, the plan will clearly explain the various responsibilities of your management team (if you plan to have one), the tasks assigned to each person in your company, as well as the capital and expense requirements related to the operations of the business. 

If the only employee will be you, you need to clearly spell out what kind of compensation you will need for yourself, as well as the equipment, supplies and space you will need to make your business operate smoothly. 

Business Basics

In planning out a new business, you need to learn basic business terms and why they’re important. There are online courses (and many of them are free!) to teach you the basics of managing a business, such as what sales and profit margins are, customer retention and conversion, etc. 

In order to successfully launch your business, here are some basic business terms you should familiarize yourself with right off the bat:

  • Sales Margin 

Also known as contribution margin, this metric basically determines what you should be charging for your products or services in order to be profitable. It is the amount of money you charge for your product minus the cost associated with producing your product or service. Those costs include manufacturing costs, advertising/marketing and salaries. 

  • Customer Acquisition Cost

This metric helps determine what each sale costs. Simply add up the cost of marketing and sales — including salaries and overhead — and divide by the number of customers you land during a specific time frame.

  • Customer Retention Rate

Customer retention rate is a key metric that essentially tells you if your customers are happy, and will help you determine how quickly you can grow your business. It measures what percentage of your customers have kept coming back over a period of time, and can be calculated over a weekly, monthly or annual basis, depending on your preference.

  • Customer Conversion Rate

This metric basically tells you whether your marketing and sales efforts are paying off. It is simply the percentage of people who walk into your business or visit your website who end up becoming customers. If the conversion rate is low, you may want to change the way you are marketing or advertising your business. You may want to offer more discounts on your website if your conversion rate is low, for example. 

  • Revenue Percentages

If your small business is like most, you probably have more than one source of revenue. Where your revenue is coming from will tell you about shifting trends in your market and what consumers are spending money on. 

For example, if you run a small contracting business, you may get revenue from customers who want to build new homes and revenue from customers who want to renovate their homes. If you notice that, suddenly, many more customers are interested in home renovation rather than new home building, you may want to change your marketing efforts accordingly. 

Build a Website

Whether you’re a doctor or a plumber, it is virtually impossible today to run your business without having an online presence. When consumers search for your services, the first place they will search is the internet. 

Having an online presence means that potential customers can easily find you via a web search, know what products or services you offer, and what makes you unique. You can even set up your website to make direct sales.

Building your own website does not have to be costly, as there are plenty of do-it-yourself website builders such as Wix and SQUARESPACE that can make it easy. In a previous article, Kapitus offered a step-by-step guide to building your own site.

Potential Funding Sources

When you’re looking to start a business, traditional and alternative small business lending sources are probably not an option, since most require years in business. There are funding sources available to you, however, if your personal savings and help from friends and family members are not enough to start your own business:

  • Angel Investors

This option is pretty much what the hit show “Shark Tank” is about. Angel investors are individuals who are willing to invest in start-ups or early stage companies, typically between $25,000 to $100,000, in exchange for a piece of ownership. Their hope is that their investments will pay off big when your company either goes public or when your company becomes big enough so that you can comfortably buy out their pieces of ownership for a hefty sum more than the amount that they originally invested. 

Source: Angel List

Angel investors are often successful entrepreneurs themselves and can offer mentorship and business advice, and typically want to see a strong business plan as well as your plans for growth before they invest. You can find angel investors from other entrepreneurs, or search online through sites such as Angel List.

  • Crowdfunding 

Crowdfunding is becoming one of the most popular ways to garner funds for startup businesses. It is the practice of raising funds through popular crowdfunding websites. 

Setting up a crowdfunding campaign is relatively easy. In most cases, all it takes is setting up a profile on a crowdfunding site, describing your company and its business, and the amount of money you are seeking to raise. In order to attract investors, your business plan and products must seem compelling and differentiating. 

One of the best features of a typical crowdfunding plan is that you usually don’t have to give up pieces of ownership in your business, as people who are interested in investing typically do so in exchange for some kind of reward from your business, such as a discount based on the amount donated, or some form of profit sharing in your business.

Equity crowdfunding, however, is when you are selling stock or some other interest in your company in exchange for cash, and requires compliance with federal and state securities laws. In this form of crowdfunding, you should consult with an investment attorney.

Crowdfunding sites usually charge a fee to list your campaign, which will either be a processing fee or a percentage of the funds raised. Some of the most popular sites include Kickstarter, Indiegogo, Crowd Supply, Crowdfunder and SeedInvest.

  • Grants

There are several private grants available through application for startup and small businesses that could reward you with $10,000 to $150,000 in startup cash, especially if you are launching a woman- or minority-owned business.  Additionally, there are some grants offered through the U.S. Small Business Administration. Some of these grants usually require a business to be community-related or involve mentorship of some kind, so be sure to carefully examine the requirements before applying. 

  • Small Business Credit Cards

Since traditional and alternative business loans are not typically available for startup businesses, you may want to apply for a business credit card. These types of cards often require a strong personal credit score – not years in business – so they may be a good alternative funding source. Like with any credit card, interest is only charged on the amount borrowed, and these cards often come with perks such as cash back rewards, airline mileage points and discounts with selected retailers. 

In the past year, a number of credit card issuers have offered cards that specifically focus on the small business market and do not require personal guarantees, which means use of the card will not impact your personal credit score. One example is Brex, which offers a small business card for early-stage technology companies with professional funding. The credit limits may be substantially higher than traditional credit cards, and they often provide valuable rewards.

  • Venture Capital

Of course, VC funding is usually thought of first as a funding source for startup companies, but they often have the most stringent requirements. VC managers typically want to see strong business plans, and often require seats on company boards, right of first refusal, anti-dilution protection and high ownership stakes. It is often difficult to obtain VC funding as most fund managers are inundated with funding requests and often only accept pitches through referrals from trusted sources, such as other successful startups and successful entrepreneurs. 

Several rounds of funding are often involved, and most VC fund managers are seeking highly profitable exit strategies, such as an IPO or an acquisition, even though most startup businesses do not have any such plans on their horizons. If your startup business does have grand plans of becoming the next Amazon or Microsoft, then VC funding may be for you. 

Starting your own business may be a complex, exhausting task that will require hard work and long hours, but in the end, the thought of being your own boss, setting your own hours and not having limits on your compensation to support you and your family may be worth it if you have a dream and a great idea.

Preparing for Shutdown with Five Tips

Five Ways Small Businesses Can Prepare for Another Shutdown

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According to the CDC, the Delta variant of COVID-19 is responsible for 93% of cases in the United States for the two-week period beginning on July 31 which is up from 83% as recorded for the previous two-week period. Even as vaccination rates increase, medical experts from the CDC advise that even vaccinated Americans should return to wearing masks indoors in Delta hotspots like New York City and Miami.

Mounting uncertainty about the Delta variant and COVID-19’s future has led to parallel concerns that restrictions may rise once more and paralyze small businesses in a way similar to early 2020. Even as in-person commerce is turning up, small businesses would be wise to prepare a contingency plan. Kapitus has collected five general tips for small businesses to keep in mind and help stay on top of another potential shutdown.

 

Track Hyperlocal Hotspots

Medical experts from Yale Medicine advise that the Delta variant and COVID-19 cases from now onward will largely affect the unvaccinated. As the United State’s vaccine rates remain uneven there is an increased chance of extremely localized viral breeding grounds otherwise known as hyperlocal hotspots. COVID-19 is likely to affect some communities severely and possibly skip whole other communities because of vaccination rates. It is imperative that small businesses be aware if they are in CDC or WHO-determined hyperlocal hotspots as unvaccinated patrons could be at risk inside your offices or stores.

If your business is inside a hyperlocal hotspot your first step should be to reevaluate your mask guidelines. It is common for small businesses, especially those with open-air facilities, to mark their facilities as ‘mask optional,’ but per CDC guidelines, even vaccinated Americans should wear masks. Consider also stepping up your signage to double down on social distancing requirements.

To see if your local neighborhood is at risk of becoming a hyperlocal hotspot for COVID-19 keep a close eye on both CDC resources as well as your local government’s neighborhood profiles.

 

Make Operational Adjustments (Again)

This tip may sound silly to small businesses already facing labor and supply shortages but even businesses seeing a commercial uptick should take that growth in stride and be certain to not overinvest in the face of potential future shortfalls. Small business owners showed incredible resourcefulness when facing the initial challenges of COVID-19 making many unforeseen operational changes that strengthened their business for the better.  Doubling down on these strategies, while incorporating a few new areas, can help you to create an emergency plan to manage operational costs.   Some areas to consider include: 

Operating Hours & Work Weeks

If you are a merchant, how long are you open daily?  Do you know which business hours typically bring in the best revenue? Consider adjusting hours to match the times of the week where you tend to see the most traffic.  If you manage an office, do you need a 5-7 day work week?  Do your employees need to be in the office or can you get them quickly moved to a work-from-home situation? Are there any daily tasks your business can complete with automation? When reevaluating your operational costs, your goal should be to run your business as lean as possible so that in the case of a shutdown you can swiftly tone down operations.

Social Media and Customer Communication

Find creative ways your business can leverage social media to both further your communication with customers and maybe even open up new revenue streams. Recording product unveilings on Facebook or Youtube live streams is a great way to get your customers involved from home. If your business does have to shut down or alter hours, use social media and your company’s website to keep customers informed and involved.

Build and Maintain a Safety Net

If your business hasn’t already, put additional money aside in an emergency or contingency fund separate from general savings. The COVID-19 pandemic has been anything but predictable and those businesses who maintained a healthy amount of emergency funds fared the best. Maintaining an emergency savings account may also help put you and your employees into a better mindset. Being prepared for an emergency often translates to being even more prepared for daily operations which will only go on to help your business.

 

Be Intimately Familiar with Your Suppliers

Keep in extremely close contact with your suppliers and vendors. The patchwork nature of modern COVID-19 outbreaks may lead to factory closures even if your own business can keep their doors open. Be certain that someone on your team is in regular contact with your largest suppliers so you can beat stopgaps and delays before they affect business.

The COVID-19 pandemic showed small businesses that relationships with multiple vendors is another “new normal” in the face of supply line shortcomings and regular supply and demand spikes. Operating your business in that new normal requires extensive flexibility in both the front and back of house. One of the best ways to proactively insulate your business from supplier shortcomings is to maintain parallel relationships for the same raw materials. Also, if you have an existing supplier who maintains more than 50% of your incoming supplies, it is imperative that your business find alternative means to maintain those supplies even just as insurance. In the same way that paying into various insurances and protections insulates your business from unexpected disasters, maintaining parallel supplier relationships functions in the same way.

 

Maintain Regular Communication with Staff and Customers

How strong are your communication lines with staff and regular customers? It pays to be upfront and detailed about your COVID-19 and Delta variant contingency plans.

Regarding your staff, be certain that your front of house staff isn’t left unaware of your COVID-19 plans as leaving questioning customers with an ‘I’m not sure’ is anything but reassuring. No matter if your staff is remote or not, set up a live meeting where employees can comfortably ask questions and you can lay out key details about the path ahead. Be as specific as possible and include “if, then” scenarios in the case of heightened restrictions or full shutdowns.

As for customers, consider your existing outreach programs like email newsletters and blogs and see what you can do to step up the personalization of your content. Another valuable resource is an FAQ page with specific details about your businesses plans and prevention strategies going into Q3 and Q4 of 2021. Throughout all your customer outreach it is essential that you are as honest and straightforward as possible. No one is certain that shutdowns are imminent, and the patchwork nature of Delta variant outbreaks means that those shutdowns may be targeted and local. Your communications with customers should reassure that your business is prepared for any outcome and that your team will do everything possible to maintain service.

 

Forgo Expansion for Savings and Invest in Good Labor

The last few months’ uptick in commerce in the United States may lead small business owners to consider reinvesting their new-found cash into upgrades and improvements they skipped out on during 2020 but the time is likely not right for most businesses.

The only sound investment small business owners should consider in the face of Delta variant surges are in good labor. Be certain that you can continue paying your staff competitive and fair wages in the face of continued American concerns about returning to the office. Keeping your staff enthusiastic and invested in your business is the best way to insulate yourself from a type of shutdown COVID-19 has little to do with: labor shortages. Give your staff as much flexibility and as many options as you can bear, and they will respond with passion and a genuine interest in their work.

 

Final Delta Considerations

Beyond masks, tests, and vaccines a key weapon in the small business owner’s arsenal against COVID-19 is information. Keep a close eye on both the CDC and your local government’s stances on your immediate area’s risk for Delta variant surges and outbreaks. Use that information to fuel your decisions as to what extent your business should open to the public. No one is certain how small businesses will fare over the remainder of 2021 but the businesses most likely to survive are those who prepare for any scenario.

 

Woman standing in front of her store wearing an apron.

Ways Female Entrepreneurs Can Recover After the Pandemic (updated 3/30/2022)

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Woman-owned businesses – especially those owned by women of color – bore the brunt of the recession caused by the COVID-19 pandemic, and need help to claw their way back.

The reason women-owned businesses in the U.S. were hit harder than most is because, according to a study by the U.S. Chamber of Commerce Foundation, many of the businesses are run by “mompreneurs” – in fact, 90% of them have no employees other than the business owner and involve selling merchandise over the internet. Additionally, many women started their own business during the pandemic because they got furloughed or laid off, and childcare centers closed.

Access to Funding Curtailed

This made getting loans from the Paycheck Protection Program or SBA impossible for them, as those loans require years in business and a certain number of employees. A number of grant programs exist for women-owned businesses, but according to a study of nearly 1,200 women-owned businesses by Gusto, the ones that are out there are not enough to help sustain the number of women-owned businesses. 

According to Gusto’s survey, the vast majority of women-owned businesses (68%) funded their business through their own personal savings.

“Women are disproportionately owners of foot-traffic-based companies,” said Sarah Gustafson, lead data scientist at Gusto. “What we saw is that female-owned businesses have had larger net losses in their headcounts [during the ongoing pandemic] than male-owned businesses.”

Shouldering the Burden

While women-owned businesses face the same challenges as any small business owner, they also face unique challenges such as childcare. In particular, minority women drove business creation during the pandemic, according to Gusto’s study. Nearly half (47%) of businesses started in the past year are minority-owned. 

Their reasons for starting a new business were overwhelmingly driven by financial imperatives. Minority women were more than twice as likely (35% vs. 17% for others) to start a new business because they were laid off or worried about their financial situation. Almost a third (29%) of these women are the sole providers of income for their family. 

The main reasons given listed by Gusto for women to start their own businesses are:

  • 58% of women want more control over their work schedule;
  • 24% wanted to start a business that they could pass on to their families;
  • 37% were looking to improve their financial opportunities;
  • 19% lost their jobs, and
  • 9% didn’t have any other job opportunities. 

Steps Towards Economic Recovery

Obviously, not all women-owned businesses are the same, but whether you own a retail store, catering service, an office-based company or beauty supply shop, there are still uniform steps you can take, as well as apply for grant programs that are available to you.

The first step you may want to take as a woman business owner is to certify yourself as such with the Small Business Administration so that you can compete for lucrative contracts:

  1. Officially certify yourself as a woman-owned business with the SBA. This will qualify your business for the SBA 8(a) Business Development Program – a program that allows women-owned businesses to:
  • Compete for set-aside and sole-source contracts in the program;
  • Get a Business Opportunity Specialist to help navigate federal contracting;
  • Form joint ventures with established businesses through the SBA’s Mentor-Protégé Program;
  • Receive management and technical assistance, including business training, counseling, marketing assistance, and high-level executive development;

You can compete for contract awards under multiple socio-economic programs, as they apply. To qualify for the program, you must have a personal net worth of $750,000 or less and a gross income of $350,000 or less. 

Grants for Women-Owned Businesses

There are also several private grants, many of which are specific to women-owned businesses, that you can apply for as the economy slowly recovers from the pandemic:

The Small Business Builders Grant Program

Private equity giant KKR has launched the seventh round of its Small Business Builders Grant program aimed at women-owned businesses. The program will give away $10,000 grants to businesses that are at least 51% owned by women. Qualified businesses also must have had $7 million or less in gross revenue in 2021 and have somewhere between five and 50 employees.

The Eileen-Fisher Women-Owned Business Grant

The Eileen-Fisher Women-Owned Business Grant awards five grants up to $120,000 per year to woman-owned companies that promote social and environmental change. Your business must have existed for at least three years, and you cannot have earned more than $1 million in annual profits.

Visa’s She’s Next program

The Visa She’s Next grant is awarded to African-American women-owned businesses. In order to apply, you must have been in business for at least two years, be a B2C company, and have a minimum revenue of at least $24,000.

Amber Grants

The Amber Grant is one of the easiest grants to apply to. It is geared towards female entrepreneurs who are planning to launch small, local businesses and awards $10,000 every month. At the end of the year, one of the monthly winners is selected for a $25,000 grant. To apply, all you need to do is go to the website and explain the purpose of your business.

Cartier Women’s Initiative Award

The Cartier Women’s Initiative awards 21 female entrepreneurs every year with one-on-one expert coaching, business workshops, media coverage for the entrepreneur and their business, and prizes ranging from $30,000 to $100,000.

IFundWomen Universal Grant program

The IFundWomen Universal Grant Program  partners with several different organizations to bring grant opportunities to women-owned small businesses which has a grant pool of over $8M. Grants are available to many different types of women-owned businesses.

GrantsforWomen.org

GrantsForWomen.org  is a versatile program that is a database of grants specifically for women-owned businesses. Not all grants are specifically for women-owned business owners, but they offer funding options in a wide range of industries. 

37 Angels 

37 Angels is a great program for women entrepreneurs who are seeking start up capital for their respective businesses, as it is made up of female angel investors that invest only in women-owned small businesses. The organization is dedicated to assisting female entrepreneurs who do not qualify for traditional lending, and offers grants as large as $150,000. 

Belle Capital 

Belle Capital is a private equity firm focused solely on women-owned businesses, and is ideal for female entrepreneurs who plan to take their company public or have a big exit strategy planned over the next few years. Some of their criteria include the feasibility of the business reaching $20 million in revenues over the next five years, and high capital proficiency. 

Going Forward

While there are grants available to women-owned businesses, female entrepreneurs also need help from the government. According to Gusto’s survey, most women-owned businesses favor President Biden’s proposed infrastructure plan that aims to increase broadband access across the nation, as the number one concern for women-owned businesses is having greater access to the internet. 

Hiring concerns and the need for more training, particularly in the eCommerce space, also represent the greatest need for women-owned businesses, as well as expanded access to capital, both in the traditional lending space and the private equity market.  

You can find training courses online (and some of them are free!) on how to use eCommerce for your business and how to best navigate your way through social media.

Father and daughter having a telehealth consultation with a doctor through a laptop.

How to Market Your Telehealth Capabilities

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Telehealth is fast becoming the new normal among healthcare practices. Even before the COVID-19 pandemic, healthcare giant Kaiser Permanente reported in 2016 that it treated more than half of its patients – some 52 percent, or 59 million – via telemedicine. The consortium also reported that the number of telehealth appointments shot up by 3700% from 2019 to 2020, as more patients continue to seek treatment for non-emergency-related conditions from the comfort of their own home via computer, tablet or smartphone. 

Whether you’re a primary care physician or a mental health practitioner, if your practice has set up a telehealth practice, how will you let your patients know about it, as well as educate and inform them when it is appropriate to use? The challenge now is leveraging your telehealth services to maximize your brand and differentiate you from other physicians, as well as use it to take a leadership position among competing practices and physicians. 

Make Telehealth User Friendly

Before even thinking about marketing your telehealth service, you need to make sure  that it is user friendly. Patients should be able to schedule telehealth visits on your website and be able to include their insurance information or make direct payment. For example, Vanguard Medical Group, a small consortium of independent physicians in Cranford, NJ, allows patients to make appointments  through its eCare service found on its website, and charges a flat fee of $45 for its telehealth visits. Patients can access the telehealth visit on their computers, smart phones, or tablets. 

As a physician, you also want to set up strict guidelines for telehealth visits. In the case of Vanguard, the medical group will only allow patients who have a history with Vanguard to use it, and if it is determined through the telehealth visit that an in-person visit is needed, it will waive the $45 fee. 

“In the end, this service helps us take better care of our patients, especially at a time when the industry is evolving towards value-based payment systems,” said Dr. Thomas McCarrick, Vanguard’s chief medical officer. “This service reduces fragmentation – if our patients can’t get in touch with us, their next option often is the emergency room or an urgent care unit where they won’t know the doctor who is treating them. So, we think this service enables us to better build a relationship of trust with our patients that will improve the care and outcomes of cases.”

Marketing Tips

There are many ways to incorporate telehealth to make your brand stronger to both current and existing patients. Some may take more time and effort than others, but those efforts will be worth it to showcase your telehealth capabilities. Some tips:

    • Use SEO and paid social media to speak directly to target audiences. They are often avid internet users;
    • Post an educational video on both your website and social media channels on how to use your telehealth services; 
    • Invest in external advertising on the web and in print ads to get the word out that you offer telehealth. You may even consider investing in paid social media ads to extend your branding reach;
    • Send broadcast telehealth marketing emails: Inform past and current patients about telehealth options and how they can benefit, especially if you practice in a rural area where patients might have to drive a long way to see you;
    • Offer a telehealth option with each patient phone call. This way, all of your patients will know that you offer the service and that it can be used at their convenience. 
    • Broadcast your telehealth services via direct email to your patients. This will serve as another channel to inform current and new patients of your services, and
    • Post POP signage internally: Reinforce your message with in-office signs and posters. Include with staff/provider conversations with patients and keep it fresh.
    • Present patient testimonials on your web site on how convenient and easy-to-use your telehealth services are. Encourage your patients to provide testimonials, and use telehealth as a way to increase patient satisfaction.

You’re Part of the Future

Most patients want telehealth, especially if a trip to the doctor’s office is inconvenient for them, and consumers in general expect to see telehealth as part of the new normal in medicine, especially after the pandemic. Now is the time to show your patients that you have embraced the future by offering this service, and that you’re part of the positive changes happening in the healthcare industry. 

Increasing a Body Shop's Profit Margins

How Body Shops Can Increase Profit Margins

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Body shops and the commercial auto repair industry at large pull in billions annually but often run with staggering operational costs from labor, parts, and general overhead. A body shop’s ability to keep revenue up is a means of survival but healthy profit margins are the basis of growth. To run a successful body shop, owners must keep a close eye on the several dozen avenues in which money both comes in and out of their shop. This article is a collection of tactics for body shop owners to maximize their profit margins without sacrificing quality and service.

Staff Management

While parts and facility costs will affect a body shop’s profit margins, staff and labor costs are just as important — if not more so. Having high-quality and efficient staff is the most concrete way to increase profit margins as experienced mechanics and technicians are likely to complete jobs faster and with fewer errors. Be certain that your shop’s pay rates are competitive and attractive to experienced workers and reassess your shop’s training structure to be more hands-on. Find out if your state offers subsidized training for auto workers as you may be able to send your staff for specialized training at a reduced cost; some vendors and suppliers are known to offer similar services. Get a general idea how long common procedures like coolant flushes or even more intensive repairs take your staff and use that information to price your services.

Instead of focusing on products and parts, remember that the knowledgeability and skill level of your staff is the basis of a good repair. According to Body Shop Business, labor profit margins for body shops often range between 50% and 65% while margins on parts go from 20% to 28%. Investing in good labor and maintaining a happy, productive staff is one of the best ways to put a body shop in the direction of better profit margins.

Improve Your Retention Rate

A trend report on customer retention from Invesp found that while businesses have about a 20% chance of pulling in a new customer, they have a 60% to 70% chance of bringing back a repeat customer. This is especially true for body shops as vehicle owners should never be a one-time sale. Cars require regular maintenance, so body shops ought to be certain they are homing in on customers that are already in their shop just as much as potential new sales. There are several key strategies to keeping your current customers engaged and willing to return for future services.

Candid and Clear Communication – Be certain that your staff regularly communicates with clients during a job. Make sure that your shop’s training and onboarding procedures are specific about keeping customers in the loop and being transparent about all steps in a repair.  It’s also important to continually assess your upselling practices – making sure not to upsell them unnecessarily. Defeat the long-standing myth that independent body shops nickel-and-dime their customers by being candid and explaining why each step of a procedure is necessary.

Testimonials and Referral Incentives – Your existing customers have the potential to be your body shop’s best advocate and marketing tool. Consider offering discounts on basic services like oil changes or coolant flushes in exchange for customer referrals. 

As your shop grows, it pays to be on top of your online reviews and to establish processes that help you solicit and respond to them. Consider asking customers to leave a positive review after a successful visit. 

Remember that not all reviews are going to be a ringing endorsement for your company, so be certain to directly address bad reviews. Whether good or bad, give personalized responses to reviews as often as possible. Part of the appeal locally run body shops enjoy comes from the personal touches that can be brought to a customer experience. Overall, make sure that your shop’s personality shines through in your online presence just as well as it does in your physical shop.

Plan Future Appointments for Regular Services – While many body shop visits are specifically problem-based, services like oil changes can and should be scheduled in advance so customers keep your shop in mind when it is time for regular servicing to their vehicle. Capitalize on necessary procedures like annual inspections stickers and coolant flushes to keep regular customers as regular as possible.

Digital Services and Software Solutions

Body shops have modernized in parallel with the vehicles they repair. As car companies continue to integrate increasingly complex computer systems and unique parts into vehicles, body shops have shown continued resiliency in their ability to keep up with consumer expectations. Another consumer expectation that body shops met in stride was the demand for digital services during the COVID-19 pandemic. Digital multi-point inspections and procedures are a win-win for consumers and body shops alike as consumers can clearly see their vehicle’s condition and body shops can more meaningfully demonstrate what repairs are necessary or not urgent.

There are several companies that offer digital interfaces for multi-point inspections; one of the most well-known is Bolt On Technology whose digital inspection program allows easy photo integration and tablet use for technicians and mechanics. Compared to traditional paper inspection forms, digital interfaces provide numerous time-saving benefits for your mechanics  while giving customers a streamlined look at their vehicle’s servicing needs.

Another software solution that body shops looking to tighten their bottom line may want to consider is management software like ProfitBoost, which allows shop managers and bookkeepers to consolidate parts and labor expenditure figures into an easy-to-read single platform. ProfitBoost gives shops the ability to quickly assess their spending and determine where they can expand or retract to help their bottom line.

Profit Margin Overview and Final Considerations

With overhead and parts costs as a constant necessity, it is a relentless balancing act for even the most successful body shops to keep their heads above water. There is no gimmick or guaranteed trick to increase a shop’s profit margin, but a valuable first step is making sure that your shop offers personalized and professional services at the highest caliber possible. When you make business decisions around this primary goal, you can expect profits to follow.  

Laptop screen with images of envelopes as Kapitus discusses email marketing solutions.

Best Free & Low Cost Email Marketing Solutions

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Well-crafted and intentional email marketing is one of the best ways for small businesses to stay in contact with their existing customers while also serving as a great tool to convert prospects into new customers. Those who opt into a company’s email marketing program actively want to keep up to date with your recent activities, so it is essential that a company’s email communications are strong and engaging. Email marketing, however, can be an intensive process and creating interesting emails is a job all its own – which is where an email platform comes into play.  Using an email platform – which comes with a wide array of tools to help you perfect your email marketing strategy –  can help you make the process more seamless, saving you both time and money.

Email marketing platforms help businesses manage, schedule, and send mass-emails to those who opt into your mailing list. There are hundreds of email marketing solutions on the market today, but several are either intensive to use or disproportionately expensive. There are, however, many free or low-cost options for businesses just beginning their email marketing ventures or even those who have a following already that can accomplish your email goals as well as the more complex and more expensive platforms This article pulls together several of the most robust and easy to use email marketing tools that are either free to start or wholly free to use. This list does not rank each platform from best to worst but instead shows the unique merits of each platform as certain tools may better suit certain email marketing strategies.

HubSpot

HubSpot is one of the most well-known and reputable email marketing tools available and their free plan is both accessible and generous. HubSpot’s collection of proprietary templates are extremely helpful for teams starting from scratch and their drag and drop editing systems require no design knowledge to create professional, stunning emails.

HubSpot uses data to better target your subscribers including time zones and lifecycle stages. Their analytics page is sleek and displays the most pertinent information front and center. HubSpot also offers several packages of marketing solutions so if your team is looking to expand into blogging, lead management or SEO, the advantages of HubSpot’s email marketing system remain true for their entire suite of products.

Pricing: HubSpot has an unlimited-length free plan. HubSpot’s free plan has a monthly sending limit of 2,000 emails, making it an exceptional choice for local or new small businesses. There are no subscriber limits, but each email used on HubSpot’s free plan will include the HubSpot logo.

Mailjet

Mailjet is an incredibly robust email marketing tool with several impressive and proprietary tools to maximize your company’s marketing potential. Mailjet also has unique tools similar to productivity software – like Monday.com – that allows a team manager to delegate tasks right from the Mailjet dashboard. If you employ a designer, writer, marketer and other staff in your email marketing team, Mailjet can be a great tool for keeping tasks in order and emails on schedule.

Mailjet’s statistics and analytics data is extremely in-depth and allows teams to tweak their campaigns based on existing data. Mailjet can also be linked to Google Analytics allowing teams to connect their email ventures with other marketing projects.

Pricing: Mailjet has an unlimited-length free plan. Mailjet allows teams to send 6,000 emails per month and 200 emails per day. There are no subscriber limits and free users have access to comparably more statistics and analytic info compared to similar tools.

Sender

With several big-name corporate advocates and an incredibly feature-rich free program, Sender feels like a too-good-to-be-true deal. Sender advertises itself as the email solution for both beginners and industry heavy-weights with both audience-creating and audience-retaining tools. Sender’s unique email delivery automation tools keep tabs on feedback loops and bounced emails to give teams a better idea of where their emails are actually making contact with customers.

Sender also plans to implement Push notification integration making it the best tool if your business is solely online or looking to expand into new marketing opportunities. Sender’s API integration is notably seamless and allows for easy website integration and subscriber contact info synchronization.

Pricing: Sender’s “Free Forever” plan is incredibly feature-rich and requires no credit card upfront. Teams can send up to 15,000 emails per month and can manage up to 2,500 active subscribers at a time. Sender’s free package also includes all of their analytic and future Push notification integrations. The only advantage to paying the monthly fee is to increase the cap on monthly emails and overall subscribers.

Omnisend

Omnisend is described as “the preferred email tool for ecommerce companies and has been long held as the king of integration tools”. Omnisend has several unique tools benefitting ecommerce companies including dynamic discount codes. Many ecommerce companies feel that the platform’s automations are also far superior compared to similar tools and analytic data is all geared toward maximizing ecommerce potential.

Omnisend also offers several website integrations including landing pages and sign-up boxes as well as a suite of tools to make compelling popups sure to net you a subscriber. Omnisend also integrated sales statistics into general analytics giving teams even better insight into successful campaigns. Unlike programs like Sender which have roadmap plans to integrate tools like push notifications, Omnisend has such tools already integrated into their most basic plans.

Pricing: Omnisend’s free package has no time limit and a more than sufficient set of tools for ecommerce companies. Teams can send up to 15,000 emails a month and there are no subscriber limits. Free users also have access to in-depth performance reports and analytics that are traditionally locked behind paywalls.

Mailchimp

Mailchimp has long been a go-to tool for email marketing and campaign management. The title is well-earned as Mailchimp’s suite of tools is robust and suitable for just about any team of any size. Mailchimp is also a web domain manager and ecommerce store platform making it a good choice for businesses with plans to expand in the future. Massive companies like Vimeo and TED are long-time advocates of Mailchimp and the service’s sleek user interface is sure to please.

Pricing: Mailchimp’s free plan has no expiration date but is notably less robust than other free options. Free users are allowed only 2,000 contacts and access to the basic level of email builder and CRM tools. Mailchimp’s essentials plan, however, which is $9.99 per month, is likely the best option for growing businesses who plan to eventually branch out into more robust marketing ventures.

MailerLite

Mailerlite is a great email marketing tool for new businesses or those hoping to break into new markets with their email marketing programs. Mailerlite is beyond easy to use and totes a uniquely hands-on customer service team that is willing to work with you during each step of making your first campaigns. Mailerlite also offers traditionally paid services like embedded form integration and pop-ups to free users. Mailerlite’s analytics page doubles as an optimization hub and gives helpful advice on how to keep open and subscribe rates healthy.

The “lite” in Mailerlite is deceptive as the platform is anything but light on features. The service’s advanced email automation tools allow for further customization and personalization than most free services.

Pricing: Mailerlite offers free users up to 12,000 emails per month and allows teams to manage up to 1,000 subscribers at a time. Free users can still access Mailerlite’s helpful customer service team and many of the program’s analytic tools are still included in the free plan.

Moosend

Moosend and Mailerlite occupy the same space of scooping up new businesses in need of a starter tool for email marketing. Moosend succeeds for mostly the same reason as Mailerlite but also includes its own flair in intuitive coding-free email templates and automation tools. The personalization tools which make Mailerlite attractive to small businesses are also here in Moosend blurring the line between which program is best.

Moosend beats out competition, however, in their rather advanced list segmentation tools as well as pre-built workflow templates which are as easy to build as their drag and drop email templates.

Pricing: The Moosend free plan allows for unlimited emails per contact making it an immediate better deal compared to Mailerlite. Moosend is so confident their plans are superior to the competition that they host several comparison pages between themselves and the most popular email marketing tools. The only tools not accessible on Moosend’s free plan are Landing Pages.

SendPulse

SendPulse is the “no frills email marketing solution”. SendPulse has the tools to build an email marketing campaign from scratch and lets the results speak for themselves. Their proprietary Automation 360 tool for automation chains is one of the most robust on the market and handily beats out competitors both in its granularity and ease of use.

SendPulse also has a tag system not seen on many competitor’s feature suites. SendPulse tags allow teams to better organize subscribers and contacts based on certain characteristics like where they signed up or how long they have been a subscriber. The tags system allows for easy personalization even in bulk campaigns.

Pricing: SendPulse’s free package allows teams to manage up to 500 subscribers and send up to 15,000 emails per month. The free plan also allows for one Landing Page integration making the plan a better deal for ecommerce companies. SendPulse’s standard plan, however, is one of the cheapest paid plans on this list at only $6.40 per month as of July 2021. The standard plan has no limit on monthly emails and allows for 3 landing pages which is more generous than any other free plan on this list. Standard users also have access to A/B email testing making it the cheapest way to access A/B.

EmailOctopus

EmailOctopus assumes that businesses already have an email marketing tool and therefore have several tools to make switching to their platform seamless. EmailOctopus also allows for teams to input pre-existing HTML templates which is often labor-intensive on drag-and-drop programs. For a service so set on making companies switch, there are actually very few features unique to the format. EmailOctopus shines for ease of use, external app integration, access to developer API, and very generous paid and free plans.

Pricing: EmailOctopus’s free plan allows teams to send 10,000 emails per month and manage up to 2,500 subscribers. The paid plans for EmailOctopus function differently from competition and finalize their monthly rate off whatever subscriber total a team may need. Because of their unique pricing structure, EmailOctopus’s paid plan is a fantastic option for small teams as they can choose their own price and expand their subscriber cap alongside their business. Paid plans start at $20 per month and can go exorbitantly high in coordination with the chosen email cap. Paid users can also access EmailOctopus’s priority customer support line which is well known as one of the most responsive even compared to large industry players.

Email Solutions Instead of Email Confusions

The email marketing solutions listed here are only a fraction of the thousands of web tools that offer similar services. This collection, however, is curated to cut down on the confusion that makes selecting an email marketing solution so difficult. Depending on your team’s needs, one tool may better suit your business than another.

The first step to selecting a program is deciding exactly what your team needs. If you are an ecommerce company looking to drive sales directly from emails, tools like Omnimail are a must have. If you are a small team sending newsletters and blog posts to your biggest fans, then services like Moosend and Mailerlite are likely more your speed. Using a free program also allows for trial-and-error meaning that teams should not be dissuaded from trying several programs to find the best fit for their team.

If you know an email marketing solution that should be added to this list, please contact us at Kapitus.

Doctor with a patient as Kapitus discusses best medical practices.

What Independent Medical Practices Need to do to Survive

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Even before the COVID-19 pandemic hit, independent medical practices were in critical condition as large hospital systems implemented cost-effective, value-based care systems and hoarded patients’ medical histories – moves that forced many independent physicians who couldn’t compete to give up their practices and join them.

Contrary to popular opinion, independent medical practices were not immune to the effects of the coronavirus pandemic, as patient visits and needs for services plummeted. According to the American Medical Association, 2% of primary care practices closed and another 2% considered bankruptcy at the end of August 2020.

So how are independent physicians supposed to prevent themselves from becoming W-2 employees in the wake of competitive challenges posed by large hospital systems, as well as the task of finding new patients as the pandemic winds down? Here are some tips for survival, based on our conversation with Marni Jameson Carey, executive director of the Association of Independent Doctors, and data from the AMA. 

Merge Your Practice Due to the Threat of Value-Based Care

  • Perhaps the most important action an independent medical practice can take is to merge or form a strategic alliance with other independent practitioners in order to spread the risk posed by value-based care – a system designed to lower the cost of healthcare by charging patients for outcomes rather than service. 
  • In such a system, insurance companies as well as the Center for Medicare and Medicaid Services (CMS) set standards of payments to doctors to incentivize them to keep costs down by cutting redundancies in treatment, offering pre-paid bundled services packages to patients for cancer care and surgical procedures, and focusing on preventative care. If doctors go over the stated annual amount, then the cost of treatment must come out of their pockets. In short, doctors are rewarded and paid to keep patients healthy year-over-year, rather than paid for services rendered. 
  • The Healthcare Payment Learning & Action Network, which was established by the CMS in 2015, aims to have 100% of providers in the US participating in value-based contracts by 2025. While value-based care has become the wave of the future in medical care, it has become the biggest threat to the existence of independent doctors, who may not be able to afford to offer discounted services, said Carey.
  • Large hospital systems that own a network of salaried physicians are in a better position to offer value-based care because of their economies-of-scale, said Carey, and that makes it harder for independent practitioners to keep up.

Marni Jameson Carey, executive director of the Association of Independent Doctors, says that independent doctors should band together to offer value-based care.

“I have a problem with value-based care philosophically because smaller practices tend to have established patients, and as doctors get older, their patient bases tend to get older and sicker, not younger and better,” she said. “So, as a doctor, I’m now being measured against my prior year, even though my patients are getting older and sicker, and I’m doing my best. Value-based care goes against the grain of the idea that every year you have to do better than the year before, when natural evolution tells us that people get older and eventually die.” 

The answer, she said, is for independent practitioners, be it primary care physicians or specialists to “Ally with other independent doctors and share risk as a consortium, but still stay independent,” she said. 

According to a recent article from the Advisory Board, a physician advocacy group that promotes equity in healthcare practices, “As care delivery becomes more complex and value-based arrangements require more upfront resources, very small practices are more likely to struggle financially and be aggregated by larger entities. This may mean hospitals, yes, but it doesn’t only mean hospitals. In fact, many independent physicians are acting as aggregators themselves—buying up struggling practices and offering models that appeal to these fiercely independent shareholders.”

Independent doctors should know that acquiring another practice in order to scale up business may require financing. In such a case, physicians should consult with their accountants as well as seek financing from either traditional lenders or alternative lenders such as Kapitus, which offers Helix Healthcare Financing – lending specially tailored for independent healthcare practices. 

Make Healthcare Records Portable 

Electronically Updating the medical history of patients is the bane of most doctors’ existence, because it involves hours of tedious paperwork and filling out forms. To add to that frustration, independent doctors often have to deal with the fact that their expensive electronic health records (HER) systems are not compatible with those of the hospitals to which they refer their patients. As a result, hospitals don’t know their patients’ medical histories and order duplicate tests and perform redundant procedures. 

“This is one of the ways hospital systems try to encourage independent doctors to join them and become employed physicians, so that they don’t have to invest in electronic health record systems that may become obsolete,” said Carey. “Hospitals like to own patient data and freeze out other providers not within their system so that they capture patient share and make it hard to share the data with doctors who might take business from them.” 

The answer to this, she said, is for independent doctors to adopt an EHR policy that makes it easy for patients to have access to their own medical history – something many doctors are afraid of doing out of fear of violating the Health Information Portability and Accountability Act (HIPAA). 

“If you look up the HIPAA laws, it’s not about patient privacy, it’s about the patient’s access to information,” said Carey. “The law has been misconstrued to mean that patients can’t even have access to their own information, and that isn’t true. The patient should be able to have the data, so when the patient goes to the hospital or a specialist the patient has the information with him or her, whether it’s on a thumb drive or on a smart phone. So, the answer to this is to make sure patients have access to their own records and to sure information isn’t siloed by hospitals.”

AthenaOne Electronic Health Records Software

For independent doctors who are still using paper files to store patient records, adopting EHR software should not be a difficult task. Some of the most popular EHR software systems out there include AthenaOne and RXNT.

Make Telehealth a Featured Part of Your Business

Even before the nation went on lockdown due to the coronavirus, health insurance giant Kaiser Permanente revealed in 2018 that slightly more than 50% of doctor visits by its participants were through telehealth, and that the number of telehealth appointments shot up by 3700% from 2019 to 2020. The bottom line is that telehealth is here to stay, especially in rural parts of the country where a trip to the doctor’s office may require a long drive. 

“I’ve been told by our doctors that they are doing telehealth visits over their phones and over Zoom, and that they bill for the service and it isn’t complicated,” said Carey. “I know there are companies out there that want to make it complicated and want to sell expensive services, but this really isn’t a technology issue. I do know that you can’t just run around doing telehealth visits, that you need to be an established patient with a practice before that provider can do a telehealth visit with you and determine whether a telehealth visit would be appropriate.”

Make Prices Transparent

Several states have passed laws requiring medical practices to inform patients of the price of their services before they are rendered. This prevents patients from receiving billing surprises after undergoing surgery or another medical procedure. The patient may believe that the surgery is covered by insurance, only to find out afterwards that one of the specialists involved in the surgery, such as the anesthesiologist, for example, may not accept insurance and receive a bill for thousands of dollars for that service. 

States such as New Jersey, for example, have passed the Out-of-network Consumer Protection, Transparency, Cost Containment and Accountability Act in 2018, a law that independent New Jersey doctors claimed threatened their survival because it allows consumers to also seek an outside arbitrator to determine whether the cost of medical services are reasonable. 

Carey said that despite the initial objections to these laws, price transparency among independent physicians – even ones that do not accept insurance – is necessary to ensure their survival because it encourages competition among physicians as well as hospital systems, which inevitably will drive down prices of medical services. 

Automate Where you can 

Some independent physicians are still stuck in the dark ages when it comes to technology but should automate some of their systems with software to make their lives easier and give them more time to spend with patients. These systems include automated appointment reminders, patient intake forms and billing – systems that large hospital systems already automate themselves. 

In summary, survival may not be easy for independent medical practices going forward, as large healthcare systems continue to gobble up small practices. Following steps for survival such as partnering with other independent doctors and keeping up with technology can prevent an independent doctor from becoming a W-2 employee.

Operational Changes in the Construction Industry Brought on by the COVID-19 Pandemic

How the Pandemic has Changed the Construction Industry

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Even as the world cautiously steps toward pre-pandemic conditions, COVID-19 will stay in our minds long after the virus is under control. COVID-19 was an unparalleled reckoning that demanded innovation for business owners to survive and the construction industry stood out during this time for being exceedingly flexible, dealing with issues both directly and indirectly related to the pandemic. Construction companies faced unique challenges in balancing worker safety, supply short-falls and maintaining build deadlines through sporadic shut-downs.  As build sites continue to drop precautions for workers, there are many pandemic-era changes to the construction industry that look as if they will live on as best practices in the future – sticking around either for workflow or financial benefits. This collection of modern practices are quickly becoming industry standards in the industry and may be essential pieces to swaying a client or winning a bid in the coming years.

 

Proliferation of Off-Site and Modular Construction

 Facing a flurry of restrictions in the early days of the pandemic, build sites that were not wholly shut down were forced to work with a reduced crew. An effective means to keeping on-site workers socially distant and speed up builds with a lower on-site population is off-site construction. Off-site construction became a means of survival for companies like Entekra and FullStack Modular who emerged as industry leaders. Companies who adopted prefabrication during the pandemic are largely maintaining their partnerships because of lower build costs and the highly replicable nature of prefabs.

The 2020 Dodge report of Prefabrication and Modular Construction found that 90% of contractors surveyed considered prefab and modular construction to be key elements keeping builds on schedule, improving productivity, and maintaining higher quality compared to traditional build strategies. The report also notes that decreased cost, increased quality and expedited scheduling are the key reasons construction companies are turning to prefab and modular building alternatives.

Modular building also became an expected commodity during the early days of the COVID-19 pandemic. As closed-off testing facilities and care pods became nationally demanded, several construction companies turned to modular buildings to keep up with demand to help build them out and then began to use them on other projects. 

The pandemic exacerbated an existing trend toward modular buildings, as a 2019 McKinsey & Company report found that the modular construction industry could be worth as much as $130 billion in the United States and Europe by 2030. FullStack Modular in particular even turned focus from Brooklyn residential development to producing modular M.I.U. (mobile isolation units) during the pandemic.The COVID-19 pandemic and the increased need for modular buildings it resulted in expediting the popularity of the already booming modular market.

 

Virtual Tours, Remote Work and New Technologies Are Here to Stay

As meetings and lecture halls went virtual, so did build sites. State guidelines heavily restricted who was allowed on a build site during the COVID-19 pandemic. Clients, consultants and sometimes even building inspectors were barred from entering sites out of fear of viral spread. While virtual tours and remote work started as a necessity, construction workers adapted to COVID-19 restrictions and modernized the industry for the better.

COVID-19 is largely responsible for the construction industry’s quick adoption of cloud-based workspaces. Beyond Microsoft Teams and Google Drive, software targeted specifically to the construction industry like InEight, have become massively popular tools for organizing remote construction work. InEight found in a 2020 report that from February to July more than 250,000 users working on more than 2,100 projects were using InEight’s collaborative document software, growth the company noted was a massive spike compared to expected year-to-year growth.

New build site documentation technology like interactive floorplans and 360-degree cameras grew from industry novelties into indispensable tools during the COVID-19 pandemic. Companies like the San Francisco-based OpenSpace and Insta360 have made strides in the modernization of jobsite progress photos. The two companies collaborated on jobsite documentation photography technology allowing remote workers to combine a floor plan with 360-degree photos, allowing for a new level of immersion for clients and consultants. OpenSpace noted that from March 2020 to August 2020 the company tracked a 500% increase in active users of the interactive construction floor plan software. Compared to the alternative of on-site workers taking individual photos with mobile devices, interactive 360-degree photos are likely to become an industry standard.

 

Supply Chain Uncertainty Is Breeding Future Caution

Even as COVID-19 vaccines become common, the tidal waves of supply chain disruption are far from over. Market uncertainty can then cause speculation, leading to massive hikes and dips in materials costs which impact contractors and the construction industry at large. An industry analysis from the Associated General Contractors of America found that from March 2020 to April 2021, construction materials rose in price 12.9%, the highest recorded jump in the AGC’s time recording market trends. In the face of material insecurity with no end in sight, contractors have been forced to seek out multiple suppliers where they would regularly only need one. Industry trends have proven that the most effective means to stay ahead of supply shortages is to be flexible. Companies with supply lines that could easily switch between vendors are the most likely to stay competitive when facing future shortages.

Lumber prices have soared throughout 2021. April saw the per thousand feet board price raise to $1,200, marking a 250% price increase since the pandemic. While timber companies are enjoying a historic boom, contractors seeking out the material are likely to see more delays. Contractors are also suffering as larger construction sites pick up to pre-pandemic levels. In the balancing act of suppliers and builders, it is currently exceedingly difficult for contractors to maintain a constant flow of materials for a consistent price. While concrete and glass prices are steady today and lumber and steel are shooting up, the fluidity and rapidity of the international construction supply chain’s pricing changes could lead to the opposite tomorrow.

Market analysts note that during the early pandemic, most suppliers cut stock and slowed production. When the construction industry began a meteoric rise in the number of job sites and active projects toward the end of 2020 due to backlogs being restarted, suppliers were left scrambling to match demand.

While large construction companies with several job sites traditionally maintain multiple relationships with suppliers for materials, contractors and smaller companies are joining the practice because of the supply chain implosion and recession prompted in 2020. Single-source suppliers have long been the favorite of large construction companies and small contractors alike because of lower costs and ease of access that comes from a dedicated relationship.. Companies are now investing more time, labor, and effort into modernizing and often diversifying supply chains to reduce the risk of shutouts, as even the most reliable suppliers have been strapped for output during the past year. Construction companies are investing more into either establishing increasingly complex supply lines or hiring more staff to manage or act as consultants in their existing structures.

 

The Future of Construction

In the wake of unprecedented collapse and climbs, the construction industry has emerged from the COVID-19 pandemic wiser and better prepared for the future of work. The construction industry was uniquely placed as the world shut down. Both on-site and remote construction workers are essential workers. Lessons learned from quick adaptation have become industry standard and pandemic-era problems have put the construction industry on an unexpectedly good path going into the post-pandemic world – supply chain issues and all.

 

Two Businesses men shaking hands

Small Business Acquisitions and How to Finance Them

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Acquiring another business can be a complicated task, but one that could very well be worth the effort to ensure the survival of your small or micro business. 

The time may also be right for considering an acquisition, as interest rates are low, making borrowing for an acquisition relatively cheap. Additionally, according to the most recent NFIB Small Business Optimism Index, the net percent of owners raising average selling prices increased 10 points to 36%, the highest reading since April 1981. 

While deal volume is not back at a pre-pandemic level, according to the NFIB, sectors such as liquor stores, home improvement businesses, e-commerce sites, medical businesses, manufacturers, and distributors are seeing high activity.

Reasons to Consider an Acquisition

One reason you may consider acquiring another business is that, now that we are (hopefully) in the waning days of the COVID-19 pandemic, your business may very well have taken a financial hit, and you may need to scale up by purchasing a similar business if you wish to survive going forward. 

Purchasing a similar business would give you an entirely new stream of revenue and a new pool of clients, as well as increase branding in your market – even if you’re a microbusiness such as an independent restaurant or retail store owner. If you’re an accounting or law firm or other type of business services firm or medical practice, it may even increase your client base to other regions of the country, depending on the location of the business you are seeking to purchase. 

Another potential reason to make an acquisition is that you may want to complement your business by offering additional services. For example, if you own and operate a construction firm that specializes in building houses, you may want to purchase a company that specializes in masonry and paving work so that you don’t have to subcontract that work whenever you build a new home.

Due Your Due Diligence

If you’re interested in making a strategic acquisition, your first task will be to work with an M&A advisor or even an accounting firm. While most banks are not interested in M&A advisory work for small businesses, there are several advisors that do specialize in handling acquisitions for small to medium-sized businesses (SMBs). 

Talk to your advisor about:

  1. Why you want to make an acquisition;
  2. What type of company you are seeking to purchase; 
  3. The location of the company in which you wish to purchase;
  4. The feasibility of merging your company’s balance sheet with the acquired company;
  5. The value of similar businesses in your industry and in your geographic location;
  6. A realistic amount you wish to spend on an acquisition;
  7. The logistics of merging your company with another, and
  8. How to fund the acquisition through debt.

A reputable M&A advisor should be able to do the due diligence for you and find you a list of companies in your area that may be a compatible target for an acquisition based on their business models, revenue, management structure and other factors. The advisor should also come up with a fair value of the acquisition target based on the financials of the target business. 

Create a Combined Business Plan 

Once you and your M&A advisor has found an acquisition target that meets your criteria and agrees to be acquired, you will have to produce new short- and long-term business plans for your new, combined entity in order to get financing to fund the acquisition. The basic ingredients of a business plan for a newly combined business typically include:

#1 Creating a New Management Team, Staff

Discuss with the head of the company that you are looking to acquire the logistics of combining your staff. Start with who will oversee the new company, and what functions each of you will have. If you are a microbusiness and the new company will only have 6 or 7 employees, then combining your respective workforces should not be too challenging. If your newly formed company will have 20 or more employees, you may wish to create new departments with new department heads, with each serving a different function.

Staffing redundancies, such as two people from each respective company essentially serving the same purpose, may be a red flag in the eyes of a prospective lender, so make sure your new staff structure is as efficient as possible. These factors will be crucial in the contingency –or 12-month plan– that you will need to present to a prospective lender to finance your acquisition.

#2 Creating a New Mission Statement in Line with Your New Capabilities

Your new company’s mission statement should detail the new array of products that you offer, how employees approach their work to reach goals and why your new company is improved in the way it provides products and services as a result of the acquisition. 

Next, ascertain the capabilities that your new entity has to offer in terms of sales. For example, the company that you are acquiring may offer eCommerce capabilities, while you have more retail locations. Post acquisition, your new company will offer both and your mission statement needs to reflect this. Your new company may now offer business-to-business, business-to-consumers capabilities or combinations thereof as a result of the acquisition. In addition to being a key component of your mission, these factors should be the benchmarks for your five-year business plan.

#3  Showing That You Can Absorb Debt

Typically, the company that you acquire will have some debt that you have to absorb. In order to get financing for your acquisition, you have to convince the lender that you can handle that debt, especially since you are using debt to finance the acquisition. 

Joshua Jones, Chief Revenue Officer at Kapitus, said the ability to take on new debt is key to acquisition financing.

“The [lending] bank is going to say, ‘does this asset (the acquired company) cover the new debt service on that business?’” said Joshua Jones, chief revenue officer at Kapitus. “Because now, you’ve just applied a whole new payment (through the financing of the acquisition) and the best way to show in your business plan that you can absorb that debt and increase your gross profit is either through efficiency gain or scale.” 

#4 Projecting Gross Income of the Newly Formed Company

Work closely with your accountant or M&A advisor to project a 12-month income. There are various ways to project income, and it is typically far more complicated than simply adding the gross income of your company to that of the company you are acquiring, so talk to a financial expert on this. 

“An effective planning tool is through the use of projections,” said Michael Kuru, a CPA specializing in family-owned businesses. “When a business is acquired, there is a strong indication of the gross income that should be generated. The experienced business owner should have an idea as to the underlying cost to generate that income.’

Obtaining Financing for an Acquisition 

Generally, the best type of financing for a small business acquisition would be an SBA loan, with the most common being the 7(a) loan. You may also want to consider a business loan, since the requirements for a SBA loan are typically stringent, require a high credit score, and are generally not easy to obtain. 

According to Jones, however, “An SBA loan will always be the most seamless with the acquisition strategy because it is going to provide the length of payback that’s more applicable to an owner buying a business and having the available profits to pay down the loan as a percentage of profits over time.”

SBA loans are typically offered by two different entities – a brick-and-mortar bank, or an accredited non-bank SBA lender (of which there are only 14). Many alternative lenders such as Kapitus do not directly provide the SBA loan, but have built a wide array of accredited lending partners and uses modern technology to underwrite, approve and manage the loan disbursement and repayment process, often in a timeframe that is much quicker than that of a traditional lender and often has fewer requirements.

Executing an acquisition could be an expensive and extremely complicated task. At the very least, however, buying another small business could help your business survive in the post-pandemic world. At most, an acquisition could help you thrive as it would allow your company to expand, scale up products and offerings, and ultimately pull in new business.

COVID-19 Operational Changes

Pandemic Pivots That Are Here To Stay

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The COVID-19 pandemic dealt a uniform blow to small business owners across the country.  But with true small business grit, many businesses turned the other cheek, which required speedy adaptation to survive. As the world’s rules of engagement quickly changed, creative and flexible small businesses emerged as pandemic heroes. Kapitus listened to the stories of some of those small business owners who implemented new ideas during the pandemic which have now changed their businesses for the better. These operational changes, or pandemic pivots, represent the determined nature of small business owners and their ability to stay competitive even in the most constricting times. Please enjoy — and, perhaps, draw some inspiration on ways to improve your own business — from this collection of accounts from small business owners to see how they uniquely adapted and grew during one of the most uncertain times in modern history.

 

A Shorter Work Week

Katherine Brown, Founder and Marketing Director, Spyic, Spokane, WA

“The significant change we made to our business culture at Sypic during the pandemic is initiating a 4-day work week. We tried this as a way of compensating most of our remote employees who were working extra hours daily. Rather than demand that they work five days a week, we realized that most of them could comfortably clear a week’s workload within four days. We, therefore, piloted a 4-day work week, and a year down the line, we are keeping it even as the ravages of the pandemic start to ease.”

 

New Target Market

Brittany West, Owner, Brittany West Photography, Estes Park, Colorado 

“I am a wedding photographer and have been for the past 7 years, before the pandemic I had a strong focus on traveling for destination weddings. It allowed me to see the world and experience different cultures. The past year I changed to marketing to couples that were closer to home and wanted smaller ceremonies with less than 75 people in attendance. This has allowed me to slow down a bit and not be in such of a frenzy, I feel like I can be more creative with a mind that isn’t in a frenzy and enjoy my work more. While I still want to travel for work, I believe for the moment I will only accept destination weddings that are within the United States and not international wedding locations just yet. As a mother of three the pandemic allowed me to focus on my children, I get to attend more basketball games and practices with my 8-year-old son, and I know that one day I will not have that opportunity. Work will always be there but giving them memories of having mom cheering them on is something I want them to have.”

 

Embracing Technology

Tony Galloni, Marketing Director, ADS Laser Cutting Ltd, Leicester, U.K.

“ADS Laser Cutting are an engineering company based in Leicestershire, U.K., who specialise in metal fabrication including laser cutting, forming, welding, finishing and assembly of sheet metal.

During the first lockdown we were forced to make some big changes to how we operate in order to adhere to Covid guidelines, keep our employees safe and still be able to continue servicing our current customers and new enquiries.

Prior to this, we had never entertained the idea of flexible working/working from home but we took the leap with anybody who could work from home doing so and where this was not possible, such as in the factory, we quickly changed the setup to provide Covid safe working conditions. In order to make working from home work, we utilised tools such as Zoom for our meetings and quickly implemented a CRM system to enable a single view of the customer from a cloud based system which can be accessed from outside of the office, with this now being used daily by a number of our teams for customer relationship management, project management and reporting.

These changes have now become a commonplace for us here at ADS Laser Cutting, with us being much more open to modern ways of working, allowing our team to work from home if required. Also, we have reviewed since and continued to upgrade our digital infrastructure.”

 

Leveraging Social Media

Jeff Moriarty, Marketing Manager, Moriarty’s Gem Art, Crown Point, Indiana

“We have a family-owned jewelry business outside of Chicago. One change we implemented during COVID was to run all our jewelry shows online instead of in person. In the past we did all our shows in person once a month and they did very well. With COVID, we had to stop those immediately.

In March of 2020 our company started doing live streams through YouTube and Facebook to our local and online customers. These live streams were both educational and commercial in nature. These live shows allowed visitors to view our items, buy online and ask questions. We advertised these live streams through emails, our website, and social media. We are now getting about 1000+ viewers watching our show each time. Not only has it helped to stay connected with our customers, it has generated a ton of sales ($20,000 from our last month’s show) for our business. It was so successful for us over COVID, that we do it once a month even now through 2021.”

 

Rethinking Office Time & Space

Seth Price, Founding Partner, Price Benowitz LLP, Washington, DC

“The pandemic certainly had an effect on our workplace, and I don’t see any of my colleagues returning to the office on a full time basis anytime soon. Quintessentially, we’re working in a hybrid workplace, but I think we’ve taken it a bit further. Employees within our firm are allowed to enter and leave the office at-will and are no longer required to let their employer know when they will be in or out of their physical office. I don’t see this rule changing now or ever, and I think it’s for the better. Our firm has grown since working remotely has become a viable option, and it’s allowed our physical office to be used in different ways. Since we don’t need all of our offices anymore, we’ve created a fantastic common space where employees can work comfortably and even chat with their coworkers. This won’t be an option for every workspace, but I’m grateful the pandemic has pushed the traditional office into the past.”

Building a Safety Net

Martin Seeley, CEO, MatresssNextDay, Canterbury, U.K.

“Pandemic has brought organizations challenges that they did not anticipate. Some businesses start to experience bankruptcy and have no choice but to close their business. As a business owner, I have seen firsthand the profound changes that the pandemic caused in the workplace. It taught me

methods I did not know my company was capable of. Since the pandemic started, our business tracked the revenues and expenses incurred meticulously. We began allocating funds for contingency occurrences because no one knows if a phenomenon similar to this will occur again in the future. This evaluation will provide a comprehensive image of a company’s financial position and assist business people in planning for the future in the current inflationary economy. We are planning to do this in the future to avoid any adverse implications for our organization.”

 

Expanding Supplier Relationships

Brian Bianchetti, Director, People’s Choice Beef Jerky, Los Angeles, CA 

“Like nearly all businesses, we experienced incredible disruptions in our supply chain. The volatility in the market made operating nearly impossible at times. This experience **reinforced the importance of having multiple suppliers for each good and service. In the pre-COVID-19 era, we had 2-3 suppliers for primary goods and 1-2 suppliers for ancillary goods. Now we have a minimum of 2-3 suppliers for all goods and 3-5 suppliers for main goods. We will definitely maintain this change in a post-COVID era as it prevents disruptions to our production, while also giving us leverage during price negotiations. We believe that this will be the new reality and want to be prepared for any future changes.”

 

Pandemic Pivots and the Small Business Owner

The COVID-19 pandemic tested small business owners in ways the world has never seen before. The quick-thinking and innovative nature of small business owners, however, existed well before COVID-19 was an everyday word and will continue to exist long after this threat passes. Those business owners who showed flexibility and resourcefulness throughout the pandemic have only grown stronger as a result.

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