Keep your customers by supporting their healthy lifestyle changes

If you own or run a food or restaurant business, you know how food trends may boost sales. While some trends last for a few weeks and are simply fads (fondue, foam, and food with added caffeine), others become more mainstream and last a lifetime (sushi, huevos rancheros, or anything organic). In urban areas, healthy trends remain important for much of the world’s population. This is especially the case in the first few months of the year as people work toward achieving their New Year’s resolutions.

Here are five healthy food trends data shows are likely here to stay, as customers have purchased an increasing number of these products in recent years:

1. Faux Meat Offerings

As the world becomes more environmentally conscious, alternative protein sources have become more popular. Both startups and established companies are perfecting ways to make faux meat tastier. All of which is helping to fuel this trend. There are two leading providers of high quality and tasty faux meat in the United States, Impossible Foods who makes the Impossible Burger, and Beyond Meat. These products have already gone mainstream. The Beyond Meat Burger is now available at all 469 TGI Fridays restaurants in the United States. For business owners, faux meat is easy to cook and easy to substitute into your existing dishes.

2. Hemp and CBD products

As marijuana has been legalized in nine American states, other products derived from the marijuana plant that don’t contain psychoactive or mind altering substances are now being incorporated into food products because of the potential health benefits they offer. You can incorporate CBD oil into a variety of products ranging from coffee to cookies to juice to tea. Treats made with this oil are known to be stress and anxiety relieving. Hemp has several properties considered beneficial to health, including its ability to balance hormones, improve mood, and assist with both pain and sleep. Even large chain stores like 7-11 are joining in: hemp-derived CBD products are now available in up to 4,500 stores.

3. Seaweed and other deep sea snacks

The oceans are rife with plant life consumers are finding both tasty and nutritious. As harvesting methods have improved, so have their snack byproducts. Healthline reports that there are many benefits to consuming seaweed snacks, including that they:

    • Are a good source of vitamins and minerals, including iodine and tyrosine.
    • Contains a variety of antioxidants.
    • Provide fiber and polysaccharides to support gut health.
    • May help lose weight by delaying hunger and thereby reduce weight.
    • May reduce heart disease risk.

If you own a restaurant, you can easily add some crispy seaweed snacks to your menu as a starter. And if you own a store, stocking seaweed snacks is as “simple” as creating some extra counter space. The Japanese have been seaweed aficionados for centuries.  So, if this trend is anything like sushi…well, it’s not going away anytime soon.

4. Fermented foods

Whether you’re a fan of Korean kimchi, new age kombucha, or good, old-fashioned American pickles, fermented foods are likely here to stay. Filled with probiotics to help make diners’ guts strong, fermented foods make for tasty side dishes, replacing foods like fries. Another benefit of fermented foods is that they are easy to make and may be stored for long periods.

5. Plant-based frozen treats

As dietary restrictions around New Year’s resolutions can curb traditional dairy ice cream consumption, chefs are finding other natural ways to create frozen desserts. Instead of classic milk-based ice cream, these chefs are using ingredients like plant-based milks and frozen fruits are sweetening frozen treats and not sacrificing taste! Here are nine dairy free vegan friendly recipes to get you introduced to the world of vegan frozen treats.

As a food or restaurant business owner, you can be inventive; you can test out a new recipe based on these emerging trends without taking on much risk. If it sells out quickly, you know your customers want it. And while fads like juice cleanses may come and go, these emerging trends may make your offerings more appealing to customers throughout the year.

3 Issues Women-Owned Businesses Should Be Watching Closely

For women-owned businesses, there are three potential challenges to keep in sight as we move throughout the year.

1. Continued interest rate hikes

The Federal Reserve has maintained a steady course of raising interest rates to keep pace with economic growth. The Fed hasn’t made any firm commitments – yet.  But, further adjustments to the federal funds rate may be on deck for later this year. That could be costly for female business owners seeking financing.

Women already face a tough business lending environment. According to the latest Private Capital Access Index (PCA Index) from Dun & Bradstreet and Pepperdine Graziadio Business School, just 18 percent of women entrepreneurs were able to get bank loan financing during the third quarter of 2018. Fifty-seven percent of women said the current business financing environment is hindering their business growth, compared to 42 percent of all business owners surveyed.

Twenty-four percent of women said additional rate hikes would restrict their growth further.  In addition 15 percent believe that rising rates would make raising capital more difficult. Women entrepreneurs who are considering a loan in 2019 should be watching Fed policy and rate movements closely. Additionally, they may want to explore bank loan alternatives, such as revenue-based financing or factoring to meet financing needs.

2. Midterm election results

The 2018 midterm elections resulted in some historic wins for female lawmakers, with nearly 120 women in Congress this year. That could be a boon if newly elected senators and representatives promote initiatives designed to advance female-lead businesses.  Business owners should keep their ears open and listen out for new grant and lending programs or policy shifts that increase the number of government contracts awarded to women are on the horizon.

The midterm elections may also have a broader impact for all business owners in terms of how Congress may shape trade, tax and healthcare policy moving forward. Businesses may still be adjusting to the latest round of tax and healthcare reform but the possibility of further changes should be firmly on their radars. The imposition of new tariffs could also result in higher operating costs for businesses that rely on imported goods.

3. Changing economic conditions

While the economy is still going strong, 2019 may bring a slowdown in the pace of growth. That, in turn, could directly affect business owners, particularly women.

According to the Private Capital Access Index, women business owners are more likely to struggle with cash flow compared to other businesses. Twenty-eight percent reported issues with receiving payments from customers, versus 23 percent of small businesses overall. A slower-growing economy could raise that figure higher if vendors or customers are sluggish in making payments because they’re dealing with cash flow issues of their own.

As we move through 2019, women business owners may want to revisit their invoicing and payment policies. Shortening payment terms, imposing late fees or accepting a broader range of payment methods could help speed up payments and avoid cash flow lags. Being prepared for these kinds of bumps can help make 2019 a smoother, more successful year for women-owned businesses.

Get Your Construction Business Ready for the Spring

If you’re a contractor or own a construction business, you’ve likely been wondering what the this year will bring in terms of revenues and opportunities for growth. While many forecasts are calling for a slight economic slowdown in 2019, construction starts are still expected to hold relatively steady. As you look ahead to warmer months, here are three things to review as you prepare to ramp up your business this spring.

Update your tech

Smart technologies, AI and automation continue to expand their influence on the construction industry. Some new opportunities to update your business technology include:

  • Streamlining project management by using cloud-based solutions.
  • Utilizing drones for site planning and survey data enhancement.
  • Investing in smart safety equipment, such as wearables to track worker movements and fatigue levels.
  • Updating your inventory tracking software to reduce materials waste.
  • Using building information modeling software to streamline project design.

While some of these options are more hi-tech (and big-budget) than others, if you run a smaller firm, consider tech upgrades that can deliver a solid return on investment without a large outlay of cash. For example, updating your company’s website is something you may be able to do for a few hundred dollars, and up-to-date information and a fresh look might help attract new customers.

Review expenses and pricing

Construction materials didn’t get cheaper in 2018. Through July, prices had risen by nearly 10 percent over 2017’s figures, according to Associated Builders and Contractors. With uncertainty surrounding tariffs and foreign trade policy, materials such as lumber and fuel might become more expensive.

Higher prices means a higher cost of doing business and a potentially smaller profit margin. When planning for the busy season, consider how rising prices may impact revenues and cash flow, in both the short- and long-term.

Specifically, think about whether you’ll need to adjust your pricing to accommodate a jump in material costs. Would a price increase allow you to remain competitive in your local construction market? How would that price increase be received by clients? Will you enhance the value you provide as your rates rise?

At the same time, look for areas where you can reduce costs. Reach out to suppliers to ask for a discount or renegotiate terms. Recycle and repurpose materials whenever possible. Consider whether it makes sense to keep maintaining older equipment or replace it with something newer to reduce repair and maintenance costs. These kinds of changes may add money back into your cash flow and create a healthier bottom line.

Assess your capital needs

With interest rates projected to rise again this year you may want to pursue financing sooner instead of later. The lower the rate you’re able to lock in, the less your financing will cost over the repayment term.

Get clear on your needs and what type of financing may work best. For example, you may want to buy a new fleet of work vans or invest in a new backhoe. Or, you may just need cash to cover everyday operating expenses during the winter months if that’s your slower building season. Equipment financing might be more appropriate in the first scenario, while a working capital loan may be better suited for short-term funding.

Remember the ROI and the overall cost when considering financing for your construction business. Before taking out a $1 million equipment loan or a $100,000 working capital loan, estimate the potential payoff, either in preserving cash flow or increasing revenues.

You also need to be sure that the payments for an equipment loan, or any other type of financing, fit your business budget. And of course, review the interest rate and fees charged by different lenders to help you secure the best deal.

Want a Better Credit Score? Put Banking and Credit Card Alerts to Work

Staying on top of your personal and business credit scores is important if you plan to apply for business financing. Setting up banking and credit card alerts can make the job easier.  Better still, it can also potentially lead to an improvement in your credit rating.

If you’re not already using banking and credit card alerts to your advantage, here’s what you need to know.

How Alerts Can Help Improve Your Credit Scores

Personal and business credit scores are calculated differently.

Your personal FICO score, for instance, is based on payment history, amounts owed, length of credit history, types of credit used and new applications for credit. Business credit scores focus on different factors. The Experian Business Credit Score looks at your credit obligations to suppliers and lenders, legal filings involving your company and public records. Dun & Bradstreet’s PAYDEX Score is determined by how well your business pays its bills.

While personal and business credit scores can measure different things, alerts can help you stay on top of both by encouraging you to be more conscious of your accounts and credit activity. When you’re paying more attention to your credit, you may become more intuitive about what can help or hurt your score. (That’s a good thing, considering that 72 percent of business owners don’t know their business credit score, according to a Manta survey.)

Getting Started With Banking and Credit Alerts

Your bank and credit card company may allow you to set up many different kinds of alerts or notifications. When you consider the things which are most likely to impact your credit scores, specific alerts may prove useful:

  • Bill due date notifications
    Payment history is the central factor in influencing your PAYDEX business credit score; it also carries the most weight for personal credit scores. Set up bill payment alerts to help you avoid late or missed payments, which could negatively impact your credit score. Even better, ensure you pay your bills on time by pairing alerts up with automatic bill payment through your bank.
  • High credit card balance notifications
    After payment history, your credit utilization is the next most important factor for scoring personal credit. Credit Utilization is the percentage of your total credit line that you’re using. Carrying high balances or maxing out your credit cards works against you. Set up an alert to notify you when your balance hits a certain threshold.  This may help you put the brakes on spending.
  • New transaction alerts
    Fraud can affect both your personal and business credit scores if someone steals your credit card or taps into a line of credit you’ve opened and runs up a balance. An easy way to help combat that is to set up an alert to let you know when a new debit or purchase transaction posts to your bank or credit card accounts.

Remember to Check Credit Regularly

Checking your own credit report won’t hurt your score.  So this is something you should do at least once per year, if not more often. Review your credit to look for things that alerts might miss — a new account opened in your name that you don’t recognize or a credit reporting error that might be hurting your score. If you spot an error, dispute it with the credit bureaus reporting the information. Doing so could get the information corrected or removed, giving your credit score a lift in the process.

Looking for other ways to improve your credit rating?  Check out these articles.

Six Business Financial Housekeeping Tasks to Get Done Before Year End

There may be several weeks left in the year before you officially close the books and shift your focus to next year, but getting a head start on your financial housekeeping tasks can ensure you end this year on solid financial footing — and start the next one with a plan to succeed. Here are six business tasks to complete before you ring in 2019.

Check your retirement plans

If you don’t have a self-employed retirement plan, there’s still time to establish one, and make contributions to it. In turn, you may also find opportunities to reduce your tax burden. As Forbes explains, a sole proprietor who has a solo 401(k) in the 2018 tax year may be eligible to contribute up to $60,000 to it (based on net business income, and the business owner’s age).

If you prefer a retirement account with little costs and administrative burden, consider establishing a self-employed IRA (SEP IRA). Many providers allow you to complete account set up, funding and management entirely online.  And, you may be eligible to contribute (the lesser of) 25% of your business income, or $55,000, in 2018.

Meet with your accountant (or find one)

If you don’t have consistent contact with your accountant, set aside time to discuss your business’s current financial reality.  You should also discuss  your business goals, future plans and anticipated challenges for the remainder of this year, and next. If possible, schedule the meeting to take place at least two months before year-end.  Doing this will give you enough time to act on any recommendations for optimizing your finances before this year ends.

When you meet, let your accountant know of any additional financial moves you are considering that could have tax ramifications.  Things that could fall into this category include buying or selling new equipment or assets. Beyond the numbers on your financial statements, ask your accountant for any recommendations to improve or optimize your business finances, based on the current and future plans you’ve shared.

Confirm your estimated payments are accurate.

If your business is a sole proprietorship, partnership or S corporation, the Internal Revenue Service says you may be required to make estimated tax payments if you expect to owe $1,000 or more when you file your annual tax return. Corporations have to make estimated tax payments if they expect to owe $500 or more when filing their tax return. (Depending on your business, you may also be responsible for payroll, sales, and excise taxes).

If you picked up new clients or sales were stronger than expected, you may owe more tax than originally estimated. Ideally, your quarterly estimated tax payments are made in equal increments.  But the IRS does put the onus on taxpayers to estimate income as accurately as possible to avoid penalties.  They also expect you to ensure it remains correct based on business or tax law changes that may impact it.

Confirm tax paperwork for independent contractors you’ve hired.

If you’ve hired independent contractors over the course of the year, the IRS requires that you have their completed Form W9 (and that you keep it on file for at least four years). Sites that make it easy to hire virtual help also make it simple to hire contract help.  However, they can also make it difficult to keep in touch with contractors who are several states (or countries) away.

Regardless, the IRS also states that employers who pay an independent contractor $600 or more over the course of one year “may have to file Form 1099-MISC, Miscellaneous Income, to report payments for services performed for your trade or business.” Allow yourself the time to collect the paperwork you need from contractors so you’re prepared to issue the Form 1099-MISC tax forms. Note that you may be required to send them for payments by late January 2019.

Conduct an employee satisfaction survey.

Employee engagement may not seem financial in nature — until you consider the impact that disengaged employees have on business productivity, customer experience, and culture. Experts at Villanova University’s School of Business report that increasing your investment in employee engagement efforts by just 10% can yield $2,400 in profit (either directly or indirectly) from each employee, each year. Engaged employees are also 87% less likely to leave their jobs.  And, having engaged employees may reduce costs associated with employee turnover, hiring and training.

Take a pulse on employee engagement in your company with a basic online survey tool and questions that address what consultancy firm Deloitte says are the five pillars of employee engagement: Whether employees feel their job provides opportunities to do meaningful work, involves hands-on management with positive coaching, guidance and support, a positive work environment and culture, and trust in leadership.

If you find that you have engagement issues, your survey can provide the insights you need to address issues.  Once you know where problems may lie, you can work to improve employee productivity, engagement and satisfaction next year.

Organize your receipts and financial statements.

You have several months until tax season officially arrives.  But, the earlier you compile the receipts, mileage logs and cancelled checks you’ll need to support business-related tax deductions and credits, the less you’ll have to scramble as tax season approaches. If you rely on a bookkeeper or accountant to prepare your business tax return, ask his preference for how you should organize and transfer tax-related documents, to streamline the process (and better manage the billable hours you’re charged for their tax preparation services).

5 Ways to Free Up Capital with Smarter Purchasing

Part of running a business means spending on inventory, goods, supplies, capital equipment, IT systems, communications, and services. Each month, these necessary expenses means money out the door, and the more you spend, the less cash you’ll have to put towards other strategic initiatives.

By spending less in your regular purchasing, you may end up with more money to invest elsewhere in your business. One way to cut fat — not muscle — by getting smarter about your procurement operations.

Revisit vendor relations and strategies

Habit can be a great tool for efficiency, but may also contribute to sloppy operations. Reevaluation of suppliers is standard procedure in quality control purchasing. Consider the same approach in reevaluating your vendor relations, including:

  • Key suppliers may have increased pricing over time, considering your account a “safe” one.
  • New alternatives, either from existing vendors or competitors, might satisfy your needs at a better cost, or you might find advantageous quantity discounts.
  • Some suppliers may offer vendor-managed inventory to hold products in a separate part of their warehouse. You don’t pay until you take an item to fill a sales order. You get the advantage of lowering inventory investment while maintaining fast availability.
  • On-time delivery, financial stability, quality of goods, and service levels also may affect the total cost of purchasing. Vendors that ship defective items cause you to lose time in returns and miss sales opportunities.
  • A company with warehouses closer to you may be able to provide rapid response to your inventory needs.
  • Between two vendors with similar pricing, the one that it is easier to do business with is the one that is more likely to save you money.

Split core and convenience ordering

Vendors have two rough categories of goods and services: core and convenience. Core offerings are items fundamental to a vendor’s business. Convenience items aren’t a mainstay but might command higher prices and margins because customers don’t want to go to other sources.

For example, an auto parts business with spark plugs, alternators, and mufflers as core items might have for convenience bolts and non-specialized tools. When you buy brake pads, you might remember you needed a 10-millimeter wrench and pick it up there rather than travel to another store.

Convenience buys may make sense if they are a one-time expense, or the time to research a lower price might be better used differently; however, if you need something regularly, buy it from a vendor for whom it’s a core item that must be competitively priced. Better pricing will pay off in the long run.

Cut waste

Take a step back and examine your purchasing strategies. Anything you buy should directly support corporate strategy. If someone in your organization can’t adequately justify a purchase, it shouldn’t be made.

To help cut waste, rationalize inventory levels; only have enough on hand, or quickly available, to cover seasonal, cyclical, or peak demands. At the same time, levels should be as low as possible to achieve these goals. The less money tied up in inventory, the more is available for other uses.

Waste happens in other spending areas, too. Considering having a service perform a full utility audit to see where there may be incorrect billing or waste in electric, water, or sewer. Many consultancies perform the analysis for free and make their money through a percentage of the savings they help you gain (which suggests how often businesses pay more than they should).

Benchmark spending

Benchmarking is the practice of comparing performance to a reference to see how your organization does by comparison.

What seems like a normal level of spending in any area, whether it’s inventory, computer technology, or legal services, may be significantly off from what your peers do. There may be good reasons your expenses in a given area are higher than competitors, but it may also be a signal of spending too much.

There are two aspects to benchmarking. The first is to know and calculate standard metrics widely used in procurement. They include the average cost to process a purchase order, percentage of suppliers that provide 80 percent of spending, the percentage of purchasing budget that is department operating expenses, and cost reduction savings as a percentage of total purchasing spending.

The second is getting access to data from a wide array of organizations in your industry to see how you stand. Get access to the information through benchmarking tools from third-parties, whether analyst firms or professional organizations. The tools are software you use to compare your metrics to the subset of your industry that comprises your peers.

Improve your negotiation skills

Most people in business, including those who work in purchasing, think they are good at negotiating. While they may have natural talent, there are common misconceptions that may work against you. For example, letting the other side go first means you may give up control of the process and be unlikely to get something positive in return. Or you may assume that the other side saying no means the end of a negotiation, when it may be a chance to continue the process and change someone’s decision.

Even people with strong natural aptitude need training to become truly effective in negotiation. If your purchasing people haven’t had training, get it for them. The return on that investment may be immense.

Inventory Turnover Ratio: Why keeping track is very important for small business owners

No matter what type of small business you run, managing your inventory correctly can be extremely difficult.

If you run a restaurant that serves perishable foods, if you order too little inventory your customers will be dissatisfied and you won’t fulfil your potential in terms of how many sales you generate. But if you order too much food, you will find yourself with space wasted, money wasted and food wasted.

Understanding your business’s inventory turnover ratio can help you more accurately manage your inventory. To understand what the inventory turnover ratio is, it is necessary to break down this term to its components:

  1. Inventory: The goods available for sale and raw materials used to produce goods available for sale. Inventory represents one of the most important assets of a business because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company’s shareholders.” (Investopedia)
  2. Turnover: “An accounting term that calculates how quickly a business collects cash from accounts receivable or how fast the company sells its inventory.” (Investopedia)
  3. Ratio: “The comparison of [two] or more quantities which indicates their relative sizes.” (ThoughtCo)

Thus, your inventory turnover ratio is an efficiency ratio that shows how effectively inventory is managed by comparing cost of goods sold with average inventory for a period. It measures how many times a company sold its total average inventory dollar amount during the year. Therefore, a company with $20,000 of average inventory and sales of $100,000 effectively sold its inventory five times over giving it an inventory turnover ratio of 5.

Take a 360 degree view of your business when making inventory decisions. Let’s say you own an auto repair shop that focuses on giving your customers new tires. There are many factors you might consider when making new tire orders:

  1. Suppliers: You must consider if there will be deals or specials from your suppliers given at different times of the year as well as the delivery speeds.
  2. Storage: You must know how much space you have to store your inventory.
  3. Waste: You must consider what percent of tires you receive will be duds that you will have to ship back to the supplier.
  4. Sales estimates: You must look at past sales data to determine which months of the year are most popular for people to purchase new tires.
  5. Discounts: You must factor in if you will offer sales or discounts to your customers.
  6. Timelines: You must evaluate which types of tires are more popular at different points of the year (e.g. snow tires vs. all-season tires.)
  7. Numbers: You must also consider what percent of your customers need one tire replaced (e.g. for a flat tire) rather than changing all four tires on their vehicle.
  8. Growth: You must calculate how fast (or slow) your business is growing.
  9. Trends: You must calculate market trends (e.g. if big winter tire companies are advertising their services, more of your customers may ask for these.)
  10. Competition: You must figure out what your competitors’ strategy is (e.g. if a shop down the road offers to change one tire for $30, you may want to focus your business on selling four-tire packs.)

There are many methods to making sure that you’re inventory is working for you. Perhaps the most important method is called First In First Out, or FIFO, if it is abbreviated. As Casandra Campbell writes about it for Shopify, “It means that your oldest stock (first-in) gets sold first (first-out), not your newest stock. This is particularly important for perishable products so you don’t end up with unsellable spoilage. It’s also a good idea to practice FIFO for non-perishable products. If the same boxes are always sitting at the back, they’re more likely to get worn out. Plus, packaging design and features often change over time. You don’t want to end up with something obsolete that you can’t sell.”

Another important principle to remember is to set “par levels.” Campbell writes:

“Make inventory management easier by setting ‘par levels’ for each of your products. Par levels are the minimum amount of product that must be on hand at all times. When your inventory stock dips below the predetermined levels, you know it’s time to order more. Ideally, you’ll typically order the minimum quantity that will get you back above par. Par levels will vary by product based on how quickly the item sells, and how long it takes to get back in stock.”

Furthermore, remember the 80/20 rule often still holds true: 80% of your business comes from only 20% of your inventory, 20% of your customers, and 20% of your suppliers; however, knowing this, remember to have alternate suppliers ready in the event one of your key suppliers messes up an order or is out of stock.

Keeping an accurate count of your inventory, and correctly predicting your future needs are excellent ways to save your business money. Wasting money on unused inventory is costly and can easily be prevented. Knowing your inventory turnover ratios for each specific item that you require to operate your business are excellent ways to make sure you properly account for your inventory, saving your business both time and money.

Growing your employees as your company grows

People who apply to work at Crank & Boom Ice Cream Lounge, an ice cream store in Lexington, Kentucky, have to answer two questions that aren’t on most employment applications:

  • What is your absolute dream job?
  • What are your hobbies/passions?

Toa Green, owner of Crank & Boom, believes this sets the right tone early on, attracting people who are ambitious and alerting applicants that the company cares about their development.

“I like to paint the picture for our team that their time with us, at least for most of them, is a path to something else,” she says in an interview with Inc. “People with big dreams and strong passions tend to be the most successful in our company. They know how to work hard for something. ”

Provide Workers with Opportunities

Growing employees as the company grows can be a critical task for any business owner. After hiring ambitious workers, the key is to provide them with opportunities. Big Ass Fans, which designs and constructs industrial cooling fans and lighting, likes to hire people who have a curious nature, and then rotate them through different units within the company so they can see what jobs appeal to them.

“I also believe in hiring people for their next job,” says CEO Carey Smith.

People don’t need to change jobs to grow, though; “stretch assignments” may be a way for employees to develop new skills.

“Don’t think about picking the most qualified person for the assignment,” says Dan McCarthy, Director of Executive Development Programs at the University of New Hampshire. “Instead, think about picking the right developmental assignment for the person.”

Ask Forward-looking Questions

A smart business owner helps employees grow by understanding what they want. Ask questions that encourage employees to think ahead like:

  • Are there any other jobs in the company that look particularly enjoyable and interesting to you?
  • What experience and skills do you have that you think you’re not able to use in your current position?
  • Which of your current skills would you like to improve?
  • Are there any new skills you would like to develop?

Invest in Your People

Investing in employee training is a significant factor in retaining workers and getting the most out of them. A survey by the Society For Human Resource Management found that 86% of workers said their job satisfaction was highly related to their company’s commitment to their professional development.

“When you strategically invest in employees, you attract and keep all the best candidates, and you also build a strong work culture unafraid of innovation, change, failure and success,” says entrepreneur William Craig. “Employees take the bull by its horns and run with ideas, instead of running away from problems.”

If your employees aren’t growing, they’re moving backwards — as may your company. Investing in employee development may put both in a position to thrive.

How a Lack of Trust May be Limiting Your Business’s Success

For many business owners, giving up control is one of the most difficult challenges they confront in running and growing their business. The most valuable asset that any business owner has is time, so giving up some control and learning to empower employees can strengthen your business and free you up to think more strategically.

Susan Armstrong, president and CEO of a strategic marketing company in Wichita, Kansas, was at a workshop for business owners when the presenter said something that was like a slap in the face. He asked if the attendees ever had a line of employees outside their door, waiting for them to make a decision. That, the presenter said, indicated the business was limiting its own success because the employees weren’t allowed to grow.

“From that moment forward, whenever a staff member came to me with a problem, I asked them to propose a solution,” Armstrong says.

Empowering Employees.

Business owners can address the need to delegate and become more trusting through a series of steps that empower employees:

Hire Well.

Trust starts by good hiring practices focused on the skills you need and the culture you want to build. “The number one reason entrepreneurs resist delegating authority to employees is lack of trust,” says business owner Heather Ripley. “It’s hard work to build a mutual, trusting relationship, but by putting an emphasis on trustworthiness during the hiring process it can help establish your expectations from the start.”

Perform a Time Check.

Keep track of how you spend your time, in five or 10 minute increments, for a week. Analyze whether your time is being frittered away on non-essential tasks. That can provide a template for the type of chores you should delegate, as well as convince you of the need to get some things off your plate.

Do a Test Run. 

Pick a single task that you would normally do and turn it over to an employee, telling them to use their own judgment and to only come to you if they need advice. Afterwards, review the effort and ask in a non-critical way why the employee made the choices he did.

Stop Being a Perfectionist. 

It’s often hard for business owners to acknowledge that others can do some tasks better than they can. It can be even harder to accept that others will do the same task differently or not as well, but that’s better for the business since it frees you up for more important tasks.

Say Thank You. 

Acknowledging the work an employee did will inspire them to do even better, which will make you feel more comfortable delegating more tasks.

The most valuable asset that any business owner has is time, and micromanaging is a thief of time. By understanding your own psychological barriers to delegating, you can put more trust in your employees, which will lead to a more satisfied workforce and a more successful business.

3 Ways to increase your average transaction size to make more money

One method to increase your revenue — both short and long term — without having to add more customers, raise your prices, or attempt to increase the frequency of your customer’s transactions, is by increasing the average transaction size.

Here are three quick ways to increase the average transaction size to help make more money.

1. Host a Flash Sale

Customers like to shop around. Flash sales can be attention grabbers when the emails or text messages hit the inbox or cell phone. Since most consumers — 86 percent — will look at at least two places to purchase according to CommerceHub, offering a limited-time promotion may catch customers’ attention and create a sense of urgency.

Shopify cites Case-Mate, the mobile device case manufacturer, as a good example. When the company compared two mini-flash sales against non-flash sale key performance indicators, the flash sales did unquestionably better.

Flash sales make people buy more than they usually intend to purchase. That’s why so many clothing stores and other companies are using them to spur on sales. If customers feel the pressure (in a nice way) they are more likely to buy more than they intended.

Case-Mate increased its conversion rates — purchases divided by the number of visits to the landing page. More importantly the company drastically increased its revenue. Although the first flash sale did significantly better than the second one, the company’s revenue increased by 236 percent and 78 percent respectively.

2. Give a Discount for Buying in Bulk

Call it the “Costco effect”. If you give a discount for buying in bulk, customers may be more likely to buy in greater volume; which, in turn, increases the average transaction size.

The Harvard Business Review recommends offering a volume discount in four situations:

  1. To compete with rivals who offer them
  2. To lock in customers in highly competitive markets
  3. To encourage a large order instead of a series of smaller orders
  4. To capitalize on the law of diminishing utility, where satisfaction decreases the more a product or service is used or consumed.

This last concept might seem counterintuitive, but it’s the reason movie theaters and other establishments charge more for a 12-ounce soda versus a greatly reduced price to double the size of their drink. Even though most customers won’t consume the larger amount, the movie theater makes a bigger sale.

3. Sell Higher Priced Items

If you sell merchandise at multiple price points, including more expensive items means by comparison, the lover-priced items you sell won’t seem as expensive to consumers, and this can bring up your total sales.

Think of it this way. If you were going to buy a $60 dress, but see a great dress for $149 and then find a sale price of $89. You might be more willing to buy the $89 dress after seeing the $149 because it feels like a deal. But if you see the $89 price after the $60 dress, it might seem expensive.

Regardless of what is charged, the pricing needs to be grounded in value, says a report by Deloitte’s Georg Müller, the director of pricing and profitability management. Doing so makes customers believe they are still getting a good deal, and that can help increase your average transaction size to help grow your profit margins.

Cash Crunch? 5 Ways to Handle Accounts Payable Woes

Business owners the world over know that a smooth cash flow can be critical to a business’s success. But, achieving the optimal flow of money coming in and going out isn’t simple. Cash flow can be difficult to manage since you often don’t have control over the money flowing in. However, the way you handle accounts payable can help smooth out your cash flow.

Here are five ways to help you meet your accounts payable responsibilities with an eye to smoother cash flow.

Renegotiate Your Accounts Payable Terms

Has your business established itself as a good customer – paying suppliers in full and on time? If so, consider requesting more flexible payment terms when contract renewal time rolls around.

Maybe you could arrange extended payment terms during the slow season to accommodate sluggish accounts receivables. Or reduce the cash leaving your business by requesting discounts for early payments or bulk purchases during traditional busy seasons.

Remember to watch out for special offers from your suppliers’ competitors. Use these offers as opportunities to ask for a price match.

Apply for a Credit/Operating Line Before You Need It

If your business doesn’t have a credit line/operating line, apply for one now, even if you don’t currently expect to use it. Don’t wait until it’s a struggle to pay your business bills. If you wait, your business credit may have suffered due to late or partial payments to suppliers or other creditors. Not to mention the added stress of hoping for a credit line approval in addition to worrying about paying the bills! Instead, applying for a business credit line while your records show good cash flow could strengthen your credit application.

A credit line helps smooth out cash flow by giving businesses a financial source that they can tap to meet immediate accounts payable obligations. You’ll only pay interest on the money borrowed against the credit line. Depending on the terms of the credit line, your monthly payments could be interest only, or a set percentage of the total amount borrowed. You can pay the balance off at any time, such as when your accounts receivables are flowing in well. Like a credit card, a credit line is a form of “revolving credit,” so when you pay your balance off (or down), you can then borrow again up to your credit line limit as needed.

Delay Payments Due Until Last Possible Date

Although you may get anxious about making payments early, when you’re trying to deal with a cash crunch consider holding off making payments until the due date. Doing so gives your business more time to collect on outstanding accounts receivable – providing the cash to make your payments. And if you’re making payments from your credit line, which charges interest from the day you withdraw the funds, you’ll pay less in interest with a delayed payment.

Pay Suppliers with Credit Cards

It seems simple, yet paying suppliers by credit card is one of the best ways to smooth cash flow and deal with accounts payable woes. That’s because unlike credit lines or operating lines – which charge interest from day the money is borrowed – credit cards have what is known as a grace period for credit card purchases.

A grace period refers to a time frame during which interest accumulates but isn’t charged as long as the outstanding credit card balance is paid in full by the due date. So you’re essentially borrowing money interest-free during the grace period. If you use this strategy, pay close attention to both the credit card grace period as well as your supplier due date to make sure you won’t get charged additional interest for late payments to either.

For example, say you owe your supplier $1500 on the 15th of the month. They process your credit card payment for the 15th, which falls at the beginning of your credit card grace period. Depending on the credit card issuer, you may have a grace period of anywhere from 21 to 25 days. And take note – grace periods may not apply to credit card cash advances and balance transfers.

Liquidate Assets You Don’t Use/Need

If you need a fast solution to paying your business bills, consider liquidating assets for cash. Does your business own equipment, supplies, machinery, real estate, vehicles or other assets that you could sell? Although it may seem drastic, selling assets may prove a quick method of gaining cash to cover upcoming accounts payables while you work on a longer-term accounts payable strategy.

Keeping on top of your accounts payables can help improve your business’ financial health. It could have a positive impact on your business credit, and establish or improve the relationship with your suppliers.

7 Customer Business Metrics You Need to Watch

Not all customers are the same. Some customers spend more than others. There are some are quick to pay invoices and others are slow and need reminders. While others are needy, disrespectful, impossible to please, or abusive of guarantees and return policies.

In an article titled, “When Should You Fire Customers?” MIT Sloan suggests the bulk of profit comes from the top 20 percent of customers, the middle 70 percent are break even, and the bottom 10 percent loses businesses money. But when you have a lot of customers and little time, how do you figure out the characteristics of each? The answer is simple – with metrics!

Just as you use numbers to help better understand your company, you can also measure the performance of customers and how they affect your business. Here are seven metrics to help support better customer relationship strategies and decisions.

1. Customer acquisition cost

The cost of how you originally obtain a customer through promotional campaigns and sales efforts is usually a company-wide metric that measures marketing efficiency. You divide total marketing and sales costs by the total number of customers. The more it costs to attract a customer, the more profit they must generate in order for you to make a profit.

However, you can’t blindly apply averages to individuals. The more accurately you track acquisition costs for individual customers, the better you can see how much profit you will need to make. It can also help identify the expense it might be worth to retain someone to get them past the initial acquisition expense.

2. Customer lifetime value

Customer lifetime value (CLV) is the total amount customers spend with a company over time. It should be the gross margin — sales minus cost of goods and direct transaction expenses — that results from revenue. For example, a customer who spends more and receives a higher discount may not provide as much gross margin as one who pays higher prices on a lower volume. The average CLV gives you an idea of how high average acquisition costs can run.

Like acquisition cost, you can’t apply an average CLV to all customers. You don’t even know what a given customer’s lifetime is until they no longer do business with you. Instead, keep a running tally of revenue and margin. Pair that with a specific acquisition cost and you can see how specific customers move toward overall profitability.

Also, realize that customers may bring value in other ways. They might test products, provide introductions to new customers, promote the company on social media, or give reliable and useful feedback. Don’t make the mistake of looking only at money spent. Think about the additional benefits as financial contributions to your business.

3. Customer profitability

You’ll want to know how profitable your customers are to your business. While this may seem similar to CLV, it’s a bit different. CLV measures gross margin. Look beyond the sales margins toward the costs of service: A customer who increases your cost to serve them lowers your profits more than customers who need less attention.

Calculating the expense of such support can be detailed, but it’s worth the effort. The more precise you can be, the more easily you see if a customer who seems big in terms of raw sales is really as valuable as other customers. Vlasic Pickles, for example, had a high-volume customer who reduced their profit margins enough that the company ultimately had to file for bankruptcy.

4. Return rate

Returns mean loss of sales revenue, increased handling costs, and possibly the loss of the cost of the product. Some amount of overall returns is inevitable. Depending on the industry and sales mechanism, it can run as high as 50 percent. (And you thought youwere having a bad day.)

Return rates will vary by customer. If you don’t track returns per customer, you can lose track of net revenue and the resulting margin. You also miss a chance to spot problems that could be corrected. A customer with an unusually high rate might benefit from a different sales method, education, or consulting, improving the purchase experience and your net results.

5. Average order size

You have two customers who order the same amount of goods over a year, but one does half the number of orders, each at twice the size of the second customer. That means less operational cost and, potentially, more profit. You might even be able to provide a higher discount level and still do better, taking both margin and reduced operational expenses into account.

6. Days sales outstanding

Days sales outstanding, or DSO, measures the average number of days it takes to collect on a sale. DSO lets you know how quickly you’re bringing in cash, which is vital to your business.

Do the same thing for individual customers, by examining their payment histories, continually updated. Not only can you see if you’re providing what becomes a free line of credit, but an individual DSO that increases over time can also be an early warning of growing risk.

7. Customer satisfaction

Typically done with surveys, a customer satisfaction score can provide multiple benefits. You can see growing disappointment that requires an intervention and is perhaps an indication of something wrong in how your organization operates. High satisfaction can help identify prospects for increased business and referrals.