Jerome Powell Recession Small Business Lending Kapitus

Say, What Kind of Recession is This? 

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Are we in a recession? As far as economists are concerned, we are, as the US has now experienced two consecutive quarters of negative Real GDP growth – the typical measuring stick of a recession. As far as economic downturns go, however, small business owners shouldn’t go into full panic mode just yet, as this recession doesn’t quite seem to have the teeth of prior ones. The two immediate past recessions are the one in 2020 that resulted from the COVID-19 pandemic and the Great Recession in 2008-2009 after the housing market collapse. 

Key economic factors are showing that the US economy is still strong in many areas, and while rising inflation is forcing many people to readjust their budgets, consumers are still spending and total business sales in the US are still climbing upwards. This is good news for small business owners, who are more worried about the future than ever before as they’re trying to adjust their prices due to inflation. 

What Does Negative GDP Growth Mean?

The Real GDP (inflation-adjusted) is the final monetary value of all goods and services produced by the US in any given period. In other words, it tells us what consumers are paying for products and services, and provides a snapshot of the economy’s size and growth rate. In the last two quarters, the national GDP fell by 1.6% and 0.9%, respectively. Additionally, stock market volatility is continuing as the Standard & Poor’s 500 Index is still down from its one year high in December 2021.

Negative growth usually means declining wages and corporate sales as well as a shrinking money supply, but none of those things seem to be happening right now. Additionally, while wealthy investors aren’t making as much money in the stock market right now as they were at the beginning of the year, that’s hardly an indication of how the overall economy is doing.

Not all Gloom and Doom

What this all means is that we are currently living in an ambiguous economic time as the country continues to bounce back from COVID: consumers are spending more, business sales are continuing to climb and the unemployment rate remains low, despite negative GDP growth. While everyone is feeling the pinch of skyrocketing inflation, statistics show that rising average wages are helping to offset that challenge. 

Additionally, negative GDP growth may be being driven, in large part, by the continued supply chain shortages – consumers still want to buy products, but those products just aren’t hitting the shelves, thus driving down GDP growth.

Here are some of the factors to show that this recession may not be as painful as past ones. 

Business Sales are up

Total business sales track the value of all goods and services delivered to consumers. Recent numbers show that despite inflation, consumers are still buying, especially in the travel and entertainment industries, after being cooped up in their homes for two years during COVID lockdowns. According to a presentation by the St. Louis Federal Reserve (using Bureau of Labor Statistics data), total business sales were $1.83 trillion in June 2022, up from $1.82 trillion in the previous month and $1.76 trillion in January 2022. 

To put that in perspective, when the pandemic-related recession began in 2020, total business sales plummeted from $1.42 trillion in February 2020 to $1.14 trillion in April 2020. During the Great Recession, total sales went from $1.22 trillion in July 2008 to just $980 billion in January 2009. 

Unemployment Remains Low; Wages are Rising

One of the most telling signs of a recession are the national unemployment rate and wage growth – after

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The US unemployment rate remains low, despite negative GDP growth.

all, if people don’t have jobs and aren’t making more money, they can’t spend. The unemployment rate dipped to 3.5% in July after remaining steady at 3.6% every month for the three months prior, while roughly 528,000 new jobs were added in July. In comparison, the unemployment rate was 14.7% in April 2020 at the height of the pandemic, and 10% in October 2009 during the Great Recession.

Additionally, according to the Atlanta Federal Reserve (using data from the Bureau of Labor Statistics), the three-month rolling average median wage growth in the US was 6.7% in June 2022, as businesses both large and small are still struggling to attract workers during the “Great Resignation.” The BLS’ Job Openings and Labor Turnover Summary (JOLTS) report showed that the quit rate (the percentage of people leaving their current jobs) remained steadfast at 2.8%, while the number of layoffs remained unchanged at 1.3 million. 

Consumer Spending Continues

In a recession, especially when inflation remains high, one might expect consumer spending and inflation-adjusted disposable income to be down, as it was in 2020 and 2009. Incredibly, that isn’t the case right now. Gross median income in the US continues to grow at a slow but steady pace, as it rose 0.6% in June 2022. Median disposable income (net income after taxes) rose 0.7% in June 2022, up from 0.4% in April 2022, according to the Bureau of Economic Analysis.

Of course, one would expect that consumers, especially in low- to middle-income areas, are struggling due to rising food and fuel costs, but according to BEA stats, people are still looking to buy products and services, especially in the travel and entertainment sectors. Personal consumption expenditures rose 1.1% in June 2022, despite rising inflation and interest rates, an increase from 0.3% in May and 0.5% in April. For perspective, consumer spending was -2.8% in mid-2008 to mid-2009 during the Great Recession. 

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Despite rising credit card debt, consumer spending is still on the rise.

One alarming trend, however, is that while consumers are still spending, they are dealing with higher prices by racking up credit card debt. A recent study by the Federal Reserve Bank of New York showed a 13% increase in year-over-year cumulative credit card balances, as well as a $46 billion increase in credit card debt in the second quarter – the largest increases since 2002. Credit cards do have spending limits, however, so as a small business owner, it may behoove you to look for ways to offer some discounts on your most popular products.

The Housing Market Remains Strong

Housing costs are a major benchmark of whether a recession is happening, as lowered housing costs typically indicate that fewer people can afford to purchase a home. According to Mortgage News Daily, the 30-year fixed mortgage rate fell to 5.13% at the end of July 2022, down from over 6% in mid-June 2022, suggesting that housing prices are cooling a bit due to continued interest rate hikes. 

The cool off in housing prices, however, are following an all-time high in median sale price of a home in the second quarter, which was $440,300. At the height of the housing boom in the 2000’s, the median sale price of a home was $257,400 in the first quarter of 2007. This indicates that there is still a supply-demand imbalance for new homes in the US, and that consumers are still willing to pay high prices to purchase a home. 

What do the Experts Say?

Financial experts are divided on whether the US is truly in a recession. Tom Siomades, CIO at Wealth Management, believes we are, despite positive economic indicators. Siomades firmly believes that negative GDP is the main factor. 

“This is technically a recession,” he said. “Some may try to define a recession in other terms but cherry-picking positive data points and ignoring the negative ones is not an effective way to deal with the challenges we face.”

Peter Tanous, chairman of Lynx Investment Advisory, disagreed, saying that the low unemployment rate

Peter Tanous Lynx recession Kapitus small business lending

Peter Tanous, head of Lynx Investment Management, believes low unemployment indicates that the US is, in fact, not in recession.

indicates that the economy is fine, despite negative growth.

“We are not in a recession if the unemployment rate remains below 5%,” said Tanous. “Most economists do not believe that the decline (in GDP) so far, while technically a sign of a recession, qualifies as such given the other positive economic indicators including demand for workers and the low unemployment rate…We are not there.”

What Does This Mean for Small Businesses?

Small businesses are still the backbone of the US economy, and when a recession hits, they typically feel the pain more than anyone. However, we know that fancy economic terms don’t really mean much to the average small business owner – making money does. So, what should small business owners do in light of all of the confusing economic indicators out there? 

For one thing, doom and gloom isn’t on the horizon as many economists may be telling you. Double down on your marketing – consumers are still looking to buy your products, and the competition out there is still stiff. Reorganize your inventory to keep your most popular items in stock, and keep searching for new employees if you need and can afford them.

You Should Still be Cautious

At the same time., it’s always a good idea to err on the side of caution by making preparations for a true recession, because you never know when the economy will take a downturn. The statistics, however, show that you have more reason to be upbeat than you may realize.

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Tips on Applying for and Winning Government Contracts

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A windfall of government contracts, both on a federal and state level, are on their way for small businesses over the next few years, thanks to the passage of the massive $1.2 trillion Infrastructure Investment and Jobs Act that was passed last November. 

The current law requires 23% of prime federal contracts be eligible for small businesses, especially women- and minority-owned businesses, and the new law means that local and state governments, as well as the federal government, will be seeking to contract construction firms, IT companies, engineering firms, equipment manufacturers, electricians, law firms and a host of other types of small businesses. 

The Money is out There…

Don’t miss out on the lucrative opportunities that will be coming from the federal government.

The new infrastructure law calls for:

  • $110 billion to repair existing roads and bridges and build new ones; 
  • $65 billion to be spent on building high-speed internet across the country; 
  • $73 billion to upgrade the nation’s existing power grids; 
  • $39 billion to increase and improve public transportation;
  • $15 billion on electric vehicle investments; 
  • $25 billion to modernize airports, and
  • $55 billion to enhance water safety.

The challenge for small businesses throughout the country now is to find and apply for these government contracts and prepare to take on new public projects. Small businesses intending to work on government contracts need to prepare themselves in terms of marketing, inventory management and employment. 

Finding Contracts

If your small business plans to apply for a government contract, the first thing you need to do is register your business in the System Awards Management (SAM) program run by the federal government, if you haven’t already. This is the system in which you can create a profile of your business and describe what your business is capable of. 

Once you do that, your business will be entered into the Dynamic Small Business Search database that is run by the SBA. That’s the database that is used by federal agencies to find small businesses with which to contract. Small businesses can also use that database to connect with other small businesses for subcontracting work. Government agencies are required to use SAM to advertise all federal government contracts over $25,000.

You also want to secure a contract with the US General Services Administration (GSA), which connects government buyers with contractors. By doing so, you will get onto the GSA’s schedule, which means you’ve been approved to do business with the government. You’re also going to want to keep up with your state and local governments, as much of the funding from the Infrastructure Act will go to them for contracting as well. 

Preparing to Serve

Landing a government contract can be quite lucrative for your small business, but you need to take steps to ensure that your company can handle the work that such contracts require. This will most likely require your business to have great access to capital and hire additional staff with specialized skills. Remember, there are a number of financing tools out there that can help you prepare to land a big contract. Some of the basic steps are: 

Increasing Inventory, Modernizing Equipment 

Landing a contract with the federal government could mean that you must either increase your inventory or buy new supplies. A construction firm, for example, may have to stock up on extra lumber and other materials and purchase new machinery to fulfill a large contract. That could mean expensive upfront costs for you if you do win a government contract. With current supply chain disruptions and rampant inflation, you may be short on immediate funds for new materials. 

This is where lending tools such as purchase order financing can come in handy. PO financing provides assets to pay your suppliers upfront, and the lender will base its borrowing decision on the credit of your customer, and in this case, who has better credit than the federal government? This type of financing will help you with your cash flow because it allows you to operate without having to take on additional debt, and it also allows you to make sure you can meet the necessary milestones for a project that you are hired for. 

If you need new, expensive equipment to fulfill a contract such as a new bulldozer for a construction project, you may want to consider equipment financing – financing that has relatively few requirements and can pay for vital equipment upfront. You should also carefully consider whether purchasing equipment makes more sense for you than leasing equipment.

Hiring Specialized Workers

If you’re going to bid for government contracts, you may need to hire additional staff that specialize in the work being required. For example, if you’re a construction firm that wins a bid to build a new road or bridge, you’re going to want workers experienced in doing so. If you’re a law firm that’s been contracted to perform an environmental study for a new construction project, you may want to add attorneys that specialize in that. 

Hiring additional workers may be both difficult and expensive, especially now that we’re still amid the “Great Resignation,” and will require extra operating cash. If you run a small construction firm, hiring additional workers for a government contract may be especially expensive, since you will be obligated to follow the Davis-Bacon Act, which mandates that construction workers for a government contract be paid the average wage of workers of a similar private project.

If that’s the situation you’re in, you may consider taking out a line of credit or negotiating an increase to your line of credit if your business already has one in place, or even taking out a new business loan. A line of credit and a business loan are generally cost-effective ways of fulfilling your operating costs – including meeting payroll – during times when your cash flow may be uneven. 

Create a Marketing Plan

The federal government, , in many ways, is no different than any other client – you need to get its attention through marketing and advertising efforts. Target specific government agencies that you want to win contracts from. Get to know who the decision makers and influences are in those agencies, and create campaigns that involve email, text and social media marketing. Let them know that your small business is capable of performing the task they are seeking to contract out. 

The Federal Insurance Deposit Corp. (FDIC) has a very good presentation on how to effectively market to the government. If you don’t have the time or bandwidth to market yourself, there are actually several firms out there that specialize in this type of marketing. 

Don’t Miss Out!

Many economists believe that the US is heading into a recession as inflation and interest rates continue to spike, so it’s important that you get as much business as possible for your small company. Government contracts represent great business opportunities, as winning them will bolster the reputation of your firm and guarantee income.

Hand reaches for file

Essential File Management Tips and Trends

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As the tides come in on another annual tax filing deadline, there is perhaps no better time for small business owners to reevaluate their current tax record management structure. An outsider may not realize how much work goes into managing and maintaining tax records for a small business but those in the know are all too aware how quickly paper files can turn into a Himalaya-sized hassle. The advent of digital tax filing tools has doubled as a great means to store those same records but there are more than a few reasons why digital records can become a chore in themselves.

An essential element of modern financial literacy (especially for small business owners) is maintaining a trusted system for storing and tracking your own tax records. A good system is also easily accessible whenever reason requires. Consider, then, this collection of methods and tips before next quarter is already at a head.

Going Paperless

You’ve certainly heard it before and will hear it again before long: it’s time to go paperless. Going paperless is more than a clutter-reducer; by having less papers spread among less places, there is an equally lesser chance that documents disappear by incorrect filing or plain old human error. While initially overwhelming for most small businesses, crossing the peak into fully paperless document management makes life easier for your business if you file digitally or even with a CPA; it is entirely likely that the CPAs you may consult come tax time already have their own paperless system in place. By carrying your relevant documents on a flash drive instead of a shoebox and a few filing tins, you may just be doing your CPA a favor. Going paperless for your essential documents is a full enough topic on its own that it deserves some sub sections:

Document Management System: Running a secure document management system is a nonnegotiable must when switching to fully paperless records. Here is the flipside all paperless considerers should, well, consider: Your document management system is the digital safe that protects your every essential document; don’t go for cost-savings and don’t cut corners: if this system fails or unexpectedly suffers a breach, I don’t have to explain what bad things can happen next. Evaluate your current tech loadout. If you are running a local server that is fully offline and, thus, more secure, this is a more than sufficient directory to store scanned and wholly digital files until they need to be retrieved.

If servers are too costly for your business, look into cloud-based accounting software. The most well-known example of such software is QuickBooks by Intuit, also the operators behind TurboTax. These systems store and organize files in a near-identical means to local storage but can also be retrieved when you’re away from your master file. Plus, if your business is small enough or manages few enough files to confidently file fully digitally, QuickBooks is fully integrated with TurboTax allowing a one-stop document management and tax filing system. For reasons we will explain later, however, there are more than a few reasons that even if you are confident in your ability to self-file, working with a CPA can still be beneficial.

Cataloging Old Documents: Depending on how long you’ve been in business, the process of digitizing and cataloging your old documents can range from no-trouble to a lengthy ordeal. If your printer has a scanner function, you’re already equipped to do most of the work from your office. Luckily, there are several apps and programs that can use your smartphone camera to do the same work as a scanner. Since such apps will be scanning your essential documents, it pays to triple-check the legitimacy and security of the service you plan to use. Digitizing old records is also a thoughtful alternative to discarding records that have passed the retention mandate; records that are over seven years only are a good place to start digitally downsizing.

Co-Management with Your CPA

There are several industries, however, where going fully paperless either makes work more difficult or costly. This simply means that the documents, receipts, expense reports, etc. for your business must be stored by a method convenient for you. If you work quarterly with the same trusted CPA, it is likely reasonable to split your files (or maintain copies of) relevant files between your two offices. Your CPA can also advise you on the essential record retention mandates relevant to your specific field and filing status. Being that essential financial documents for your small business may include personally identifying information about you and your employees, be certain that any files you leave on record with your CPA are equally (if not more) protected and secure compared to your own record security system.

Stepping Up Security Online and In-Person

The financial documents you maintain for your business are considered essential for a reason; if those documents were stolen or compromised, it may not be just your business at risk. Your employees, as well as any contractors that were directly paid by your business are likely personally identified in your essential documents and identity thieves are aware of this. And as you’re likely aware, identity thieves aren’t safecrackers and cat burglars; they are the digital prowlers, constantly vigilant of unprotected infrastructures with easily accessible SSNs to flip for cash. It is then paramount that every “what if” of your security structure is hammered out.

In-Person Security: The rules for in-person security of your documents luckily haven’t changed much in the past 50 years. The most meaningful way to increase security for your physical documents is to keep them somewhere locked (preferably a safe, not a flimsy locked filing cabinet drawer). Second, know with unimpeachable certainty who has access to those secure documents; reduce the number of people who interact with those documents as much as possible. Only relevant, trusted employees should have access to your essential documents. A modern security element to consider is motion detection modules on the hinge edge of your safe or document holding area. Modern modules can even connect to an app on your phone and inform you directly if some amount of motion is detected. Essentially, treat documents bearing SSNs or other personal information with the same gravity as cash itself; thieves want it just as bad.

Digital Security: If you are on the road to paperless documentation, it’s worth knowing that those digital files are just as attractive as the physical ones. Plus, there are infinitely more methods of egress for cybercriminals to test. If your files are stored on a computer with Internet access be certain that you have an external (cloud-based or local) back-up of those files. In the event of a ransomware attack, those files could be irreparably encrypted. The best way to securely store digital files is on a wholly offline local system with semi-regular back-ups. Since nearly all small businesses file taxes quarterly, it’s sensible to pair back-ups on that same schedule. Hard drives and even modern solid-state drives all fail eventually; so, like paper records, it pays to have extras and back-up copies.

Every Management System Has Room for Improvement

The most effective file management systems are in a state of constant improvement. Whether your records are paperless, paper-ful, or somewhere in between, it pays to regularly shake up your management system both to keep intimately familiar with the where and how of your most essential records as well as to take advantage of cutting-edge trends. Especially for small businesses who don’t have the luxury of in-house accounting and legal departments, being the master of your finances and the keeper of an organized collection of records is the cornerstone of financial literacy.

Shipping Unboxed: Should I Partner with a Fulfillment Company?

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As e-commerce continues to expand worldwide, it is imperative that small businesses do everything they can to make their products visible and accessible to the average consumer. In the fight for consumers’ eyes and hearts, small businesses seemingly have the leg down compared to e-commerce giants like Amazon and AliExpress. These services are triply appealing to potential customers due to extremely expedient shipping times, massive variety of products, and often unbeatable prices. Many small businesses have asked themselves, “if you can’t beat ‘em… why not join them?” It is currently easier than ever for businesses of any size to partner with massive fulfillment companies, allowing their products to be bought and sold on some of the largest digital marketplaces ever conceived. But simply because small businesses can partner with giants like Amazon with just a few clicks or one phone call, this doesn’t mean that fulfillment companies are the right path for every small business.

Small business owners on the fence about outsourcing their products to a fulfillment company have many factors to consider before they should sign the digital dotted line to become a partner with any fulfillment company. In this article from our Shipping Unboxed series, consider if the following questions apply to your small business as to whether a fulfillment company is the right way to go.

How Many Orders are You Processing?

Depending on the number of digital orders your small business makes on a regular basis, fulfillment companies can be a massive time saver. Consider this example: A small business with 30-50 employees opened a digital store during the pandemic to supplement stagnant in-person shopping. The operation quickly became a substantial revenue stream while preparation and shipping duties could, at one time, be left up to employees with a little free time on their hands; the business is now spending as many hours packaging orders as ringing up customers in-person. This example is less conjecture and more wishful thinking, but this is also a perfect example of when a fulfillment company can be a great option for small businesses that don’t have the time or money to hire a full logistics team.

As a rule of thumb, if you are processing less than 50 small orders per week, the warehouse space square footage charge will likely cost you more than consumer-based shipping (and possibly even with packaging materials included).

What is Your Current Order Turnaround Speed?

Another reason working with a  fulfillment company could fall in your favor to work is if your online orders take longer than normal to process. If you and your customers are concerned with speedy delivery, it is almost a certainty that outsourcing to a fulfillment company will speed up your operation. Especially if you partner with direct carriers like FedEx or UPS, you can cut an entire leg from your order processing speed: the amount of time it takes you to source the order and package it for delivery.

As seen with the advent of uber-expeditious services like Amazon Prime, consumers are seemingly more likely to make an order if they know it will get to their mailbox quickly. Secondly, partnering with fulfillment companies that have their own marketplaces like Amazon or AliExpress can lead to an increase in product exposure.

Who is Managing Your Inventory?

Fulfillment companies are, in essence, logistic companies; so you better believe their warehouse management is top notch. Companies like Amazon have become notorious for their order fulfillment speed and heavy-hitters like FedEx are close behind. This speed and convenience is especially tantalizing for small businesses, but without the warehouse or dedicated large-scale inventory space what are they to do?

Small businesses that already have internally managed inventory have some serious logistic questions to ask themselves before signing with a fulfillment company. There are several more possible configurations that would make local inventory more cost-effective than outsourcing.

Warehouse Rent + Logistic Time and Wages Vs. Fulfillment Receiving, Storage, and Packing Rates: Sit down with your financial team and trusted managers and run the numbers on your current warehouse information. Weigh your effective rent and all fees related to shipping alongside the relevant fees of your preferred fulfillment company. The most common fees are listed below:

Receiving Fees: Fulfillment companies tend to charge by the hour when receiving and processing your items. Essentially, from the moment your items enter the hands of the fulfilment company’s employees until those items are packed in the proper bins you are charged for their handling. Shipbob, for example, charges $25 per hour for the first two hours in receiving and then $40 per hour after that. Other companies like Fulfillment by Amazon do not charge for receiving as long as packages are considered “planned” in their system, meaning they were approved inventory ahead of time, otherwise, Amazon will charge for the unexpected labor based on their own calculations.

Storage Fees: Storage fees are often based on the type of warehouse space being used: pallets, shelves, or bins. If you anticipate using bins, Well-known carriers charge around $5 per month per bin used. Some carriers, however, charge by total square-footage used in their warehouse (Fulfillment by Amazon) which is difficult to calculate without speaking directly to a representative.

Pick and Pack Fees: These are the fees charged for each time at the warehouse one of your items are “picked and packed” for final delivery by a logistics worker. These fees are more straightforward and range from $0.20 per item on Shipbob to $1.79–$13.23 for products up to 20 lbs on Fulfilment by Amazon.

While these are the most universal fees among fulfillment companies, there are likely several more you will have to take into consideration depending on your choice of carrier. But some carriers like Fulfillment by Amazon charge account management fees of $40 per month. Outsourcing is meant to be a time and money-saving tool for businesses who lack the resources to maintain larger operations; once outsourcing becomes a chore and is outsizing your business, it isn’t doing its job anymore.

How Much Control Do You Want Over Customer Experience?

Like all cases of outsourcing, fulfillment companies take the lead for all of your orders, successful or missing in action. If an order from your business doesn’t go smoothly from the fulfillment company’s end, it can be very frustrating for the source business. While fulfillment companies all have their own customer support teams and helplines, small businesses lose out on a chance for customer retention when they do not handle orders that don’t go smoothly. Speaking directly to an employee from your company rather than a nondescript customer service agent from an international logistics company can help customers feel like their order actually matters to your company and can turn a negative experience into one that builds trust with your customers. While having a hands-off shipping experience with companies like Amazon gives you more time to run your business in-person, you equally risk neglecting your online customers’ experience with your business.

Small businesses who ship their own packages are also appealing to customers who are searching for grassroots or locally sourced products; these types of consumers usually turn to small businesses before big corporate players anyway, so you can comfortably assume that those customers who consciously chose your business over a big-name company would consider personalized or handmade packaging to be part of their customer experience.

So, Do Fulfillment Companies Fulfill Your Needs?

Unfortunately, it is notably difficult to run any kind of trial with a fulfillment company since you have to send them your inventory in advance; returning inventory can incur further fees to boot. In most cases, however, small businesses who would benefit from a partnership with a fulfillment company likely already have a good idea why: as soon as your ecommerce operation gets big enough to impede your primary operations, fulfillment companies can save you a massive amount of time. Also, the time it takes to go from your first quote to being warehouse-ready can be very quick. Another perk?  When you’re at an in-between stage of growth fulfillment companies can  be a stopgap between hiring a logistics team or renting your own warehouse.

No matter where you fall on the small business spectrum of size, scope, and efficiency, running a successful shipping operation is well within your grasp.

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Shipping Unboxed: The Pros and Cons of Primary Postal Carriers

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Small business owners have several high-quality options when it comes to shipping orders. In those options, however, lies a good amount of indecision that near-every small business owner likely faces before settling on one carrier over the other. On the surface, each carrier performs the same task but, especially for small businesses, there are more than a few reasons why one carrier may be a better fit for your products or your customers. Each small business owner weighing the pros and cons of the primary domestic postal carriers in the United States is bound to treat certain pros and cons with different gravitas. Therefore, if a certain carrier appears to suit your needs best, investigate on the carrier’s website or speak to one of their merchant representatives, as several postal carriers are ready to work out specific deals with small business clients.

USPS

Pros:

Often the Cheapest: For small businesses who ship small or infrequent packages, the USPS will likely have the best deal for you. First Class Mail postage applies to most packages under 13 ounces and if you are shipping books, media like CDs, or educational materials, Media Mail postage is an admittedly slower but genuinely unbeatable deal starting at $1.91 if posted with commercial pricing.

Free Pick Ups: The USPS offers free, unlimited pick-ups for any number of parcels which is a deal you will not find with any other carrier. If parcels already have postage attached, the USPS will pick up your packages at nearly any domestic address.

First Class Mail for Letters: If you are shipping parcels small enough to fit in an envelope like stickers or novelty stamps, the USPS is undoubtedly the most convenient means to ship your product. If your product weighs less than 13 oz and is small enough to fit in a standard envelope, it is worth investigating if you can take use First Class mail for letters. For the price of a USPS Forever Stamp or Extra Ounces Stamp, you can ship your product to nearly any address (even internationally).

Cons:

Generally the Slowest Carrier: While USPS shipping speeds have notably increased in recent decades, they still lag considerably compared to other carriers. For example: packages shipped from USPS Parcel Select are guaranteed to reach their destination within 7-days nationally while UPS offers 4-day maximum shipping for the same size parcels. The same can be said when compared to premium carriers like FedEx and DHL. That slower speed, of course, comes hand in hand with lower prices.

Limited Tracking Information: USPS tracking updates only show the most basic “proof of scan” tracking updates which can be especially unhelpful if a package is delayed; services like media mail can sometimes go unscanned for several days at a time. If your customers expect a premium amount of tracking information or you would like to use tracking information in a mix with your own customer support, USPS may prove insufficient compared to other carriers.

Comparably Poor Customer Service: While the USPS will happily flood their customer service webpage with links and resources, getting the information you need when a package goes missing can be incredibly frustrating with the USPS. Intercepting a package with USPS is famously like trying to catch a salmon going downstream; even if you get it to happen, it’s more likely good luck rather than good service.

UPS

Pros:

More Expedient Shipping Options: Small businesses who partner with UPS can take advantage of the carrier’s several quick delivery options like same-day shipping. While these services are generally more expensive, that shouldn’t matter unless your business offers free shipping. Giving your clients the option for overnight shipping can both help those clients in a pinch and help your business appear more reliable.

Heavy Parcel and Freight Accommodations: Unlike the USPS whose weight limit for most mail is 70 pounds, UPS lets merchants ship items up to 150 pounds with some further exceptions as well. Those exceptions being freight delivery. It is exceedingly simple to get a quote from UPS for freight services which can be incredibly helpful if you have foreign offices or frequent foreign orders.

Cons:

Pick-Ups Cost Money: Even if UPS is attractive to your business for speed or weight accommodations, any kind of financial advantage to using this carrier will shrink if you plan on scheduling pick-ups at your business. UPS charges $6.80 for same-day unscheduled pick-ups and $5.80 for scheduled future pick-ups. Having an efficient shipping schedule, however, could make this cost much less of a burden.

Higher Shipping Cost Than USPS for Similar Services: Unless you are taking advantage of very specific shipping methods like UPS Express Critical or Next Day Air, UPS offers services that are near-identical to their USPS counterparts; the only difference is that USPS is consistently a touch cheaper. Here’s a general breakdown: UPS Ground currently starts at $8.76 and delivers within 6 days to any domestic location. USPS Retail Ground starts at $8.50 and delivers within 7 days domestically. While $0.26 is a small difference, that difference reflects the minimum price for both carriers, so that space will only widen as the size, weight, and distance to your destination increases.

FedEx

Pros:

Top-Notch Parcel Tracking: Any business that has worked with FedEx in the past will likely rave about both the simplicity and level of control possible in the carrier’s parcel tracking system. From a merchant’s account, businesses can monitor packages in real-time and even hold packages in transit if a customer cancels an order.

Premium Customer Service: There must be something about companies with the word “Express” in their name because like a certain “American” company which shares the word, Federal Express has a comparably hands-on and empowered customer service team. FedEx is very enthusiastic about their Quality Driven Management (QDM) system which is the mantra behind both delivery and customer service in the company.

Volume Rate Deals: While UPS also deals in freight services, FedEx has an even more robust group of shipping options, several of which can be lucrative to small businesses. For example, non-urgent deliveries and less-than-truckload deliveries can fill unused truck space for a discount. Also, quotes can be determined on a case-by-case basis meaning your shipping deal can be tailor-made specifically to your capacity.

Cons:

Smallest US Retail Presence: Compared to the USPS and UPS, there are fewer physical FedEx locations in the United States, and they are especially sparse  in rural areas, meaning that drop-offs and other services are more likely to be inconvenient for small businesses compared to other carriers.

Complicated Pick-Up Pricing: Taking advantage of FedEx’s pick-up services to your financial benefit is much harder than when working with UPS or USPS. If you would like to schedule a regular stop for FedEx Ground pick-up, their policy is that pick-ups cost “$15.50 or $31 per week: Based on whether the previous week’s total charges on FedEx Ground, FedEx Express and FedEx SmartPost® are over or under $75.” Further, same-day, next-day, and future pick-ups scheduled individually are all $4 per package.

DHL

Pros:

Robust International Shipping Options: DHL has simply the most robust options for shipping parcels to Europe, South America, Australia, Asia, and even large sections of Africa. If you have customers, or a large portion of orders shipping to non-domestic customers, having DHL as a shipping option is both a convenience for you and the customer, as DHL is consistently one of the most efficient carriers when passing customs.

Free Pick-Ups: Back again! Standing side-by-side with the USPS, your small business can schedule pick-ups with DHL for no additional fee. DHL, however, will not accept furniture, household goods, or personal goods at pick-ups; in essence, don’t use DHL instead of movers when you change offices.

Impressive Money Back Guarantee: U.S.-based paying merchants are subject to a full money-back guarantee for shipments that do not meet their destination or even deliver late. This guarantee, of course, does not extend to unusual customs delays or inaccurate shipping information-related delays.

Cons:

Even Smaller US Retail Presence: Unless you are in a major US city, you may have genuine trouble finding a brick-and-mortar DHL location. This, however, will not affect your eligibility for DHL pick-ups, but if you ever need to speak to a representative in person or use in-person services, you may need to make a day of it.

Several Surcharges: As to be expected with a carrier that focuses on international mail, there are several surcharges for small business owners which could affect their interest in partnering with DHL. For example, packages shipping to Afghanistan, Belarus, Myanmar, Zimbabwe, Russia, and Lebanon from locations international to those countries are subject to a $30 Exporter Validation surcharge. Further, countries that DHL determines to harbor a higher risk for their mail carriers are subject to a $20 surcharge. DHL’s list of high-risk locations is regularly updated to reflect international discourse.

Several Solutions, but Only One for Your Business

In the United States, we are lucky that each of our primary carrier options are reliable enough to consistently deliver packages. Finding the best value for your business is as basic as closely analyzing each carrier’s systems and finding the one which best synergizes with your own. There is nothing inherently wrong with any of the above carriers and it is more than conceivable that one carrier could be a financial watershed for one business and an unnecessary expense for another. Finding the right carrier for your business may also include getting in direct contact with the carriers you are most interested in; some carriers like FedEx are known for making deals for long-term clients.

How to Reduce Shipping Costs for Small Businesses

Shipping Unboxed: How to Reduce Shipping Costs

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If your small business runs any kind of shipping operation in-house, you’re likely familiar with the common headaches that come along with order fulfillment: boxing sold items; taking several trips to the post office or UPS & FedEx stores, dealing with increasing rates, never having enough packing tape, and several more problems which sometimes lead businesses to abandon the process altogether or partner with a fulfillment company. There are, however, several modern methods business owners ought to try before giving up. In this introductory article to our series on shipping and ecommerce, we are laying out concrete strategies to keep shipping costs, and time commitments, low when fulfilling customers’ orders.

Over the past number of years, more and more storefronts began taking online orders and the COVID-19 pandemic forced those die-hard traditional brick-and-mortar shops to adopt shipping to survive. Running a shipping operation in tandem with a traditional storefront is near-Herculean for small teams, so for those teams where every dollar and every minute counts, these tips are for you:

 

Use Flat-Rate Boxes Provided by Carriers

USPS, UPS, and FedEx all have their own flat-rate shipping boxes you can use instead of your own boxes. Since these carriers all charge by your package’s dimensions, more often than not their flat-rate boxes will end up costing less per shipment. Even better, you can have flat-rate boxes shipped to your business in-bulk and often for free.

USPS in particular offers a near-unbeatable deal for their Small Flat Rate Box. If you are shipping objects smaller than 8 5/8″ x 5 3/8″ x 1 5/8″, you can use a Small Flat Rate box domestically for as low as $8.65 for a fully-insured delivery. The upper weight limit for USPS flat-rate boxes is 70 pounds per parcel.

One downside to using carrier packaging is, of course, the sometimes-aggressive branding covering the box. If you still want your own brand and business personality to shine through, you can simply place your own branded packaging within the box, but you can also do a number of other things inside your parcel to make the shipment memorable and personal. An example of this (and a great tip for small businesses still shipping in house) is to attach hand-written thank you notes to the inside of packages.

 

Take Advantage of Commercial Base Pricing

If you aren’t already using commercial base pricing to buy postage for your small business’ shipments, drop everything and start today. Commercial base pricing is a program from the USPS (also used by UPS) which discounts shipping rates when you buy postage from an online provider. Discounts for parcels can be lucrative with USPS First Class postage discounted 26% per parcel on stamps.com, one of the most well-known online postage providers.

There are no minimum or maximum postage limits on commercial base pricing, so businesses who ship parcels infrequently can benefit just as much as large ecommerce companies. All you need to take advantage of commercial base pricing is a computer and printer. Extra points if you are using a carrier’s flat-rate boxes! Making these two simple changes are important first steps to running a leaner shipping operation.

 

Weigh Packages Accurately to the Ounce

If you’ve chosen to take advantage of commercial base pricing postage and print your own shipping labels, it is essential that you use a digital postal scale to make sure you aren’t overpaying for shipping. Without a postal scale you are forced to estimate your parcel’s weight which can only lead to two things: overpaying for postage or getting the dreaded “return to sender due to insufficient postage” stamp. Underestimating postage is a headache for you and your customers but getting an ounce-perfect reading only takes one trip to Staples. Or better yet, new members to Stamps.com can snag a free digital scale for free when they make an account.

Counterpart to weight, measuring your parcels is good for accuracy but also opens another door for savings. USPS charges approximately $16.25 for packages measuring 11 1/4″ x 8 3/4″ x 6″ and then close to $22.65 for packages 12 1/4″ x 12 1/4″ x 6″ not accounting for weight. Meaning if you can shave only a few inches off your packaging, you can massively save on your per-parcel pricing.

 

See if Prepaid Shipping Works for Your Business

USPS, UPS, and FedEx all offer their own versions of prepaid shipping labels which offer a huge discount when bought in bulk. Prepaying for your postage is a great way to reduce headaches, but also can be quite the gamble for small businesses.

Prepaid postage is fantastic for small businesses that run subscription packages or any kind of item that is consistently sized and consistently shipped. For example, if you run a postal book club where you send the same book to a list of subscribers, prepaid shipping is likely a monstrous money-saver. Being that the company will know exactly how many parcels they will be sending, also since all the packages will be the same size, the company can confidently buy their postage upfront at the beginning of a month and likely save loads of money.

For companies that run more ad-hoc shipping, as in they only ship after orders are made, prepaid shipping may either leave them short or with too many labels at the end of the month. And, companies that sell several differently sized items may run into issues calculating prepaid shipping ahead of time.

 

Consider 3rd Party Shipping Insurance Companies

If you are still using major carriers’ insurance for your parcels, you’re likely missing out on savings. Parcel insurance is likely one of the last things on your mental checklist before a package goes out, so take this moment to reassess if you could be leaving money behind on each of your sales. Shipping insurance is often pennies on the dollar for smaller parcels, so small businesses with a healthy output of parcels would do well to see how they can save. The most well-known 3rd party shipping insurance company, Shipsurance, charges 90% less per sale than the USPS directly.

3rd party shipping services aren’t for every small business. If you are using base commercial pricing, for example, it is a near-certainty that the website you are using also maintains their own insurance system. A great example of when 3rd party parcel insurance may come into play is if you sell small, luxury items like jewelry. 3rd party parcel insurance companies generally are quicker to respond to claims and more directly reimburse for parcel contents compared to carriers like USPS. If you declare your items ahead of time, you can rest even easier.

 

Finding Your Dream Shipping System

Every small business is unique and so is every shipping solution. No matter if your small business ships one parcel a month or 1,000 there is a good chance there is still money to be saved. Do your research and get intimate with the details of your own shipping procedure. A few dollars savings becomes a boatload after a steady stream of parcels. The Internet and home printing were both revolutions for the shipping industry, but we are only enjoying the synergy of those several advantages right now. One thing is certain: small business owners have no excuse to wait in line at the post office anymore.

Inventory Management Kapitus

How to Practice Good Inventory Management

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Maintaining a positive cash flow may be the most important task for your small business, but to do that, you’re going to need strong and well-organized inventory management. 

Ideally, good inventory management is the part of the supply chain that will allow you to always have the right product available at the right time and in the correct quantity. 

Inventory control, however, can easily spiral into a mess due to poor planning and the ongoing supply chain disruptions being caused by the COVID-19 pandemic. To prevent your inventory situation from getting out of control, your best bet is to practice the basics when it comes to inventory management, as well as possibly stocking up on your most popular products as the current inflationary environment and supply chain shortages worsen. 

Inventory Management Options

barcode scanning Kapitus

A barcode scanning system can go a long way in practicing good inventory management.

You may wish to consider an inventory management system that utilizes barcode scanning, as that will give you a way to easily monitor your inventory. There are plenty of great software packages out there to help you with this. As we move into 2022, now is the perfect chance to take the right steps to make sure you have a handle on your inventory to ensure the financial health of your business. 

If your budget allows, you may want to hire an inventory manager or stock controller who will be responsible for processing all customer orders, receiving deliveries and making sure that your business receives all of the inventory that is ordered. The inventory manager should know how much inventory you have and be able to conduct inventory valuations at any given time.

Is Dropshipping Right for You?

Dropshipping is an inventory control method in which the manufacturer or wholesaler is responsible for shipping the products once your customer buys the product from you. This will allow you to avoid keeping products in a warehouse or storeroom and is often used by online stores. This method can be used across multiple industries.

Be forewarned, however, that there are some definite drawbacks to dropshipping: this method will result in a lower profit margin, as the manufacturer or wholesaler will demand a cut of the cost of the product, and you won’t be able to offer rock bottom prices. Also, you will have no control over the cost of shipping or quality control, as the product will never touch your hands before they are shipped to your customer. 

Conduct Accurate Sales Forecasting 

Sales forecasting is crucial to good inventory management – knowing how much inventory you need at any given time is especially important in the current economic environment, as supply shortages continue to plague businesses due to the COVID-19 pandemic. Given that inflation is at its highest in 50 years, you may even want to order excess inventory of your most popular items before it gets much higher.

Sales forecasting uses historical data, industry trends, and the status of your current pending sales to predict – with reasonable accuracy – your sales volume on a weekly, monthly, quarterly, and annual basis. Sales forecasting can get tricky, but there are plenty of sales forecasting software packages out there to help you. If you want to do it on your own, here are some steps you should take when forecasting sales: 

  • Determine your sales cycles. Many small businesses rely on seasonal sales, so it’s important to document what times of the year you close the greatest amounts of sales. It could be during the holidays. If you sell stationery products, it could be during the back-to-school season; if you sell pool products, it could be around Memorial Day. This will be key in figuring out when you need the most inventory.  
  • Examine your historical data. Use a record of your past sales volumes under similar conditions to estimate how your business will perform in the present. Given the current economic environment, this is especially important. How many sales per rep did you get in years past? How did your business perform in times of rising inflation? Determine your average year-over-year growth, and if you have historical data, then adjust it to rising inflation and to the fact that you may not have as many sales reps as in years past due to the “Great Resignation.”
  • Assess your sales pipeline. How many potential sales do you have in the works? Analyzing this will give you an idea of what inventory you need in the near term. Examine each sales lead and determine the probability of it closing. You may want to ask yourself: at what stage is the potential sale? How old is this lead? What is the level of interest? When do you expect it to close? 

Use the FIFO Approach

Using the FIFO approach (first in, first out) will help you organize and prioritize your inventory. In essence, this means that inventory should be sold in the order in which it was purchased, with the most popular inventory being ordered and sold first. This is especially important if some or all of your inventory is perishable or will become obsolete once a holiday has passed. This will go a long way in keeping your inventory management precise and organized. The best way to apply FIFO to your warehouse or storeroom is to keep the newer items in front and the older ones in the back.

Calculate Annual Consumption Value

Knowing the annual consumption value (ACV) of your inventory will help you keep tighter control over your warehouse or storeroom. ACV is simply the annual demand for a product multiplied by the product’s cost. Generally, products with the highest ACVs are the most expensive products, so, therefore, should make up the smallest percentage of your inventory. Then, you can create the ABCs of your inventory, with category A being the items that have the highest ACV; category C being the items with the lowest, and category B being the items that are in between. 

Regularly Audit Your Stock

It is a good idea to physically check your inventory for quality control and to make sure you have the items that you think you have. Even with a good barcode inventory management system, you still may have miscounted the number of items you have, or you could have damaged items on your shelves that, obviously, you don’t want to ship to customers. Conducting regular spot checks of your inventory is especially important for your most popular items. 

Identify Unpopular Stock

Nothing will clutter your inventory management like holding onto stock that isn’t selling. Perhaps you overestimated the stock’s value and popularity; but regardless, holding onto it will cost you money and space in your warehouse. Examine different strategies to get rid of it, such as a special discount sale or promotion. 

Make it a Regular Practice

Good inventory management requires a daily effort to make sure your business has everything that your customer wants. If done properly, it can prevent costly situations such as stock shortages or excess stock. In short, good management of your products will reduce costs, improve your business’ cash flow and bolster your bottom line.

virtual assistant small business

The Benefits of Hiring a Virtual Assistant 

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As a small business owner, time and money are your two biggest commodities. Now that the pandemic is (hopefully) winding down, you may be able to save on both by hiring a virtual assistant. 

A virtual assistant is typically a contracted employee that works remotely and can perform a variety of mundane tasks, thus freeing you up to focus on the core job of running your business. As more workers want to work remotely nowadays, all you really need to manage a virtual assistant is a phone, computer and an account with Zoom or other video conferencing software. There are also companies such as Belay and Virtual Assistant Assistant that specialize in finding a virtual assistant for you.

Virtual assistants can be hired for almost any type of role, such as:

  • Administrative work
  • HR functions
  • IT support
  • Data Entry/spreadsheet management
  • SEO services for your website
  • Manage accounting/payroll
  • Blogging
  • Social media marketing

There is practically no downside to hiring a virtual assistant, and now may be a good time to hire one as businesses bounce back from the COVID-19 pandemic and remote work seems to be the new normal. Roughly 10 million Americans who don’t want to go back to an office have turned to freelance work during the COVID-19 pandemic, according to a survey from Upwork, so there are plenty of candidates out there for you to choose from. 

Reduce Labor Costs

Let’s face it – hiring a full-time employee is time-consuming and expensive, especially for small businesses. When you do hire a full-time employee you have to spend time and resources on the onboarding process; you’re on the hook for payroll taxes; medical/dental insurance; granting PTO/sick days and vacation days, and in some cases, offering them a matching 401(k) retirement plan.

A virtual assistant, on the other hand, is an independent contractor and typically is what the IRS refers to as a 1099 employee, so they would be responsible for their own expenses and taxes. Also, as we are in the midst of “The Great Resignation,” finding a full-time, qualified employee who is willing to come to your office for 8-hours a day has become an increasingly difficult task. A virtual assistant would work for pre-agreed upon hours and perform tasks that you specify.

Increase Productivity

A virtual assistant may be even more productive than a nine-to-fiver because they are only focused on the tasks that you assign to them and can work on their own time without the distractions of an office environment or experiencing the daily doldrums of 8-hour day. 

In fact, according to career advice site Zippia, the average American office worker only performs about 4 hours and 12 minutes of actual work in a given 8-hour workday. So, if you want to avoid having full-time employees spending half the day at the water cooler, surfing the web, or taking smoke breaks, and you want to avoid hiring the main character from the famous comedy “Office Space,” then hiring a virtual assistant may be your best bet since they would only work on the job for your company on their time.

 Increased Flexibility, Better Work Quality

A virtual assistant would not be saddled with the obligation of showing up for a 9-5 workday, rather, they would work around your schedule. Hiring a virtual assistant in a different time zone may even work to your advantage because such a worker could be working during off-hours for you. 

Also, as a business owner, consider how much time you currently spend during the day checking emails, answering phone calls, managing your website, social media marketing or blogging about your industry? Those mundane tasks can be handled by a qualified virtual assistant and free you up for more important tasks such as speaking to your customers and managing sales. 

Expansion Plans Made Easier?

If your small business has grown to the point where you are debating whether to expand with more employees, then hiring virtual assistants may give you a way to expand without the operational risks of taking on new, full-time employees. 

After all, the hiring and onboarding processes are long, expensive, and require a large amount of resources. If you hire full-time employees and the situation doesn’t pan out and you have to terminate their employment quickly – or if they quit soon after you hire them – then a good amount of your time and energy will have been wasted. 

If you hire a virtual assistant and they don’t turn out to be the employee you expected, then all you need to do is end the contract.

How Do You Hire One?

The process of hiring a virtual assistant would be the same as hiring any other employee. You would need to advertise the job specifications on employment websites such as Indeed or Glassdoor, or you can advertise the job on social media sites such as LinkedIn. As more workers want to work remotely nowadays, all you really need to manage a virtual assistant is a phone, computer and an account with Zoom or other video conferencing software. 

In all, hiring a virtual assistant can bring you endless benefits, free up your time and save you money. Carefully weigh the pros and cons of hiring one before you do.

Auto mechanic working on car engine in mechanics garage. Repair service. authentic close-up shot

SMB Owners Share Solutions on Getting Around ‘Right to Repair’ Issue

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Nearly every small business, be it a manufacturer, medical office, restaurant, or dry cleaner, has run into the nagging ‘right to repair’ issue. While the issue has been brought to light recently by McDonald’s finicky soft-serve ice cream machines, for small businesses, the right to repair issue could threaten their very survival. 

The scenario is very simple: a machine that is vital to your small business’ operations breaks down, and if your state does not have a right to repair law, you have no choice but to contact the manufacturer of the machine – or a repair company authorized by the manufacturer – to repair it. This process can take a significant amount of time and cost thousands of dollars, as the manufacturer essentially has the monopoly on repair services and can charge whatever it wants.

SMBs Lose Time and Money 

Business owners say that having the right to repair their own machines through whatever local repair shop they choose would reduce machine downtime, increase the lifecycles of their machines, and potentially save them money on repair costs. It also costs consumers money, especially with cell phones, as many consumers would rather replace their cell phones or other electronic devices than go through the hassle and expense of contacting the manufacturer to fix them.

Manufacturers, however, claim that the right to repair would divulge proprietary trade secrets and could, in some situations, even be dangerous -for example – if a doctor’s office tries to repair a piece of medical equipment on its own and does not do it correctly. 

Either way, small businesses, such as manufacturers that rely on complex CNC machines or farmers that use John Deere tractors are caught in the middle of this issue, and it is costing them time and money. The US Public Interest Research Group (PIRG) estimates that Americans throw away 416,000 cell phones each year because most states do not have right to repair laws in place, and electronics makers such as Apple force customers to come directly to them for repairs. 

So if your state does not have a right to repair law in place, what do you do when your crucial machine breaks down? Kapitus spoke to everyday small business owners to find out. 

Get to Know Your Machine’s Warranty

In some cases, your machine’s warranty will cover the cost to repair, or parts needed to repair the machine yourself, said Ryan Fyfe, COO at Workpuls, Inc. 

“As with many pieces of legislation, the Right to Repair Act is a set of guidelines intended to keep electronics manufacturers accountable for their products,” he said. “The bill states that all companies must make their devices easily repairable and provide parts or tools necessary to do so. Keep in mind that you may not be able to get a refund on your device if it can’t be fixed…More often than not, the warranty will cover damaged components even after you’ve been using it for some time or attempting DIY fixes yourself. In addition, see what type of warranty your device has from its manufacturer before making any repairs, so you don’t void the protection policy.”

Get Comfortable Negotiating

Kyle MacDonald, president of GPS fleet tracking systems provider Force by Mojio emphasized that manufacturers generally want to keep you as a customer and therefore are often willing to negotiate repair prices.

“I am personally a supporter of ongoing ‘Right to Repair” campaigns since small businesses like mine would benefit from being able to seek lower-priced repairs by independent entities rather than going to the manufacturer,’ said MacDonald. “That said, we negotiate with the manufacturer when there is no other option for repairs. A lot of people think repairs aren’t negotiable, but we have had some success in talking manufacturers down to a lower price in the past. We also keep all warranty information on hand in case we can evoke the language used there to seek a free or low-cost replacement.”

Have Backups 

James Green, owner of Build a Head, added that his company works with manufacturers to make sure machines get repaired quickly. 

“We have made sure that we have at least two (usually more) of every essential machine so that production doesn’t come to a complete halt if one machine breaks or has an issue,” said Green. “Our management staff has also made it a priority to build personal connections with our manufacturers so that we can hopefully get repairs done more quickly. We haven’t had too many issues, but whenever we do, we try to personally reach out to our connections to reduce the time it takes to fix the problem.”

Be Your Own Repair Person 

Most small business owners that Kapitus spoke with said the real solution is to learn how to repair machines themselves. Of course, this solution will take training and hours spent watching instructional videos on Youtube, but it could be well worth it. 

Alex Wan, co-founder of small business Vinpit, said learning how to fix his own machines has become an invaluable skill. “I experience frequent breakdowns of my machines, and if I were to pay someone every time something needs fixing, then I’d have spent millions by now,” said Wan. “In short, I usually do a lot of the fixing on my own unless they’re complex and need an expert to get things done. Even when I hire someone to do repairs for me, I usually ask them to take me through the steps because I know I’d need that skill in future. In my honest opinion, small business owners ought to have basic repair skills especially related to their line of work since they could save them boatloads of cash.”

Jose Mier, founder of Heliotherapy Research Institute, said that becoming his own repairman has also saved his company a lot of money. “When I started out with my business and moved to an office, I kept running into problems with the air conditioning unit,” he said. “I had to constantly call AC repairmen, and the costs were piling up. Then, I decided to learn to fix the ACs myself. I watched many YouTube tutorial videos and took some help from professionals…Now, when I run into problems, such as electric control failures and leaks, I’m able to fix them myself. In the past few months since I learned this skill, I’ve been able to save myself a lot of hassle and money.”

Push for Legislation 

If your state does not have a right to repair law, you may consider writing to your local politician to push for one. Right to repair laws in states that have them typically require manufacturers to provide repair information on their machines to all customers, including manuals, and offer parts that can be used to repair their machines. 

“Repairing your own machinery is actually a great idea, but often one might not be able to do that despite having the knowledge because some companies do not provide the information or the parts one might need,” said David Attard, a web designer at CollectiveRay.com. This act will help small businesses save time and money.”

You can check to see if your state does have a right to repair law. If not, you can contact your local politician and join repair.org, an industry trade group that is advocating for a right to repair law on a federal level. 

Fostering the Customer Experience Without Breaking the Bank

Best Low Cost Methods for Creating a Stellar Customer Experience

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Before a customer makes even one purchase from you, their customer experience has already started. The customer experience is the culmination of every moment a customer spends with your business until they are no longer your customer. A good customer experience creates an emotional bond between your business and that customer, keeping them coming back again and again. Cultivating a stellar customer experience takes time and care but does not have to break the bank. Many strategies that strengthen the customer experience are cost-free and those with a price tag have the potential to produce great ROI through satisfied return customers and increasing the life-time value of a customer.  

Don’t Confuse Customer Experience with Customer Service

All of the most basic interactions your business and staff have with a customer account for customer service. Customer service is the most baseline expectation for customer interaction that businesses must meet to avoid bad online reviews and word of mouth. Answering the phone, making eye contact, saying ‘thank you,’ and listening to customer requests are all examples of customer service; all good things, but in no way memorable. Customer experience, on the other hand,  accounts for all of the unique, personal touches your business can make to emotionally connect with your client base. If done correctly, your customer experience should both raise your reviews from average to great as well as increase the number of sales you make through word of mouth and advocacy marketing.

The customer experience is what people remember about your business. Think about the small businesses that have made an impression on you. All of those elements that may have impressed you or made you laugh are a part of your own customer experience; it should be your business’s goal to get those same emotions from your customers.

Building a Brand

The first step to strengthening your customer experience is making sure you have a strong brand. While your small business may not be able to match the variety of Amazon or the low prices of Wal-Mart, small businesses have every opportunity to make their own brand, or business personality, compelling, targeted, and identifiable. Building a compelling brand for your business often begins with keeping all aspects of your brand like colors, tone, font consistent. If you don’t know what aspects work best for your business, do some light research to find out the median age and interests of your customers. Having a business with a distinct personality is the first step to making customers feel like their interactions with your company feel special.

Focusing your businesses’ brand to be more appealing to your customers is the best way to make those customers feel even better about visiting your business. Keep in mind these key pieces of a business’s brand when assessing your own.

Brand History and Story: Customers will feel even more connected to your business if they know how you started out. Small businesses with grassroots or individual histories should actively tell those stories on their website and social media pages. Businesses with start-up stories will likely resonate even more with customers, strengthening their customer experience.

Brand Personality: Establishing a brand personality means giving traits to your business that customers can then associate with. The first step to finding or refining your brand personality is choosing some adjectives that you think define your business. Get your staff into the conversation as well and try to get a list of words like “laidback, friendly, sophisticated, professional,” or anything that fits your business. A brand personality is essential for cultivating the customer experience, as customers more easily establish an emotional bond with a business that has perceived human traits.

Brand Values: Being upfront about what your business stands for is increasingly important to the customer experience. Bind your brand to memorable and compelling values like diversity, accessibility, or whatever values you think apply to your business. Then, draft a concise mission statement for your business that encompasses those values. Make sure your customers can easily access your mission statement from your website, social media and especially in your actual place of business.

Handwriting Goes a Long Way

This tip may seem basic, but handwriting is often overlooked for the sake of digital convenience. How often does your staff use pen and paper when communicating with customers? Think back to any time you’ve received a thank you card with genuine handwriting and how that made you feel. Clever use of handwritten notes reminds customers that your business is run by people and not robots and algorithms. Even further, use writing by hand as an opportunity to further your brand personality. Here are a few places your staff can implement handwriting to go the distance and make a personal connection with your customers.

Receipts: When appropriate, encourage staff to add a personal touch to customer receipts. Even a smiley-face or “thanks” is a quick way into a customer’s memory.

Special Notices: Even the most mundane notices like restroom closures or your business’ mask guidelines are ripe for handwriting as well as brand personality. Instead of simply writing “restroom closed,” consider your brand personality and make a sign another way to display your business’s unique traits.

Marketing Materials: Marketing doesn’t have to mean expensive postal and email campaigns. Marketing to cultivate the customer experience can be as simple as making changes inside and out of your store. If your storefront is along a street or busy walkway, consider getting a chalk board and writing something clever about your business beyond your hours. Once again, if your business is on a walkway, consider getting a water bowl for pets during the warmer months. Write a witty, cute note above the bowl inviting pets to take a drink. While the pet partakes, the owner is then much more likely to take a second look at your store.

Get Your Staff Involved

Direct interactions with staff are the basis of making customer experiences memorable. If you run a business with outward facing staff, be certain that your training encourages staff to interact with customers when appropriate. If you have in-house customer service, be certain they are trained to be both effective and infectiously friendly. For businesses who sell products from a brick-and-mortar location, round up your staff and either cultivate a ‘Staffs’ Picks’ collection of products or encourage your staff to select their favorite products and write up endorsements; double points if those endorsements are hand-written!

When getting your staff involved, be sure they are just as aware of your company’s brand and personality as you are. When your business’s brand is strong enough, you can even use your brand to attract staff that already represent your preferred tone and outward appearance.

Dynamic and meaningful staff interactions account for the most important piece of a customer experience. If customers are meant to resonate with your business’s brand and perceived traits, those traits ought to come through strongest via your employees who embody those same traits.

Follow-up After Visits

Following-up with your clients is one of the most certain ways to both improve their customer experience as well as increase the chances they will return to your business. There are several ways a business can follow-up with clients eg: email, SMS, letters, social media; it is essential your business finds out which medium resonates most with your customer base.

Follow-ups with clients absolutely must be timely. Be certain that any kind of follow up message is sent either the same day the customer interacted with your store, or as soon as possible. By sending a follow-up message close to the client’s visit, it’s clear to the customer that they are a priority to you, the business.

In order for your follow-up messages to avoid a quick send to the digital trash bin, think of creative ways to add value to your correspondence. Some examples are to give avenues for direct feedback and places for customers to give suggestions. If a customer fills out a feedback or suggestion form, that is another great place for a personalized follow-up! Be receptive and respectful if customers have meaningful complaints or thought-out criticism in their responses, as addressing those complaints thoughtfully can massively rebound a poor customer experience.

Social Media, Blogs, and Keeping Customers Engaged

Customers who are already wowed by your company and want to keep up with your brand even further will often use social media and your company website to keep in touch with your business until their next visit. Make sure that your web presence is sharp and up to date with content that reflects your established brand. Use your social media channels to advertise events in your store or to highlight new products in fun and charming ways. Your goal with social media outreach is to stay in the conversation; whatever that conversation is will be up to your target audience and existing customers.

The most sure-fire way to positively influence the customer experience on social media is to actively engage with customers. When people comment on your posts or “@” your business, it is imperative that your official account responds and engages with those posts in a timely manner. Keep a close eye on posts from people who tag your business after visiting; just a simple ‘thanks for stopping by’ can make a huge impact on that customer’s experience.

A great way to make social media part of the customer experience is responding to comments or posts that mention your business. Even engaging customers on social media is part of the customer experience. Get creative! If you have some regular customers who are big fans of your business, maybe feature them on your social media page along with a quote from that customer. Make sure to always get clear consent from customers before taking their picture or uploading pictures of them to the Internet.

An new strategy for keeping social media costs low is to work with interns. Large companies searching for social media managers often ask that applicants have several years’ experience to even apply. By making your company an entry-level opportunity, you can both grow your brand and business personality while giving young professionals the experience they need to pursue social media management as a career.

Final Considerations on Brand and Customer Experience

The basis of a memorable customer experience is one that breaks the mold of mundane daily tasks. Your aim should be to genuinely surprise customers with your business’s humanity and attention to detail. Good staff are an undeniable necessity when building a memorable customer experience; be certain they are as aware of this as you are. Find ways to both engage your customers as well as your outward-facing staff and those stellar experiences emblematic of small businesses will often happen naturally.

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