Folks walking up the red arrow

Financial Literacy Month Resources

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Financial literacy has been a moving goal post throughout the digital age. Modern financial technology has majorly shaken up how consumers and business owners alike manage their capital and if current trends are any indication, financial literacy is by no means a simple or straightforward goal to achieve. Only the savviest and most adept business owner understands that there is always more to learn when it comes to finances; those who settle are the most likely to be left behind. Once you have the basics down on understanding finances, it’s wise to stay up to date on current financial trends and means to manage your capital. In recognition of Financial Literacy Month, we at Kapitus have aggregated a mélange of valuable resources to test and refine your financial literacy, as it’s just about impossible to know too much about your finances.

Money Smart for Small Business

Money Smart for Small Business is run and operated by the U.S. Small Business Administration; a great place to start your journey for financial literacy info. Money Smart is a curated course jointly run by the SBA and the FDIC with 13 separate modules available in both English and Spanish. The entire course is free and downloadable directly from the SBA’s money smart main page.

Money Smart is a fantastic tool to diagnose your own financial literacy strong suits and areas that need focus. Being that the course is a comprehensive overview of all the potential needs a small business owner may benefit from in the financial sphere, this course can be a great   first step in your literacy journey. Since the course is fully online as well, busy business owners can take the course piecemeal over several weeks or months in between daily operations.

Entrepreneurs’ Learning Centre

For this accessible collection of financial literacy tools and lessons we have no one other to thank than the Business Development Bank of Canada. Even if your business is not operating in the great North, that doesn’t mean you can’t take advantage of the BDC’s collection of resources! After making a free account, you can access several courses and digital workshops (all on your own time) which span several topics from running efficient operations to “advanced cash flow.” The BDC’s resource centre represents a more selective group of resources tuned specifically for business owners with established companies and an interest in tightening up their financial ship. Being the BDC is primarily a financial institution themselves, there are also courses about small business’s connection to banks at-large including courses such as “be credible and prepared when speaking to a banker;” a lesson well worth learning.

SCORE Workshops

If you are not already closely associated with your local SCORE branch, consider this article the match lighting the fire under your behind; SCORE is one of the most reputable and ubiquitous small business learning resource centers out there for both individual mentorship and online courses. SCORE likely has the widest variety of engagement options of the resources on this list; from one-on-one in-person mentorships and audits all the way to lecture-style Zoom lessons, SCORE proudly serves just about as many topics and interests as there are small businesses.

Getting involved with SCORE is also a great means to kick off a partnership with another small business, as local SCORE branches often double as meeting places for the small businesses in your area. There is likely no small business owner that couldn’t benefit from SCORE resources. Better yet, once you know the SCORE system well enough, you can give back to your fellow business owners by becoming a SCORE volunteer.

Visa Financial Center

Large financial institutions have a lot to gain by lending and partnering with small business owners who are financially literate. Articulating your financial needs and building a trend-informed plan for the future of your business doesn’t happen by magic; and Visa knows this to be true. The Visa Financial Center is an online collection of articles, learning documents, and videos covering a wide range of topics relevant to small business owners. Visa also frequently features real-life small business owners who share their own tips about big ideas like funding your business or financial starting points.

Being that Visa has an interest in keeping small businesses educated about trends in their own technology, you can also learn about the finer points of Visa systems like accepting contactless payment or getting financing.

NYC SBS Business Courses

Even if you are not a resident of New York City, you can still take full advantage of the NYC Department of Small Business Services free business courses. The department’s online courses vary widely and are offered frequently, often multiple times a day. From free legal consultations to the finer points of signing a commercial lease, the purpose of the NYC SBS’s courses is fully, and unambiguously, to help businesses run better.

Signing up for NYC SBS courses, once again, does not require you to be a New York City resident, nor do they require you to be a current small business owner. Many of the department’s courses are actually centered on either scoring your first location or managing your first accounts; there are also advanced courses about building marketing strategies and a full 15-hour course on starting a wholly online business.

ABL, Always Be Learning!

While some may say the best experience for small business owners comes from, well, running their business, the most successful small business owners don’t stop their financial education simply because they run their own business. Being ahead of current financial trends and having a firm understanding of your financial situation is the straight spine in your business’s skeleton. While April may indeed be Financial Literacy Month, every day is financial literacy day for America’s small business owners, as there is always more to learn and always more ways to save.

cash surplus investing financial advisor

Should You Invest Your Business’ Surplus Cash? Absolutely

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If sales are booming and your small business is flush with cash, congratulations! While having a large surplus of cash is great for your small business, SMB owners also need to understand that the more surplus cash you have, the greater your chances are of losing money. 

How? Well, the rate of inflation reached a four-decade high of 7.9% in February, and the interest you’re collecting on your business savings account is almost certainly far less than that. Also, if you have any outstanding loans, the interest you’re paying on them is far greater than the interest from your savings account. You should also remember that we’re still going through “The Great Resignation,” so if you plan to increase your staff, current wage growth most likely is exceeding the interest that you’re getting from your business savings account.

Determine Your Timelines

If you’re in the fortunate position of having a large cash surplus for your business, you have plenty of options to invest that cash in a way that you won’t lose money. Before you consider your options, however, you should first take the time to determine what you want to use that excess cash for. The first thing you want to do is assess what you want to spend it on, and what your time horizons may be for spending that cash. 

Registered investment advisor

A registered investment advisor can assist and educate you on your investment decisions.

You may want to seek advice from a financial advisor or a broker-dealer on how to invest your extra money. Take note that some financial advisors will only deal with you if you have a certain amount to invest and are generally more expensive than brokers, so choose carefully. If you feel you’re a sophisticated investor, you can always use online trading services such as Ameritrade, E*Trade or Robinhood. 

Short-Term Spending and Investing

If you have short-term plans to spend your surplus cash over the next year or less, such as expanding your business with additional staff; leasing a larger workspace; purchasing additional non-perishable inventory before inflation rises even further; or replacing old equipment crucial to your business in the next 12 months, there are investment instruments that can give you a much higher yield than your business savings account. 

You can also forgo investing by using your surplus cash to pay off any outstanding loans you may have, as many lenders do offer a pre-pay discount if you choose to pay off several types of loans before their terms expire.

If you are willing to go the investment route, there are plenty of asset management firms that offer a wide array of short-term investment options. As a business owner, you want these options to give you returns that are greater than your business savings account and are highly liquid. Some of these options include:

  • A money market account. This is an account that you can open at most large banks or by going through a broker and purchasing shares in a money market mutual funds. It will provide a higher yield than a savings account because it invests your money in short-term treasury bonds or commercial paper – a form of short-term financing typically used by large corporations. These types of accounts are considered very low risk and can be liquidated at a moment’s notice. 
  • A short-term treasury market mutual fund. Most investment managers do offer mutual funds designed for short-term investors. These funds tend to be low risk and typically invest in a mix of investment-grade and short-duration treasury bonds. Keep in mind, however, that mutual fund fees can be expensive, so shop around.
  • A certificate of deposit (CD). With the federal funds overnight rate set to rise, you may consider a CD. This is considered a low-risk account in which you can park your money and get a monthly fixed, compounding interest rate over a predetermined period that can be six months, a year or longer.  Most banks offer these types of vehicles, but you should shop around for ones that offer the best rate.
  • An exchange-traded fund (ETF).  ETFs are often cheaper than mutual funds because they don’t invest directly in securities like stocks and bonds, but rather, index futures. Put simply, they are funds that will typically generate the passive returns of whatever financial index you choose. Common indices include the S&P 500 Index (stocks) and the Bloomberg US Aggregate Bond Index (bonds). If your risk/return tolerance is high, you can invest in the stock market. Keep in mind that the average annual compounded return for the S&P 500 since its inception in the early 20th century is 10.5%, but the short-term volatility is high. 

Long-Term Spending Plans

Are there long-term spending goals in your business plan, such as developing and offering a new product, or moving your headquarters to a larger space a few years down the road? The COVID-19 pandemic, which is now entering its third year, taught us that the economy can turn on a dime, so maybe you want to create an emergency cash reserve fund to keep your business afloat when the next recession hits. These are just a few examples of what you may have long-term spending plans for. 

If you have plans for your surplus cash that extend beyond a year, you can tolerate more risk, which means you have the potential to generate higher returns on your investments over the long haul. There are plenty of asset classes you can choose from that, despite having short-term volatility, have average annual returns that are much higher than anything you would see from a savings account or short-term bond investment. To put it simply, the longer your investment time horizon is, the greater your returns on capital can be. 

Your registered investment advisor (RIA) should educate you on the different asset classes and types of mutual funds that are best for long-term investing, as well as the basics such as risk management, modern portfolio theory, and portfolio optimization strategies. Depending on how much cash you have to invest, you may wish to invest in a basket of mutual funds for a diversified portfolio. Your RIA should also keep you informed on world events and how they may affect your portfolio.

Long-term Asset Classes

Some options you may consider for long-term investing include:

  1. An asset allocation mutual fund. If you want to invest in the long-term but don’t have the stomach for taking on excess investment risk, this may be the option for you. This type of mutual fund automatically allocates your assets among stocks, bonds and cash to optimize investment risk.
  2. Mutual funds that invest in equities (stocks). There are plenty of funds that invest in stocks. While these funds tend to be more expensive than low-risk bond funds – especially if they are actively managed – they tend to produce the highest returns over the long term. There are equity mutual funds that invest in everything from the S&P 500 Index to foreign stocks in emerging economies.
  3. Real Estate mutual funds. There are mutual funds that invest exclusively in various forms of real estate. Before you decide to invest, you should speak to your financial advisor and know that these types of mutual funds carry high management fees and high short-term volatility.
  4. Alternative investments. There are mutual funds that engage in exotic investment strategies, such as long/short, absolute return, and portable alpha strategies, and carry high management fees. These funds often seek to curb risk while delivering consistent returns. However, you need to make sure you get a solid understanding of these funds from your RIA before investing.

Don’t Lose Money!

Having surplus cash is a great thing for your small business, as it gives you many options for growing your business and surviving during a downturn. You must understand, however, that simply squirreling it away in your business savings account can cost you dearly. If you’re in such a fortunate position, speak with your accountant or an RIA to find out what your options are. 

 

SMB Owners Need to Prepare for Another Headache: Rising Interest Rates

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Small business owners have dealt with a multitude of challenges this past year, and now, yet another is looming on the horizon: rising interest rates. Federal Reserve Chairman Jerome Powell has publicly stated that fighting inflation is one of the Fed’s biggest priorities this year, and has all but stated that the Fed will raise the federal funds overnight rate at the next Board of Governors meeting on March 17. 

What the Fed will do afterward is still up in the air. The majority of Fed Reserve members are predicting only three rate hikes this year, while economists at financial institutions such as Bank of America foresee up to seven rate hikes this year. Currently, the overnight rate – the interest rate at which commercial banks lend money to one another – has remained firm at 25 basis points (0.25%) since the start of the pandemic to encourage consumer spending. 

Beware the Cost of Capital

The Fed’s upcoming tightening of its monetary policy will mean higher interest rates for banks, who will

Fed Chair Jerome Powell said rates are going to rise in March to fight inflation.

then pass along those costs to its borrowers. Put simply, if you’re a small business that relies on financing or planning to borrow this year, you’re going to see higher interest rates on most types of loans, be it term loans, revolving lines of credit, equipment financing, SBA 7(a) loans, invoice factoring and business credit cards. Additionally, if you plan to buy property for or through your small business, you will see a higher interest rate on your mortgage.

This could mean that the cost of lending could increase significantly at a time when small businesses are already dealing with staff shortages, spiking inflation and supply chain disruption. Fiscal year 2020 was also a year in which small businesses, which make up 99% of businesses in America, relied heavily on financing to get through the pandemic, according to the US Small Business Administration. That trend is likely to continue.

For the year ending Oct. 28, 2021, small businesses borrowed $28 billion through SBA lending programs, according to the US Small Business Administration, a significant spike from the previous year. Small businesses also relied on $525 billion given to them through the Paycheck Protection Program.

Lock in Your Rate Now

If you are considering any sort of financing for your small business through a bank this year, you would be well advised to try to do so before March 17, the day when the Fed is expected to increase the overnight rate. 

Kapitus COO Ben Johnston says that rates on most bank lending products will continue to rise this year as the Fed continues to tighten monetary policy.

“Interest rates have already begun to rise in anticipation of Federal Reserve rate increases in 2022,” said Ben Johnston, chief operating officer at Kapitus. “Small businesses that are currently seeking capital will likely see higher rates than they would have last summer on most bank lending products. 

“For small businesses that currently finance themselves with variable rate products, rates have already risen from their pandemic lows and are likely to rise more. Fixed-rate loans are not subject to interest rate volatility, but borrowers will see higher rates should they choose to refinance or upsize their fixed rate portfolios.”

Slower Consumer Spending?

The Fed’s tightening in March may also mean bad news for small businesses on a macro level, given that rising interest rates generally have an inverse effect on consumer spending. The idea is that when interest rates rise, people generally tend to borrow less and therefore, be inclined to spend less and save more because the interest on their savings will go up. Consumers are also less likely to finance the purchases of big ticket items, since rates will be higher.

With the economy being as wonky as it has been since the beginning of the pandemic, it remains questionable if raising the overnight rate will have that effect on consumers. Of course, less consumer spending will naturally lower inflation because the demand for goods will decrease. Less spending, however, means fewer sales for businesses in general. 

Think Ahead

Besides securing a low rate now for any lending product you plan to apply for, there are other ways to prepare for higher interest rates:

  • Pay off as much debt as you can, especially on variable rate debt such as revolving or credit card debt, to avoid paying higher interest rates.
  • Open a higher-yield savings account for your business’ surplus cash to take advantage of higher interest rates.
  • Fed tightening is often followed by a downturn in the economy, so look at ways to strengthen consumer trust in your brand so that they will come back to you, even when they have less money.
  • If your business sells expensive products or services, such as construction services, custom computers or heavy machinery, consider widening the offering of financing options to your customers when they purchase your products. This will allow you to actually take advantage of rising rates. 

It Won’t Last Forever

An economic slowdown may be inevitable when rates are increased, but by preparing now for higher rates, your small business should be able to continue its growth and innovation. Also, since the infamous Sept. 11, 2001 terrorist attacks, the overnight rate has swung wildly. Consider that the overnight rate spiked from roughly 1% at the beginning of 2004 to 5.25% at the end of 2006, and then went to nearly zero at the beginning of 2009. Your business will get through this period.

Hands, graph chars, word payroll.

Top Payroll Software Systems for Small Businesses

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Spending time processing payroll is not what you want to be doing as a small business owner, as the chore can often be tedious, expensive, error-prone and time-consuming. 

Managing your payroll, however, is obviously one of the most important aspects of your business. The Software-as-a-service (SaaS) industry is skyrocketing, and utilizing top payroll software for your business can conveniently automate your payroll process for a small, monthly fee, and can help you avoid costly mistakes.

Advantages of Automating

If you manually process your payroll on your own via a spreadsheet, you should consider automating your payroll processing through relatively inexpensive software designed specifically for small- to medium-sized businesses (SMBs) to resolve the challenges of keeping up with your task. Whether you run a dry-cleaning business and only have two employees, or you run an accounting firm and have 20, the benefits of utilizing a good payroll software system are endless, and can help you:

  • Automatically keep up with new tax and employment laws and regulatory changes and incorporate them into your payroll system;
  • Maintain accurate payroll records in accordance with the Fair Labor Standards Act; 
  • Prevent unintentional under- or overpayments to employees which can complicate year-end accounting and W-2 processing and cause potential legal issues for you;
  • Ensure that you are properly withholding federal, state and local taxes from your employees’ paychecks, and 
  • Reduce administrative costs or time (if you’re the owner and are the one responsible for payroll).

If you think payroll software may be too expensive, think again. Kapitus has identified six of the best payroll software systems based on cost, capabilities, ease of use and the availability of customer support.

#1 Gusto

Gusto is ranked as the number one payroll software package by a variety of sources, including PCMag and US News and World Report, for its ease of use and low cost. Every Gusto plan offers Automatic local, state, and federal payroll tax filing, automatic state new-hire form filing, workers compensation administration, paystub and W-2 access for employees, and two-day direct deposit. 

Gusto offers four distinct packages: 

  1. The Basic package is $19 per month and $6 per employee and offers features such as automatic payroll filing, employee self-service and workers compensation administration.
  2. The Core package is $39 per month and $6 per employee, and offers automated tax filing in addition to what the Basic package offers.
  3. The Complete package is also $39 per month, but increases to $12 per employee. In addition to offering everything in the Basic and Core packages, it incorporates PTO tracking, time tracking, employee directory and onboarding services.
  4. The Concierge Package costs $149 per month and $12 per employee, and offers what the firm coins “complete and comprehensive HR support.”

#2 PayChex 

The Paychex Flex package starts at $39 per month and $4 per employee, and generally has positive user reviews for its ease-of-use and compatibility with most HR software systems. The price increases as you add more features. While Paychex does not detail the price increases on its main website, what differentiates it is that it offers cloud-based payroll management and HR software to small businesses. All Paychex payroll programs include new-hire state reporting, automatic payroll tax filing, and an employee financial wellness program. Paychex Flex offers 160+ reports with its payroll and HR packages – something that most payroll software packages do not offer.

#3 ADP

ADP is one of the oldest and most popular payroll companies. Reviews are mostly positive for its customer service and ease-of-use. It offers four RUN Powered by ADP plans, but you need to contact ADP to get a price quote based on your needs. Each plan offers basics such as direct deposit, automatic payroll tax filing, and W-2 submissions. Its cheapest plan, Core Payroll, does include employee onboarding, health care compliance forms, and a regular HR checkup. It’s more expensive plans include employee background checks and ZipRecruiter assistance plus more comprehensive payroll help, like wage garnishments and state unemployment tax deductions. 

 

#4 OnPay

OnPay starts at $6 per month and $5 per employee, and has garnered mostly positive reviews for the extra features it includes for which most payroll software companies charge additional money for. Even its most basic package offers services such as garnishing wages, withholding state unemployment insurance, and giving employees multiple payment options such as direct deposit and paper checks. OnPay also will tailor its payroll services to specific industries such as construction and restaurants at no extra cost. Unlike Gusto, however, it does not offer a mobile app.

 

#5 SurePayroll

SurePayroll has garnered excellent reviews for its guarantee to deal with the IRS in case you make any mistakes deducting taxes from your employees’ paychecks, including paying any fines that might be levied against you in case you do. The service starts at $19.99 per month and $4 per employee, and will charge more as you add on additional services. SurePayroll charges extra for services such as accounting integration software and is limited to QuickBooks and Xero. Time-clock integration starts at $4.99 a month. Still, the $29.99 it charges for its full-service payroll system makes it one of the cheaper payroll software services out there, especially given its tax guarantees.

 

#6 UZIO

UZIO starts at $30 per month and $4.50 per employee, and is specially tailored to small businesses with fewer than 10 employees. Its affordability and ease-of-use has garnered it positive reviews. Its self-service employee portal and automatic payroll tax deductions make it  simple and affordable. If you want to add additional HR support, you can upgrade to UZIO’s All-in-One package, which does not cost much more than its basic package.

All in all, while utilizing payroll software may be an extra expense, automating your payroll system is definitely worth the money. Doing so ensures that your employees get paid in full and on time, and it will avoid costly mistakes that could result in hefty fines by the IRS and other agencies if you make a mistake, 

Managing your financial turn around strategy

How to Manage Your Company’s Financial Turnaround

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If you’re a small business owner, you probably took a major financial hit during the dark times of the COVID-19 pandemic. Right now however, you should probably be congratulating yourself – you survived over a year of turmoil! 

With a light at the end of the tunnel shining brightly as more Americans get vaccinated, now is the perfect time to plan your company’s financial turnaround, provided you’re willing to rethink your operations, cash flow, employment situation and potential financing.

How To Rethink Your Business Cash Flow

Maintaining a healthy cash flow is one of the most important aspects of running a business, as it impacts every area of day-to-day operations – both current and future. If the last year and a half taught us anything, it’s that you never know what can come around the corner and negatively impact your cash flow, so it’s important to address this head-on, and there are a number of areas where you can do that, but a great place to start is your collections and billing processes.

Tackle those outstanding invoices

Lazy bookkeeping, the pandemic, and other factors could have resulted in a negative cash flow for your business over the past year. While outstanding invoices are positive assets on your company’s balance sheet, they are useless until your customers actually pay them. If you’re behind on collecting invoices, or if your customers are slow to pay, one strategy that could be useful to you is invoice factoring – financing that quickly provides you with cash tied up in outstanding invoices.  

Review and Adjust Your Process

As you ramp back up post-pandemic, take advantage of the opportunity to do a complete review of your billing and collections policies.  Many times, a review will reveal some holes and/or inefficiencies that, if corrected, can have a substantial impact on cash-flow stability. Once you’ve defined any gaps, consider implementing invoice management software, such as Quickbooks or Invoice2Go – useful tools that can automate the invoice, payment processing and collections systems for your business. 

Negotiate with Vendors

Healthy vendor relationships are almost as important as a healthy cash flow, and one way to maintain a great relationship with your vendors and suppliers is to negotiate contracts that are mutually beneficial. Suppliers generally want to keep you as a customer, so it never hurts to ask them if you can renegotiate prices and payment options, at least until the economy gets back on its feet. Be honest about your financial situation and propose a solution that seems mutually beneficial, such as longer-term payment options. 

Restructuring Your Business Should Be a Consideration in Your Company’s Turnaround

Operational restructuring should be a major consideration in any organization’s financial turnaround.  Look for costly and redundant processes in your business and have a plan to streamline or outsource them. Consider that it could be cheaper to outsource certain services to freelancers or outside firms. For example, if you’re a small publishing company, it may be cheaper to streamline production services for all of your publications and hire freelance writers. If you’re a doctor’s office, for example, it may be cheaper to outsource x-ray analysis work to radiologists in a different country.

Prepare Your Business for Rapid Growth

As the COVID-19 pandemic winds down, most small business owners and economists are expecting the economy to grow. The national unemployment rate dropped to 6.1% in April from 14.8% a year ago, according to the Bureau of Labor Statistics. Consumer spending has increased by over 40% in 2021, while it was down by nearly 30% in 2020, according to the Bureau of Economic Analysis. 

Whether you’re a construction company, a restaurant or retailer, you need to be ready to handle this growth. You should sit down with your accountant and produce a realistic, three-year business plan that accounts for an increase in sales, operational growth and an increase in your number of employees. Some factors to consider:

  • During the pandemic, employees have gotten a taste of working from the comfort of their own homes. If you’re a small business that operates out of an office and you want to permanently move to a remote working environment, you should consider relocating your company headquarters to a smaller, less expensive and more tax-friendly location. However, if you do this, talk to your accountant about the tax implications.
  • Consider financing to handle growth. More business should be coming your way over the next year. Whether you’re a construction company that needs a new excavator, or a restaurant owner that wants a new brick oven to make your famous pizzas, you may consider new financing that you can repay as your business grows. Kapitus offers a wide array of financing options such as equipment financing, a new line of credit or a business loan that could help you with that.
  • As business grows, you will probably need to hire additional employees. When you do, it is important to make sure that you are hiring within your means. The number of additional staffers you hire should be in lockstep with the rate at which your business is growing.

While the pandemic was a source of severe economic strain for many small businesses, there is a bit of a silver lining:  It has created a valuable opportunity to rework aspects of your business that you may have had to put on hold in the past, which puts you on the road to recovery while providing a stronger foundation for your business in the future. 

Surviving Covid: Rethinking Revenue Models

Rethinking Revenue Models During Re-Opening and Beyond

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As businesses look toward the third quarter of the year, many are still looking for ways to overcome the unexpected pains that COVID-19 has inflicted on their revenue models. With states and localities having widely varying re-opening plans, it’s only natural for businesses in every sector to be on the lookout for new ways to generate revenue.

 To help your business find inspiration for its own COVID-coping and re-opening plans, the businesses below share how they’ve reimagined their revenue models over the past two quarters.

 Adding Humanity to Membership Models

Before COVID-19, Scott Beaver, Ph.D. (affectionately known as Dr. Scott) and his company Easy Hard Science operated on a fee-per-course revenue model for its pre-recorded and live-by-chat video classes. With kids out of school for an indefinite time and parents’ needs to keep their kids learning, Beaver switched his business over to a membership model.

Now offering unlimited courses for a simple monthly fee, Beaver can overcome the trend he sees with how other companies are leveraging the internet during the COVID crises.

“Families are still stuck at home, and they are being offered all sorts of digital and mail order products,” says Beaver. “These products are safe, yet perhaps less human.”  Easy Hard Science provides what Beaver refers to as “good old ‘service with a smile’” and believes that his commitment to personal service is why families want to join and then stay in his membership program. He experienced a 300% increase in revenue in just six weeks after launching his membership model.

“We spend hours and hours talking with parents and having learners in live online classes and suggest you do the same,” he says. “Don’t expect robots to keep your customers happy. The world wants and needs more humanity at this moment, even if it’s delivered in a digital format.”

Investing in Micro-Influencers

 

 

Escape the chaos and embrace the calm one drop at a time. ☀️ Via: @jamesaspey #nuleafnaturals #nuleaf #cbdoil #cbd #organic #fullspectrum #wellness #peace

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NuLeaf Naturals had a healthy revenue stream built up through retailers, which came to a halt once states and cities imposed shutdowns. That forced NuLeaf to rethink its revenue model and focus on one that would help it become more self-reliant in all economies. 

No matter the circumstance, NuLeaf’s Vice President of Operations Ian Kelly knew that people still need to buy things, and eCommerce is the best bet in terms of safety. He helped navigate NuLeaf to a new revenue solution with micro-influencers through Instagram – online personalities with 10,000 followers or less.

“Micro-influencers are great for growth hacking social media without shelling out too much money,” says Kelly. “Investing in five micro-influencers with 10,000 followers is better than targeting one influencer with 100,000 followers. If you can find micro-influencers who are already fans of your products, it’s a great catch.”

Through NuLeaf’s micro-influencer campaigns, they’ve experienced a significant increase in engagement – especially direct messages from potential customers asking questions about their products. NuLeaf can now engage with new customers on a one-on-one level and start meaningful conversations that address a potential customer’s specific concerns. As a result, they’ve seen a rise in sales and plan to carry the micro-influencer marketing strategy alongside retailer re-openings and beyond.

Envisioning New Verticals

Rethinking Revenue Models During Covid

Credit: UCplaces.com

 

When you wanted to create or take a virtual tour – through a city, a haunted house, a historical monument – UCPlaces was the place you went to. Their app took you inside for a look at destinations far and wide, yet when COVID came along, tourism ground to a halt. Tourism was one of the main reasons people tuned into UCPlaces tours, for the self-guided experiences in new cities and countries.

“Since tourism took such a huge downturn, we were forced to adopt a new business model out of necessity,” says Mary Rutt, the company’s Director of Business Development.

As the company started rethinking revenue models, one COVID-related trend stood out.

“With folks moving out of crowded cities and rural real estate markets becoming flooded, we felt that the UCPlaces tour creation platform could be a great tool to help real estate agents stand out,” says Rutt. The only challenge was figuring out a way to create tours that real estate agents and their clients found beneficial. UCPlaces did their version of market research.

“We started by presenting the platform to a few local agents for their feedback. Our goal was to determine if providing tours to potential buyers would be something they’d find exciting,” she says. “The reaction was overwhelmingly enthusiastic, and we knew this was a revenue stream we had to explore.”

Two months after having the idea, UCPlaces now targets real estate agents to create “where to live” tours for their potential buyers to learn about a new location and not have to be in the car with their agent. 

“UCPlaces users can pop in their earbuds or connect to their car’s Bluetooth speakers and take one of our pre-recorded, GPS-led walking, hiking, cycling, or driving tours on their own schedule without needing to gather in groups,” says Rutt. “It’s perfect for social distancing.”

As you move into re-opening, the rethinking revenue models, such as the revamped models mentioned above, can help you identify new opportunities to keep the cash flowing in any market conditions. With a bit of creative thinking, you could discover that your next enduring revenue stream is easy to implement and can provide value for years to come.

4 Ways You Can Turn Excess Inventory Into Extra Revenue

4 Ways You Can Turn Excess Inventory Into Extra Revenue

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Are you looking for a way to give your business revenue a boost? Your inventory may hold the answer. If your excess inventory is collecting dust on shelves or in a warehouse, moving it around can inject new life into your revenue numbers. Here are four ways to help reinvent your excess inventory.

1. Bundle it

One option is to bundle your inventory and sell multiple items together at a singular price. This can get products that have been gathering dust off the shelf and out the door–all while generating a profit. There are several ways to approach bundling, including:

  • Combining older or slower-selling products with newer or faster-moving ones
  • Bundling multiple units of the same items
  • Grouping items that are commonly used together

Here’s an example: If you run a salon, and have a hot-selling brand of styling gel, you could package it with the overstock of shampoo and conditioner you’re struggling to get rid of.

To make a bundle enticing–generally speaking, the total price of the bundle needs to be lower than the cost to buy each item individually. Just remember: Keep profit margins in mind so you’re not unnecessarily sacrificing revenue.

2. Offer it as an incentive

Upselling can be a simple and effective way to increase revenue. The idea of an upsell incentive is to use one item to convince your customers to buy a second, more expensive item. In an upsell, you can use the extra inventory to offer products as a bonus–or as a “gift with purchase” when a customer meets a certain requirement. For instance, the customer(s) may need to spend $50 or $100 to get the freebie. This way, you get the revenue benefit from the sale–and you get to move more inventory in the process.

Upselling with incentive works best when customers feel like they’re getting a high-value freebie or bonus. When you create an incentive campaign, remember to weigh the value of what you’re giving against what you’re asking customers to spend.

3. Create a timeline

Marking items down can attract bargain-hunting customers. But, it helps to have a plan if you want to run a sale with maximum impact. Just sticking items on a clearance shelf may not cut it–especially if you have a lot of inventory to move. A better option might be to hold a “flash sale” online or door-buster sale in-store. These kinds of events can create a sense of urgency among customers who don’t want to miss out.

Remember: Timing matters for sales. Have them too often and they might lose their impact.

4. Change up your marketing

Sometimes, sprucing up how you promote excess inventory can boost sales. Simple techniques to vary how you market your inventory may include but aren’t limited to:

  • Relocating items to a different part of your store
  • Redesigning product displays
  • Updating product photos in your online store
  • Adding new keywords or descriptions for products sold online
  • Placing them somewhere new on your site
  • Writing a post about it on your business blog

These are all ways to showcase excess inventory in a new light. The payoff can be a healthy revenue boost if repositioning inventory results in a sales comeback.

5-key-reasons-to-forecast-your-cash-flow

5 Key Reasons to Forecast Your Cash Flow

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Projecting your cash flow can help you plan for the future, avoid unexpected shortfalls and even qualify for a small business loan.

Many overextended small business owners are weary of cash flow analysis. “Analysis” of any kind sounds difficult, and who has the time or energy to make future projections? More importantly, why bother to forecast your cash flow?

Consider that poor cash flow is the number one reason small businesses fail. An alarming 82% of companies fail due to cash flow issues. Convinced you don’t need to worry because your business is profitable? Think again. Profitable companies fail all the time for the simple reason that they run out of cash.

Beyond keeping your doors open, forecasting your cash flow can take the guesswork out of where you’re going. Having a good idea of your direction can help you make smarter business decisions. A little planning goes a long way, and it doesn’t have to be difficult.

These days, intuitive online tools can do the hard work for you, automatically generating cash flow projections based on your past transactions and financial history. No spreadsheets required.

There are myriad benefits to forecasting your cash flow, from avoiding dips into the negative to planning for growth. Consider these five ways that cash flow projections can improve your business.

Avoid Shortfalls

Unexpected shortfalls can be crippling, and it may take months (if not longer) to recover. Negative cash flow can creep up on you if you don’t consistently track the cash coming in and going out. Fortunately, shortfalls are often avoidable with a bit of foresight.

Projecting your cash flow will help you identify — and plan for — market swings, seasonal fluctuations and other business patterns that can lead to unpredictable cash flow. Forecasting can even help you visualize cash flow trends with the help of automatically generated charts and graphs.

Optimize the Timing of Accounts Payable and Receivable

On a more granular level, many avoidable cash flow issues are often a simple matter of timing. Significant lag time between invoicing your customers, or shipping out products, and getting paid can cause unnecessary strain on your cash flow.

Cash flow projections that are based on your financial history can help you anticipate when you’ll be paid by customers. This allows you to stagger or otherwise adjust outgoing payments to your vendors accordingly. In turn, this can keep you from dipping into the red.  And keeps you out of the uncomfortable position of not being able to pay your suppliers, or worse, your employees.

Prove You Can Pay Back the Loan You Requested

 When you apply for a small business loan, lenders will scrutinize your cash flow history in an attempt to answer one primary question: Can this borrower pay back the loan they’re requesting?

Asking for a loan of any amount without showing your plan for paying it back is a good way to land in the rejection pile. This is especially true if your current cash flow won’t clearly cover all of your regular operating expenses — plus your loan payment.

If you find yourself in this situation, cash flow projections can help strengthen your case by showing the lender exactly how you plan to use their funds to get to a place where you can easily make loan payments. This type of forecasting allows you to hand over a road map that can instill a lender with the confidence they need to approve your loan.

Anticipate the Impact of Upcoming Changes

Does your business plan to purchase new equipment? Launch a new product? Cash flow projections allow you to gain a complete picture of the ripple effect that these types of changes will have on your cash flow.

When your finances are synced up with FINSYNC, cash flow projections are automatically generated based on future invoices, bills due and payroll. You can then create “what if” scenarios, such as buying new equipment. Forecasting shows you how the cost will affect your bottom line.  It can also show the potential increase of revenue generated by the new machine.

Plan for Future Growth

In the same manner, cash flow projections can help you plan for future growth and expansion. Whether you’re expanding your team with new employees and need to factor in increased payroll costs, or ramping up production to keep up with increased sales, future projections help you see exactly where you’re going — and how you’ll get there.

Forecasting is also an excellent goal-setting tool to help you plan out the financial steps your business needs to take to achieve targets. There’s power in cash flow projections and the insight they can provide your business. Fortunately, this competitive advantage comes with little effort when you leave the analysis to today’s sophisticated online tools.

 

Guest post by FINSYNC

How to Strengthen Your Balance Sheet to Qualify for a Loan

How to Strengthen Your Balance Sheet to Qualify for a Loan

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Admittedly, some business owners neglect to review their financial statements monthly. Some, actually, only review financial statements yearly–and only for tax purposes! If you want a true ideal picture of your company’s financial health, you absolutely need to regularly monitor your financials, including your balance sheet. While lenders want to see that your firm is profitable, they are most concerned with whether or not you have sufficient working capital, a manageable debt to equity ratio and a strong operating history. Since your balance sheet provides all this information and more, you will definitely want to strengthen your balance sheet if you are seeking a loan.

Increase your working capital.

The more cash or assets you have readily on hand that can be converted into cash to pay your current obligations, the lower the risk you will default on a loan. In other words? Lots of cash and equivalents encourage a lender to lend. Working capital is short-term assets less short-term liabilities. Short-term assets include cash and cash equivalents as well as inventory and receivables. Short-term liabilities include all payables. Hence why lenders focus on working capital.

However, your working capital calculation can significantly differ from the lender’s. Lenders will drastically discount older current assets. If your inventory does not have quick turnover (this timing varies by industry), then lenders will discount its value from what shows on your balance sheet. Furthermore, if you are in an industry with shorter inventory lifespans such as retail and you have unsold inventory that is over two years old, when you sell it, you likely will only get a fraction of what you paid for it. Obviously, lenders cannot count on that cash for bill payment. They will thus exclude that inventory from your firm’s working capital calculation. The same applies to receivables. If your receivables are due in 30 days but 40 percent are over 90 days old, the lender will completely ignore that 40 percent. The exceptions are slow-paying industries such as industrial construction.

Since your old inventory and receivables will be totally excluded by lenders in their working capital calculation, convert those assets to cash. The cash will be included. Sell off your old inventory. Vigorously pursue all overdue receivables. To ensure your inventory turns over in a reasonable amount of time, only buy what sells or ramp up your marketing efforts. To square up your receivables within 30-day terms, create and implement strong accounts receivable and credit policies.

Decrease your debt.

Lenders look at your overall debt, your interest-bearing debt or both, compared to your equity. A high debt burden could mean trouble. Acceptable debt to equity ratios vary by industry. A capital-intensive industry like manufacturing will require much more capital investment than a services-oriented industry like marketing firms.

If you have unused or chronically underused equipment, strongly consider selling it. The purpose of an asset is to help produce or deliver the goods or services your firm provides. If a large asset is just sitting there, it is not fulfilling its mission. Not only will selling reduce your debt, it will convert the associated asset from PP&E to cash on the balance sheet. Although both are assets, the additional cash is much more powerful because it increases your working capital. Remember, working capital indicates your firm’s ability to repay debt in the near term.

Increase your equity.

The lender wants to see that your company has a profitable history. She also wants to know that you reinvest in the company. Why? That shows you both believe in your firm and expect it to grow. Therefore, the owner’s equity piece is very important. Do you retain a sizable portion of the earnings or do you pull every last dollar out you can? If it’s the latter, stop. Your owner’s equity needs to be high enough to be compelling.

One way to both decrease debt and increase owner’s equity at the same time is to convert any shareholder loans to equity. Owners often provide loans to the company instead of injecting equity capital for several reasons. The most notable reason is that you can receive a loan repayment of principal tax-free. But, you must pay taxes on any distributions received. However, if you are seeking funding, a strong balance sheet trumps your lower taxes. Make that conversion and immediately strengthen your balance sheet.

Reviewing your financial statements is important as they serve as the barometer of your firm’s financial condition. This is especially true of the balance sheet. If your firm is in expansion mode, use one or more of these suggestions to proactively strengthen your balance sheet to qualify for a loan.

Determining Your Small Business Owner Salary

Determining a Small Business Owner Salary

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Determining your small business owner salary can be complicated. But, it’s not a big obstacle if you go about it carefully. The central dilemma–as we have noted elsewhere–is that if you “over-compensate yourself, you can put undue pressure on yourself and the business could suffer.” On the other hand, by undercompensating yourself, “you may be unable to give your business a fighting chance.”

To overcome this obstacle, here are key points and action steps to consider:

Focus on profits, not revenue.

Revenue is the money your business derives from sales. But, it’s not the same as profit. Before you see any profit, the income you collect from sales must go to paying your employees, your taxes, overhead expenses and fixed costs.

Therefore, a percentage of profits is the best rule of thumb to follow when determining your salary. According to NFIB, an actual salary figure should be “based on a percentage of profits over the past 2 to 3 years,” not “based solely on projections for the upcoming year or years,” even if you have contractual assurances of business yet to come.

Make sure you still set aside the right percentage of business earnings for:

  • A cash reserve (or emergency fund) account
  • Estimated tax expenses
  • Paying off debts
  • Funds to go back into the business for operating costs, fixed expenses, marketing expenditures, etc.

You can funnel what’s left over after paying for these business expenses into your own small business owner salary. NFIB adds that “most owners of profitable small businesses don’t take out more than 50 percent of profits for themselves.”

Get a sense of what other small business owners pay themselves.

It takes a bit of research, yes. But, finding out what owners of comparable enterprises pay themselves can help you determine your own salary requirements.

On salary comparison sites such as Payscale or Glassdoor, you can look at positions similar to your own. It might help you grasp what’s “market appropriate” in these areas. Often times, the same information is available in industry trade magazines or similar materials.

Keep in mind: Business owners on the east and west coasts generally pay themselves at a higher rate than their counterparts in the south or the Midwest regions.

Consider market-based wages.

Ask yourself, what would you pay another person with the same amount of skill and experience you possess? Other relevant factors include range of expertise, business contacts and overall scope of knowledge.

The salary figure you determine, based on these factors, gives you at the very least a ballpark estimate of what’s appropriate to pay yourself.

Be sure to pay yourself on a regular schedule.

Once you’ve determined what your salary should be, don’t look at the process as something you do from time to time, as profits permit. Instead, according to the accounting software firm Xero, establish payments “for you and your employees … and stick to them.” Following this system, “you’ll get used to the amount of money you receive and won’t have to worry about taking out occasional large lump sums.”

In other words, decide upon an annual salary and then divide that amount by 12 (for monthly payments). Don’t deviate from that figure. Additionally, check in with your accountant to make sure this amount matches what the IRS considers “reasonable compensation” for running a trade or business.

Many factors go into determining the appropriate small business owner salary that’s right for you. Remember that if your business is in the delicate startup phase, you’ll probably have to survive on the bare minimum. This is because all available funds must sink into the business enterprise in order to stay afloat. As time passes and when profits become tangible, then it’s time to start looking at how best to ensure you receive an appropriate base salary.

And for good reason–you’ve earned it!

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