For the 25th consecutive month, small business optimism remains below the 50-year average, with only eight percent believing it’s the right time for growth.
February 27, 2024, Houston, Texas— Leading invoice funding company Charter Capital says there’s a significant divide in the optimism small business owners feel about growth in today’s economy. Further insights are available in the report “Business Expansion Timing: How to Know When to Grow,” which is accessible on charcap.com.
The Charter Capital report echoes sentiments business owners shared in the recent NFIB Small Business Optimism Index, which shows optimism is down two percentage points. This places optimism eight points below the 50-year average at a mere 89.9. While 14 percent plan to increase employment and 23 percent have plans to make capital outlays, just eight percent say this is a good time to expand.
“Given today’s economic conditions, a cautious approach to business growth is understandable and warranted,” explains Gregory Brown, Co-founder and Executive Manager at Charter Capital. “However, the findings are not universal, and each business needs to perform its own assessment.”
Brown notes that businesses may still spot signs of readiness, such as having a solid customer base that demands more, as well as consistent revenue growth and profitability. When paired with stable and strong operational processes and a prepared team, businesses may be able to scale successfully despite the economic concerns. Spotting the signs and moving forward with the right resources and strategy in place may allow businesses to gain a competitive advantage as competitors hold back.
“Only one in four businesses report that their funding needs are fully met,” Brown says. “This is a crucial element in business success whether expansion is on the table or not.”
He adds that many small businesses are reporting greater difficulty in obtaining working capital via traditional lending, though he contends that alternative funding options, such as invoice factoring, remain viable solutions. Rather than taking out a loan, the business receives immediate payment on its outstanding B2B invoices. Through factoring, businesses can receive 90 percent or more of an invoice’s value upfront and don’t accrue debt because the balances are cleared when clients pay their invoices.
Those interested in learning more about invoice factoring or who would like to request a complimentary quote may do so by calling 1-855-336-1473 or visiting charcap.com.
About Charter Capital Headquartered in Houston, Texas, Charter Capital has been a leading provider of flexible funding solutions for the B2B sector for more than 20 years. Competitive rates, a fast approval process, and same-day funding help businesses across various industries secure the working capital necessary to manage daily needs and grow. To learn more, visit charcap.com or call 1-855-336-1473.
A supply chain disruption can impact your ability to serve customers and run a profitable business. Issues can creep up at any time too. While you may not be able to prevent these disruptions entirely, you can take steps now to minimize their impact and be prepared, so your business operations recover faster.
On this page, we’ll cover a few types of supply chain disruptions, explore real-world examples, and then cover some tips that will help your business be more resilient.
What is a Supply Chain Disruption and Why Does it Happen?
A supply chain is comprised of all entities involved in creating a product and delivering it to a customer. It starts with the raw goods and finishes when the end user receives it.
For example, let’s say you decide to purchase a gold ring online. The first link in the supply chain is the raw materials, or the gold used to create the ring. The company mining probably sells the gold to a supplier. A manufacturer then takes it and turns it into a ring. The online retailer buys it, then sells it to you and ships it off.
Five entities are involved in this very basic example. There’s usually more than one type of raw good involved and often more links in the supply chain. If any of those links face an issue that prevents that ring from being made or reaching you, it’s considered a supply chain disruption.
Types of Supply Chain Disruptions
There are lots of supply chain disruption examples in everyday life. A few are covered below.
Pandemics: Supply chain disruptions from COVID-19 impacted 94 percent of Fortune 1000 companies, per Accenture research. Although this is an extreme example, it happens more often than people think. For example, the Swine Flu and the Avian Flu caused similar issues.
Natural Disasters: Hurricanes, floods, fires, earthquakes, and other natural disasters can cause supply chain issues too. For example, the 2011 Great Tohoku Earthquake and Tsunami took out a power plant in Japan. Because the plant-powered a factory that made components used in 60 percent of vehicles, carmakers across the globe were forced to shut down for a period of time. Wildfires across the western United States cause similar chaos by creating a shortage of wood used for pallets.
Transportation Delays: Issues like the trucker shortage, inclement weather, and seasonality often cause supply chain disruptions too.
Price Fluctuations: Cost shifts can happen for a variety of reasons. For example, when fires impact wood availability for pallets, the cost to make them naturally rises. Some manufacturers have reported costs doubling almost overnight. As trucking companies have had to work harder to keep pros behind the wheel, transportation costs go up too. Most people became acutely aware of pricing fluctuations during the pandemic as well. The price of eggs, for example, skyrocketed by more than 30 percent. The cost of PPE, such as masks and gloves that medical professionals rely on, has risen exponentially.
Cyber Attacks: Sometimes hackers specifically target a company, such as when Colonial Pipeline was hit with a ransomware attack. The incident disrupted gas supplies and increased prices. Other times, the attack is broader. The SolarWinds hack is an example of this. Often referred to as one of the biggest cybersecurity breaches of the 21st century, the hackers involved exploited a vulnerability in Orion software created by SolarWinds and used by more than 30,000 organizations to manage their IT. Once the malicious code was installed on an Orion system, it could spread to the data and networks of the business’s customers and partners. In other words, it effortlessly spread across entire supply chains, including government agencies.
How to Prepare for Possible Supply Chain Disruptions
Disruptions can happen at any time, so it’s important for businesses to take a proactive approach to supply chain risk management. Supply chain risk management commonly emphasizes the process of mitigation, reflecting limitations, additional tasks, and audits that adversely impact the value, as well as the complexity and velocity of sourcing processes and operations.
Strengthen Your Supplier Relationships
If you have strong relationships with suppliers, they’ll do their best to look out for you when there are supply chain disruptions. Treat suppliers like they’re part of your team, communicate with them often, and always pay them on time.
Build Up Your Inventory
Try to keep enough inventory on hand so that you have some breathing room and time to pivot if you face supply shortages. Remember that tying up working capital in excess inventory can hinder business growth. Identify the sweet spot for your business that allows you to run lean without compromising your ability to fulfill orders or meet demand if there’s an issue.
Supply Chain Planning System
Supply chain planning systems typically include the following components: Sales and operations planning offer businesses the opportunity to make better decisions that are informed by key supply chain drivers, such as sales, production, inventory, and marketing. By adopting the tenets of modern supply chain planning systems and relying on data instead of predictions, businesses can help make their operations and supply chain more agile and resilient.
Have a Customer Demand Management Strategy
There may come a time when you need to shift how you’re operating. It’s best to think through potential solutions when you’re not under pressure and are more likely to catch any unintended consequences of your intended path.
GM’s issues in the wake of the Japanese earthquake and tsunami are a prime example here. The company’s supply chain is massive and highly organized. Each component of a vehicle can take weeks or more to produce and needs to arrive on the assembly line at just the right time, as explained by MIT.
The company became unable to produce heated seats because of supply chain disruptions related to its electronic control modules. As a result, some company insiders called for GM to stop ordering the seats, but Bill Hurles, executive director of Global Supply Chain, recognized that path would have unintended consequences.
A shift away from heated seats would necessitate a shift away from leather seats, which heaters are commonly paired with. The company would then need to increase fabric seat orders, which could create its own set of issues. Furthermore, the lack of leather seats would impact the packages typically offered in vehicles, as higher-end models usually come with leather. Lastly, the company would still have leather seats and heated seats in various stages of preparedness scattered throughout its supply chain. Resolving the problem would be complicated.
GM decided to stay the course. Despite the fact that moving away from heated seats seemed like an easy solution, it created far more problems than it solved.
Explore various ways your business can manage customer demand if you’re in a similar situation, such as:
Substitution: Find ways to guide consumers to a product that isn’t impacted by the current supply chain issue, such as increasing the price of the affected item and lowering the price of a substitute item that isn’t.
Dilution or Stretching: See if there are ways to make your raw goods go further without impacting the quality and upsetting customers.
Triage: Know which products will receive priority treatment if you’re forced to decide which to produce or whom to serve.
Auction: Some companies switch to selling their products to whoever is willing to pay the most. Although this strategy can provide an immediate payout, it can also alienate loyal customers and damage the business in the long run.
Identify Backup Suppliers and Diversify Your Supplier Base
Work with a few different suppliers that come from different backgrounds. That way, if a regional or individual issue impacts one, you can bump up your orders with the others. Continue working with them and building up your relationships, so they’re more likely to help you out if you’re facing an issue.
Conduct a Supply Chain Vulnerability Audit
A key component of supply chain risk management is pinpointing potential issues in an audit or vulnerability assessment. This involves jotting down all of your raw materials and components, then making note of what controls or protections are in place for each. Then, use a four-point scale (very high, high, low, negligible) to assess the vulnerability of each item.
When you know your biggest risks, develop a plan to minimize the risk or establish a backup plan to ensure you won’t be without the item if there are delays or shortages.
How to Deal with a Supply Chain Disruption
Although you can take steps to minimize the impact of a supply chain disruption, it’s not always possible to prevent issues altogether. However, these tips can help you bounce back quicker.
Plan for Recovery
Keep the long-term health of your business in mind as you navigate supply chain issues. How you handle the disruption will impact how your customers and suppliers feel about you afterward.
Communicate with Customers
At a bare minimum, customers who are already waiting on delivery need to know why it’s delayed, what you’re doing to address the issue, and when you anticipate a resolution. However, it’s better if you set the right expectations by communicating before someone places an order. Consider sending an email to your loyal clients or including information on your website.
Evaluate the Impact on Cash Flow
Supply chain disruptions can:
Identify how the supply chain disruption impacts your cash flow and be prepared with a backup source of funding that can help you cover expenses if needed while you’re working things out.
Assess Buyer Behavior
Demand for certain products and services may shift while you’re working through your supply chain issues. Keep a pulse on what your customers want to see if there are opportunities to pivot away from products or services that have become difficult to produce.
Boost Cash Flow During Supply Chain Disruptions with Invoice Factoring
Invoice factoring is often used by companies that are experiencing rapid growth because it provides debt-free funding by accelerating payment on B2B invoices. However, it’s also an excellent option as a backup source of working capital because it’s flexible. When you factor and which invoices you factor is up to you. Plus, factoring can be tapped into quickly whenever the need arises, with the option to receive your advance as soon as the same day you submit your invoice. To learn more or get started, request a complimentary rate quote from Charter Capital.
Small business management is never easy but building a strong enterprise can seem impossible during times of economic uncertainty. Whether your business is presently struggling, or you want to future-proof it against common issues, this page will walk you through what to look for and how to fortify your business going forward.
Common Financial Management Challenges Small Businesses Face During Times of Economic Uncertainty
Before we begin, it’s important to have some background on the financial challenges small businesses often face in times of economic uncertainty. Even if you aren’t facing these challenges currently, being aware of them can help you plan for future uncertainties in your business.
Budgeting
Nearly two-thirds of small businesses don’t have an official documented budget under ordinary circumstances, according to Clutch. The figure jumps to nearly three-three quarters for businesses with between one and ten employees.
During times of financial uncertainty, it becomes that much harder to create a budget and stick to it. Clients are typically slower to pay their invoices, vendors often start charging more, and customer spending can drop in non-essential industries.
Even still, budget management and monitoring is one of the top four things successful businesses have in common, according to research by the Federal Reserve Bank of Chicago. You must create a budget. It’s ok if it needs to be adjusted as you go. Get the basics documented, so you’ll have a better idea of where you stand and where you want to be.
Making Payroll
More than two-thirds of workers live paycheck to paycheck, according to the American Payroll Association. If their paychecks were delivered a week late, around 35 percent say it would be somewhat difficult to meet their financial obligations, and 29 percent say it would be very difficult. It’s no surprise, then, that 44 percent of employees who are paid incorrectly will start looking for alternate employment, per Keka.
Making payroll is one of the most important things you can do as an employer. The importance of this becomes even more apparent during difficult times such as economic downturns when employees are stretched thin, just like you are. Having cash set aside for payroll is one of the four commonalities successful businesses share, per the Federal Reserve Bank of Chicago’s research too.
Staying Ahead of Expenses
Overall, 60 percent of small business owners say cash flow has been a problem per Intuit. This ties back to cash flow and budgeting. If you don’t know what’s coming in or when it’s coming in, it’s difficult to make timely payments of your own.
Controlling Debt
The ability to repay debt has decreased for all businesses except very large ones, according to Deloitte research. Strapped for working capital, it is not uncommon for businesses to take out loans with unfavorable terms in an inflationary environment in order to get them through economic times of uncertainty. However, small business recovery tends to be slower. It’s common for small businesses to get caught in a debt trap, making interest-only payments and never getting ahead.
This may be why a high level of unused credit balance is one of the four traits successful balances share, per the Federal Reserve Bank of Chicago’s research. It’s second only to having knowledge and experience with credit.
Obtaining Financing
Just 42 percent of businesses have their funding needs met, compared to 47 percent last year, according to the latest Small Business Credit Survey. The reasons for this are myriad. Denials are up, and even those who are approved still don’t receive the amount they need. Many are discouraged by these figures and don’t bother to apply, while the number of debt-averse business owners is climbing too.
Tips for Managing Your Small Business Through Economic Uncertainty
Next, let’s take a look at some additional ways you can help your business stay strong during times of economic uncertainty.
Evaluate and Improve Your Cash Flow Management
Eight in ten business failures can be tied to cash flow management issues, according to research presented by Entrepreneur. Some relate to common cash flow management mistakes, such as not actively requesting payment of receivables. Others are more about not seizing opportunities to improve cash flow, such as accelerating receivables and opting for leases over purchasing.
Explore ways to reduce and slow your cash outflows while increasing and accelerating your cash inflows. Follow financial management best practices, such as creating a budget, and never put your greatest asset (your talented employees) at risk by missing payroll.
Automate Processes Where You Can
More than three-quarters of businesses that automate feel more comfortable responding to a crisis than their counterparts, according to Zapier research. Nearly a quarter of those using automation software were exceeding their pre-pandemic revenue by May 2021 too.
The top benefits gained through automation include:
Greater Productivity
Enhanced Focus
Reduced Stress
Cost Savings
Work with your team to identify tedious, repetitive tasks that each person handles. For example, you can automatically enter new leads and customers into your CRM based on data they provide in forms or at checkout. Emails can automatically be sent internally or externally after specific actions are taken or sent on a schedule. There is a myriad of payroll and billing tasks that can be automated too.
Focus on Your Customers
Happy customers are the lifeblood of your business.
More than two-thirds of customers are willing to pay more for products and services when the brand offers good customer experiences, according to HubSpot.
Nearly nine in ten customers are more likely to make another purchase after they’ve had a positive customer service experience per Salesforce.
Increasing customer retention by just 5 percent can boost profit by 25 to 95 percent, according to Bain and Company.
Use surveys to gauge client happiness and identify pain points, then address the issues you uncover. As satisfaction grows, your cash flow and profit will improve too.
Investigate Financing Options
Even if your business doesn’t need cash right now, you should always be prepared with a backup form of funding. Approval rates are low during times of economic uncertainty, and even those who get funding don’t usually receive everything they need.
Explore all potential working capital sources, not just traditional options like small business loans and lines of credit.
Invoice Factoring Can Save Time and Provide Immediate Cash Flow
One alternative is invoice factoring. Instead of taking out a loan that you pay back with interest, factoring involves selling your unpaid B2B invoices to a third party, known as a factor or factoring company. You get most of the invoice’s value right away, then receive the remainder minus a nominal factoring fee when the client pays. There’s no debt to pay back because your client clears it when they pay their invoice. Most businesses qualify, including startups and those without strong credit.
Accelerate Your Cash Flow with Charter Capital
If you’d like to accelerate your cash flow through invoice factoring, connect with Charter Capital. With decades of experience and competitive rates, plus perks such as same-day funding and free collections services, Charter Capital can help your business weather uncertain economic times and come out stronger. Request a complimentary rate quote to learn more or get started.
Do you want to know the difference between a Roth and traditional IRA? No matter what stage of life you’re in, it’s important to be building a nest egg for retirement.
A general rule of thumb, according to Fidelity, is to have at least:
1x your annual salary saved by age 30
3x by 40
6x by 50
8x by 60
10x by 67
Putting money into an IRA can help you get there, but which option is best? You’ll get a brief overview of IRA types on this page, plus an in-depth comparison of two of the most popular: Roth vs traditional IRA.
What’s an IRA?
An IRA, short for individual retirement account, is an account set up through a financial institution that allows you to save for retirement on a tax-deferred basis or with tax-free growth. IRAs are one of the most powerful ways to save, plus can often work together or alongside a 401(k) to help you meet your goals.
Quick IRA Comparison of IRAs
There are seven types of IRAs.
Traditional IRA: Usually the best IRA for those who think they’re in a higher tax bracket now than they will be during retirement as well as those who cannot contribute to an employer-sponsored retirement program.
Roth IRA: Usually best for those who think they’ll be in a higher tax bracket during retirement than they are now and those who might need to draw funds before retirement.
SEP IRA: Short for Simplified employee pension; usually best for small business owners who want a retirement plan without paying extra startup and operating costs.
Nondeductible IRA: Usually best for those who would otherwise go for a Roth or deductible IRA but don’t qualify.
Spousal IRA: Works for a low-income or nonworking person who is married to someone with earned income.
SIMPLE IRA: Short for savings incentive match plan for employees; Usually best for small businesses that have less than 100 employees.
Self-Directed IRA: Usually best for seasoned investors, as self-directed IRAs carry additional risks in exchange for potentially higher returns.
Despite there being seven types of IRAs, most people will opt for either a Roth IRA or traditional IRA, so we’ll focus on those for the rest of this page.
Key Differences: A Traditional IRA vs a Roth IRA
To get started, let’s look at a high-level overview of the differences between a Roth IRA vs traditional IRA.
Eligibility
Eligibility Requirements for a Traditional IRA: Anyone may contribute to a traditional IRA if they’ve earned U.S. income that year.
Eligibility Requirements for a Roth IRA: There are income limits for Roth IRA contributors. For example, contributions are phased out for those with an income between $129,000 and $144,000 who are filing as single or head of household in 2022. It’s phased out at $204,000 to $214,000 for those filing as married filing jointly or qualifying widow(er).
Taxes
Tax Rules for a Traditional IRA: You may be able to deduct all or a portion of your contributions.
Tax Rules for a Roth IRA: Contributions are never deductible.
Contributions
Contribution Rules and Limits for a Traditional IRA: The maximum contribution changes annually. For example, those under age 50 have a maximum annual contribution of $6,000, while those over 50 can contribute up to $7,000.
Contribution Rules and Limits for a Roth IRA: The rules are the same. The maximum contribution changes annually. For example, those under age 50 have a maximum annual contribution of $6,000, while those over 50 can contribute up to $7,000.
Withdrawals and Mandatory Distributions
Withdrawal Rules for a Traditional IRA: You must begin taking a required minimum distribution at age 72. Earnings withdrawals are taxable, and there are generally penalties for withdrawing before age 59.5. You can withdraw contributions anytime, but deductible contributions are taxable, and you’ll usually pay a penalty if you’re not at least 59.5.
Withdrawal Rules for a Roth IRA: You’re not required to take a minimum distribution at any age. Certain withdrawals of earnings may be tax-free and penalty-free after the age of 59.5 if you’ve become disabled before that age and for other circumstances. Withdrawals of contributions are not subject to taxes or penalties.
Pros and Cons of a Traditional IRA
Now that we’ve looked at the two most common IRA types side-by-side, let’s do a deep dive into the pros and cons of a traditional IRA.
Benefits of a Traditional IRA
Anyone with earned income can contribute. Unlike other forms of investment that have caps on income, anyone who has earned income in the U.S. can contribute to a traditional IRA that year.
Your savings grow tax-free. You aren’t taxed on profits as your investments grow.
Your contributions are deductible. Because your withdrawals are taxed, anything you add to a traditional IRA isn’t taxed now, so you can deduct it from your income and pay lower taxes now too.
Drawbacks of a Traditional IRA
Withdrawals are taxable. Since the money you invest should grow, you’ll be taxed more than you would have if you had been taxed before you invested. In retirement, there are tax benefits if you are in a lower tax bracket than you are now, however, it can reduce your savings otherwise.
A withdrawal penalty applies if you withdraw early and don’t qualify for a withdrawal exception. You’ll pay an extra 10 percent tax penalty if you withdraw before age 59.5.
Contribution limits are low. Depending on your situation, you might be able to contribute two or three times more with other investment options.
Pros and Cons of a Roth IRA
There are benefits and drawbacks to choosing a Roth IRA too.
Benefits of a Roth IRA
Your savings grow tax-free. The money isn’t taxed as income until distributed when you retire.
You can withdraw your contributions at any time. If you’ve added $10,000 to your account, you can withdraw it at any point without penalties.
There are no required minimum distributions. Other investment options force you to start withdrawing at a certain age.
Qualified distributions are tax-free. If your account has been open for at least five years and you’re 59.5 or older, there are no taxes or penalties for distribution. If your distributions are not qualified, they’re subject to a 10 percent penalty and may be taxable.
Drawbacks of a Roth IRA
Those with higher incomes won’t qualify. The cap shifts from year to year, but if you earn more than the average person, you may not be able to contribute to a Roth IRA.
Contribution limits are low. Roth and traditional IRAs have the same contribution limits, so there’s no disadvantage to going with a Roth IRA vs traditional IRA in this respect. However, you may want to work with other investment options if you need to put more money away.
Contributions are taxable. Rather than taxing you at distribution, Roth IRA contributions are made after the money has already been taxed. That’s not a bad thing if you’re in a lower tax bracket now than you will be in retirement, but it can eat away at your savings if you’re in a higher tax bracket now.
Rollovers from your traditional plan are taxable. The entire amount is taxable if you transfer rollover money from your traditional IRA to your Roth.
Should You Choose a Traditional IRA or Roth IRA?
If you’re in a higher tax bracket now than you will be in when you retire, a traditional IRA is generally best.
If you’ll be in a higher tax bracket or think you may need to withdraw contributions before retirement, a Roth IRA is probably the better choice.
With that said, investing for retirement is very personal, and it’s always best to speak with a tax specialist or financial planner to establish which is best for you and how much to contribute to each.
Can You Contribute to Both a Roth IRA and a Traditional IRA?
Yes, you can have both a Roth IRA and a traditional IRA and even contribute to both in the same year if you meet the qualifications. However, they will share the same contribution cap, so having both doesn’t mean you can double your investment. If your goal is to set aside more than the IRA contribution limit allows, you can use other investment vehicles. Employer-sponsored plans such as a 401(k) are one example.
Build a Stronger Business with Invoice Factoring
If you’re a business owner, your biggest and best retirement investment is, no doubt, your company. However, businesses experiencing rapid growth often find themselves short on working capital, and any company may be impacted by seasonal lulls or slow-paying clients. Invoice factoring can help your business thrive during these times and come out stronger by providing you with instant payment on your B2B invoices. To learn more or get started, request a complimentary rate quote from Charter Capital.
Disclaimer: This article has not been produced by or vetted by a certified legal or accounting advisor. The information provided in this article may be stale, dated, inaccurate, or not appropriate for reader’s investment purposes. Content of this article should not be relied upon for making any investment decisions. You should seek appropriate counsel for your own situation.
The transportation industry was short some 80,000 drivers by the end of last year, according to American Trucking Associations (ATA) Chief Economist, Bob Costello. Already at an all-time high, Costello believes the shortage of truck drivers could reach 160,000 by 2030. His sentiments are echoed throughout the trucking industry.
It’s not just a problem for the transportation industry, though. Trucking alone is responsible for moving more than 70 percent of all freight in the United States, per ATA reports. The trucker shortage is impacting the overall cost of goods and has the potential to halt commerce in its tracks.
What is Causing the Truck Driver Shortage Issues?
More than half the shortage of drivers can be attributed to retirement, according to the National Transportation Institute (NTI). Its representatives say the average age of a commercial truck driver is 54, and new entrants are 38. The industry isn’t attracting younger drivers, which many attribute to a reputation issue with the industry. The scarcity of drivers entering the field simply isn’t enough to make up for those leaving and increased demand.
The root of the issue, however, isn’t as clear-cut. Some cite difficult or downright unsafe working conditions and low pay. Others point to the pandemic and note that training and licensing programs reduced capacity or shut down during the early months of COVID-19.
Still, some contend there isn’t actually a driver shortage. “We’ve seen that what economists would call a reallocation of drivers,” Jason Miller, associate professor of supply-chain management at Michigan State University, explained to Business Insider. He believes that truckers simply moved to smaller transportation companies, became owner-operators, or moved to short-haul.
Challenges Due to Driver Shortage
The majority of truck drivers are inching towards their fifties and find it hard to keep up with the growing demand. This predicament often culminates in a high turnover rate. When coupled with extended working hours, the trucking profession can venture into the realm of unsafe occupations due to the potential for exhaustion and fatigue-induced accidents.
The root of this truck driver shortage is multifaceted. The impending retirement of a substantial segment of the workforce is a significant contributor, and unfortunately, there’s a shortage of young drivers entering the profession to fill the impending vacuum. Further complicating matters, the trucking industry’s competitive nature often leads recruiters to prioritize hiring seasoned drivers, creating an entry barrier for those new to the field. Other obstacles that exacerbate the shortage include stringent regulatory and safety standards, the repercussions of the COVID-19 pandemic, and a noticeable gender imbalance in the industry.
4 Ways the Transportation Industry is Addressing the Truck Driver Shortage
With so many causes and potential causes for the truck driver shortage, a multi-pronged approach is being used across the industry.
1. Improving Truck Driver Wages and Conditions
The median annual wage for heavy and tractor-trailer truck drivers was $45,260 in 2019, according to the U.S. Bureau of Labor Statistics (BLS). Truck driver wages climbed to $47,130 in 2020, with many reports that drivers received raises three to five times last year.
But, pay is only one part of the equation. Drivers often spend weeks away from home jutting across the country. Restrictions on hours, set to combat fatigue behind the wheel, all-too-often leave truckers with the decision as to whether they want to stop at the nearest grimy rest stop simply because it has guaranteed overnight parking that will allow them to catch a few restless winks, or press forward to the next stop that may be nicer, but could leave them stranded on the shoulder overnight due to insufficient space.
To combat this, many companies are switching to a hub and spoke system. Similar to the way airlines work with connecting flights, the hub and spoke system has truckers following a single path from a home hub to one that may only be a few hundred miles away, allowing for more work/life balance and precious nights and weekends at home.
2. Introducing Apprenticeships and Lowering the Truck Driving Age Limit
Truckers 18 and up have historically been allowed to drive big rigs in most states, but federal law has prevented them from crossing state lines. However, the Federal Motor Carrier Safety Administration (FMCSA) recently established the Safe Driver Apprenticeship Pilot Program (SDAP) to help address this. Under the three-year program, those 18-20 with an intrastate commercial driver’s license will be able to cross state lines, provided they meet specific criteria, the FMCSA reports.
Many states, such as New York, are easing restrictions on younger drivers as well. The new legislation will allow those 18 and up the opportunity to earn a CDL Class A through a specialized training program, something once reserved for those ages 21 and older, ABC News reports.
These initiatives will make it easier for trucking firms to recruit younger drivers straight out of high school, but it could take years before they provide any real relief.
3. Diversification: More Women and Minorities in Trucking
Moving beyond age, the industry is working to improve diversity on the whole. Greater efforts are being made to recruit female truckers, who presently only account for 6.6 percent of truck drivers, and minorities, who comprise just over 40 percent of drivers per the ATA. Calls are also being made to attract other underrepresented groups, such as veterans. Others, like C.H. Robinson, believe the solution lies in attracting more immigrants to the profession, CNBC reports.
4. Leveraging Technology for the Trucking Industry
When the word “automation” creeps into discussions about the transportation industry, driverless trucks are the first thing that comes to mind. They may be part of the overall truck driver shortage solution as technology improves, but it overlooks one huge problem truckers face: driver detention. While there isn’t accurate or complete data as to how long drivers wait, particularly since it isn’t often tracked unless the length exceeds contractual obligations, around one in ten stops for loading and unloading exceeds two hours, and the average detention time is an additional 1.4 hours according to the FMCSA.
The agency’s big discovery is that crashes rise exponentially as detention time increases. However, its study notes that these delays result in net income reductions of up to $302.9 million annually, which amounts to more than $1,500 for a for-hire each year. It doesn’t even touch on reduced downtime or increased stress and expense.
Through automation and leveraging technology to optimize the shipping and receiving process, the transportation industry can reduce dwell and detention times significantly, thus making the field a safer, more hospitable place to be.
Boost Your Trucking Business with Transportation Factoring Companies
Whether you run a trucking company or operate an established company, maintaining healthy cash flow is key to success. Cash in hand means you have the fuel to take on an extra load, cover maintenance costs, or even add to your fleet, but it isn’t always possible to operate this way when it takes 60 or more days to get paid. With transportation factoring from Charter Capital, you can get paid for your load right away and even get a fuel card that can help save money too. To learn more, request a complimentary rate quote.
Nearly a quarter of small business owners say their greatest concern is inflation, according to the latest National Federation of Independent Business (NFIB). With the current inflation rate sitting at 7.5 percent—the highest it’s been since 1982—per the Bureau of Labor Statistics (BLS), it’s no wonder businesses are feeling the strain. What’s behind this shift and how can you protect your small business from inflation? Let’s take a look.
Primer: How Does Inflation Work?
The dollar in your pocket doesn’t buy what it used to. That’s generally to be expected, and it isn’t always a bad thing, but the growing pains can sting depending on how you and your business are impacted. There are two types of inflation: demand-pull and cost-push.
Demand-Pull Inflation: The demand for goods and services exceeds production ability.
Cost-Push Inflation: The rising price of input goods and services increases the final price.
How is Inflation Measured?
The most common way to measure inflation is through the Consumer Price Index (CPI). It uses a standard set of consumer goods and services, known as a market basket, and measures the change in pricing over time. For example, BLS readings from January 2022 showed a 27 percent jump in energy prices over the previous 12 months. There was a seven percent rise in food prices over the same period. Medical care approached a three percent hike.
A jump in a single area or even a few doesn’t necessarily signal inflation. Rather, the overall cost of goods and services must be rising for the definition to be met. Generally speaking, inflation rates:
Below 2.3 percent is low.
Between 2.3 and 3.3 percent is mild.
Between 3.3 and 4.9 percent is high.
Above 4.9 percent is very high.
The U.S. Federal Reserve monitors inflation, sets a target of around two percent, and adjusts monetary policy if inflation veers too far from its two-percent target. In other words, it’s normal for last year’s dollar to be worth 98 cents today.
Why is Inflation Skyrocketing Now?
The cause of the inflation surge may not come as a surprise to most small business owners. Simply put, the country is experiencing a mix of both demand-pull inflation and cost-push inflation. On one hand, consumer demand for certain products and services skyrocketed amid the pandemic. Conversely, supply chain disruption caused the price of input goods and services to climb.
7 Proven Ways to Protect Your Small Business from Rising Inflation
Before we dig into the most common ways to protect a small business from inflation, it’s important to note that you should always bring your personal finance professional onboard before making any financial decisions. What works for one business may not work for another, and certain strategies are only appropriate under specific circumstances.
1. Understand How Inflation Affects Small Businesses
While there are generalities associated with inflation, it can still impact businesses in unique ways. For example, many, if not most, businesses will see less revenue because consumers must make their dollars go further. However, businesses producing essential goods aren’t impacted to the same degree.
Another aspect is the decision of whether to raise prices. Whereas large companies with brand recognition can often get away with a price increase, smaller businesses usually absorb increased costs to retain customers.
2. Budget for Inflation
Take a hard look at your expenses to see if you can cut back or reduce costs. A few options include:
Connect with suppliers to see if you qualify for better pricing or bulk discounts.
Take advantage of prompt pay discounts from suppliers/vendors and consider asking for same if not already being offered.
Renegotiate rent if your landlord is willing or move.
Cut back on discretionary spending.
Sublet unused space in your office or warehouse.
3. Invest in Assets That Beat the Effects of Inflation
While it’s important to keep cash on hand to run your business, any cash you hold will lose value in a period of inflation. Many traditional investment devices are the same. For example, traditional bonds and CDs aren’t generally good choices during periods of high inflation because they’re priced based on the fixed interest paid. Options with variable interest are generally better because they can rise with inflation.
The best bet, however, is appreciation-oriented assets, or assets that grow in value. Stocks, real estate, and raw land are common examples in the business sector. Options like cryptocurrency, rare art, and fine wine are leveraged as well.
4. Use Debt to Deal with Inflation
Employees usually receive wage increases to ensure their salaries keep up with inflation. By that token, a typical consumer could borrow a dollar today and then pay off their debt later with their higher wage. Small businesses, of course, do not get automatic wage increases to keep up with inflation, but many business owners are raising their prices to cover their increased costs. It works the same in this sense. If your prices rise due to inflation, any debt you take on will likely be easier to pay off.
Bear in mind, however, that interest rates and fees tend to increase as borrower demand rises. Interest rate hikes are one way the Feds try to correct inflation extremes too. In these cases, lenders, rather than the borrowers, tend to come out on top.
5. Conduct an Energy Audit
Energy is almost always one of the first, fastest, and highest to climb. You can reduce your burden by performing an energy audit and acting on the items discovered. For example, installing insulation and performing maintenance on your heating and cooling systems are generally affordable and can have a lasting impact on energy costs.
6. Invest in Growth and Diversify
It’s often said that the best way an individual can fortify themselves against inflation is to invest in personal and professional development. Doing so can help a person develop new skills and become more marketable. As a small business owner, you may want to take some additional business courses or pick up new skills and knowledge you can apply to your company to help propel it forward.
It’s a good idea to apply the same concept to your business as well. Can you reach a new market? Diversify with different products? The broader your company’s reach is, the less it will be impacted by economic shifts.
7. Collect Debts (Invoices) Promptly
When you invoice your clients after goods or services are delivered, it’s essentially giving them an interest-free loan. During periods of high inflation, the money you collect later will be worth far less than it was worth when you delivered. Look for ways to improve your accounts receivable process, such as shortening payment terms or incentivizing prompt payments.
How Small Business Owners Can Accelerate Their Cash Flow with Charter Capital
As a small business owner, the cash you have in your hands today and how you manage it determines how your company weathers inflation. If slow-paying clients are preventing you from growing, investing, or fortifying your business against inflation, factoring can help small businesses by providing immediate B2B invoice payments. To learn more or get started, request a complimentary rate quote from Charter Capital.
Was 2019 Just a Pothole for Trucking? Or Something More?
Nearly 800 trucking companies failed in 2019, taking almost 25,000 trucks out of the industry’s capacity. Is this a sign of things to come? Or is it an overdue correction?
Celadon Group, by far, represented the biggest name to fall last year when it filed for bankruptcy in December 2019. The Indianapolis-based trucking firm’s demise was the largest in industry history. No surprise, as Celadon was one of America’s 10 biggest trucking outfits at the time. When it closed, more than 2,800 drivers hit the road not with a load to deliver, but a pink slip. Another 1,300 support staffers also lost their jobs.
Ten months earlier, New England Motor Freight shuttered, putting its nearly 1,500 truckers out of work. The company blamed labor costs, excessive regulation, toll increases and insurance rates for its decision to close. Other major carriers that went bust in 2019 included New England Motor Freight, HVH Transportation, Cold Carriers, Falcon Transport and LME.
To be fair, trucking had a banner year in 2018, so anything less than a repeat performance was bound to be a disappointment. A downturn may have even been inevitable. Some believe, even with a driver shortage, there was simply too much capacity in the market. When demand slipped a little in early 2019, it didn’t take much for companies operating with razor-thin margins and little room for error to crack.
But even big companies are hurting. Such industry stalwarts as J.B. Hunt, Knight-Swift and Schneider have revised their outlooks downward. This comes amid news that freight volumes have dropped since reaching a high for 2019 last May. The Cass Freight Index shows shipments in December 2019 at a low last seen in February 2016.
It sure seems like things are bleak. But is this grim view justified?
The United States has entered new trade deals with Canada, Mexico and China. The latter agreement puts an end to a trade cold war between the two giants that has had markets on edge. These trade deals could now spark new demand for equipment, machinery and consumer goods, all of which would absorb excess trucking capacity. Combined with the weaker trucking firms going out of business in 2019, reducing the number of rigs available, rates and revenues should increase, helping boost the industry overall.
No one can predict the future with absolute certainty. While there’s a lot of glum faces in trucking today, there are indicators that better times could be just around the corner. You just have to look for them. Keep in mind that bad news almost always makes for better headlines and generates more clicks. Sometimes you have to read between the lines to get the clearest picture of what lies ahead. Two facts are certain in good times and in bad: Things need to be transported and there’s no more popular or efficient way of getting goods from place to place than trucking.
Is your trucking company currently struggling with cash flow waiting for the turnaround to begin? Do you need the funds presently tied up in outstanding invoices? There is a solution available now. This solution lets you keep on trucking with invoices paid and cash flow problems now in the rearview mirror.
It’s called invoice factoring. With this type of alternative business funding, the factoring company advances you funds in exchange for your accounts receivable invoices. The factoring company pays you right away for your outstanding invoices and takes care of collecting on them from that point forward, freeing you of the troublesome and time-consuming chore.
Invoice factoring is also quick – you can usually get paid within just a day or two instead of waiting the usual 30, 60, 90 days or more. Utilize invoice factoring as often as needed to keep your cash flow running as smoothly as your fleet on a wide-open, traffic-free road. Invoice factoring is a convenient alternative to traditional bank loans or fee-laden online loans. To learn more about how factoring companies work, simply call toll-free 1-877-960-1818
Not long ago, a well-known professional wrestler had a popular catchphrase he would shout out during TV promos. “That’s the bottom line, ‘cause Stone Cold Steve Austin said so!” This meant the audience could bank on what the hulking grappler had said would come true, usually to someone else’s grief. Stealing a phrase from Mr. Austin, what’s the “bottom line” on the current economy? And is there something coming that could cause small business owners grief?
Right now, as of mid-August 2019, the line looks encouraging. Unemployment stands at a low 3.7 percent. The latest small business confidence index has fallen slightly to 103.3, but still remains historically high. The annual inflation rate for the 12 months ending in June 2019 tallied a modest 1.6 percent. Even stocks continue to rise, with the current bull market now past its 10th anniversary, making it the longest on record. One small negative blip recently appeared when the Purchasing Managers Index fell to 51.2 in July, its lowest level in three years.
If there’s one thing certain about good times, it’s that they don’t last forever. Somewhere, sometime in the future a downturn in business or some other crisis will occur. As Austin would put it, “that’s the bottom line.” History has shown it time and again. Austin made a career out of sneaking up on unsuspecting opponents and applying his dreaded “Stone Cold Stunner” with devastating results. But unlike a clueless brawler, you don’t have to be caught by surprise. Here are a few heavyweight suggestions that may ensure that even when times do get tough, you’re still standing when the match bell rings.
Don’t Cut Advertising, Publicity and Marketing – It’s always cheaper to try to wrestle new sales from existing customers than to find new ones. As a result, many small business owners believe the first department to cut in a downturn is marketing. That belief can prove fatal. True, building upon and expanding existing client relationships is never bad policy, but not going after new customers is. Without new customers continually refreshing and growing the sales pipeline, an operation quickly stagnates and ultimately shrinks or even dies. A downturn is a great time to renew marketing, advertising and publicity. For one thing, your competition may be foolishly cutting back, leaving an opportunity for you to build market share at their expense. For another, customers may be using the downturn to search for new vendors and better deals. If you’ve cut back on or eliminated marketing, you may not find them nor they you.
Recession-Proof Your Personal Credit – Just as a homeowner prepares for winter by weatherproofing a house in the fall, wise small business owners use prosperous times to ensure their personal credit can withstand tough economic times. Small business loans are hard enough to get as is, with nearly 50 percent getting denied. Those loans are even tougher to secure in a recession, as banks keep money close and become risk averse. This means you may have to use your personal credit to keep your business afloat. Do what you can now to boost your credit rating and available credit lines.
Manage Inventory, Vendors and Debt – When you’re in a hole, the first step in getting out is to stop digging. In a downturn, excessive inventory, costly vendor contracts and excessive debt can tag team your business, making a bad situation even worse. As a recession begins, take steps to reduce inventory, renegotiate vendor contracts or seek out new ones, and pare down debt. These actions will turn your organization in to a lean, mean fighting machine able to better withstand a downturn.
Focus on What You Do Best – When times are good, businesses naturally expand into new areas and diversify their offerings outside their primary area of expertise. This is a good and healthy thing. But when times get bad, these extras may drag you down. Every business has a core competency that forms the basis of their business and sets them apart in the marketplace. Focus on this strength during a downturn. If you’re a widget maker that does event planning on the side, event planning probably distracts you and wastes resources better spent on the real center of your business and earnings.
Protect and Improve Cash Flow, the Lifeblood of Your Company – It’s no revelation that in tough economic times, access to money tightens. The best way to keep your business off the mat in a recession is to keep a healthy stream of cash coming in. This means, as mentioned in the first tip, to resist the urge to drop marketing efforts that identify new customers. It also means ensuring those who have done business with you pay you for your products and services in a timely manner. In an economic downturn, businesses will naturally try to delay paying expenses and invoices if possible to keep funds on hand. A 30-day invoice can quickly turn into a request for 60 or 90 days, greatly impacting your cash flow and harming your small business’ ability to function.
In a recession, one proven method to improve cash flow and protect your business is to engage the services of a factoring company. The factoring company can fund you the amount of your outstanding accounts receivable invoices upfront, giving you the cash you need today to run your business today, and eliminating the worry and hassle of slow pay collections. You’re left free to run your business.
Invoice factoring is a convenient alternative to a traditional bank loan or fee-laden online loans. Factoring gives you the money you need when you need it with no long-term obligations. You can also get cash quicker through invoice factoring – usually within a day or two. To learn more, simply call toll-free 1-877-960-1818 or email [email protected].
Last month we discussed the continued optimism of American small business owners as 2018 draws to a close. As that article mentioned, the U.S. Chamber of Commerce’s 2018 4Q small business index measured a strong 69.3, just six-tenths of a point down from its all-time high.
According to the chamber, the results show small business
owners and operators are still upbeat about the overall national and local
economies. More than a quarter of small businesses surveyed said they planned
to increase investments and hire more staff in 2019. However, as the calendar
now flips to a new year, is that near-record optimism justified in light of
recent economic news?
Current business headlines across the news spectrum have
suddenly grown darker. While there is no clear consensus that a recession is on
the horizon, an increasing number of forecasts point to an overall slowing of
the domestic economy.
For example, the Washington Post declares “Wall Street Predicts Economy Slowing Dramatically.” The story says investment bank Goldman Sachs is predicting a second-half of 2019 slowdown due to the fading effects of federal tax cuts and rising federal interest rates.
Another Wall Street banking firm, UBS Global Wealth Management, is quoted in a Fox Business News article that a slowdown is coming, but a recession is unlikely. Instead of a recession, UBS CIO Mike Ryan said the slowdown will be more like a “moderation” of the economy. Ryan told Fox Business consumer confidence remains high and the banking sector is improving.
Meanwhile, USA Today reports business spending is starting to dip, in part due to the U.S.-China trade war. The trade war has impacted revenues and cash flow, and that is causing many manufacturers to delay key spending plans. The article quotes one manufacturing CEO as being “uncomfortable” with spending due to the ongoing uncertainty.
That uncertainty has rocked the stock markets in 4Q 2018,
which are roiling with volatility. Drops of several hundred points followed by
large jumps are increasingly common, reflecting investors’ increasing concerns
over the future direction of the economy. For example, on Dec. 26, the Dow
Jones saw a record-setting 1,021-point jump that would have had investors
dancing with joy had it happened in July. However, the one-day surge only
helped mitigate drops of 525 points, 426 points and 365 points in the previous
three days of trading.
Overall, the stock market has gone through a very rough final quarter of 2018. On Oct. 1, the Dow opened at 26,598, while the NASDAQ began the day at 8,091. The Dow reached its high for the quarter two days later midday at 26,951 before closing at 26,828 on Oct. 3. The NASDAQ’s high for the quarter came during the Oct. 1 session at 8,107 before closing the day at 8,037. It’s been a downhill slide for both ever since. The Dow reached its low for the quarter at 21,712 early in the Dec. 26 session moments before the 1,021 surge kicked in to close at 22,878. The NASDAQ sunk to its quarterly low of 6,190 near the end of the shortened Dec. 24 session, closing at 6,192. On Jan. 2 (the first trading day of the year), the Dow opened at 24,809 while the NASDAQ started at 6,937. On Dec. 31, the Dow closed at 23,327 (a 1,482-point drop for the year) and the NASDAQ closed at 6,635 (a 302-point drop for the year). A year that started with such promise ended with a lot of uncertainty.
So, after all those forecasts and all those numbers, the real question is: What does this mean for small business owners? Will 2019 resemble the optimism of the U.S. Chamber of Commerce’s survey? Or will it more closely reflect the views of economists and investors? Only one thing is certain, and that is no one knows for sure. But there are a few things you can do now to prepare yourself just in case.
Increase your sales
channels: If you’re overly dependent on one type of product or sales
package, you may be hit hard in an economic downturn as your customers decrease
spending or look for different types of deals.
Seek out new sales partnerships
and alliances: This will enable you to reach a greater variety of leads and
attract new prospects in the event a slowdown causes a drop in your revenues.
Improve customer
service: It’s likely you already offer great customer service, but there’s
always room for review and improvement. Look for ways to enrich your customers’
experiences with you and strengthen their loyalty to you, that way, should a
recession hit, they’ll be less likely to seek a better deal elsewhere in the
event they have to cut spending.
Boost your credit:
Having more credit during a recession will help you better weather a potential
economic downturn.
The just finished 2017 was a banner year for investors and publically traded companies. The Dow Jones Average opened 2017 at 19,762 and closed 12 months later at a near record of 24,719 (up a hefty 25 percent). That’s nearly double the average of five years ago, when the Dow closed 2012 at 13,104. The rally shows no signs of stopping, as the average rose even higher to 25,295 in the first week of 2018.
So clearly, investors enjoyed the past year and are looking for more strong gains in the months ahead. But what about small businesses?What are their prospects for the New Year?
The overwhelming majority of small businesses are not publically traded companies. A rising stock market may have little to no effect on them. Do they have reason for optimism as we enter 2018?
According to the Metlife/U.S. Chamber of Commerce’s Small Business Index, the answer is yes. During the most recent survey, a healthy 63.2 percent of small business owners queried say they were confident in their local economies, the overall small business climate in the United States and in the health of their companies.
The South leads in small business confidence, while the Northeast comes in last of the four regions. However, the difference between the highest and lowest confidence scores is only 2.6 percent. However, confidence and optimism are not necessarily the same thing. While 63.2 percent were confident about their companies, only 38 percent were optimistic about the future.
That lower optimism rate could be a simple by-product of operating a small business, where the odds of long-lasting success can sometimes seem daunting. Another factor that could affect optimism is something that is actually good: increased competition. One-in-five small businesses owners expect to see increased competition in the coming months. That could indicate a growing economy, with more entrepreneurs willing to risk capital to start new companies. Indeed, nearly half of those surveyed say they believe their local economies are strong. That number has increased six percent since the second quarter survey of 2017.
Other survey highlights include 57 percent responding that they expect their revenues will rise in 2018. A quarter of small business owners plan to increase their investments in the coming year, a number that may rise following the recent tax bill enacted by Congress. Finally, 27 percent anticipate hiring more workers, up three percent over the last quarterly survey.
A Bank of America poll of small business owners found that optimism runs highest among the youngest operators. Millennial entrepreneurs expressed the greatest belief their revenues would rise in 2018 (81 percent), while Baby Boomer owners seemed rather dour in comparison (40 percent). Gen X came in between with 60 percent confident in rising revenues.
In another survey, conducted by Microsoft, 37.6 percent of small business owner respondents answered they planned to introduce new products and services in 2018, indicating optimism about the future. A similar number (35.7 percent) revealed they intend to adopt a new marketing strategy within the next 12 months. Nearly 20 percent said they were considering partnering with other small businesses to expand their markets.
While most small businesses then seem quite confident and fairly optimistic regarding the new year, there still are several areas of concern. Quite a few probably sound all too familiar.
First, of course, are taxes. However, this concern may lessen as a result of the recently passed tax legislation. Obviously, it’s far too early to tell the impact that these new tax rates will have on small businesses. Some time will have to pass before it can be determined if the effects were positive or negative.
A second small business concern is technology. Cybersecurity looms large here as companies conduct more business over the internet. Surprisingly, however, a significant portion of small businesses have little or no internet presence – be it the ability to fulfill orders online or market via social media – possibly due to cybersecurity concerns.
Finally, effective cash-flow management is a growing concern for small businesses. A weak cash-flow management system puts a company at constant risk. As a result, services such as invoice factoring have developed to help companies get a better grip on incoming payments.
On the whole, 2018 looks to hold promise for small business owners. What does the future truly hold? Only time will tell.
