Tag: Small Biz

Is Brick-and-Mortar Dead? Hold Up on That Obituary

Is Brick-and-Mortar Dead? Hold Up on That Obituary

When asked about wild rumors of his passing in 1895, Mark Twain reportedly replied, “Reports of my death have been greatly exaggerated.”

Fast forward nearly 125 years and there’s another rumor of death floating around. Only this time it’s not about a person, but about a way of doing business. According to analysts and experts, we’ve entered the e-commerce age. All purchases will be transacted online, and orders will be shipped overnight to waiting customers. Amazon and companies like it will rule the marketplace. As a result, “brick-and-mortar” (those that rely on a physical location) businesses are dead.

But is that, in fact, true? Has ecommerce replaced traditional brick-and-mortar businesses or, has brick and mortar’s death been greatly exaggerated? The answer is … no one really seems to know. A cursory search of business headlines reveals a mixed bag. Fortune magazine proclaims that a “Record Amount of Brick and Mortar Stores Will Close in 2017.” Meanwhile, Forbes magazine has just reported “How Brick And Mortar Stores Are Making A Comeback With Millennials And Gen Zers.” Business Insider bleakly intones “The Crash of Brick-and-Mortar is Only Going to Get Worse,” yet earlier the same publication gives “The Simple Reason Brick and Mortar Stores Aren’t Dead.”

So, which is it? They can’t all be true. Should we be buying “Congratulations on Your Recovery” cards or “Condolences for Your Loss” ones? And should we buy the cards at a brick-and-mortar store or online? And if you’re a small business owner, where should you be investing your resources for future growth: in e-commerce or in a new physical location?

Lots of people have crystal balls, but not everyone is seeing the same thing when they peer into them.

For one thing, most of the talk about ecommerce vs. brick-and-mortar revolves around retail outlets and sales. If you’re not a trinket shop in a suburban mall, it may be tough to get relevant information on how this commercial tug-of-war affects you and your business. If you sell or service heavy equipment, you’re probably wondering how you’re going to even sell your products online. If you’re in the tech field, you’re no doubt scratching your head because you’ve been in ecommerce since the very beginning.

For small businesses on the fence about ecommerce versus brick-and-mortar, the first consideration should be your customers and how you can best meet their needs. No matter how they buy – whether at a physical store or via the Internet – there is one sure thing you can always count on: When they are ready to buy, they want to be able to find it and buy it fast. In the end, it’s their choice. Your job is to figure out how they want it and be able to deliver what they want using the channel they prefer. The only way to know that is to know your customers, their needs and how they want to interact with you.

Brick-and-mortar and e-commerce each offer advantages and disadvantages to both the seller and the buyer.

Brick and mortar’s advantages include a physical location where customers can see, touch and even try out your products before they buy. There’s also the sense of legitimacy that comes from having a physical location – people can see you and speak to you and subconsciously that builds a foundation of trust. On the other hand, that physical location also incurs higher startup and ongoing business costs. Operating a physical location also requires the owner put in a lot of long hours at that location, as the owner is frequently not only the ultimate decision-maker, but also the face of the business.

Online businesses likewise have their advantages and disadvantages, too. Unlike physical location, the owner of an ecommerce venture can work from home. As many of the tasks associated with an online company can be automated, an e-commerce entrepreneur doesn’t have to put in nearly the hours as the owner of a physical business. Doing business online also has much lower startup and ongoing costs. But there are drawbacks, as well. Just as having a physical location adds an air of legitimacy, the lack of one may lead some customers to wonder if you’re a fly-by-night business, here today and gone tomorrow. Many prospects may shy away, concerned if there is a human being they can talk to should they encounter problems after the purchase. Finally, an online business is tougher to find than a brick and mortar location. People can drive by a physical business or see a sign and be curious enough to want to learn more. Not so for online businesses. An online business requires much more marketing and promotion to stand out, gain visibility and attract customers.

So, back to the original question: Is brick-and-mortar dead? The answer is, it depends on what type of business you are in. If you sell sweaters or office supplies, the outlook for brick-and-mortar is not so promising. However, if you engage in providing niche business-to-business products and services, the answer is not quite so clear. Perhaps one way to look at it is, “if Amazon sells it, then you need an ecommerce platform.” (Learn more about how to set up an ecommerce business here, in our post from February 2018.)

However, many small businesses aren’t worried about whether brick-and-mortar is dead or if ecommerce is overrated. Why? Because they’ve embraced both. Omnichannel marketing incorporates both concepts and enables a company to offer its customers a choice on how to do business with them. Customers can make use of a traditional brick-and-mortar location to see a vendor’s products, ask questions one-on-one, and take home purchases immediately. Or, if they prefer, they can do all their interactions online. It’s a win-win for both parties.

Again, most of the stories and data concerning brick-and-mortar vs. ecommerce revolve around retailing and not small business in general. That makes it tough to issue predictions or give guidance about the non-retail segment. However, there is one very telling sign that shows brick and mortar has not seen its final days: Several famous online companies are now opening … wait for it … brick and mortar stores. So maybe we should hold up on its obituary. Clearly reports of brick-and-mortar’s death are not only exaggerated, they’re premature.

June 4, 2018
Made in America: Real Progress or Manufactured Hype?

Made in America: Real Progress or Manufactured Hype?

Made in America. At one time, those words stamped on a product meant you, the buyer, were getting a quality-made product manufactured by trained, well-paid American workers. However, in the last few decades, that phrase has not only vanished from a number of products, it’s also lost its luster as more and more Americans have chosen to purchase cheaper foreign goods.

Made in America has slowly been coming back into play in recent years. Wal-Mart famously uses the slogan in its advertising and in-store signage. President Donald Trump made it part of his 2016 campaign, promising to bring manufacturing jobs back from overseas (a process called “reshoring”). The White House held a Made in America event last summer. There’s even a nationwide organization with the stated purpose of getting more Americans to buy products made in the U.S.A.

As Dr. Phil might ask, “How’s that worked out?” Has Made in America manufactured a comeback, or is it just a lot of clever advertising and branding?

There is a market for made in America goods. According to a Consumer Reports survey, 8 out of 10 Americans say they prefer to buy American-made products instead of imported ones. The same survey indicates 60 percent say they’re willing to pay up to 10 percent more to buy an American product. Nevertheless, Consumer Reports reveals a lot of confusion in the public about what is really made in America and what isn’t.

For example, many American-based car manufacturers make their cars overseas, while many foreign car companies make cars for the American market here in the U.S. If you simply go by the nameplate and buy a car from an American company, you may really be buying a car put together overseas, And, vice-versa, if you purchase a car or truck with a foreign nameplate, you may be putting more Americans to work.

According to the Reshoring Initiative, government and private reshoring efforts brought 171,000 overseas manufacturing jobs back to the U.S. in 2017. That’s up 2,800 percent since 2010. The group also says those 171,000 jobs represent 90 percent of the total 189,000 manufacturing jobs added in the country last year. That’s in stark contrast to the early years of the 21st century, when American manufacturers were sending an estimated average of 240,000 jobs overseas between 2000 and 2003.

Domestic factories have gained – and kept – a solid momentum of job creation. American manufacturers added 24,000 new jobs in April 2018, 2,000 more than in March. These new jobs greatly aid the local and the national economy. Manufacturing employs nearly nine percent of all American workers, so when manufacturing is ailing, it has a large impact everywhere.

Several factors have stemmed the flow of manufacturing jobs overseas and have helped bring such jobs back to the U.S. One of the biggest is proximity to customers. Manufacturing close to a customer base helps lower shipping costs and can make a company more flexible in response to market trends. Branding and imaging are other key factors, enabling manufacturers to build good will and take advantage of patriotic sentiment.

It also draws a stark, positive comparison between a domestic company that manufacturers at home versus a competitor that makes its products overseas. Finally, government incentives and tax breaks have caused companies to rethink sending manufacturing jobs overseas and instead to focus on bringing them back or keeping them in the U.S.

So, regarding the question posed in the headline … Made in America: Real Progress or Manufactured Hype? Thus far the numbers point to solid progress, which means more jobs for U.S. workers, more choices for American consumers and a better image for domestic manufacturers.

May 14, 2018
Three Things That Can Hinder Business Growth

Selling to other businesses on credit terms?

Is this hurting your cash flow and hindering your company growth?

Achieving and maintaining an effective and flexible cash flow is essential to the success of your business – particularly if you sell on credit terms. But, all too often you can find yourself facing a long wait for payment – an unwelcome strain on your cash flow – while chasing payment, which wastes valuable time and resources that could be more profitably employed elsewhere.

Our invoice factoring services can help you fund, manage, and protect your invoices, unlocking the power of your accounts receivable and freeing up valuable time, resources, and cash.

Many companies have realized the benefits of factoring their invoices in order to establish a long-term positive cash flow solution for their business. Factoring is nothing more than selling the invoices at a discount to a third party (Charter Capital) in exchange for immediate payment. In return, companies can heal their cash flow pains almost overnight, enabling them to put more money back into their business, maintaining their operation and capital for growth.

Improving Business Growth Through Strategic Resource Management

In today’s competitive market, small business owners and entrepreneurs must navigate numerous challenges that can hinder business growth. It’s not just about managing cash flow or implementing the right business plan; it’s also about understanding every aspect of the business, from customer research to strategic planning. By focusing on efficient resource management, businesses can gain valuable insights into their target market, allowing them to make informed decisions that align with their business goals. Effective use of business resources, coupled with a keen eye on market trends and customer needs, enables small businesses to evolve their business models, ensuring sustainable growth. Strategic planning goes a long way in identifying potential competitors and clients, while also pinpointing the ideal customer profile. This approach not only maximizes profitability but also ensures that every entrepreneur is ready to take their business to the next stage of growth. Whether you’re just starting out or looking to expand, focusing on the right strategies, hiring the right people, and maintaining alignment with your company’s growth objectives are crucial steps toward building a successful business.

If you would like to know more about how our services could help your business, please contact us at1-877-960-1818

April 25, 2018
Small Business Street Smarts

Small businesses often fail to grow for lack of funds to cover short term working capital needs, not because business is bad! The biggest challenge faced by most small businesses is how to fund the growth that makes owning your own business a worthwhile endeavor. Once a business is up and running, cash flow issues, funding growth, dealing with the natural ebb and flow of the sales cycle, become the daily issues that can potentially undermine the financial future of the business. Traditionally, start-ups use a small business loan, as seed capital, which remains an ideal, low risk approach. Private investment is another common, but more costly, route for small business to take in business capital. Regardless of the merits to either source of funds, when does it make sense for small business to use alternative sources of funding, like Invoice Factoring?

There are many reasons why traditional bank financing may not be a good option for you. The loan application process can be long and cumbersome. The delay from the time of submission of the application to loan disbursement can be substantial as well, putting extra constraints on your ability to timely pay your operating costs. In some cases, you may not be creditworthy, or you may have used up your available credit limit, or you may have too much trade and other debt built up in your business.

In the case of private investment, capital cash injection is given in exchange for equity in the business. This type of investment can take various forms, but it will ultimately end in diminished equity in the company that you worked so hard to build. While more often used by large corporations, the costs associated with private investment are more seriously felt by small businesses, especially in situations where there is only one or very few owners involved. Private investment usually demands ownership rights which dilutes the value of ownership shares and usually creates a situation where the private investor has a preferred status relative to the original owner and priority in terms of getting repaid. Additionally, it usually results in a lack of control over the decision making processes relative to the demands of the investor and the capital invested. These hidden costs need serious consideration.

So, how do you finance an unexpected opportunity to double your sales? Given any opportunity to meaningfully increase your sales, how do you manage, especially when you know that your customers will expect customary payment terms? Making application for a new or expanded bank line of credit can result in long and protracted negotiations. If the banker decides your desire or ambition to grow is too aggressive or financially risky, then where do you turn? If you have no or limited availability to draw on a traditional line of credit, then you will most likely miss the opportunity to increase your sales. The time it would take to acquire capital from a private investor is certain to be even more protracted and costly. Well, this is a good example of when you should consider an alternative funding source like “Factoring”. Factoring is the financing industry term used to describe the sale of accounts receivable (open invoices) at a discount from their face value. It may not sound common, but over $1 trillion in sales is factored worldwide annually. In the United States, there are many independent finance companies that offer Factoring. Some banks even have Factoring divisions. In modern times, Factoring has become a champion of small business and an ideal alternative to a bank loan or private investor funds.

Factoring involves the sale of accounts receivable at a discount. Essentially, you sell your receivables (open invoices that are due to you from your customers) to a “Factor”, who discounts the value of them and pays you in advance of actually collecting payment on the receivables. The discount taken by the Factor generally ranges from 1%-3% for invoices collected in the normal course of business. Essentially, the Factor is providing you with funds, not on the basis of your creditworthiness, but on that that of your customers. So, even though your borrowing profile may not be ideal for a bank lender, as long as your customers are creditworthy, you can leverage that to establish a factoring line and obtain funds from a Factor.

For example, you may be a start-up, hotshot delivery service, but your customer could be Baker Hughes who may take 40 plus days to pay your invoices! You may not be a good prospect for a bank loan, but you may be an ideal prospect for factoring! AND, here’s the wonder of factoring, you do not take on the burden of bank debt, nor do you dilute your equity. Yes, you incur an expense in the form of a discount fee, but the expense does not come out of your pocket upfront and should be viewed as a cost of doing business. The simple truth is that factoring allows you to fulfill your main goal of getting financing in a timely manner and enables you to take advantage of a growth opportunity that you otherwise would lose. The same line of reasoning works for generating cash to support your ongoing business operations. Like most businesses, the majority of your cash is tied up in receivables (open invoices). Regardless of whether your need for funds is for payroll or inventory or other critical operating cost, factoring is an ideal way to get funds to cover it.

Establishing a factoring relationship with a Factor should be relatively simple. Remember, the Factor is mainly concerned about the credit worthiness of your customer accounts. So, in comparison to the underwriting process that a commercial bank is obligated to undertake when considering a loan, relatively little or no emphasis is placed by a Factor on approving you for a factoring line. Generally, you are required to authorize the Factor to take a priority security interest in your receivables. In considering factoring, if you have inadvertently pledged your receivables to a bank in connection with a loan for inventory or equipment, then all that would be required would be that the bank release its security interest in the receivables.

I think what you will find most surprising is that factoring is highly endorsed by financial professionals, including banks. Business clients have many needs, and good advice, be it from lawyers, accountants or bankers, should be enlightening. The disclaimer offered by most is that Factoring is more costly than traditional bank financing. This is true due to the effort expended by the Factor to ensure the receivables are collectable. Although, factoring may be more expensive, it is generally considered a short-term (6 months to 2 years) funding solution for small businesses. Factoring essentially enables a business to grow and buy time until it qualifies for traditional bank financing. Traditional bank financing and private investment are the irreplaceable cornerstones of corporate finance. The challenge is getting to the point where you can truly benefit from their value. Regardless of business size, from small to large, factoring should be considered as an alternative to private investor funds and traditional bank financing.

June 10, 2014
Survival Instincts: American Small Businesses Doing What It Takes

For all businesses, being resourceful is essential when costs rise. With the current economic conditions, many companies are finding creative ways to deal with rising costs. At the top of this list is the cost of energy and fuel. In an April survey, American Express found that 86 percent of small-business owners are feeling the effects of higher energy and gas costs.

Many business owners are using this lull in the economy to closely assess their costs and cash flow. In lean times, savvy business owners make management improvements that they have thought about for years. Discipline and resourcefulness established in difficult periods can help give business owners the tools they need to maintain their business over in the long term. Simple, but meaningful, strategies can make a big difference to the bottom line: Reviewing/revising budgets, and sticking to them; Outsourcing (payroll, accounting, HR, IT); Getting receivables in line (Charter Capital can help with that); Cutting postage and overnight fees by sending document via email; Buying used equipment for non-critical tasks.

Since approximately fifty percent of every dollar in the economy is generated by cash-starved small businesses, their effects can be felt throughout the economy. If they are unprepared and their operating expenses go up, they may not be able to pass along these costs quickly enough to keep their business cash flow positive. Without proper planning and some outside help, very few small businesses have large enough cash reserves to ride out a recession.

In an increasingly competitive global marketplace, small business owners shouldn’t take anything for granted. Entrepreneurs should always be looking at ways to stay lean and efficient. No matter the size of the company, it should be a part of the “corporate culture.”

September 4, 2008