Tag: Small Biz

Starting a business is not for the faint of heart. One in five fails within the first year and half close within five years, Investopedia reports. Less than one-third make it to ten years. While these statistics may seem grim, most of these closures can be directly attributed to just a few common startup mistakes. On this page, we’ll walk you through some entrepreneurial challenges you’ll likely face in the early years and how to avoid the business founding mistakes that trip most people up.

1. Having a Product or Service That Doesn’t Solve a Problem

You may see the value in what you’re offering, but do others? Often, people close to a business don’t realize there’s no market for their product or service. Think critically about what happens when you tell others unfamiliar with your company what you do.

• Do people seem confused by the concept?
• Do people stay mostly quiet or clam up beyond giving basic congratulatory messages?
• Do you spend a lot of time explaining what you do or how it works?

If so, there might not be a market for your product or service. Consider doing more market research to see if there is a way you can adjust your offering to fill an unmet need.

2. Following Bad Advice

Everyone will have advice on how you should run your company. However, most people will have no experience running a successful startup. Skip the advice from well-meaning friends and family.

It may be helpful to connect with other entrepreneurs but remember that they’re also experiencing a large learning curve. Even if someone has found something that works for them, that doesn’t mean their solution is viable in the long run or isn’t creating more problems they haven’t discovered yet. Take this advice with a grain of salt.

If you’re stuck, defer to an expert. That may mean bringing in finance pros, tax specialists, lawyers, consultants, and more. Also, keep a pulse on your customers. While they may not be able to help you run a profitable business, they are experts in knowing what they want and need.

3. Not Scheduling Downtime

The average CEO works close to 12 hours per day, according to Harvard Business Review. In the tech industry, CEOs clock 14-hour days, First Round reports. People can’t sustain this kind of momentum in the long run. It impacts stress and sleep, which often leads to needless mistakes and burnout.

You may be thinking that the extra hours are essential. You have work to get done. However, the hard truth is that you probably aren’t getting more done when you put in extra hours. Productivity declines sharply at the 50-hour mark. People who work 70 hours per week are no more productive than they would have been if they’d worked 55 hours, CNBC reports.

Schedule your days in a way that ensures you get time away to rest and rejuvenate. Your performance, and therefore likely business performance, will be better as a result.

4. Hiring Too Fast

First-time founders are usually eager to begin hiring. Bringing in extra bodies can help your business grow and allow you to delegate more tasks. However, when businesses hire too fast, they often wind up with people problems such as:

• Employees who aren’t a good fit for their role.
• A lack of culture fit.
• Slow or poor onboarding and training.
• More employees than needed.

Bring on newcomers strategically. Evaluate outsourcing specific tasks or processes before creating full-time roles. When you do hire, choose the roles you fill carefully and try to resist the urge to hire someone simply because they’ve worked at a startup before. Evaluate each candidate’s skills, knowledge, and culture fit before moving forward.

5. Not Defining Job Roles

You’ve probably seen job descriptions, or maybe even written ones, that ask for a “rockstar” or “Jack of all trades.” This tends to be code for: “I want someone who can do everything.” Unfortunately, nobody is good at everything, and those who try to do it all for you will wind up burning out.

Instead, create clearly defined job roles. This will make it easier to find the right person for each role, ensure their deliverables are understood, and help you measure their success in the role.

6. Overestimating Revenue

It isn’t easy to gauge how much money a business will make when it’s just getting started. While you can leverage market data and compare similar businesses, you’re still using figures generated by established companies to create your projections. Generating brand awareness and developing an audience takes a considerable amount of time. During this time, you’re also developing processes and building the infrastructure to do business, which may impact how much work you can take on and the resources you have to apply to growth initiatives.

Expect a very slow start and give your business time to ramp up. If you’re unsure what this looks like for your industry or business, connect with a consultant who does.

7. Forgetting to Build Scalability into Processes

Startups tend to develop processes as they go. For instance, you may be managing several departments as a founder. That means you’ve probably set up all emails and online lead generation forms to forward directly into your inbox. You process these things using your preferred methodology, and then they “evaporate.” There’s no trail to show what you’ve done. All information is stored in your head. Nobody but you knows what happened or what else the person might need. This is common with most business processes in a startup. It creates major headaches as the business grows and more team members are brought in.

As you develop your internal procedures, consider how things will need to be handled as you grow. Try to develop processes that will scale with you and get the systems in place early. That means you’ll probably need tools like customer relationship management (CRM) and accounting software. As an added benefit, you can use these tools to begin automating many of your processes now. It’ll save you time and allow you to focus on growing your business.

8. Underestimating Costs

Remember when you moved into your own home for the first time? There were so many things to buy. The costs, from linens to cleaning supplies and paying utilities, really added up. It’s the same way when you’re starting a business.

Make a detailed list of potential expenses and carefully check your estimated costs. It’s also helpful to leave yourself a cushion to ensure you have cash for unexpected expenses and build an emergency fund.

If you’re planning to bring on freelancers or independent contractors, make sure you understand how that affects your budget, too. While you won’t have to carry the expenses of traditional employees or directly pay a portion of their premiums, health insurance for independent contractors can be pricey, and contractors often charge higher rates to help offset those and other self-employment costs.

9. Not Managing Cash Flow Effectively

The top reason businesses fail is because their money ran out, Investopedia reports. Note that this is an entirely different problem than a lack of profitability. If you have expenses that need to be paid but won’t have the cash for another month when your clients pay their invoices, your business will be in trouble.

Perform cash flow projections and monitor your cash flow at least weekly. Maintain your cash cushion and set up a backup funding source like invoice factoring to ensure you can close cash flow gaps before they become a problem.

10. Growing Too Fast

Rapid growth is often viewed as a champagne problem, but it can be quite serious because you’re trying to cover today’s higher expenses with yesterday’s lower revenue. You may not have the infrastructure or resources to ramp up quickly either. This is when companies start having problems like coming up short at payroll, not having cash to procure supplies, and feeling tempted to hire without a strategy. Customer satisfaction often falters, too, which can damage your company’s reputation.

If cash flow issues are holding you back from taking on more work, your reserve and backup funding can allow you to push forward. If you’re missing the processes and infrastructure to level up, limiting the amount of work you accept may be better until you’re ready for it.

11. Failing to Pivot

You probably started your business with a vision and determination to make things work. Perseverance is crucial, but knowing when to let go of your plans and pivot is equally important.

Monitor the market and how people respond to your offerings, finances, and organizational processes. You will need to refine these strategies as your company grows. It’s not a failure to change things up. It’s resilience, and it can help ensure your business stands the test of time.

Navigating Startup Challenges: Essential Mistakes to Avoid

For every entrepreneur venturing into the world of startups, understanding and avoiding common startup mistakes is crucial for laying the foundation of a successful business. From the initial excitement of launching a new business or small business, many founders often overlook the significance of conducting thorough market research, creating a robust business plan, and developing a marketing strategy that resonates with prospective customers. One of the biggest mistakes startups make is failing to monitor cash flow and neglecting continuous feedback, which can lead to a lack of product-market fit and, ultimately, the startup’s failure Additionally, you need to make a business plan that addresses startup growth, customer experience, and the right team composition to ensure the success of your business. Learning from the mistakes and pivots of others, making any needed adjustments, and providing a thorough understanding of the market need are essential steps to avoid the common pitfalls that lead to the statistic that 9 out of 10 startups fail. By focusing on these key areas, new business owners can significantly reduce their chances of making common startup mistakes, thereby enhancing the likelihood of their startup’s growth and long-term viability.

Avoid Common Startup Mistakes with Invoice Factoring

Invoice factoring provides instant payment on your B2B invoices, so you can close cash flow gaps and have money as needed for crucial expenses like payroll or ramp-up. It also helps address other issues, such as the time you spend chasing invoices. Plus, it can be a very flexible funding solution when you partner with a factoring company like Charter Capital. Request a complimentary rate quote to get started.

Many people will say that the keys to business success include discipline and perseverance. While these are essential characteristics for business leaders, they’re traits that make the person more successful, not necessarily the business they serve. This page will focus on the trifecta for business: dependable operations, positive customer relations, and mindful financial management. You’ll learn why each matter and get strategies to shore things up in each area.

Key Strategies for Achieving Long-Term Business Success

Every successful business understands that the key to success in business lies in a multifaceted approach, blending organizational skills, excellent customer service, and an understanding of both risks and rewards. As a business owner, whether you’re nurturing a new business or striving to keep a running business thriving, it’s essential to grasp these crucial keys to succeed in business. An important key to success is keeping detailed records, allowing for a clear understanding of your business’s financial standing, which is critical to making informed decisions. Moreover, offering great customer service is not just an add-on but a cornerstone of a successful business, helping you achieve a competitive advantage and fostering business growth. Every business must also recognize the importance of the right people – those who share your vision and are dedicated to helping your business grow. These individuals are instrumental in creating a strong team that can respond to the various challenges facing businesses today. In addition, a successful business owner is always looking for ways to improve, whether by enhancing the customer experience, staying on top of organizational tasks, or offering high-quality products or services. Taking calculated risks and making some sacrifices are often part of the journey towards business success. For instance, embracing new technologies or innovative business strategies can be critical factors in helping your business grow and stay ahead in a competitive market. Moreover, understanding labor statistics, market research, and customer feedback provides valuable insights, helping you make strategic decisions that align with long-term goals and create a clear path for growth. It’s also crucial to prepare for potential challenges, whether from business activities or external factors, ensuring your business can survive and from business activities or external factors, ensuring your business can survive and sustain it successfully over time. Remember, the first five years can be the most challenging; however, with the right approach, you can create long-term success, making your company a beacon of success and a testament to the power of dedication and strategic planning.

1. Scalable and Dependable Operations

Developing scalable and dependable operations is one of the biggest keys to succeeding in business. This category includes all activities related to planning, organizing, coordinating, directing, and controlling all aspects of your business required to produce goods or services. While many businesses think of this in an administrative capacity, it spans across all departments, from procurement to manufacturing, marketing, and distribution. That means the related expenses are likely to comprise the bulk of your total expenses and will, therefore, considerably impact overall profitability.

Develop Processes to Enhance Operational Efficiency

Most businesses develop processes as they go to fill an immediate need. For instance, you might wonder if you have enough working capital to order more supplies and ask your administrative assistant to check your account. This task then becomes the administrative assistant’s duty, whether or not she has a firm grasp on cash flow, payables, or receivables, and you’re likely to stick with it until you face a disastrous outcome that necessitates change or your business expands enough to hire a bookkeeper.

Small businesses should reevaluate their processes regularly and identify what can be done better or more efficiently and if the current process will scale with the business as it grows.

For instance, at least 30 percent of activities in 60 percent of jobs can be automated, according to McKinsey. Keep a critical eye on these aspects as you review operational procedures to allow your staff to work more efficiently or produce more without becoming overburdened as your business grows.

Have Plans for Overcoming Operational Challenges

Similarly, businesses should have documented plans that cover what to do if specific challenges arise. If you don’t already have a business disaster plan or continuity plan covering supply chain disruption and natural disasters, get one in place now. This will ensure most adverse events don’t impact your operations and that your business recovers quicker when an impact is unavoidable.

Embrace Technology to Boost Operations

Nearly nine in ten small businesses report increased efficiency due to technology platforms, according to the U.S. Chamber of Commerce. Keep an open mind about adding new digital tools that may help your business work more efficiently, reduce errors, or produce better results, especially if they make it easier to scale as you grow. 

2. Positive Customer Relations

Developing and maintaining strong customer relations is crucial to growth and is one of the crucial keys to succeeding in business because you need to retain customers to increase your customer base, and happy customers can grow your business through referrals and reviews.

Address Customer Concerns Efficiently

Customer trust is built through repeated positive interactions: those you have directly with customers and those you see reported by other customers. However, resolving concerns isn’t enough. Customers expect fast resolutions. Maximum response times, per Zendesk, are:

• Email: 12 hours or less
• Social Media: 5 hours or less
• Live Chat: 1 minute or less

Collect and Act Upon Customer Feedback

Proactively collect customer feedback and act on it to ensure your customers feel heard and respected. Use the information you gain from customer reports to improve your offerings.

Foster Customer Loyalty

Loyal customers are more likely to refer others, spend more, and stay with your company longer. Addressing concerns and requesting feedback will help in this area. You can also boost loyalty through thorough onboarding, continuous nurturing, and dedicated loyalty programs.

3. Mindful Financial Management

While most businesses understand that effective financial management is a key to business success, many fail to implement strategies that contribute to this.

Predict Cash Flow with Accuracy

Know how to produce a cash flow forecast or procure software that will do it for you. Accurate forecasts will allow you to see when your business might face a cash flow shortfall so you can take corrective action before you run out of cash. It can also help you avoid taking on high-interest loans that might otherwise bury your business in debt.

Implement Financial Strategies to Boost Cash Flow

Cash flow is comprised of cash inflows, such as your customer invoices, and cash outflows, such as your vendor payments. You can accelerate and increase inflows or slow and decrease outflows to improve cash flow. It’s important to review all your related processes to ensure your business maximizes cash flow.

For instance, one method to boost cash flow is to speed up customer payments. You can do this by:

• Shortening the payment window
• Sending invoices as soon as goods or services are delivered
• Making it easy for customers to pay
• Sending reminders as the due date approaches and after
• Penalizing late payments
• Leveraging invoice factoring

Prepare for Potential Financial Hurdles

Maximizing your working capital and performing cash flow forecasts can help your business avoid everyday shortfalls, but sometimes unexpected events can derail your plans, too. For instance, equipment may break, or a customer might not pay as planned. It’s essential to prepare for these issues, too.

Your best defense is to have a business emergency fund ready. Most small businesses cannot afford to set one up all at once. If your business is in this situation, consider treating yours like a bill and set up recurring payments to help build your cushion a little at a time.

Having a backup funding source ready to go is also a good idea. This can ensure you’re not tempted to take out a loan with bad terms in the event of an emergency. Invoice factoring is often ideal in these cases because you can set up your account and not use it unless you need it. It’s also quite flexible. You’re in control of when you factor and which invoices you choose, so you can keep more money in your pocket and get the right level of funding for any given situation.

Bolster Your Business Growth with Factoring

Whether you need working capital to implement any of the ideas outlined here or you want to ensure you can accelerate inflows and have a backup source of funding whenever needed, we can help. To get started, request a complimentary Charter Capital factoring quote.

 “The most powerful ingredient in business is positive momentum. Get it and keep it.” Although this powerful quote can’t be attributed to any one person, the sentiment stands. Scaling up a business is challenging. Leveraging the momentum you’ve built makes it easier and opens new opportunities.

But, what does momentum in business look like, and how can you capitalize on momentum to amplify the results you’re getting? Give us a few minutes, and we’ll walk you through these concepts and provide some business growth strategies to get you started.

Recognizing the Right Time to Scale Your Business

• Proven Success: If your business consistently hits its targets and shows stable growth, it’s a sign you’re doing something right.
• Rising Demand: An unmistakable sign is when the demand for your product or service consistently exceeds your current capacity.
• Replicable Processes: When you can standardize and replicate business operations efficiently across different scenarios, you’re ready.
• Financial Health: Examine your balance sheet. If revenues are steadily increasing and you have a buffer to absorb potential scaling challenges, it might be time.
• Skilled Workforce: If you’ve got a team that’s efficient, adaptable, and can handle the challenges of expansion, you’re a step ahead.
• Feedback and Data: Your customers’ feedback and data analytics might be suggesting a shift. If there’s a consistent request for expansion or more offerings, heed the call.

Scaling is a big decision, but recognizing these signs can offer clarity on when it’s the right move.

1. Strengthen Your Core Business Procedures

It’s easy to have rose-colored glasses when scaling up a business, as if all your problems will evaporate with increased revenue. In reality, your problems will scale with you. Minimize the risk of this by getting the right processes and people in place now.

Remain True to Yourself and Your Mission

We know that authenticity is vital for businesses. Customers are willing to pay more for your products or services when they believe you’re authentic, as HBR reports. It’s essential in building trust and when attracting and retaining customers. It also makes a massive difference in how you and your team feel about the work that you do.

Businesses must make decisions at the speed of light when a high-growth period kicks in, and we don’t always see how we’re slipping away from our core values until we’ve ventured so far off our intended path that we can’t even tell how we arrived there. It may start as compromising on the quality of raw goods to ensure supplies arrive on time or to stretch a budget and ultimately result in a subpar product. Or, maybe it’s a shortcut in your customer service processes that diminishes the customer experience. Consider whether the new process or item aligns with your goals as you face these decisions. Don’t compromise if it doesn’t.

Focus on Building a Solid Team

Have a strategy in place for recruiting a solid team. Identify which roles you’ll need to fill and the criteria you’ll use to determine your readiness to hire beforehand. It may also be helpful to draft your job descriptions now while you have time, though expect to revamp them later as your needs for the role become clearer.

Invest in Your Employees

As you’re hiring, make sure you’re offering competitive wages and bringing employees into an environment where they can do their best work. Because effective team building has been shown to improve teamwork, morale, and more, planning your strategy for this and employee development in advance is a good idea.

2. Leverage Technology and Innovation

Leveraging technology and innovation in business is crucial to success. It can help stretch your dollars when scaling up a business and ensure your money is going where it will have the greatest impact.

Make the Most of Modern Tech Tools

There are a multitude of online tools that can streamline processes and save your business money. For instance, investing in a project management tool increases the odds of reaching your goals by 21 percent, according to the Project Management Institute. Bookkeeping and accounting tools can make managing your money easier and getting paid faster. You can even boost sales by 29 percent by implementing a customer relationship management (CRM) platform, per HubSpot data.

While there may be upfront costs as you invest in new tech, it usually saves you money in the end through increased efficiency and sales.

Consider Outsourcing Certain Tasks

Outsourcing benefits businesses in lots of ways. For instance, you may outsource your marketing to ensure an expert handles it and that you get maximum ROI. Or, you might outsource customer service to provide customers with a broader range of options and save money. These options also allow you to focus more on the daily aspects of running your business.

One area business owners often overlook when it comes to outsourcing is additional services provided by their current vendors and partners. For example, if you work with an invoice factoring company like Charter Capital, your payments are collected for you. You’ll also qualify for free client credit reports, so making informed decisions about how much credit you extend to your customers is easier.

3. Emphasize Customer Experience

Businesses that focus on customer experience (CX) achieve up to a 15 percent increase in revenue, according to Zippia. Their customers are willing to pay 16 percent more, too. Focusing on CX while your business is on the smaller side allows you to replicate great experiences as you grow, so your business scales faster and more solidly.

Create Comprehensive, Updated Customer Profiles

Earlier, we talked about investing in a CRM. This is where it really starts to pay off. A CRM that’s loaded with customer data will help you improve virtually all areas of your business. For instance, you can track their interest in products and services, market to specific groups, track and improve your sales cycle, and more.

Ensure a Stellar Customer Service Setup

Consider the whole customer journey as you set up your customer service processes.

• Onboarding and Training: Ensure customers understand how to use your products or services.
• Self-Service Tools: Provide customers with tools they can access 24/7 to learn more about your offerings or troubleshoot issues, such as video tutorials, user guides, and chatbots.
• Reactive Customer Service: Ensure customers can easily reach you through their preferred channel if they have an issue. Phone, email, social media, and live online chat may all deserve a place in your strategy.
• Proactive Customer Service: Request feedback from your clients and ask how their experience is going. This step is vital because not all dissatisfied customers will complain. Plus, it shows your clients you care, which improves the experience even more.

4. Understand Your Business Financials

Cash is tight when you’re scaling up a business. You have new and increased expenses that you must pay with the money you earned yesterday, when your revenue was lower. This is why cash flow issues, not a lack of profit, hurt most growing businesses. Address a few key areas to ensure you have enough cash on hand while you’re scaling.

Know What’s Driving Your Financial Decisions

You’ll need to do some soul-searching or work with an accountant to determine what’s driving your financial decisions and if you’re serving your company’s best interests. One common issue in growing businesses is the tendency to put off uncomfortable truths or difficult situations. For instance, you might know money is tight and have an idea that you may need to do something about it, but put it off until you can’t make payroll. This can be a slippery slope because businesses in this situation often have knee-jerk reactions and accept any funding they can get in time, even if it’s costly or damages the business in the long run.

Your financial behavior may be different. Nevertheless, it’s always a good idea to examine how you’re spending, managing, and obtaining funds to see if there are patterns you can improve.

Evaluate Your Trade Credit Terms

Businesses don’t always recognize that they’re extending credit when invoicing clients after goods or services are delivered. However, if you invoice, that’s precisely what you’re doing. Unfortunately, businesses sometimes take advantage of this system by paying late or not paying until right before the due date. A growing business cannot withstand this kind of strain for long. Reevaluate your payment terms to see if you can accelerate payments by shortening the payment window, adding late fees, or leveraging other tactics.

Explore Invoice Factoring as a Cash Flow Solution

If you can’t adjust your trade credit terms or doing so isn’t enough, invoice factoring may be your ideal cash flow solution. Instead of relying on your clients to pay faster, you’ll sell your invoices to a factoring company like Charter Capital at a discount. You’ll receive most of the invoice’s value upfront and can spend the cash in whatever way makes the most sense for your business. Then, you’ll receive the remaining value of the invoice, minus a small factoring fee, when your client pays their invoice.

This approach works particularly well for growing businesses because it’s not a loan. Therefore, you’re not subject to the same rigid qualifications. Most businesses are approved. It also doesn’t result in debt that your business must pay off like a loan does. Plus, you can set factoring up in advance and not use it until needed. It helps eliminate knee-jerk financial decisions because of this.

5. Enhance Your Marketing Efforts

It may seem odd to double down on marketing efforts when business is going strong, but this is the perfect time. You have something happening right now. Maybe demand increased, a competitor shut down, or some other condition changed that is accelerating your business growth. Most of these situations also mean that any marketing initiatives you kick off now will be more effective than usual and allow you to capture an even greater slice of the market.

Experiment More in Marketing and Advertising

Try funneling some of the additional revenue into marketing and advertising channels you haven’t tried yet or leveraging a new approach to channels you’ve had lackluster results with in the past.

Encourage Your Customers to Do Your Marketing

Word-of-mouth marketing is one of the most powerful forms of marketing. Your influx of business means you have a whole new group of people who can help spread the word. On a basic level, you can increase word-of-mouth marketing simply by asking customers to leave reviews for your business online. Then, build a formal referral program. These programs incentivize customers to refer their friends, family, and associates to your company. Some brands offer customers a discount or free item for each referral, while others pay cash rewards.

Collaborate with Another Brand for Mutual Benefits

A referral partner program works similarly to a customer referral program. In this case, however, it’s usually other businesses or professionals sending referrals rather than your clients. It’s a very effective way to get more leads or sales and can easily be launched at the same time you begin your referral program for customers. Formal factoring referral programs like those offered by Charter Capital support partner relationships that generate qualified leads while delivering real financial value.

The more you network with other brands, the more you’ll likely find co-marketing opportunities. For instance, you may be able to work with a brand that shares your audience on webinars, research publications, podcasts, or blogs.

Successfully Scale Your Business With the Help of Charter Capital

If you’re struggling to bridge cash flow gaps during rapid growth or want to kick off some of the initiatives covered here but lack the working capital, invoice factoring from Charter Capital can help. To learn more or get started, request a free rate quote.