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  • 5 Practical Reasons to Build a Small Business Emergency Fund

    5 Practical Reasons to Build a Small Business Emergency Fund

    Small Business Emergency Fund

    Don’t have a small business emergency fund or struggling to grow yours? Unfortunately, one in four small businesses has less than a 13-day cash reserve buffer per JP Morgan research, and many don’t have anything set aside at all. While the reasons for this are entirely understandable, a lack of cash reserves can make or break your business.

    On this page, we’ll explore why it’s important to have an emergency fund, how much extra cash a typical business needs to set aside, and practical tips for growing your company’s reserve fund, so it’s easier to get started.

    What is a Business Emergency Fund, and What is it for?

    Sometimes referred to as cash reserves, a business emergency fund is cash you’ve set aside for unexpected expenses or periods when your cash flow slows.

    It’s also different from your general business savings account. Whereas your savings account should be left untouched in emergencies and allowed to grow, your emergency fund can be dipped into as needed to ensure you can cover day-to-day business operating expenses.

    5 Reasons to Create a Business Emergency Fund

    The median small business has daily cash outflows of $374 and inflows of $381 on average, per JP Morgan research. According to their research, the typical company has $12,100 in reserves.

    If we crunch the numbers, we can see that $374 in outflows equals $11,220 per 30-day month, so a typical business can’t survive a month without its regular cash flow and won’t survive very long with diminished cash flow either.

    But, again, this is only a “typical” business. Those in labor-intensive or low-wage industries tend to have lower inflows and lower cash reserves than their counterparts. It’s harder for certain small businesses to build cash reserves and that much harder to bounce back from emergencies.

    This is no doubt why 82 percent of business failures are linked to cash flow issues, according to the National Federation of Independent Business (NFIB). Building a business emergency fund is essential to the longevity of your business, but it’s not just about whether your doors stay open. Your cash reserves influence lots of different areas that relate to the overall health of your business. Let’s take a quick look.

    1.  You Have Greater Peace of Mind

    More than a quarter of small business owners lose sleep over cash flow and about a third say they’re “drowning” in receipts, according to a Staples poll. Setting aside an emergency cash fund can provide peace of mind that, no matter what your business is up against, you’ll come out strong.

    2. Your Savings Remain Untouched

    Savings are intended for growth initiatives, such as purchasing real estate, buying equipment, or marketing and operations investments. When you draw from your business savings account or even your personal funds, because you’re facing a financial emergency or simply can’t cover daily business expenses, you’re basically stealing from your business’s future. Cash reserves keep your savings intact, so you can build a stronger company.

    3. You Have Access to Cash in Critical Times

    Throughout virtually the entire time Google Trends has tracked interest in specific terms, the phrase “I need emergency money” has received the same number of searches. In other words, people are always running short on cash regardless of what’s happening with the economy or impacting small businesses.

    Unfortunately, when people hit the point in which they’re looking for quick cash, they’re usually in a desperate situation. They need cash to cover payroll today, can’t afford to repair equipment that’s critical to business operations, or facing another challenge that may determine whether their doors stay open. With the strict approval requirements, the long application process, and the stretched payout timelines that are common with financial institutions that offer traditional loans, business owners who can’t afford to wait, seek alternative financing options. That also means the business owner is vulnerable to accepting terms that aren’t in the best interests of their business.

    When you have emergency reserves, you’re not only able to weather unforeseen events better but come out stronger than your counterparts because you don’t get caught in debt traps – the vicious cycle of making interest-only payments to keep accounts current but never reducing the balance.

    4. Your Cash Flow Issues Aren’t a Problem

    Most businesses have cash flow cycles that wax and wane. For example, you may peak during the holiday season and see reduced inflows during the spring. At least some of the extra income generated during the peak season should be held to see you through the slower months, or you’ll find yourself seeking necessary funding. Your cash reserves are great for this purpose.

    5. You Can Capitalize on Business Opportunities

    Sometimes, businesses get a small window in which making an investment will dramatically increase revenue. For example:

    • Volume discounts from vendors
    • Overstock discounts
    • Mergers and acquisitions
    • Growth initiatives

    You can easily make these types of investments when you have cash reserves, and your business will grow stronger as a result.

    How Much Should You Save in Your Emergency Fund?

    How much to set aside in your small business emergency fund will vary depending on your goals and situation. Generally speaking, you should try to set aside three to six months of your outflows.

    How to Build a Business Emergency Fund

    Setting aside three to six months of your cash outflows for a small business emergency fund may sound like a pipe dream, but it’s easier than you might think, and it doesn’t have to happen overnight.

    Determine the Amount You Need

    Start by calculating your big-picture goal or the total amount your business needs to set aside in cash reserves. Again, if you run a typical small business, that could be anywhere between $11,220 and $22,440 or three to six months of your outflows. This figure may seem daunting, but you’ll break it down into smaller goals in a later step. This is only to give you an end goal so you know where you’re going.

    Decide Where to Keep Your Emergency Reserve Fund

    Most small business owners (65 percent) report having a secret hiding place for their emergency money, according to the Staples poll. Nearly half wouldn’t disclose the location, while 19 percent say they stash their cash in a desk drawer, 13 percent keep it on them, and seven percent hide it in their car. None of these places is secure.

    Instead, it’s best practice to keep your cash reserves in a place like a:

    • High-Yield Savings Account
    • Money Market Account
    • Certificate of Deposit (CD)
    • Traditional Bank Account

    These all keep your cash secure and can help you grow your reserves at the same time. Just be aware that some options, like CDs, lock you in for a set period of time, and there may be penalties for early withdrawal.

    Set Monthly Savings Goals

    Setting monthly savings goals is what makes reaching your overall goal realistic. If your cash flow cycles are predictable, it’s relatively easy to identify what ten or 20 percent of your monthly profit looks like and select a figure that works for you. If your cash flow is irregular, you may need to set a variable goal that fluctuates with your anticipated profit.

    Start Depositing Funds into Your Cash Reserve

    Begin by choosing a deposit schedule and start paying your emergency fund just as you would any other payable that comes your way.

    Let’s say your emergency fund goal is $11,220. That’s three months of outflows for a typical small business. In this example, there’s only a $7 daily difference between your inflows and outflows, so you apply all of it toward your emergency fund. That means you’re stockpiling $210 per month or $105 per deposit if paying your emergency fund in two monthly installments.

    When you focus on this smaller goal – depositing $105 twice per month – it’s much easier to meet your goal than it is if you’re only focused on the big-picture goal.

    True, in this scenario, it will take just over 53 months (about 4.5 years) to reach your big-picture goal, and that’s only if you never draw from your reserves during this time. However, each step you take toward this goal is a win. Each dollar you have set aside is a dollar that can help you weather a small emergency or a dollar you won’t have to borrow if you hit a financial wall.

    It’s also important to remember that your business will be growing during this period as well, and with growth comes greater outflows. You’ll need to increase your big-picture goal and micro-goals over time because of this.

    Invoice Factoring Provides Quick Access to Cash

    Businesses may need quick access to funding for a variety of reasons. You can easily run short if you’re growing, hit a seasonal lull, are facing an emergency, or if your clients are paying slowly. If you don’t have your emergency fund set up or you don’t have enough in your cash reserves to cover it, you will need some form of business funding to get through the crunch.

    In these situations, invoice factoring is ideal because it turns your unpaid B2B invoices into cash. There’s no debt to pay back because your clients pay the balance when they pay their invoices, and it’s flexible. In addition, you’re in control of which invoices you factor and when to factor them.

    Supplement Your Business Emergency Fund with Factoring by Charter Capital

    With decades of experience, competitive rates, and flexible terms, Charter Capital can help your small business breeze through the issues associated with low cash reserves and grow stronger over time. To learn more about supplementing your small business emergency fund with factoring or to get started, request a complimentary rate quote.

  • Digital Transformation: Pros and Cons for Small Businesses

    Digital Transformation: Pros and Cons for Small Businesses

    digital transformation concept in business, disruption

    Most businesses born in the digital age are equipped with the tools required to operate seamlessly in a connected world by default. Those who have been around for any length of time, however, must be moving toward digital transformation to remain competitive and grow. We’ll cover what this means, along with some of the benefits and challenges, so your business can reap the benefits while avoiding the most common pitfalls.

    What is Digital Transformation?

    Digital transformation is the process of leveraging digital technologies across your business processes and customer experiences to meet new market requirements and changing business needs. Moving away from post-it notes for to-do lists to a proper project management tool is one example. Switching from spreadsheets to a CRM for customer and order management is another.

    9 Benefits of Digital Transformation for Small Businesses

    The benefits of digital transformation are innumerable for businesses. We’ll go over a few of the biggest below.

    1. Enhanced Data Collection  

    The average person spends nearly seven hours on screens each day per Comparitech. This gives businesses an incredible amount of data that can be leveraged to understand the needs of consumers better, improve offerings, and streamline funnels.

    2. Data-driven Customer Insights Allow a More Customer-Centric Business Strategy

    We often think of data in terms of marketing initiatives. For example, 67 percent of brands use their data to craft messages that resonate with their audience segments, according to Forbes research. However, this is only part of the picture. Imagine having data at every customer touchpoint. You can tailor the whole customer experience, not just the words you’re using in marketing.   

    3. Stronger Resource Management   

    The average enterprise-level company has 900 applications per MuleSoft research. When digital transformation becomes a priority, they’re able to cut back by 29 percent. That, in and of itself, frees resources to be used in more meaningful ways, but it’s only one example. You’ll see all sorts of savings sprinkled throughout this benefits section and ways resources can be reallocated for the betterment of companies.

    4. Customer Experience Improves

    A basketball team recently took up the digital transformation challenge by creating a new app for its fans, per EY reports. With the app, the team could track ticket sales and attendance as well as food and beverage sales. Naturally, this put them in a better position to price tickets and adjust pricing on-demand to find a perfect balance between revenue and filling to capacity. They also used the app’s insights to gauge friction points within their arena. For example, their data and AI now make it easier for fans to find the shortest lines for bathrooms, concessions, and parking. Similar approaches are seen in how AI is being used in customer service to reduce wait times, personalize support, and route inquiries more effectively.

    5. Collaboration Improves and a Digital Culture is Fostered

    Data silos, for example, create business challenges for 83 percent of businesses, according to the same study. Streamlining and merging data means teams can work more collaboratively with increased visibility and deeper understanding.

    6. Business Profits Increase

    One of the biggest reasons companies engage in a digital transformation is to boost profit. It can certainly have a huge impact, but the degree depends on the level of maturity seen in their initiatives. For example, companies with a lower digital transformation maturity level tend to have a net profit margin that’s 15 percent higher than their peers, per Deloitte research. It jumps to 43 percent with companies at a higher maturity level.

    7. Agility Improves

    Companies that embrace digital transformation have a wealth of data at their fingertips that makes it easier to identify new opportunities and understand where to draw resources from.

    8. Employee Productivity Increases

    Employee productivity jumps by 25 percent when companies go digital, according to McKinsey research. It’s easy to understand how that happens when people are moving away from silos and sheets of paper to centralized data, but even this can be taken a step further.

    The basketball team explored earlier, for example, added large screens for the sales team that measure daily, monthly, and quarterly goals. While a simple tweak leveraging their new data, the adjustment led to friendly competition in the sales department that grows sales even more.

    9. Businesses Gain a Competitive Advantage

    To be fair, only current data has value, so companies working with data that has a short shelf-life won’t see a large advantage from that. However, they can develop a competitive advantage by consistently delivering solid customer experiences as well as pivoting quickly to meet the changing needs of customers and business conditions.

    9 Challenges of Digital Transformation for Small Businesses

    Around 70 percent of digital transformation initiatives fail, according to McKinsey. Understanding why this happens is the key to avoiding these pitfalls as your business makes the transition.

    1. Agility

    Nearly 70 percent of business leaders say agility is one of their most important initiatives per CIO Insight, but it’s a bit of a double-edged sword. Moving to digital processes makes organizations more agile, yet it takes some agility to shift.

    2.  Understanding the Complex Software and Technology

    Again, the average enterprise-level business leverages 900 applications. Ideally, companies that modernize will do away with some applications as part of the transformation process, but not all do because finding options that work together rather than layering is hard. Roughly 40 percent invest in new technologies but don’t integrate them into their existing systems, according to Avanade research.

    3. Slow Adoption of New Tools & Processes

    People problems rank supreme when it comes to digital transformation challenges. For example, 46 percent of respondents to Avanade’s survey said finding and training people to lead their digital transformation was their biggest challenge. Similarly, McKinsey’s study found lack of employee engagement and inadequate management support to be two of the most common reasons why initiatives fail. Be sure to shore up your training and support prior to kicking off any initiatives.

    4. Continuous Evolution of Customer Needs

    Simply put, what customers wanted yesterday is not what they want today, nor is it what they’ll necessarily want tomorrow. For example, demographics that were not digital natives have historically eschewed digital channels. During the pandemic, even some of the most resistant groups learned how to use chatbots and place orders online. Now that they can use them, their preferences have shifted, and they want to be able to use them—especially if long waits for a live agent are the alternative. Keep a pulse on your customers, follow trends, and watch the data to see when you need to pivot.

    5. Lack of a Comprehensive Digital Transformation Strategy

    In all, 96 percent of businesses in Avanade’s poll say they have a digital transformation strategy, yet 43 percent report having transformation fatigue. This suggests that, although businesses may have some kind of a plan, it’s not detailed enough to streamline the transition. You’ll want to map yours out thoroughly to avoid this pitfall.

    6. Insufficient IT Resources, Skills, and Management

    As mentioned earlier, finding talent is a serious challenge for businesses. Over 38 percent say insufficient in-house skills are holding them back, per Avanade research. If you’re planning to go digital, keep this in mind while hiring and select those with more digital experience and/or a strong willingness to learn.

    7. Digital Security Concerns

    Security incidents are rising as more data is moved online. Risks like hacking, phishing, and ransomware are understandably worrisome, considering a single data breach now costs a typical company $4.24 million per IBM’s annual report. Thankfully, the right solutions include their own security and can be more secure than older and non-digital methods.

    8. Budget Constraints

    Although savings is a major motivator for businesses to begin the digital transformation, finding the cash to invest in technology and people can be a challenge. It’s important to remember that you don’t need to transition all at once and, sometimes, all it takes is a small investment in the right processes to get the ball rolling.

    9. Continuous Changes in Technology

    Technology changes in the blink of an eye. Just over a third of businesses are struggling to modernize legacy systems and processes, per Avanade research. Not only are companies wrestling with finding solutions that allow for data migration or interoperability, but they’re worried about future-proofing their new solutions, too. For this reason, it’s helpful to choose technology partners and solutions that have been in business for some time, as they’ll understand your needs better and are more likely to build systems in a way that extends their lifespan.

    Digital Business Models for Sustainable Growth

    Small businesses must embrace innovative digital business models to stay ahead. The adoption of such models not only facilitates a seamless digital transformation journey but also harnesses the full potential of digital tools and strategies. By strategically implementing digital solutions, businesses can redefine their core operations, driving substantial improvements in efficiency and customer satisfaction. The journey towards digital maturity involves more than just adopting new technologies; it requires a fundamental shift in business practices, enabling organizations to tap into new markets and create value in ways previously unimaginable. Through a great digital transformation program, small businesses can develop numerous advantages by making digital adoption central to their business development. This approach not only helps in streamlining business operations but also in aligning digital transformation goals with the overall business strategy, ensuring that the transition to digital is both purposeful and impactful. By focusing on the right digital tools and innovative digital marketing techniques, small businesses can achieve digital excellence, turning potential digital challenges into opportunities for growth and innovation.

    Streamline Your Digital Transformation with Invoice Factoring

    Invoice factoring provides instant payment on your B2B invoices, so you’re not stuck waiting 30 or more days for customers to pay and can invest in the tools, technology, and people necessary to streamline your digital transformation. Charter Capital also provides digital invoice processing to make invoicing and tracking a breeze. Request a rate quote to get started.

  • Top 4 Types of Inventory Financing for Small Businesses

    Top 4 Types of Inventory Financing for Small Businesses

    Inventory Financing Options for Small Businesses

    Inventory financing options are a hot topic as of late. The most common reason small businesses sought funding in the past year was to meet operating expenses, according to the Small Business Credit Survey. The bracket includes business loans for expenses such as inventory, rent, and wages. However, the same study notes that more than half of all businesses with a funding shortfall didn’t even bother to apply. Weak business financials were cited by 56 percent as the cause, while nearly one-third said lender requirements are too strict.

    The good news is that there are many types of inventory lending available, and not all have the same stringent requirements. Below, we’ll explore some of the most common options of inventory financing for startups and small businesses, as well as a couple that are often overlooked, so you can find the best inventory funding solution for your needs.

    Top 4 Inventory Financing Options for Small Businesses

    Short-term inventory loans, lines of credit, vendor financing, and invoice factoring may all be used to pay for inventory. Each has unique benefits and drawbacks to consider when choosing the right one for your needs.

    1. Short-Term Inventory Loan

    When most people think of inventory financing, it’s short-term loans that come to mind. In reality, there are two main types of inventory financing: short-term loans and lines of credit. We’ll cover short-term loans first.

    What is a Short-Term Inventory Loan and How Does it Work?

    By definition, short-term loans have small repayment windows, usually lasting from six months to a year. They’re offered by a variety of banks, credit unions, and online lenders. While you can get a short-term loan with more flexibility to use funds however you want, strong credit is typically required, and most businesses can’t fully fund their inventory needs this way. A short-term loan for inventory is different in that the inventory serves as collateral, so more businesses can qualify.

    In addition to having decent credit, businesses must supply the lender with traditional loan documentation, such as profit and loss statements, tax returns, and sales forecasts. Lenders often require an appraisal of the inventory and have reporting requirements that continue through the loan term. However, you may get around some of this by choosing a lender that specializes in your industry and understands the value of your inventory and sales cycles.

    Once approved, the funds may be disbursed in one lump sum directly to your vendor or you, depending on the loan’s terms. You should expect to put some money down. Around 20 percent is common. Minimums are also common with short-term inventory loans and can reach as high as $500,000 or more.

    Fees and interest are added to your balance on top of the principal, which you’ll pay back in installments. Some lenders and loans require daily or weekly payments rather than monthly. Although the ongoing payments can be a hassle, payments on your short-term loan are usually reported to major credit bureaus, so they can help build your credit too.

    Pros of Short-Term Inventory Loans

    • Can work for businesses with bad credit and startups.
    • Your inventory can serve as collateral.
    • Funds can be sent directly to your vendor.
    • Can help improve your credit.

    Cons of Short-Term Inventory Loans

    • Fixed fees and interest increase overall costs.
    • Rates can be unexpectedly high.
    • Down payments are commonly required.
    • Inventory may need to be appraised and you may need to report regularly.
    • You may need to pay daily or weekly.
    • Loan minimums are common and can be hundreds of thousands of dollars.

    2. Business Line of Credit

    The second primary type of inventory financing is a business line of credit. Just as we saw with the short-term loan, a business line of credit may come from a traditional bank, credit union, or online lender. Business lines of credit can provide general financing options or be inventory focused, too.

    What is a Business Line of Credit and How Does it Work?

    A business line of credit works like a credit card. Your lender approves you for a specific amount, which you can then draw upon as needed. As you pay the balance down, you can draw from the account again until you reach your maximum.

    Approval for lines of credit varies depending on whether you’re trying for an unsecured account or one that’s secured by collateral, which in this case is your inventory. Naturally, unsecured accounts require very strong credit and are usually only offered to established businesses that are both profitable and financially stable. There’s a bit more wiggle room when the credit line is secured by your inventory, but your business will still need good credit and will have to supply considerable documentation.

    Payment and fees work differently, though. You only withdraw what you need, and you’ll only pay interest on what you take. Sometimes lenders require more frequent payments with inventory-specific lines of credit, but monthly payments are normal. You can build your credit through paying on your line of credit too, but sometimes businesses find themselves only paying interest rather than paying on the principal, which leaves them stuck in a perpetual cycle of debt.

    Pros of a Business Line of Credit

    • Can be less expensive than short-term financing if paying interest only (no fixed fees).
    • Continuous access to cash as you pay down your balance.
    • Inventory can serve as collateral.
    • You only take what you need.
    • Can help improve your credit.

    Cons of a Business Line of Credit

    • Easy to get caught in a debt trap by only paying interest and not principal.
    • You may need to pay daily or weekly.
    • Harder to qualify for, especially if not using inventory as collateral.
    • Typically has lower limits than short-term loans.

    3. Vendor Financing

    Sometimes referred to as seller financing or trade credit, vendor financing may be a viable option if your vendors offer payment options. For this type of small business financing, you’ll work directly with the vendor rather than going through a third-party financial institution.

    What is Vendor Financing and How Does it Work?

    If your supplier invoices you after they’ve delivered your inventory, they’re technically already providing financing. However, sometimes vendors will work out special terms with their most valued and trusted clients. For example, they may provide you with a longer payment term. In these cases, you may be expected to pay for a portion of the inventory on delivery. The repayment schedule, and any interest or fees due, will vary based on your arrangement.

    Sometimes vendors are willing to work out other deals too. For example, some will barter and provide inventory in exchange for your finished goods. Others will provide inventory in exchange for a share of your company or profit-sharing.

    Pros of Vendor Financing

    • Often based on vendor relationships rather than credit.
    • Can work for startups and small businesses.
    • You can negotiate a deal that works for both of you.

    Cons of Vendor Financing

    • Financing is limited to the vendor you’ve negotiated a deal with.
    • Terms vary greatly and contracts can include unusual rules.
    • You must be a skilled negotiator and have a good relationship with the vendor to get a good deal.

    4. Invoice Factoring

    Invoice factoring is often overlooked as an inventory financing option, but it may be the most ideal choice if you run a B2B business and invoice your clients after goods or services are delivered.

    What is Invoice Factoring and How Does it Work?

    Invoice factoring, sometimes referred to as accounts receivable financing, unlocks the cash trapped in your unpaid B2B invoices. It works differently than short-term loans and lines of credit because it’s not a loan. Because invoice factoring does not work like a loan, it is one of the best small business funding options available. It’s a funding service offered by a factoring company, it has a quick and easy application process, and qualifying for it is largely based on the creditworthiness of your clients instead of your business or personal credit score. That’s because your clients ultimately settle the balance when they pay their invoices and there’s no debt for you to pay back.

    Factoring companies typically run credit checks on your clients and then let you know how much credit can be extended if you choose to factor their invoices. You choose which invoices to factor and when to factor them. You may even qualify for same-day funding. The factoring company then advances you most of the value of the invoice you’ve submitted. You can spend the cash on whatever you need, be it inventory, payroll, or anything else that will help your business. When the client pays, the factoring company sends you any remaining funds minus a nominal factoring fee.

    Pros of Invoice Factoring

    • You can spend your factoring cash on anything from inventory to growth initiatives.
    • You only pay for the invoices you factor.
    • Same-day funding is often an option.
    • Can work for small businesses, young companies, and even those with bad credit.
    • Excellent for growing companies – Obtain more flexibility and leverage than possible with a traditional line of credit.

    Cons of Invoice Factoring

    • Relies on the creditworthiness of your customers, which may be an issue if you’re serving customers with poor credit or startups.
    • Invoices must be to businesses – cannot be to consumers.

    What to Know Before You Apply for Inventory Financing

    Before you apply for inventory financing, evaluate which solution aligns with your business needs. Inventory financing can help cover seasonal demand, restock shelves, or support growth when cash is tight. You can use inventory financing to purchase new inventory or maintain inventory you have on hand.

    Start by reviewing how quickly your products sell and whether your inventory can be used as collateral to secure funding. Inventory financing typically works best when items can be sold easily. Overvalued or outdated stock may limit your options or increase costs.

    Organize your previous financial and inventory records. These will help lenders or a financing company assess your funding request. Depending on your needs, you may consider a loan or line of credit, purchase order financing, or an express business line of credit.

    Also, think about whether you need short-term funding or a longer-term option. Alternatives to inventory financing include invoice factoring, small business loans, or even equipment financing. Each option offers different terms and structures.

    Choosing the right inventory financing to purchase inventory or manage expenses starts with understanding your goals and funding limits.

    Which Inventory Financing Option is Best for Your Business?

    Vendor financing is often the best place to start because some vendors, especially if you have a good relationship, will provide longer repayment terms with no fees or interest. But, this can leave them with the upper hand because you then become dependent on the single vendor and whatever terms you set.

    Loans and lines of credit are better for strong, established businesses with little debt and good credit because rates tend to be lower, and these options will help build your credit score. However, few businesses meet the stringent requirements, and even fewer receive the level of funding they need.

    Invoice factoring is a great alternative if you don’t have strong credit, haven’t been in business long, and don’t want to be tied to a single vendor. It’s also more ideal if you need fast funding or prefer a flexible and on-demand solution.

    How to Use Inventory Financing Strategically for Growth

    Once you’ve secured the right inventory financing loan, the next step is to align its use with your broader business objectives. Rather than treating it as a short-term fix, consider how this type of financing can support expansion, improve operations, and drive profitability.

    A revolving line of credit or term loan can be timed around seasonal sales cycles, allowing you to stock up on inventory ahead of peak periods without straining your cash reserves. If your inventory turnover is high, financing enables you to replenish stock consistently and avoid lost revenue due to shortages.

    Some inventory financing lenders also base approvals on inventory value or inventory as collateral, which means your inventory management system and inventory records become strategic assets. With clear insight into your business inventory, you can make timely purchasing decisions and secure volume discounts to improve margins.

    Used wisely, inventory financing allows a small business owner to pursue growth initiatives such as new product launches, regional expansion, or simply maintaining momentum during cash flow gaps—all without compromising day-to-day operations.

    Get a Complimentary Factoring Quote from Charter Capital

    Charter Capital goes above and beyond traditional factoring benefits by eliminating long-term contracts, providing free collections services, offering competitive rates, and more. If you’d like to take the next step or have questions, get a complimentary quote from Charter Capital.

  • How to Keep Your Employees Engaged and Boost the Remote Work Experience

    How to Keep Your Employees Engaged and Boost the Remote Work Experience

    Group of Busy People Working in an Office

    Hybrid and remote work are here to stay. Although there’s been a significant drop in total remote workers since the peak of the pandemic, more than a quarter of full-time employees are completely remote, and a whopping 92 percent work remotely at least one day a week, according to Zippia research.

    This is great news for many reasons. People who work remotely at least some of the time are generally happier and more productive, while companies that allow remote work tend to have lower turnover per SmallBizGenius.

    However, with each person off in their own corner of the world, employees can easily become disconnected or cut off from the team. Today, only 36 percent of employees report feeling engaged in their work and workplace, according to Gallup polls.

    Why it’s Important to Keep Remote Employees Engaged

    Most definitions of employee engagement mention things like a connection to the workplace, psychological investment, enthusiasm, and willingness to contribute to the company’s success.

    It makes sense, then, that engaged employees are 4.7 times more likely to do something good for the company even if it’s not expected of them and 3.5 times more likely to stay late at work when something needs to be done, according to a Temkin Group study.

    Furthermore, businesses with highly engaged employees have 41 percent less absenteeism and 17 percent greater productivity per Gallup. They deliver significantly better customer experiences than their competitors too, the Temkin study notes.

    These factors have a major impact on the bottom line. Revenue growth is 2.5 times higher when employees are highly engaged too, according to Bain & Company. Profitability is 21 percent higher as well, Gallup research shows.

    Statistics abound. Keeping your employees engaged is good for business.

    8 Ways to Boost Employee Engagement and Improve the Remote Work Experience

    Despite the benefits of remote work, it presents challenges for employee engagement. There are no impromptu meetings at the water cooler or lunches together in the breakroom. You can’t just pass by someone’s desk and tell by the look on their face that they’re having a rough go of things and need a one-on-one. Even still, there are many things you can do to boost engagement in a remote work environment.

    1. Equip Your Employees with the Proper Tools at Home

    If your team is struggling with equipment or establishing a proper work setup at home, their productivity and morale are going to tank. You may even be required to procure equipment or reimburse for work-related expenses depending on local legislation. A few things employers routinely address include:

    • Computer and monitor
    • Software
    • Tech support
    • Printer
    • Scanner
    • Cell phone
    • Headset
    • Internet connection

    2. Invest in Development

    Researchers recently polled more than 18,000 employees to find out what drives both employee engagement and employee disengagement. Interestingly, the top ten factors in disengagement repeatedly reference the word “manager.” This is not mirrored on the list of top engagement factors. In other words, management alone can break an experience, but it’s not enough on its own to make one.

    One of the biggest killers of engagement was not feeling valued by one’s manager, according to the Custom Insight survey. While there are certainly many factors that go into feeling valued, such as treating employees with respect and remembering to celebrate wins, investing in your team is huge. When you provide your team, not just with a strong onboarding but ongoing development, you’re telling them that you believe in them and want to keep them around.

    3. Ask for Employee Feedback

    Asking for employee feedback falls squarely in the “feeling valued” box mentioned above. Most companies perform annual surveys or request feedback during employee reviews, but you may want to do it more frequently when your team is remote because contact tends to be reduced.

    Experiment with a mix of options. For example, you may want to give employees the option to reply anonymously to some surveys or address specific initiatives and projects in different surveys. You can also ask for direct feedback during one-on-ones.

    4. Listen to Your Workforce

    Asking for feedback means nothing if it isn’t paired with action. If your employees pinpoint issues in their surveys or report concerns to you directly, be prepared to follow up on them. You may also want to institute a virtual open-door policy, so the team knows that they can come to you about their concerns without fear of repercussions.

    5. Utilize Employee Journey Mapping

    Have you ever heard the parable about the blind men and the elephant? It goes something like this: Three blind men come across an elephant for the first time and reach out to touch it. The first grabs the tail and describes the elephant as being snake-like. The second touches the ear and says it’s like a fan. The third grabs a leg and says it’s more like a tree. None of them is wrong. It’s all about perspective. Your employee experience is the same way.

    A newly onboarded employee may feel competent and empowered, while someone who’s been with the company a few years might feel neglected and ignored. Employee surveys don’t account for these differences. They tend to lump everyone together even though they’re at a different stage with the company and therefore are experiencing the organization differently.

    Employee journey mapping addresses this and can show you where your organization is lacking, so you can shore up weak areas in the employee experience and meet the needs of your team better.

    6. Improve Internal Communication

    Employee communication is about more than endless meetings and email chains. Make sure your team is set up with the right communication tools, including an instant messaging platform and project management tools. You may also want to look into creating an internal company newsletter. These things help the team come together over common goals and provide more avenues for solidifying company culture.

    7. Foster Social Interactions

    Positive social interactions boost morale and bring the team together. A few virtual activities to consider include:

    • Charity events and fundraising
    • Virtual office parties, watercooler chats, and coffee breaks
    • Formal peer-to-peer recognition programs
    • Dedicated time during meetings to share positive personal news
    • Non-work channels on company chat applications
    • Employee Resource Groups (ERGs)
    • Peer buddy groups and mentorships

    8. Invest in Employee Wellness

    Now more than ever, employers are acutely aware that employees need mental and emotional wellness programs in addition to physical health benefits that are traditionally offered. If you offer your team health insurance, your insurance provider may already offer things like access to health and fitness programs, counseling, or virtual healthcare. In these cases, you can simply promote the programs already available to your team rather than paying for additional options.

    If these perks aren’t already available, find out if there are ways to offer them at little or no cost to your team. You can also adopt new company policies related to sick time, vacation, and leave to ensure employees can see to their personal needs and feel more focused at work. 

    Invest in Your Employee Experience with Help from Invoice Factoring

    Some initiatives to improve your employee experience don’t cost anything to implement. However, if cash flow issues or slow-paying clients are preventing you from moving forward with larger initiatives, invoice factoring can provide you with the cash to kick them off. Unlike loans, which are paid back with interest over a period of time, factoring is similar to getting a cash advance on your unpaid B2B invoices. Your clients pay off the balance when they pay their invoices. To learn more or get started, request a complimentary rate quote from Charter Capital.

  • 7 Tips for Buying Out a Business Partner or Majority Owner

    7 Tips for Buying Out a Business Partner or Majority Owner

    Buying Out a Business Partner or Majority Owner

    Wondering how to buy out a business partner? You’re not alone. Just under 12 percent of small employer firms are legally classified as partnerships according to the U.S. Small Business Administration (SBA), which means around 74,000 are formed every year. About half will break up within four years per Antonoplos & Associates.

    As you navigate this uncertain terrain, you’re probably wondering:

    • Can I buy out my business partner?
    • Can my business partner push me out?
    • What is the best way to buy out a business partner?
    • What are the alternatives to partner buyouts?

    The short answers to the first two questions are “yes” and “sort of,” but the reality is that breaking up is complicated. It’s not unlike the dissolution of a marriage. There are certainly wrong ways to do it, but there are lots of right ways to do it too. It’s up to you to find a way that works for you, your partner, and the company. These tips will help you determine how to buy out a business partner in a way that helps you all find the best path forward.

    1. Keep the Process Positive and Friendly Throughout

    First and foremost, keep things friendly and civil. Remember why you initially chose your business partner and consider that you’ve both likely poured blood, sweat, and tears into the company. Maybe your partner has let you down in a big way, or you no longer see eye-to-eye on crucial business matters. When you’re ready to break up, that no longer matters. What does matter is ending things amicably with as little collateral damage as possible. You must try to keep things friendly and eliminate emotion from the process as much as possible to make that happen.

    2. Communicate Your Expectations from the Beginning

    Before you approach your soon-to-be-ex, ask yourself the following questions:

    • Why do I want to buy out my partner?
    • Am I ok with my partner maintaining some involvement with the company?
    • What do I hope to get out of the buyout?
    • Of all my buyout goals, what matters most?

    The answers you give will make it easier to negotiate the termination of your partnership and communicate your wishes and negotiate a solution that works for everyone involved.

    For example, maybe your business partner is a close friend who recently became ill and is no longer carrying their weight, but you still want to ensure they’re taken care of and that hurt feelings are minimized during the breakup. You might be ok with this person staying somewhat involved with the company. Conversely, if your business partner was never a close friend and recently made a series of rash decisions that hurt the company or damaged the business’s reputation, you probably want them out as quickly and silently as possible. 

    When you have a firm grasp of why you want to end the partnership and what you hope to achieve, communicate your expectations to your partner.

    3. Review Your Operating Agreement and Relevant Documents for Buyouts

    Ideally, you will have created a buy-sell agreement with your partner already. This document, typically signed when a partnership is formed, outlines all terms and conditions associated with buying out a partner. It usually covers situations like incapacitation, retirement, and voluntary exit. Sometimes buy-sell agreements cover extenuating circumstances as well.

    You can use this and similar documents to guide you now. Even if you disagree, or your partner isn’t ready to let go yet, valuation clauses, payment guidelines, and other decisions you once agreed upon can pave the way for smooth negotiations today.

    4. Determine the Value of the Business and Your Partner’s Equity Stake

    There are many approaches to business valuations, including:

    • Adjusted Net Asset Method
    • Capitalization of Cash Flow Method
    • Discounted Cash Flow Method
    • Market-Based Valuation Method
    • Seller’s Discretionary Earnings Method

    If you chose a valuation method as part of a buy-sell agreement created when the partnership was formed, you might be able to avoid conflict by using that method now. If there’s disagreement about the value of the company, consider bringing in a business valuation expert or having both of you create an estimate and use the average to determine a fair value.

    5. Hire an Experienced Mergers & Acquisitions Lawyer

    There are two main ways business partnerships end: dissolution and disassociation.

    • Dissolution: When a partnership ends via dissolution, the business is required to wind up its business activities. Debts are paid off, assets are split, and the business usually shuts down.
    • Disassociation: When a partnership ends via disassociation, it means one partner is withdrawing from the partnership. The “partnership” or remaining partner must buy out the dissociating partner’s interest in the company.

    Laws Are State-Specific

    If your goal is to buy out your partner, it will generally be a disassociation. This is likely the case even if the partner leaving is in breach of your partnership agreement or has behaved unlawfully. Sometimes dissolution is necessary, though. This is often the case if courts must get involved. For example, if partners cannot agree on a buyout plan or if the company is in financial trouble and creditors get involved.

    With that said, there are no steadfast rules. The laws related to ending a business partnership will vary by state, the type of partnership, any contracts or business agreements you have, and how the partnership is ending. It’s important to work with an experienced mergers and acquisitions lawyer even if you and your partner agree on how to end the relationship because of this.

    A seasoned attorney will ensure all documents are filed, that the departing partner is released from any liability and that the remaining partner holds all interest to which he is entitled.

    6. Consider All Your Financing Options

    Before you start drawing up contracts, you’ll need to know how you plan to purchase your partner’s share of the company. You’ll likely be choosing between one of the methods outlined below if you don’t have personal funds to cover the transaction.

    Loans

    In theory, bank loans are a good way to finance a partnership buyout, particularly if you require a large lump sum. However, banks usually expect businesses to turn the cash they loan out into something that will help grow the company. Buyouts don’t boost the bottom line, so it can be difficult to obtain loans.

    Installments and Interest

    It’s common for departing partners to receive payments in installments. Expect to pay interest if you go this route.

    New Partner/ Outside Investor

    If you’re ok with another party having some control over the company, you can bring on a new partner or outside investor as well.

    Alternative Funding

    Most alternative funding solutions are gap-fillers rather than total financing for the business buyout. For example, you can work with an invoice factoring company to accelerate payment on your B2B invoices. This may get you some or all the cash you need for your buyout or at least enough for an initial payment. You can use factoring to keep up with your installments during slow periods as well.

    7. Negotiate the Terms of the Deal and Make Sure You Have All the Necessary Paperwork

    The final step is to work out all the terms of your buyout deal. It should include details such as the partner’s equity stake, how payment will be made, and the exit timeline. Your attorney should be the one to draw up the contract, as they’ll address things you might overlook, such as non-compete agreements and whether the company needs to be legally restructured.

    Alternatives to Partner Buyouts

    You still have some options if you can’t agree to buyout terms.

    • Change the weighting. Let’s say you’re 50/50 partners in every possible way now. You’re both equally liable, split profits evenly, and share decision-making power. You can reduce this to a 25/75 split, move one partner into a silent partner role, or divide things up in whatever way makes the most sense for you.
    • Walk. Partners generally have the legal right to file disassociation paperwork at any time. That means you’ll leave the company, and your partner will have to buy you out.
    • Dissolve the partnership. This may only be an option if it was included in your partnership agreement or if a court determines it’s the only path forward.

    Boost Working Capital with Invoice Factoring

    Whether you need a cash injection to help cover your buyout or want to start moving on it but need funds for attorneys and accountants, invoice factoring can help. Request a complimentary Charter Capital rate quote to get started.

  • Slow-Paying Clients: 5 Strategies for Dealing with a Difficult Accounts Payable Department

    Slow-Paying Clients: 5 Strategies for Dealing with a Difficult Accounts Payable Department

    Dealing with a Difficult Accounts Payable

    Slow-paying clients have always been a concern for small businesses, but the pandemic brought concerns to a whole new level. While most small businesses have net 30 payment terms, around a quarter are now waiting 20-30 days past the due date for payment, according to a recent YouGov survey. Moreover, nearly one-third believe delinquent payments are putting their business at risk of closure.

    If your business is dealing with a difficult accounts payable department or struggling with slow-paying clients overall, these five strategies will help.

    1. Have Customer Credit Policies

    Each time you allow a customer to pay after goods or services are delivered, you’re extending them credit. Unfortunately, many businesses don’t look at it this way and extend everyone the same level of credit or don’t have policies in place to determine who qualifies for which terms. Begin by creating an established policy that includes the items outlined below.

    Who Sets the Policies

    One person on your team should be responsible for setting credit policies and maintaining written documentation. Ideally, this person will work with the team to ensure all bases are covered.

    How Pricing Overrides Are Handled

    Sales teams are often allowed some wiggle room with pricing. However, it can cause billing confusion if there are no written guidelines on who can override your regular prices, to what degree they may override them, and how overrides are documented.

    How the Extension of Credit is Handled

    Your policy should include who on your team determines the creditworthiness of each client, including how much credit each client qualifies for and how long they can wait to pay.

    The Full Approval and Denial Process

    You must have a standardized way of assessing credit risk, as all accounts should be handled the same way to avoid legal concerns and minimize the risk of bad debts.

    Policy Review Plans

    Documentation should include when the policies will be reviewed and who is responsible for evaluating and revamping as needed.

    Training

    Everyone on your team will need training on your policies to ensure they’re applied in a uniform way. Map out your training process and keep a written log of training dates.

    2. Ensure Customer Data is Complete and Accurate

    Incorrect information can result in billing and payment delays, so customer data should be confirmed with each order. Your CRM or order management software should also include the terms for each customer, including the total allowable balance they’re allowed to reach and any relevant payment terms.

    3. Implement an End-to-End Electronic Invoice and Billing System

    Going digital is essential in the modern age. For customers, this means having access to an online portal where they can view and pay their invoices when it’s convenient for them—without having to speak to an agent. They’ll appreciate it and likely pay faster.

    For the business, using an electronic system is priceless. You can automate repetitive tasks, eliminate manual entry and the errors that come with it, and free your team from having to manually process each payment.

    It’s also a good idea to reevaluate your invoicing process. Many companies only send batch statements at the start or end of the month. If you switch to sending an invoice immediately after goods or services are delivered, cash flow naturally improves. 

    4. Create an Airtight Collections Process

    Once you’re set up with a digital billing and invoice system, collections become much easier too. For example, you can automate reminders to pay, so it’s easy to let clients know when their due dates are approaching and when they’ve missed a deadline.

    Just as you’ve set up processes for determining credit and billing, you’ll want to set up collections processes too. These should include the items outlined below.

    Billing Intervals

    Consider the full timeline, including initial invoices, notices to indicate payment is due soon, and overdue notices.

    Payment Plan Requests

    Sometimes even customers who traditionally pay on time will request a payment plan. Having a written policy is good for customer relationships and can help ensure you get some of the cash trickling in. These types of arrangements are typically best handled by an accounting department, as an accountant will be in a better position to map out a plan that benefits your company without letting emotion creep in.

    Interest Accrued for Delinquent Accounts

    It’s common for a late-paying customer to pay interest or fees on overdue invoices. Identify what your charge will be and ensure it’s properly documented and shared with customers. The latter will increase the likelihood of timely payments and cover your expenses for overdue ones.

    Discounts for Early Payments

    Businesses can often speed up payments by offering a small discount for early payments or pre-payments.

    It’s worth noting that more than half of all small businesses believe their delayed payments are deliberate, per the YouGov survey. Using a mix of late penalties and early payment discounts discourages this practice.

    When to Work with Debt Collectors

    Determine in advance when it’s appropriate to hire a collection agency. Many work on a contingency basis, meaning they don’t get paid unless they collect from the customer. However, some have fees that can exceed the balance if it’s small, so you’ll need to identify the right criteria for your company and current setup.

    When to Leverage Invoice Factoring

    You may also want to incorporate invoice factoring into your collections process. Using this method, your invoice factoring company advances you most of the value of an invoice right away and then waits for payment from the customer. You’re able to use the cash in whatever way benefits your business most and the client can benefit from more relaxed terms. Working with a full-service factoring company like Charter Capital can help bridge some of the gaps in your technology and processes too, as you can benefit from free client credit reports and receive free collections services. That way, you can make more informed decisions about extending credit and are freed from chasing payments too.

    5. Have Effective Tracking and Reporting Systems in Place

    Having the right data makes it easy to see if your current processes are working for you and where issues are occurring. A few KPIs to track include:

    • Average Days Delinquent (ADD)
    • Days Sales Outstanding (DSO)
    • Percentage of Current A/R

    It’s also a good idea to track the habits of individual clients and set a threshold for the total number of allowable late payments. Because late payments cost your business money, there may be a time at which it simply doesn’t make sense to continue the relationship.

    Reduce the Strain of Slow-Paying Clients with Help from Charter Capital

    Charter Capital can provide you with same-day cash for your unpaid B2B invoices. We also offer perks like free customer credit checks and will follow up on invoices for you, plus have a digital invoicing system that makes processing a breeze. Best of all, most businesses qualify. Request a complimentary rate quote to learn more or get started.

  • 4 Effective Goal Setting Tips for Small Businesses

    4 Effective Goal Setting Tips for Small Businesses

    Effective Goal Setting

    Setting small business goals is one of the best things you can do to improve the strength of your company and overall odds of success but creating goals in a way that gets results isn’t always easy. We’ll walk you through the basics and cover various goal-setting strategies on this page, so you can start creating effective goals on your own right away.

    Benefits of Setting Goals

    Fewer than 20 percent of people say they write down their goals in vivid detail, yet this simple step makes a person 1.2 to 1.4 times more likely to reach their goals, according to research presented in Forbes. Experts say there’s a neurological reason for this.

    Writing things down increases the likelihood that the information will be logged in long-term memory. By encoding it this way, we’re more likely to remember and act on the information. Keeping the visual representation of your goals where you see them daily helps too.

    When you have small business goals, you also have:

    • A greater sense of direction.
    • Clearer focus on what’s important to your small business.
    • Greater clarity in your decision-making process.
    • More control over your future.
    • Increased purpose and motivation to reach your goals.
    • Greater personal satisfaction.

    4 Effective Goal Setting Tips for Small Businesses

    Once you’re ready to set small business goals, these four tips will simplify the process and increase the likelihood of meeting them.

    1. Remember There Are Many Types of Goals

    It’s helpful to think of your business objectives in a broad sense before deciding what goals to set. There are three main types: outcome, performance, and process. Work with all three to achieve your overall goals or big-picture goals.

    Outcome-Related Goals

    Most people think of outcome-related goals at first. These relate to the end of an event or the “win.” It’s usually easy to create outcome goals and identify when they’re met, but factors that lead to success with outcome goals aren’t always in your power. For example, a small business owner might set a goal of opening a second location but stall out in the purchase or financing process.

    Performance-Related Goals

    It’s a little easier to find success with performance goals because most of the factors involved are within your control. For example, maybe you want to increase sales by 20 percent this quarter. You can increase marketing and advertising, launch a new product, expand your business, or do other things to help ensure you reach your goal.

    Process-Related Goals

    Process goals relate to addressing strategy, workflow, and other areas that can help you reach your desired outcome. For example, maybe you want your sales team to close more deals. Rather than focusing on the number of deals to close, you might give them process-related goals that will set them up for success, such as contacting five additional leads per day.

    2. Consider the 4 Cs of Setting Goals

    Another thing to consider before starting to set goals are the Cs. Sometimes referred to as the three Cs or four Cs of goal setting, and used interchangeably, the items covered below can help you frame out goals in a way that leads to greater success.

    Complexity

    The number of contributing factors involved in reaching a goal impacts your success. Limit the number of working parts to increase your odds.

    Challenge

    Set small business goals that are a bit of a reach. If you set goals that are too easy, they won’t have the same impact, motivate you as much, or get you excited. It’s easy to become discouraged if you choose goals that are too hard to reach too.

    Clarity

    It’s also easy to become derailed if the goal or steps required to reach it are ambiguous. Make sure everything you envision and write down can create a clear path for someone else, even if you don’t plan to share it with anyone.

    Commitment / Closure/ Completion

    Create a full roadmap for your goal with regular check-ins to keep yourself committed, and what it will take to meet your goal. You may also want to consider what steps you’ll take if you meet roadblocks along the way and when to reevaluate your goal.

    3. Conduct a SWOT Analysis

    Short for Strengths, Weaknesses, Opportunities, and Threats, a SWOT analysis helps ensure the goals you set are more strategic in nature. That way, you’re not only more likely to be successful but will conserve resources as you move forward, too.

    It’s helpful to include others in your SWOT analysis as each person will have a unique perspective and may uncover things you don’t think of alone. Consider enlisting your business partner(s), key employees, mentor, consultant, or close friends and family members.

    Doing a SWOT analysis is simple. Just draw a two-by-two grid on a sheet of paper and add a SWOT category to each quadrant. Then, list out items that fit within each category.

    Strengths

    Create a list of your business’s strengths. These can include things your company does well, resources you possess, tangible assets, or qualities that set you apart from competitors. For example:

    • Better pricing.
    • More features.
    • Bigger network.
    • Larger team.
    • Loyal customers.

    Weaknesses

    Create a list of things that make it difficult for your small business to be competitive. This may include resources you don’t have or things your company lacks. For example:

    • Lack of capital.
    • Low brand awareness.
    • Inadequate supply chain.

    Opportunities

    The opportunities section should include external things your business can take advantage of to gain a competitive advantage. For example:

    • An emerging need for your products or services.
    • Lack of competition.
    • Underserved markets.

    Threats

    List things that have the potential to harm your small business in the threats section. For example:

    • New regulations that impact your small business negatively.
    • Changing economic conditions.
    • Changes in consumer behavior or attitudes.

    4. Use the SMART Goals Framework

    The SMART Goals framework is one of the most popular methods for setting goals. The letters stand for Specific, Measurable, Achievable, Relevant, Timebound. Use it in conjunction with the above steps to build out goals to increase odds of success.

    Specific

    A goal that’s specific includes a variety of details such as:

    • What’s being accomplished.
    • What steps are involved.
    • Who is responsible for each step.

    Measurable

    Make sure it’s clear when you reach the finish line by quantifying your goal. For example:

    • Boost sales by 20 percent.
    • Open a second location.
    • Have each sales rep reach five new prospects per day.
    • Have each sales rep close one deal per day.

    Achievable

    The Cs are helpful when you consider what’s achievable. Is the goal you’re setting within your reach and control? If not, select a different goal.

    Relevant

    Consider your big picture. How is the goal you’re setting now contributing to it? If it’s unclear or doesn’t flow into the big picture, select a different goal or adjust it so it does.

    Timebound

    Decide what the cutoff point is for your goal. It’s a good idea to have both short and long-term goals. Your big picture is likely a long-term goal or several long-term goals. The short-term goals feed into it. Apply strategies for staying focused on business goals, like breaking these down into smaller milestones, to help ensure you reach your goals on time.

    Get the Working Capital You Need to Meet Your Goals

    If a lack of working capital is holding your small business back from meeting its goals, invoice factoring can help. It’s like getting an advance on your unpaid B2B invoices. To learn more or get started, request a complimentary rate quote from Charter Capital.

  • Business Partners’ Buy-Sell Agreement: What is it & Why is it So Important?

    Business Partners’ Buy-Sell Agreement: What is it & Why is it So Important?

    Business Owners Buy-Sell Agreement

    Business Partners’ Buy-Sell Agreement : Creating a buy-sell agreement is one of the most important things you can do to protect your rights to your business, ensure the longevity of your company, and avoid burdening your loved ones if you should ever become unable to continue managing it. It’s as essential as creating a will. Yet, just one-in-ten business owners have taken this crucial step, according to Forbes research.

    On this page, we’ll go over what a buy-sell agreement is, how it works in various scenarios, and what to include in yours.

    What is a Buy-Sell Agreement Between Partners?

    Sometimes called a buyout agreement, a business prenup, or a business will, a buy-sell agreement is a legally binding agreement that stipulates how a business owner’s share of a company is reassigned if he or she leaves the business. It can address a variety of trigger events, such as:

    • Death, Permanent Disability, or Incapacitation: Ensures ownership stays within the company and saves the deceased owner’s family from having to sort out a business they don’t understand and/or don’t want.
    • Retirement: Ensures there’s a plan in place to end the partnership agreement amicably when one partner is ready to retire.
    • Exit: Helps avoid conflict if a partner wants to sell or leave for any reason.
    • Involuntary Seizure: Because ownership of a company is an asset, judges can sometimes rule that an owner’s stake be awarded to another party or sold. For example, a spouse might get some or all of an owner’s share in a divorce. Courts will sometimes get involved in debt-related situations or bankruptcies too.

    Cross-Purchase Agreements vs Redemption Agreements

    There are two common types of buy-sell agreements: cross-purchase and redemption. Although business partners can choose just one method, a mix of the two can be used as well.

    • Cross-purchase: The remaining owners purchase the available share.
    • Redemption: The business entity purchases the available share.

    Can a Sole Proprietor Enter into a Buy and Sell Agreement?

    Oftentimes, people think of buy-sell agreements in terms of partnerships or closed corporations, but they’re just as important for sole proprietorships too. In these cases, a key employee is usually given the option to purchase the business. It ensures there’s a continuity plan in place and that the business will continue to operate even if the business owner has passed away.

    What Happens if You Don’t Have a Buy-Sell Agreement?

    If there’s no buy-sell agreement in place and a sole proprietor passes away or becomes incapacitated, the business usually passes to the spouse or next of kin. It may also be given to the owner’s guardian to manage. It’s treated no differently than any other personal property owned by the individual.

    The same is true in the case of death or incapacitation in a partnership. However, these arrangements also have challenges with retirement, exit, and divorce situations too. If the parties involved cannot agree, and the new owner has the right to sell, he or she may do so against the other partner’s wishes. If the situation prevents a sale, it may become a court matter. In these cases, judges often rule that the business must be dissolved or sold, debts paid, and any proceeds be split accordingly.

    What if the Partner or Key Employee Can’t Afford to Buy the Available Share?

    Buy-sell agreements typically address this through life insurance policies. Those who will purchase shares take out a policy on their partner. That way, if the business or share would ordinarily pass through to a relative or an estate, the intended shareholder can purchase it.

    What Should a Buy-Sell Agreement Include?

    Buy-sell agreements can be customized to the needs and wishes of business owners and will vary based on factors like the number of owners, as well as the type, size, and strength of the business. For that reason, it’s always a good idea to touch base with an attorney to ensure everything is addressed properly. A few things that are routinely included in buy-sell agreements are outlined below.

    Valuation Clause

    It’s important to determine how the business valuation will be handled ahead of time. Sometimes business owners determine a buyout price in advance or create their own valuation strategy. As a business grows, a valuation expert is usually brought in at the time of sale, and the purchase price is set at fair market value.

    Buyer Limitations

    Some contracts offer remaining partners the right of first refusal, meaning the remaining partner or partners need to be offered the available stake but don’t necessarily have to take it. Others get a bit more detailed about who the departing party can sell to. For example, a partner may only be allowed to sell to a private party rather than a corporate entity.

    Payment Guidelines

    In some situations, such as retirement or permanent disability, it may be better for all parties involved for the departing owner to have a slower exit. Rather than pay in one lump sum, the partner buying out the departing partner may make payments over a set period of time. It can reduce the strain on the buying partner while giving the departing partner a source of income.

    How Can I Create a Buy-Sell Agreement?

    There are lots of buy-sell agreement templates online. These can help if you’re in a bind and want something on paper fast, but it’s generally best to have an attorney draft a buy-sell agreement for you. That way, you can be sure it’s tailored to your company and doesn’t leave any ambiguous terms that might create loopholes or make it difficult to transfer ownership later.

    Get the Cash Your Business Needs Today with Invoice Factoring

    If slow cash flow is impacting your ability to create or execute a buy-sell agreement fairly, invoice factoring can help. It instantly turns your unpaid B2B invoices into working capital, so you can take care of whatever your business needs and focus on the way forward. Request a free Charter Capital rate quote to get started.

    Disclaimer: The information provided in this article does not, and is not intended to, constitute legal or accounting advice; instead, all information, content and materials available are for general informational purposes only and may or may not be up to date. You should seek appropriate counsel for your own situation

  • 7 Proven Ways to Manage the Impact of Inflation on Small Businesses

    7 Proven Ways to Manage the Impact of Inflation on Small Businesses

    Businessman holding an umbrella protect from problems

    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.

  • 6 Leadership Secrets Every Small Business Owner Should Know

    6 Leadership Secrets Every Small Business Owner Should Know

    Leadership Secrets Inspire Motivate EnvelopeLeadership Secrets: Leadership skills are essential for all aspects of your career, from securing a job to advancing your career. Even if you have been in a leadership role for several years, leadership development programs that help you build vital skills around effective leadership can assist you greatly in your professional development and advancement. New business owners have a steep learning curve as they try to make their mark. Thankfully, you don’t have to create your own long list of failures to uncover the wrong ways of doing things! Many entrepreneurs have already taken care of this before you and, when you apply their wisdom to your own entrepreneurial path, you can shorten the learning curve and come out ahead that much quicker. Below, we’ll cover six leadership qualities and secrets of people who have consistently come out on top for you to draw from when you need a new source of inspiration or are trying to build business strategies that really work. However, first, we should break down the qualities of a good leader.

    Characteristics of a Successful Leader: The Foundation of Business Success

    There are many different leadership styles, and the one that you use should suit your personality and your business goals. Look at what you prioritize and decide how you would like to lead. Some of the most common leadership styles are autocratic, transactional, transformational, democratic, and empathetic leadership. Despite the many different styles, the important leadership traits remain relatively constant. Effective leaders:

    • Are good listeners and communicators
    • Constantly look to learn and improve 
    • Are service-driven
    • Are accountable
    • Are focused
    • Are self-aware
    • Are ethical 
    • Have a high emotional intelligence (EQ)
    • Encourage strategic thinking, innovation, and action

    The leadership traits and styles you embody significantly influence your team’s morale and your overall business growth. You are, first and foremost, a mentor and should lead by example.

    Below Are Six Leadership Secrets To Help You Become A Better Leader:

    1. Innovation Keeps Businesses Alive

    “I have not failed. I’ve just found 10,000 ways that won’t work.” –Thomas Edison

    When we think of Thomas Edison, we typically consider his best innovative ideas and many contributions to modern life, such as the incandescent light bulb, phonograph, and motion picture camera. What doesn’t get nearly as much press is how many times he didn’t hit the mark while working on his inventions and improvements. Thankfully, he saw these mishaps as a bit of a blessing rather than a failure and used what he learned to continue developing his ideas and eventually coming up with the perfect solution. This mindset was one of the many things that made him a successful leader. 

    When you apply the spirit of innovation to your company, think beyond new business trends and products. Consider ways to keep your team motivated, such as sponsor or mentorship programs as well as alternate paths up the company ladder, college courses employees can take that will benefit you both, and other things that might create a dream work environment. If you’re struggling for inspiration, check out publications like Harvard Business Review, Forbes, and Inc. for leadership tips, or see what other business leaders are saying on social media.

    2. The Power of Effective Communication

    “You can have brilliant ideas, but if you can’t get them across, your ideas won’t get you anywhere.” –Lee Iacocca

    Perhaps best-known for innovative ideas like the Mustang, Lee Iacocca was a major driving force behind the success of Ford Motor Company for more than three decades. Ultimately pushed out by Henry Ford II for being too bold, Iacocca no doubt understood the importance of effective communication all too well.

    Iacocca didn’t flounder, though. Instead, he was immediately picked up by Chrysler. Though the company reported a $159 million quarterly loss the day his CEO appointment was announced, it made a cool $723 million the year he left.

    “Listening can make the difference between a mediocre organization and a great one,” Iacocca said. He didn’t simply share his ideas with others. He attributed his success to open communication with employees and customers alike. Having an open line of communication helps build trust and professional relationships with your employees, which ultimately results in higher office morale, increased performance, and better productivity. Keep in mind, true leaders know that listening is the key to effective communication; prioritize listening to your employees and approach their concerns with empathy, compassion, and professionalism.

    3. The Value of Seeking Advice

    “I think it’s very important to have a feedback loop, where you’re constantly thinking about what you’ve done and how you could be doing it better.” –Elon Musk

    Elon Musk may come across as a confident take-no-prisoners entrepreneur, but he’s well known for soliciting the advice of those around him. “Don’t tell me what you like; tell me what you don’t like,” he’s said. It’s perhaps because of this trait that he’s become known as one of the biggest innovators of our time.

    The culture around him may not have always been this way. Prior to a 2016 SpaceX launch, Musk reportedly asked for the top ten risks of the mission. It was the 11th on the list that led to a fiery end to the launch. “If people are going to be afraid, I’d rather they’re afraid of what will happen if they stay silent than being afraid of what will happen if they speak up,” he said. “We’re not going to have a culture where the messenger gets shot. We’re going to celebrate the person who called a potential threat or risk to our attention.”

    Since then, Musk has made it part of his company’s long-term goals to foster open dialogue at every level. To help your company build bonds or friendships that encourage free sharing, consider teamwork activities in place of team meetings from time to time. As people get to know one another better, more sharing and challenging of ideas tends to occur organically.

    4. The Impact of a Clear Vision

    “Build the castle first.” –Walt Disney

    Walt Disney was turned down by 300 bankers and financers when planning Disney World, according to Forbes. They didn’t think he had an idea that would pay off or a sustainable business model. But, Disney had a grand vision of what he wanted to achieve, and he stuck with it despite the naysayers. When he finally got to start bringing his idea to life with his own cash reserves, Disney reportedly told his crew to build the castle first. He believed that by starting there, others would see the big picture and start to share in his vision too.

    This wasn’t the first or the last time Disney applied this tactic, either. When he was afraid he wouldn’t get buy-in for Snow White, the animator literally acted out every scene and every character to get the team excited about creating it.

    As a leader, the worst thing you can do is put yourself in a bubble or create barriers between you and your team. Your vision, and your passion for seeing it through, are contagious!

    5. Perseverance Will See You Through

    “I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.” –Steve Jobs

    It’s easy to look at what Steve Jobs accomplished with Apple and think he had an easy path, but the real story is quite a bit darker. While he was indeed co-founder of Apple in 1976, a title he shared with Steve Wozniak, Jobs was forced out of the company in 1985. The above quote was made that same year as Jobs launched his new company, NeXT Computer, later acquired by Apple, thus bringing Jobs back into the fold.

    Jobs contended that the enormous workload a new entrepreneur carries results in 18-hour days, seven days a week, during the early stages. “You’ve got to have an idea, or a problem, or a wrong that you want to right, that you’re passionate about,” Jobs continued. “Otherwise, you’re not going to have the perseverance to stick it through.”

    As a small business owner, it can be difficult to cope with the burden of your new life but remember that almost nothing is forever. Businesses even come back from bankruptcy. A few examples include General Motors and Marvel Entertainment. Even Apple hit a serious low in 1997 but was brought back from the brink. Whether you’re struggling with cash, people, products, or something else, you can push through it and come out stronger.

    6. Attract Fresh New Talent Through Social Media

    “Social media allows you to make your jobs more human. Tell talent about the people behind the products. Trust your recruiters to be your digital warriors.” –Celinda Appleby

    You may not have heard Celinda Appleby’s name before, but she works in a space known as “recruitment marketing,” serving as the Director of Global Talent Attraction for Visa with an impressive resume that includes the likes of Nike, Oracle, and HP. While she doesn’t necessarily dig in the trenches of social media to find new talent, she uses various platforms for employment branding, showcasing how an employer has a culture, growth opportunities, and incentives that job searchers will find irresistible. Other tactics she keeps in her wheelhouse include choosing the right platform for the demographic and using employee-generated content often.

    As you explore the options, LinkedIn may be a great place to start, but don’t limit yourself. You may find your target demographic is more active on Facebook, Instagram, or another social media site. Cut through the weeds and focus on what works best for you and your ideal candidates.

    Don’t Let Cash Flow Problems Stand in the Way of Your Business Growth

    Business growth can be hindered by cash flow issues, a common challenge that many businesses encounter, especially during peak times and periods of rapid expansion. But, if slow-paying clients are preventing you from innovating, attracting talent, or leveling up your business through any of the leadership skills outlined here, your company growth can stall. Invoice factoring will help by giving you an instant cash advance on your unpaid B2B invoices so that you can focus on the future. To get started, request a complimentary quote from Charter Capital today!