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  • 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.

  • 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.

  • Factoring for Business: Enhancing Cash Flow & Growth

    Factoring for Business: Enhancing Cash Flow & Growth

    How Factoring Can Help You Run Your Business More Effectively

    Run Your Business More Effectively: Many business owners only hear about invoice factoring services when they face cash flow issues and need a source of financing for working capital. However, it’s a valuable financing tool for overall cash flow management and long-term growth. We’ll go over the basics of the factoring process and discuss the advantages of factoring in business below.

    The Factoring Process Explained

    Also referred to as receivable financing, invoice factoring converts outstanding customer invoices your slow-paying customers might ordinarily pay in 30, 60, 90, or more days into constant cash flow your business can use right away.

    Signing up with a factoring company, sometimes simply called a “factor,” is the first step. Once the relationship is established, you’ll send unpaid B2B invoices to your provider. They’ll advance you a portion of the invoice’s value, then wait for the payment from your customers. You can spend the money on whatever you feel benefits your business the most. Once your client pays, the factoring company will send you any remaining funds minus a nominal factoring cost.

    Benefits of Factoring: Running Your Business More Effectively

    By now, it’s clear to see how invoice factoring services can help you overcome cash flow challenges by accelerating payments or dealing with cash flow issues. Now let’s look at the benefits of invoice factoring in terms of the broader business landscape, particularly in managing late payments and improving cash flow management.

    Advantages of Factoring and Flexible Funding Solutions

    You can factor on-demand in most cases. So, you can choose to factor once and then never again, sign up and wait months to factor your first invoice, factor all your invoices, or just send in invoices occasionally as you need cash flow accelerated.

    Think of invoice factoring for small businesses as an ace in the hole. It’s not just a business loan alternative, but a cash flow factoring strategy that allows for an improved cash flow, giving you the power to seize growth opportunities whenever they arise. For instance, security businesses can greatly benefit from tailored factoring for security companies, ensuring they can manage operational expenses like payroll while maintaining a steady cash flow.

    Factoring Promotes Constant Forward Movement

    Many traditional business funding solutions create debt, along with interest and long-term repayment terms that can stall momentum. It’s easy for growing businesses to get trapped making minimum payments without reducing the balance. Invoice factoring offers a different path—advancing cash based on your unpaid invoices and repaid by your clients, so there’s no debt to carry forward. This makes it especially valuable in industries with long billing cycles. For example, accounts receivable factoring for service companies makes it easier to maintain steady cash flow between invoicing and payment, allowing these businesses to meet expenses and keep scaling without relying on credit.

    Streamlined Approval Process: The Ease of Qualifying for Factoring Services

    If you’ve ever applied for a bank loan, you know it’s a lengthy process. There are credit checks, digging into your business and often personal finances, then weeks or months of waiting. The invoice factoring process is not a loan, so you’re not forced to jump through the same hoops. You can find out your rate the day you apply and even get paid for an invoice the day you submit it. This simplicity is one of the key advantages of factoring in business.

    Making Informed Decisions About Your Clients

    Factoring companies put more weight on the credit history of your clients. While you’re still free to work with whomever you wish, your factoring company will provide insights about creditworthiness, so you can take on more work for clients who are financially responsible and mitigate credit risk by limiting work for those with weaker histories.

    Reducing Administrative Burden with Factoring

    Some factoring companies, like Charter Capital, offer free collections services. You’re relieved from the task of chasing payments from customers, eliminating any labor or other expenses associated with late payments. This contributes to a more steady cash flow.

    Speeding up Payments With the Factoring Process

    Factoring companies have systems in place that encourage faster payment. For example, it’s common for factoring companies to provide clients with ways to pay their invoices online. They’re more likely to have multiple communication methods as well, so clients catch their statements sooner. Little things like these increase the speed of payment overall, alleviating concerns about cash flow, so money comes to you quicker.

    Strengthening Client Relationships

    When you work with a factoring company, you have more freedom to extend terms that are favorable to your clients. They’re balancing cash flow just like you, so having more flexibility in payment can reduce strain on the relationship for you both. This often makes it easier for clients to place larger or more frequent requests, which creates extra revenue for you, contributing to a more steady cash flow. To illustrate this point, consider how a business like a staffing agency works. In a typical arrangement, the staffing agency covers all the expenses associated with finding quality talent and pays workers weeks or months before the client pays them. Maintaining this type of relationship is crucial for the staffing agency’s health and growth but is undeniably financially difficult for the agency. By partnering with a staffing factoring agency, the business can continue providing payment terms that work for its clients while improving cash flow.

    Increased Bargaining Power with Vendors

    First and foremost, stabilized factoring cash flow makes it easier to keep up with your vendor payments, so you’ll develop better relationships with them too. In addition to this, you may be able to work out better deals with your vendors, thus enhancing your business growth opportunities. For example, you’ll be in a better position to qualify for bulk discounts. Sometimes vendors will sell stock at a discount when another client cancels their order as well. Because you can tap into cash as you need it, you can jump on these opportunities as they arise.

    Building Better Credit

    Factoring doesn’t build your credit by itself, but it can help you address all sorts of situations that influence your credit, like making timely payments. Companies often use their factoring cash for growth-related expenses as well. For example, it can help you purchase the supplies necessary to accept a large order, purchase new equipment, or hire more employees. As your revenue grows and stabilizes, banks will look more favorably at you when you want to borrow.

    Streamlining Processes with Value-Added Factoring Services

    Although many factoring companies simply offer factoring services, others go above and beyond to support their clients. At Charter Capital, we offer perks like digital invoice processing, so managing invoices is a breeze. Your client credit reports are free too.

    We also offer industry-specific perks. As a freight factoring company, for example, our clients can tap into a free load board and fuel discount cards.

    Focusing on Core Business Functions

    You have a lot of jobs as a business owner. Chasing payments and constantly rebalancing things to make sure you have the cash to cover payroll and other vital expenses don’t have to be among them. By entrusting your collections and invoice processing to a factoring company, you’re able to focus on your core business functions and build a healthier company overall. This is one of the major advantages of invoice factoring.

    Run Your Business More Effectively with Invoice Factoring by Charter Capital

    With decades in the industry, full-service solutions to help your business thrive, and competitive rates that keep more money in your pockets, Charter Capital is America’s leading invoice factoring company. If you’d like to run your business more effectively through factoring, start with 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!

  • The Best Business Structures to Consider for Tax and Legal Purposes

    The Best Business Structures to Consider for Tax and Legal Purposes

    Different types of business formations for a small business owner

    Which business structure is best? There are several types of legal structures to choose from, each with its unique benefits and challenges. It’s a good idea to familiarize yourself with all the options when you’re setting up a new company so you can select the right structure for your needs and make sure it will suit you in the long run too. We’ll give you a quick overview of the options and some tips to help you choose the best one below.

    Choosing a Business Structure That’s Right for You

    First and foremost, your business structure impacts how much you’ll pay in taxes and how your taxes are paid, plus determines your personal liability for business-related issues. It also affects how you can raise money and the types of paperwork you file. With that in mind, there’s no singular “best” business structure. Instead, you’ll want to choose the one that aligns with your business needs.

    Can My Business Structure be Changed?

    Before we begin, it’s important to note that the ability to change a business structure depends on the structure you’re presently using. It works in a linear fashion. For example, if you start with a structure designed for one owner, you can change it later to include multiple business owners or to a more advanced level. However, if you’re running a corporation, you cannot change the structure later. You’d have to dissolve the corporation and create a new business. For that reason, it’s always a good idea to speak with an attorney and/or accountant specializing in business matters.

    Different Types of Business Structures

    Sole Proprietorship

    Sole proprietors have total control and ownership of their companies. With more than 23 million sole proprietors across the United States, this is the most popular option for small businesses per Small Biz Trends. All assets and liabilities are exclusively yours and indistinguishable from your personal assets and liabilities. You’ll even pay taxes, under ordinary income tax rates, on your business earnings when you file your personal tax returns rather than paying taxes separately as a business. This is known as pass-through taxation or flow-through taxation.

    It’s easy to file sole proprietorship paperwork. Your business will automatically be designated as one if you’re doing business alone as well. You can operate under a trade name or “doing business as” (DBA) name for professionalism or privacy too. However, raising money as a sole proprietor can be more difficult as banks and investors are a bit more hesitant to lend, and you can’t sell stock.

    Partnership

    Partnerships are the simplest business structure for two or more people. Though there are several types that vary in form and function, taxes are managed through personal returns in all of them, but sometimes there are additional IRS requirements.

    • The general partner has unlimited liability and must pay self-employment taxes, but also typically has more control over the company than the limited partners do.
    • Only certain types of professional service businesses qualify for this designation. The list varies by state but typically includes professionals like doctors, attorneys, accountants, and so forth.
    • Limited Liability Limited Partnership (LLLP): There’s a gap between LPs (Limited Partnerships) and LLPs (Limited Liability Partnerships) that leaves general partners unprotected from business issues. In the past, some businesses would create an LLC to serve as the general partner to avoid the risk. Nowadays, some states allow the creation of an LLLP to serve the same purpose.

    Filing partnership documents for any of these arrangements is comparatively easy. However, it’s always a good idea to have an attorney examine the partnership agreement to ensure there are no questions or misunderstandings about the rights, privileges, and profits any partner will receive.

    Corporation

    A corporation is a distinct legal entity from its owners and has its own rights. There are several types of corporations.

    C Corporations: A C corp can own and sell property and sue or be sued. It’s also responsible for paying income tax. This is done when the profit is made and when dividends are paid to shareholders too. Corporations can raise money through the sale of stocks and usually have an easier time getting funding from banks and other sources. However, it’s more expensive to form corporations compared to other options. A C  Corporation is not only subject to corporate income tax, but its owners must still pay personal income tax on profits (known as double taxation). Plus, there’s less flexibility for management as corporations are required to have a board of directors, and additional recordkeeping is involved.

    S Corporations: S corps are the most common business structure for small businesses with employees. The biggest benefit to running an S corp over a C corp is that double taxation of profits is not an issue. Only shareholders pay taxes on profits received. However, there are additional requirements to file as an S corp, such as all shareholders need to be U.S. residents. There are limits set on how stocks are handled too. For example, there can only be a maximum of 100 shareholders, and owners can only get common stock.

    B Corporations: Sometimes referred to as a benefit corporation, a B corp is guided by a societal mission. It aims to generate profit and provide some kind of public benefit. Taxation is the same as with a C corp. However, B corps can qualify for additional certifications that can shape public perception and sometimes qualify for special programs or discounts.

    Limited Liability Company

    A limited liability company (LLC) is similar to a hybrid between a partnership and a corporation, though you can also form one alone. Your personal assets are largely protected under an LLC, and double taxation is not an issue. Taxes on profits are paid by the individuals on their personal returns rather than at the corporate level. However, all members of an LLC must pay self-employment taxes and contribute to Medicare and Social Security.

    Guidelines vary quite a bit at the state level, so it’s a good idea to check your local laws to see how they’ll impact your business before settling on an LLC.

    Cooperative

    Cooperatives are unique in that they’re owned and operated by a group of members for their own benefit. These members, known as user-owners, usually vote in a board of directors who make decisions for the cooperative. Any profits are split, and taxes are paid as a pass-through.

    Best Type of Business Entity for Tax and Legal Purposes

    There’s no single best type of business entity. But, again, each one comes with unique advantages and disadvantages, so you’ll have to familiarize yourself with them all and see what fits best with your business needs. The highlights are covered below.

    Considerations Before Choosing a Business Structure

    As you’re deciding which business structure to choose, consider the following questions:

    • Am I ok with being held personally liable for my business debts or lawsuits?
    • Do I want to retain total control of my company, or am I ok with a board making decisions?
    • Does the option I’m considering minimize my tax liabilities?
    • Will I be able to get the funding my business needs with this business structure?

    Get the Funding You Need at Any Stage

    Small businesses often have a difficult time getting the funding they need to grow based on the type of legal structure they choose. At the same time, it’s not always best for the business to move to a more advanced business structure, as moving can drain resources and reduce the amount of control you have over your business. If your company is struggling with funding issues, consider invoice factoring. It’s like getting an advance on your unpaid B2B invoices, except your clients pay the factoring company rather than you after you’re funded, so you don’t accrue debt and are free to move forward. To learn more, request a complimentary rate quote from Charter Capital.

     

    DISCLAIMER: This article is not intended to provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

  • Tips on Valuing a Small Business When Buying or Selling

    Tips on Valuing a Small Business When Buying or Selling

    Tips on Valuing a Small Business When Buying or Selling

    Not sure where to start with a small business valuation? Unless you’re an accountant or specialize in buying or selling small businesses, it’s not something most people will have experience with. Even still, it’s a great skill to have and can be easy to do if you follow a few rules of thumb. In this article, we’ll break down the basics so you can start performing your own calculations right away.

    Know When and Why to Perform a Small Business Valuation

    There are many reasons you might want to perform a small business valuation. You may need to if you’re:

    • Applying for a loan or line of credit
    • Trying to attract investors
    • Buying out your partners
    • Engaging in tax planning
    • Trying to understand your business growth better
    • Considering selling your business
    • Planning to sell stock or offer employees equity

    Gather What You Need to Perform a Small Business Valuation Ahead of Time

    Depending on which valuation method you choose, you’ll likely need a variety of documents handy.

    • Three to five years of business tax returns
    • Three to five years of financial statements (balance sheet, income statement, cash flow statement, etc.)
    • List of tangible business assets (cash, property, equipment, etc.)
    • List of intangible assets (copyrights, patents, trademarks, licenses, etc.)
    • Sales reports
    • Business plan
    • Industry forecasting documents

    Bear in mind that even things like the business brand, reputation, and customer or subscriber base can have an impact on the overall valuation. You might even be able to argue that your low employee turnover rates increase the value of the business, as a new owner will have highly trained employees on board to create a smooth transition. However, if you’re considering including these and don’t have experience with business valuations, it may be better to hire a business valuation expert or have a professional appraisal performed, as an improper valuation can cause future financial issues or damage your reputation.

    Choose the Right Valuation Method for Your Situation

    There are many business valuation methods. Each is used in different circumstances and has its own pros and cons. Below, we’ll give a quick overview of the five most popular. The first four work for businesses of all sizes, while the final method is just for small businesses.

    Adjusted Net Asset Method

    If your balance sheet is well organized, using the adjusted net asset method is straightforward. For example, you might use this method if you’re valuing a company that is losing money or one that has modest earnings. In addition, small-business owners sometimes use the adjusted net asset method to set a floor price when selling a business. It’s also used to determine the value of a company that has real estate or serves as a holding company.

    To use the adjusted net asset method, you’ll simply add up all your assets and then subtract your liabilities. However, the “adjusted” component comes in because you’ll also spend more time ensuring your asset valuation is accurate. For example, your receivables are an asset you’d include in your valuation, but if you know certain receivables aren’t going to be paid, you’ll subtract them. You’ll also need to take depreciation into account.

    Capitalization of Cash Flow Method

    There are two common ways to determine business value based on income. The capitalization of cash flow (CCF) method is the simpler of the two. It’s more often used with mature companies that don’t see significant cash flow shifts and are experiencing steady growth. You’ll need to know the business’s expected rate of return, also known as a capitalization rate or cap rate. You’ll generally narrow your numbers down by a set period of time, such as a quarter or year.

    Cap Rate = Net Operating Income / Current Market Value

    Most small businesses will have a cap rate of 20-25 percent.

    From there, you can perform the final calculation: Business Value= Cash Flow / Cap Rate

    Discounted Cash Flow Method

    The second and more complex income-based method is the discounted cash flow (DCF) method. It’s unique in that it considers where a business might be years from now, so it’s used more with companies that are experiencing rapid growth and those that are reducing in size. So, for example, if you’re running a startup that isn’t profitable yet, but you think it will be soon, you’ll probably want to choose this method. You might also prefer to use the DCF method if you’re comparing multiple companies and want to gauge which one will deliver the most return on investment (ROI).

    This calculation typically uses the weighted average cost of capital (WACC) as a discount rate in the formula.

    If you’re only looking at one year, the formula is: DCF = Yearly Cash Flow / (1 + Discount Rate)

    The same formula can be added to itself as many years as you’d like, substituting the appropriate anticipated yearly cash flow in the first portion as you go.

    Market-Based Valuation Method

    There’s no official formula for the market-based valuation method. You’ll simply look at the purchase price of similar businesses in your area. If there haven’t been recent purchases or no businesses of the same size and industry have recently sold, you can sometimes look outside your geographic area too.

    Seller’s Discretionary Earnings Method

    The seller’s discretionary earnings (SDE) method is exclusively used in small business valuation. It might be your best bet if you’re a business owner presenting your company to potential buyers because it can help them better understand what they might earn. It’s similar to earnings before interest, taxes, depreciation, and amortization (EBITDA) in that it looks at the profit of a business.

    To calculate business value using the SDE method, you’ll start with the business’s earnings before interest and taxes (EBIT). Then, you’ll add back in all expenses that relate to the current owner including salary, health insurance, and other benefits. You’ll also add back any expenses that aren’t related to the business as well as non-essential and non-recurring expenses. For example, if you’ve been claiming educational or trip expenses against the business, you would add those back in. As a final step, you’ll also subtract liabilities from your net income. This includes any debts you’re currently paying or will have to pay.

    Sometimes prospective buyers will argue sellers are adding things back in that shouldn’t be in an effort to bring the estimation back down. For example, let’s say you sponsored a little league team this year and paid for their jerseys. Since it’s a one-time expense, you add it back in. The buyer might contend it’s part of an ongoing marketing campaign and that they’ll need to sponsor again next year. Any items such as this that come up for debate will need to be resolved before the valuation is set.

    It’s also worth noting that professional appraisers will use multiples when working with the SDE method. Multiples vary based on the business, industry, and other factors and make it easier to see what a business is really worth. For example, it’s conceivable that a company that makes parts to repair VCRs could have the same value as a company that produces smartphone parts if you’re looking at a one-year snapshot. However, the company making VCR parts has a limited audience that’s only getting smaller while the smartphone parts company has room to grow.

    Know When to Get Help and When to Pivot

    If calculating a small business valuation is too complicated or a lot hinges on getting it right, it may be better to bring in a business broker or specialist in valuations. On the flip side, you may find that having a formal valuation performed is a bit more trouble than it’s worth or won’t help you if your goal is to secure funding. In this case, you may prefer invoice factoring. With factoring, you get instant payment on your B2B receivables that you can then apply to your business in the way that makes the most sense to you. To learn more or get started, request a free rate quote from Charter Capital.

  • 5 Benefits of Business Networking with Other Small Business Owners

    5 Benefits of Business Networking with Other Small Business Owners

    Benefits of Connecting and Networking with Other Small Business Owners

    Connecting and Networking with Other Small Business Owners: Small business networking can help you grow your company and help you find more satisfaction at work. Plus, it’s really easy to find networking opportunities even if you’re short on time and cash and aren’t usually a social or outgoing person. On this page, we’ll go over some of the many benefits of small business networking and best practices, then highlight some simple ways to get started.

    Benefits of Small Business Networking

    It’s often said that it’s not what you know but who you know. Small business networking connects you with the “who,” so it’s easier to grow your company.

    1. You’ll Be Introduced to New Opportunities

    Take a stack of business cards with you when you attend a networking event. You never know who you might meet. Many entrepreneurs forge joint ventures from chance encounters that developed into longstanding relationships. You may also find other small business owners you can work with on joint marketing campaigns or content. Additionally, sometimes people find investors or suppliers through social events too. Keep an open mind as you meet other people and be ready to explore opportunities as they arise.

    2. You’ll Make More Connections

    Roughly 40 percent of prospects become new customers after an in-person meeting, according to Oxford Research. Plus, more than two-thirds of a typical company’s new business comes from referrals, per research presented by Entrepreneur. Networking puts you in front of more professionals, giving your business growth and an even bigger boost on a multitude of fronts.

    3. Your Confidence May Get a Boost

    Being a business owner can become somewhat isolating. Sure, you have your employees, but how often are you really putting yourself out there with your peers? When you start networking, you learn how to master your elevator pitch and introductions become more natural simply because you’re doing it all the time.

    4. You Can Get Advice from People Who Relate and Understand

    If you need advice from someone who runs a successful business or are looking for people to bounce ideas off, small business networking is a great way to get linked up. Look for someone who has a venture similar to yours or who has followed a similar career path, but bear in mind mentorship comes in many forms. For example, you may find someone you can forge a formal mentorship with, in which you meet regularly to chat, or you may find several people you can connect with as needed to get useful information on different topics.

    If you’re already running a successful business, mentoring can provide you with emotional satisfaction, plus help you stay on top of trends and benchmarks too.

    5. You’re Likely to Find Camaraderie and Friendship

    Over 73 percent of business owners say they’ve felt lonely while operating their company, according to CEO Today. Around one-third say they regularly feel this way. Again, that’s not overly surprising given most are surrounded by subordinates rather than peers all day, but the isolation can wear on a person more than most entrepreneurs would like to admit. You don’t necessarily need to go out looking for friends at networking events, but chances are you’ll forge relationships with certain people over your shared interests or struggles.

    Where to Find Business Networking Opportunities

    Small business networking doesn’t have to take a lot of time or money, but you may want to consider including expenses as part of your marketing budget since it’s a great way to grow your business. You may be able to deduct certain expenses at tax time too.

    Social Media

    The benefits of business networking are evident, especially in today’s digital age. Nearly three-quarters of small businesses are already using social media for marketing, according to Small Business Trends. Recognizing that business growth is dependent on such strategies, it becomes natural that networking will result in opportunities. If you’re keen on personal growth and business development, social media platforms, especially LinkedIn, are critical to your journey.

    Start by updating your profiles to include your current status, interests, and goals. This establishes a foundation for a mutually beneficial relationship with potential connections. It’s good to have a network of friends and associates on these platforms, making it easier for others to discover you organically. As you delve into this venture, remember that networking is a valuable tool for building connections with their network. Begin searching for other local businesses and business owners in your area. If you’re in a densely populated area, narrow it down to people who don’t directly compete with you but perhaps share similar audiences or interests. Sending each person a personalized note outlining why you’d like to connect not only showcases your intent but also provides you with an opportunity to establish rapport.

    This can sometimes be time-consuming, so if you have a marketing team or a trusted employee who can help, assign them the duty of refreshing your profiles and making the initial reach-outs. You can also look for automation tools that will make the process easier.

    It’s also worth noting that you should be adding your real-life connections to social media as you meet people. Take time to send a request through LinkedIn and make a pass through that person’s connections to find other people you might want to meet as soon as possible after you’ve been introduced. If you’re “reaching” and want to connect with someone of high status, ask your connection to make an introduction first.

    Networking Groups

    Once your profiles are revamped, you can start looking for networking groups. Facebook and LinkedIn are good places to start. Some of the groups you find will stay virtual and simply offer a platform to share ideas or get insights, while others are used to organize in-person meet-and-greets.

    You may also want to check out Meetup and other similar sites. Meetup is designed to help people connect virtually and coordinate in-person events.

    Lastly, your local chamber of commerce can be an invaluable resource, too. Many offer a mix of professional development sessions and networking events, with some as simple as connecting for morning coffee, so it’s easy to meet with other professionals whenever it’s convenient for you.

    Business Seminars and Conferences

    Keep an eye out for things like business workshops, seminars, and conferences. Although they’re designed for professional development, there are usually lunch or coffee breaks that are perfect for networking.

    Professional Associations

    Depending on your personal circumstances, there is a variety of professional associations that may meet your needs. Generally speaking, professional associations are built around individuals who work in the same industry or share the same credentials. You may also want to consider searching for associations by:

    • Location
    • Alma Mater or Degree
    • Entrepreneurs with the Same Previous Career as You
    • Gender
    • Ethnicity

    Maximizing Network Growth Through Strategic Channel Selection

    With countless networking options available, the key isn’t finding more opportunities. It’s choosing the right ones based on your business goals, bandwidth, and growth stage. Strategic network growth is about focus, not volume. Let’s take a look at how to assess and prioritize.

    Match The Channel To Your Goal

    Want leads? Focus on events where your customers are. Need mentorship? Prioritize peer groups. Looking for partnerships? Target industry-specific forums and trade shows.

    Evaluate Time-To-Value

    Some channels, like mastermind groups or advisory boards, deliver deeper value over time but require a longer ramp-up. Others, like LinkedIn outreach or local mixers, can provide faster wins.

    Balance Scale With Depth

    Large events give exposure, but deeper connections often form in smaller settings. A healthy networking strategy includes both.

    Leverage Your Team

    Assign networking roles based on strengths—send your marketer to workshops, your founder to investor events, or your ops lead to peer circles.

    Review ROI Quarterly

    Track which channels are actually leading to referrals, partnerships, or insights that impact business outcomes. Adjust accordingly.

    How Strategic Networking Builds Long-Term Business Value

    Strategic networking goes beyond short-term gains like referrals or leads. It’s about building a resilient, high-value ecosystem of relationships that continuously support your business through changing market conditions. For small business owners, this means embedding your company within a trusted network that enhances agility, improves decision-making, and opens doors to growth that traditional marketing channels can’t reach.

    Rather than collecting contacts, high-performing entrepreneurs focus on cultivating alliances that deliver mutual value, whether through knowledge sharing, joint ventures, or supply chain efficiencies. This proactive, intentional approach forms the backbone of a growth-oriented business strategy.

    Strategic Advantages of Long-Term Business Relationships

    While initial networking often brings quick wins like referrals or support, the long-term value lies in building relationships that strengthen your business across multiple dimensions. These connections evolve into strategic assets that help small business owners adapt, scale, and outperform competitors.

    Here’s how long-term, strategic connections enhance business resilience and scalability:

    • Faster Access to Intelligence for Competitive Positioning: Established relationships can surface early insights into shifting regulations, competitor moves, or customer expectations, giving you the edge to adapt first.
    • Collaborative Infrastructure and Cost Efficiencies: Mature networks often lead to shared resources, like pooled vendor agreements, joint hiring initiatives, or co-marketing campaigns, that increase efficiency without additional overhead.
    • Continuity Planning Through Redundant Relationships: When primary partners or suppliers fail, your extended network provides alternative paths to maintain operations with minimal disruption.
    • Credibility by Association: Long-term alignment with trusted industry peers boosts your authority and makes future partnerships, media opportunities, and client trust easier to secure.
    • Access to High-Value Expertise Without Full-Time Cost: Instead of hiring consultants or adding permanent roles, strong connections give you just-in-time access to specialized insights that would otherwise be costly or inaccessible.

    By cultivating these deeper, reciprocal partnerships, small business owners can build a strategic foundation that compounds in value, outlasting market shifts and outperforming isolated competitors.

    Cultivating Authentic Professional Relationships for Long-Term Success

    Authentic networking requires a fundamental shift from transactional thinking to a relationship-building mindset. The most valuable professional connections develop through genuine interest in others’ success, consistent value delivery, and patient relationship cultivation.

    Successful networkers understand that relationship-building is a long-term investment strategy. They focus on understanding others’ challenges, goals, and priorities before introducing their own needs. This approach creates a foundation of trust and mutual respect that supports ongoing collaboration.

    Demonstrate Professional Integrity

    Regular check-ins, prompt responses to requests, and reliable delivery on commitments build the trust necessary for meaningful business relationships.

    Value-First Interactions

    Distinguish authentic networkers from those seeking immediate returns. Sharing relevant industry insights, making strategic introductions, or offering assistance without immediate reciprocal expectations creates goodwill that often returns multiplied.

    Authentic Interest In Others’ Success 

    This drives the most productive networking relationships. When you genuinely care about helping others achieve their goals, they naturally become invested in your success as well.

    The strongest business networks are built on reciprocal value creation, where each relationship contributes to mutual growth and success rather than one-sided benefit extraction.

    Practical Networking Tips for Small Business Owners

    Networking becomes most valuable when approached with intention and consistency. The following strategies can help small business owners maximize outcomes from every interaction:

    Set Clear Objectives

    Identify whether your goal is to connect with potential customers, build referral partnerships, or learn from industry peers before attending any event.

    Do Your Homework

    Research attendees, speakers, or organizations in advance so you can target conversations that align with your business needs.

    Follow Up With Purpose

    A brief message within 24 to 48 hours shows professionalism and keeps the connection alive. Mention something specific from your conversation to strengthen rapport.

    Provide Value First

    Share insights, connect contacts, or offer resources that may help others. Establishing trust and goodwill increases the likelihood of long-term, reciprocal relationships.

    Be Consistent

    Networking is not a one-time event but an ongoing process. Attending regularly and staying visible helps build credibility over time.

    Building a Network That Evolves With Your Business

    As your company matures, your networking needs will change. A strong, adaptable network ensures you can leverage the right connections at the right time:

    Early-Stage Businesses 

    These types of businesses benefit from networking to generate leads and establish credibility in the marketplace.

    Growing Businesses 

    These businesses rely on networks for strategic partnerships, larger contracts, and specialized expertise that support scaling operations.

    Established Businesses 

    Established businesses use their networks to stay competitive, access new markets, and gain referrals that sustain long-term growth.

    Level Up Your Small Business Networking with Factoring

    If you’re looking at all the ways small business networking can benefit your company, but slow payments from your B2B clients are tying up your cash, factoring can help. It’s like getting an advance on your receivables and frees you from the standard 30, 60, and 90+ day waits many business owners see. To learn more, request a free rate quote from Charter Capital.

  • 6 Business Growth Strategies for Successful Small Businesses

    6 Business Growth Strategies for Successful Small Businesses

    Growing business or store from small to bigger as success

    You’ve created a product or service that your target audience appreciates, developed a brand, and finetuned your processes. You’re profitable and doing well, but your small business isn’t growing. What gives?

    Developing effective business growth strategies is a serious challenge. Just one in five manage to scale their businesses, according to McKinsey research. Despite this, more than 60 percent can succeed, provided their business growth plan is detailed and addresses key areas. On this page, we’ll outline six foundations of successful growth strategies so that you can take your enterprise to the next level.

    The Impact of a Successful Business Growth Strategy on Your Company

     All too often, entrepreneurs and company leaders focus on the creation of the company as a revenue stream. Still, more than two-thirds of value creation is achieved through scale-ups, McKinsey consultants say. That’s because a focused business strategy lets you cut out the noise and target your resources on a single aspect of the business.

    Strategies for Effective Business Growth

    With the right formula, most businesses can thrive and grow. Use the strategies outlined below and follow the steps to ensure you’re primed for success.

    1. Identifying your Target Market for Business Expansion

    Before you begin to develop expansion strategies, it’s important to consider which specific area of your business you want to develop more. You can’t grow every area at once, or you’ll dilute your resources. However, a few common tactics are outlined below.

    Market Penetration – Maximizing Your Marketing Efforts

    A market penetration strategy aims to successfully launch a new product or increase the market share for an existing one. Examples include:

    • Reducing your prices to attract a wider audience
    • Running specials
    • Creating packages of your products or services

    Alternative Channels

    It’s a big world, and there are many ways for you to reach new customers or increase the spend of your current customer base. Examples of channels you might try include:

    • Business website or online storefront
    • Email
    • Social media
    • Digital ads
    • Permanent brick-and-mortar shops
    • Temporary pop-up shops

    Market Development – Reaching a New Target Audience

    With a market development strategy, you’ll be trying to get your existing products or services into the hands of new customers in new markets. Examples include:

    • Expanding your territory
    • Selling in new locations
    • Reaching a new potential buyer with a different message. For example, you may sell yoga mats online, but perhaps you could create a model in which yoga teachers or gyms sell your mats for you and get a cut of the sale.

    Market Segmentation – Streamlining Your Marketing Efforts

    Often, segmentation is thought of in terms of marketing. You’ll want to reach individual customers with a message that resonates specifically with them. Perhaps you have customers of all ages, but you know your younger audience will prefer different language and contact methods than your older audience, so you’ll make different ads and brochures for them. When you use market segmentation as part of your growth strategy, you’ll zero in on a specific group and cater to them so that you can build out your customer base with that particular group. 

    Product Expansion – Aiming for Sustainable Growth

    Sometimes, changing up your line can make it more appealing to new customers and your current customer base. Examples include:

    • Creating new products
    • Adding new features to existing products
    • Modernizing your offerings

    Diversification – A Risky but Potentially Rewarding Growth Strategy

    With a diversification strategy, you’ll be trying to launch a new product or service in a new market. It can be particularly challenging for small businesses to make this work because it generally requires immense amounts of market research and resources. Plus, it can be hard to recover if you don’t nail it. However, if your new market is similar to an existing market you serve and there’s a fair amount of crossover, it can work. For example, let’s say you run a trucking company and you operate a fleet of refrigerated trucks for the restaurant industry. It might not be a far stretch to purchase additional equipment and begin delivering supplies or chemicals. Again, though, research is paramount.

    2. Conduct Research on Whether your Chosen Area of Growth is Feasible

    As you explore potential target areas, ask yourself two questions:

    • How will expanding in this area help my business in the long run?
    • Is this focal area feasible?

    You may need to conduct market research to get a definitive answer. Consider polling current and potential customers or hosting some focus groups if you can’t find existing data to clarify the feasibility of your plan. For example, you may think expanding your territory is a good idea and have your sights set on operating in a neighboring county or state.

    3. Invest in Good Staff

    Your team can make or break the customer experience, so you’ll want to have the right mix of people on board and ready to help when your business levels up. When hiring, consider:

    • The total number of people you’ll need.
    • The skills each team member needs to have as well as unique skillsets you’ll require.
    • The culture you’re trying to create and the personalities, traits, and behaviors your business needs to achieve it.

    4. Setting Tangible Business Goals for Growth

    To measure your success later, you’ll need to set clear goals now. Most are familiar with the SMART Goals framework. That means the goals you set are specific, measurable, attainable, relevant, and time-bound.

    To give an example, let’s say you want to focus on product development. Your goal is to modify some of your current products, so they’re new products. Maybe you sell wooden horses, and you can easily convert them into unicorns. Instead of stopping there, you’ll want to quantify the number of unicorns you intend to make and set a clear date by which you wish to have them ready. Your final goal could be, “Have 500 unicorns ready for market by November 1.”

    To improve your odds of success, break this goal down into smaller milestones. You might need to note when you’ll need supplies by, how many you should have ready by specific dates, and so forth.

    5. Allocating Resources for Achieving Business Growth Goals

    No matter what your goal is, you’ll need resources to reach it. Consider making a two-pronged list that includes non-negotiable resources you must have to execute your plan and resources that can help you grow your business faster or more efficiently. A few areas that can serve as jumping-off points are covered below.

    Funding

    If you don’t already have cash and aren’t sure which solution is best for your situation, read “What Working Capital Options Are There for Small Businesses?” for an overview of solutions.

    Professional Service Providers

    You may need someone to handle your marketing campaigns and advertising, a consultant to help you nail down your market expansion strategy, a lawyer to examine contracts or help from another specialist. Connect with professionals ahead of time and build the expense into your budget too.

    Tools and Equipment

    Some costs are obvious. For example, maybe you operate a trucking company and are adding another trailer as part of your growth strategy. But, there are usually hidden costs too. In this case, there may be licensing and insurance too. You might also discover it’s hard to track all your trucks and trailers after your expansion, so you could need to include software too. Brainstorm with your team to uncover potential needs to ensure you’re prepared for them.

    Raw Resources and Supplies

    Take time to evaluate both obvious and hidden costs here too. For example, you may need extra wood and paint to make your unicorns, but you’ll also require additional packaging material for shipping if all goes well.

    6. Look at What Your Competitors Are Doing

    Watching what your competitors are doing too closely can kill innovation, but you should have at least some general knowledge of what they’re doing. That way, you can capitalize on any opportunities they’re missing and bring your offerings up to speed if they’re doing something that will chip away at your share of the market.

    Financing Your Business Growth with Debt-Free Working Capital

    If you’re in the B2B sector and invoice your clients after work is performed or goods are delivered, invoice factoring can give you cash injections as needed to help you scale your business. Top factoring companies like Charter Capital provide working capital solutions without adding debt, allowing businesses to grow sustainably. It’s similar to getting an advance on an invoice, but there’s no debt to pay back because your client ultimately pays their invoice, and most businesses can leverage it because it doesn’t have the same stringent requirements that bank funding options do. To learn more or begin the approval process, request a quote from Charter Capital, or contact us today for more information!