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Small businesses and small business owners

  • 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.

  • 7 Cash Flow Management Mistakes Businesses Should Avoid

    7 Cash Flow Management Mistakes Businesses Should Avoid

    7 Cash Flow Management Mistakes Businesses Should Avoid

    Cash flow management mistakes can throttle business growth. They’re also incredibly easy to make and can go undetected until serious issues arise. They’re one of the reasons why 90 percent of small businesses sought emergency funding during the pandemic, per the Federal Reserve Banks Small Business Credit Survey, and why even lesser cash flow problems can leave a seemingly successful business without working capital to cover payroll or purchase inventory under ordinary circumstances too.

    The goal of cash flow management is to get you in the “green,” also known as positive cash flow, where you have more money coming in than going out. Before you can work towards a positive cash flow, you need to know how much you need to earn to simply break even.

    However, you can avoid most common cash flow mistakes, so your business is prepared for unexpected expenses and has the cash it needs to grow. In this article, we’ll look at seven cash flow issues routinely seen in midsize and small businesses so that you can safeguard yours against them.

    1. Paying Too Much Attention to Profit

    While profit is a key indicator of financial strength, it’s not everything. “It is quite possible for a company to report profits but go out of business,” explains Aretha Boex of the Nebraska Business Development Center. “It is also possible for a company to be profitable and not be able to grow, secure financing, or attract investors.” With that in mind, it’s important to monitor your profit margin and business cash flow equally.

    2. Not Actively Requesting Payment of Receivables

    Sending out invoices has become such a routine activity for small-business owners that many don’t realize they’re extending credit, let alone verify the creditworthiness of customers before doing it. Start thinking of your accounts receivable as a short-term loan. Set payment terms that benefit your business. If you’re currently waiting 30, 60, or 90 days, reduce the span to days or weeks to accelerate your inflows. To speed payments further, consider adding penalties for late-payments and discounts for early payment.

    3. Not Monitoring Cash Flow Properly

    It’s hard to have effective cash flow management if you do not measure your inflows and outflows to begin with. So, if you aren’t currently using a cash flow statement to monitor your cash outflow and inflow, start now.

    Although one of your most impactful financial statements, a cash flow worksheet is easy to create. Excel even offers a free basic template to get you started, but you may want to select specialized software that can tackle your cash flow forecast as well. This is a helpful tool, as it can help you visualize how much cash you’ll have on hand at any given point in time so that you can make the most of it.

    4. Failure to Monitor Inventory Levels

    While many business owners worry about running out of inventory or not having enough to take on a large order, having an oversupply is just as worrisome. Items collecting dust on the shelf represent money that could otherwise be generating more revenue for your business either through growth activities or investments.

    Although the “right amount” of inventory to keep on hand will vary by business, industry, season, how long it takes to procure materials and other factors, you’ll generally get a feel based on historical data and regular tracking.

    5. Paying Certain Liabilities Too Early

    It’s important to pay your vendors in a timely manner for the sake of maintaining good relationships, and it’s good practice to cover general operating expenses as your terms dictate to avoid late payment penalties. Because of this, many business owners get in the habit of pushing out all upcoming payments as cash flows in. However, this creates a problem similar to inventory overstock if payments are made too early. In addition, the money you’re pushing out might be better spent elsewhere or could generate interest if invested. 

    6. Not Preparing for Slow Periods

    Seasonality impacts most businesses but manifests itself in different ways. For example, retail typically peaks in the fourth quarter. Logistics and transportation companies that support the industry often ramp up around the same time, though international shippers often see increases starting during the summer. Much focus is placed on the peak periods, but the slow periods are often overlooked.

    It’s important to remember that the income you make during a peak season needs to carry you through your slow season. You’ll need to have a surplus available to help you ramp up when the busy season kicks in again too. Effective cash flow management is paramount here. Rather than spending, you may want to find ways to put your money to work for you while ensuring it can be tapped into as employees need to be paid and expenses accrue during the slow period. 

    7.  Improperly Managing Taxes

    More than 90 percent of business owners overpay their taxes, according to Forbes research. For this reason alone, it makes sense to work with a tax professional. However, taxes are likely one of your most significant expenses and a significant source of stress, too, so even if you’re certain you’re one of the ten percent in the clear, it may be worth getting some help regardless. A specialist will help ensure your business is set up in a way that minimizes your tax liabilities and keeps you on track for deadlines throughout the year. Plus, they’ll have a wealth of business tax tips that are specific to your company so that you can keep more money in your pocket.

    Improve Your Cash Flow with Invoice Factoring from Charter Capital

    Even if you avoid all the common cash flow management mistakes, you may still find yourself short on cash from time to time. Invoice factoring can help in these situations by offering you same-day payment on your B2B receivables. Then, you can spend the cash in whatever way makes the most sense for your business while Charter Capital waits on payment from the client. Want to learn more or find out your rate? Get started with a free quote.

  • 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!

  • Are You Prepared for Your Peak Season? How to Ensure Your Business is Ready

    Are You Prepared for Your Peak Season? How to Ensure Your Business is Ready

    Is your business prepared

    “Give me six hours to chop down a tree and I will spend the first four sharpening the ax,” Abraham Lincoln reportedly said. While the source of the quote is debatable, the wisdom is not. As a small-business owner, your peak season is an opportunity to shine. You can reach a wider audience, attract new customers, and build lasting relationships that will carry you through the slower months of the year. However, there’s little margin for error, and you’re likely contending with an array of unique challenges, including inventory shortages and an influx of temporary employees. Whether you run a warehouse or are in e-commerce, transportation, personal services, or something else entirely, the sooner you start “sharpening your ax,” the smoother your busy season will go and the stronger your business will become. Use this guide to prepare and make the most of the time you’ll have.

    Make Alterations to Your Operational Strategies

    Preparation is key to success during busy periods. Start by examining your metrics from the previous year and prior peak periods to identify trends and any shortcomings you faced. You can also gather stakeholders for a discovery session to see if they see potential issues. Staffing is a big one that must be carefully weighed with labor expenses. Raw materials, inventory management, and equipment are also common concerns. Can you ramp up for a busy day or accept a large order with ease? If not, adjust your strategy or create contingency plans that will give you the boost you need.

    Ensure Temporary Staff Are Properly Trained

    Last year, UPS alone had to hire 100,000 temporary workers for the holiday season, according to Transport Topics. As the largest transport company in the U.S. by revenue and third-largest employer of seasonal employees, it certainly knows a thing or two about gearing up temporary help. The company’s gone so far as to install an artificial ice patch in its training facility to give delivery drivers practice walking on slippery surfaces. All drivers undergo extensive training before hitting the road. Those taking on 18-wheelers have three weeks.

    Safety isn’t the company’s only concern, though. Customer service remains a priority. “The demands we have this time of year create a spike and, in order for us to do that in a customer-satisfying manner, we have to make sure they know how to do the job,” Stefon Harris, then acting Vice President of Human Resources for U.S. Operations, told Business Insider.

    While your team may not need to practice walking on ice, equipping them with the knowledge to perform their jobs well and maintain customer satisfaction is paramount. Not only will it help you win over the new customers you’re seeing and turn them into lifelong fans, but it also gives you a glimpse into who might be an ideal candidate to hold onto once the season concludes.

    Most seasonal employees are in place a month before seasonal sales ramp up, with some companies onboarding staff two months or more in advance. That means if your peak season is November and December, your team should be largely in place in October. It takes an average of 23.8 days to fill a position per Glassdoor research. Certain industries take longer. So, working backward, you’ll want to start planning your recruitment and training strategy during the summer and have job postings up by August or September to ensure a smooth process for this type of scenario.

    Continue Marketing Your Company to Maximize Exposure

    Many small-business owners stop marketing when business ramps up for the season, thinking there’s no benefit because they’re so busy. Nothing could be further from the truth. First, if you don’t attract the people looking for your product or service while they’re looking for it, your competitors will. And, they will keep them. To build your business during the rest of the year, you must maximize who you can reach during the peak period.

    Secondly, consumers in many industries require longer nurturing periods. If you suddenly stop marketing to them because you’re busy, you give the relationship you’ve already built time to cool off.

    Lastly, certain marketing techniques grow more effective with time, especially when you’re running digital marketing campaigns. Each share on social media, visit to your site, and even minute spent on your site can build your reputation in the eyes of Google, so it sends you more traffic going forward. Use it to your benefit when people are actively engaging in online shopping and searching for what you do.

    While you may want to adjust a marketing campaign here and there to meet your current needs or capitalize on shifts in consumer behavior, you’ll lose ground if you stop altogether.

    Don’t Lose Touch with Your Current Customer Base

    Consider this:

    50 percent of “loyal” customers have left a company for a competitor they felt was more relevant and could better satisfy their needs.33 percent of customers say they’ll consider switching companies after a single instance of poor service.A 5 percent increase in customer retention correlates with at least a 25 percent boost in profit.

    These statistics from HubSpot hit home an important point. Your existing customers are valuable, and your relationship with them needs to be maintained. Whether that means offering special perks for your long-time customers, giving them a deal, or simply just checking in to ensure their needs are being met, your gesture will go a long way.

    It’s also wise to take stock of what and who has been bringing your business success. Sometimes companies get caught up in trying to capture new markets that they forget who made their business. The McDonald’s Arch Deluxe is a prime example of this. If you don’t remember it, this was McDonald’s attempt to be “sophisticated.” The company reportedly spent $150 million advertising it per Mashed, releasing a series of commercials that included Ronald McDonald with golf clubs and highlighting how it wasn’t intended for kids. It missed two big points. First, people going to the restaurant aren’t visiting for sophistication. Secondly, it alienated its audience by being less kid-friendly. It failed as a high-price menu item and failed when the company tried to revive it at a lower price point. While this clearly didn’t do the company in as a whole, it certainly could have if it was smaller.

    Ask for Referrals

    Referrals are one of the best ways to bring in new customers. They tend to be easier to sell to because someone has already warmed them up to the idea of doing business with you. Plus, they have a 37 percent greater retention rate, and you can expect at least 16 percent more in profits from them per Extole. Use the busy season when you’re seeing more of your customers and people are looking for your services to ramp up referrals. This can be as simple as asking for referrals, but you may generate more interest with a formal incentivized program.

    Stock Up on Inventory and Supplies

    Early ordering gives you several advantages. First, you’ll probably have more cash on hand, so you may be able to negotiate volume discounts or other deals with your vendors. Secondly, it can save you from having to pay premium prices when everyone else wants the same thing or, worse, not being able to get shipments you need because your supplier is out or something happened to the supply chain.

    Forecast the Season

    As your peak season approaches, forecasting and planning ahead are critical to ensure your small business operates efficiently during the busiest time of year. Many small business owners rely heavily on historical data and customer feedback to predict peak demand and streamline their operations. This can help your business pivot quickly and avoid costly mistakes like stockouts or supply chain delays.

    Proactive Tips to Help Small Businesses Forecast and Streamline for Peak Season Success

    Start by reviewing sales data and customer behavior from your last peak season. Are there clear trends in order volume, product shortages, or customer preferences? Use this insight to optimize stock levels and improve your reorder schedule. If you’re a retailer or in e-commerce, real-time tracking and an integrated inventory management system can help reduce friction in order fulfillment.

    Customer data can also shape your dynamic pricing strategy or influence how you schedule to accommodate peak times. For example, adjusting pricing based on demand or promoting slower-moving items earlier can help spread out traffic and increase sales.

    Finally, consider how your business runs during downtime. Investing in systems now, like automation tools or generative AI for marketing, can reduce stress when the season begins and improve your ability to deliver excellent customer service when demand surges. For some businesses, these systems also help highlight when external funding support, like invoice factoring, may be needed to handle surges in demand.

    Allocate Your Resources Wisely

    Periods of growth and surges are always difficult to cope with because you’re trying to meet today’s demands with yesterday’s smaller profits. Work out your budget ahead of time and determine where your cash will be going. Whenever possible, set a little aside for the unexpected too.

    Address Cash Flow Issues Required to Get Through the Busy Season

    If you’ve balanced your budget and see points where cash will be tight, put an ace in your pocket and set up some kind of cash flow solution ahead of time. Common solutions are bank loans and lines of credit, but if your small business doesn’t qualify for these options because you don’t have strong credit, you already have debt, or you don’t want debt, you can also get set up to factor your invoices. With invoice factoring, you sell your unpaid B2B invoices to a factor at a slight discount. They advance you the cash right away so you can cover payroll, buy supplies, or take care of whatever you need. Although approval and funding are generally quick, you can become established with one now to save time should you want to factor later when you’re busy. To get started, request a rate quote from Charter Capital.

  • How Invoice Factoring Can Help You Expand Your Business

    How Invoice Factoring Can Help You Expand Your Business

    Invoice Factoring Helps Expand Your Business

    Invoice factoring or accounts receivable financing is often leveraged by small businesses as a way to get the working capital necessary for expansion. However, if you haven’t heard of the concept before, you’re missing out on all the benefits a factoring company can offer. Below, we’ll break down the basics, so it’s easier to see if invoice factoring is the right tool to help your business grow.

    Why Invoice Factoring Matters

    Each working capital solution is appropriate for specific situations, and invoice factoring is no different in this respect.

    Best for Small Businesses That Need Cash Fast

    Most working capital sources take weeks or months to process and approve your application. With invoice factoring, you get fast cash. Small businesses can usually get cash within a couple of days or even on the same day if they’re working with a factoring company like Charter Capital.

    Best for Startups Expanding Their New Businesses

    Startups normally have a very difficult time qualifying for financing because they haven’t been in business long. Time in business is not a major factor in qualifying for invoice factoring, so it’s much easier to get approved.

    Best for Business Owners with Low Credit Scores

    When faced with denials on a business level, many small-business owners turn to their personal scores and creditworthiness to get business funding. However, roughly 39 percent of small-business owners qualify as “credit ghosts” according to the Miami Valley Small Business Development Center. That means their personal credit score is 620 or lower and they have a limited credit history or no history at all. It’s all but impossible to qualify for traditional financing with this background.

    The problem is further compounded by the very steps business owners often take in light of their credit woes and capital shortcomings. A full 51 percent of successful entrepreneurs have willingly denied themselves a paycheck to keep their business afloat, per a Business News Daily report. More than a quarter held off on their own pay for two to six months, while an almost equal portion went six months without an income. Meanwhile, CNBC reports that 21 percent use their personal savings. These things essentially lock in their status as credit ghosts, creating a cycle that drains their personal reserves and diminishes their personal creditworthiness even more.

    However, invoice factoring doesn’t rely on personal credit and allows business owners to tap into cash without using their personal savings or trapping them in debt. This makes it easier to qualify and gives the business owner a leg up in establishing good credit, a twofold solution to this common business problem.

    Why Would a Business Use Factoring?

    Businesses use factoring to address a multitude of situations.

    Cash for Expansion

    Sometimes companies use their invoices to get the cash they need to purchase another location, tap into a new market, or expand in other ways.

    Payroll and Other Daily Operational Expenses

    Because payroll is often the greatest expense for small businesses, organizations often use their invoice advances to cover it and ensure their teams and employees are paid on time, even if customers aren’t paying in a timely manner. For example, staffing factoring is frequently used by staffing agencies to maintain steady payroll funding without waiting for client payments.

    PPE

    Businesses today are coping with a major unexpected expense—personal protective equipment (PPE). Although most don’t have a budget for purchasing things like masks, or even extra disinfectant, they’ve fast become a mandatory business expense.

    Inventory and Supplies

    Virtually all businesses must purchase goods from suppliers, including raw materials which are turned into an end product ready for sale or supplies, like fuel and printer paper. You can tap into your unpaid invoices to get cash for any of these vital purchases.

    Equipment

    From manufacturing equipment to trucks and tires or even office computers, invoice advances can supply the funds and provide a good financing option.

    Paying Off Debts

    Most business funding options rely on debt—you borrow money and then pay it back with fees and interest. When you’re working with a factoring company, there’s no debt to pay back, so it can be a good way to pay off high-interest loans or other debts with excessive fees.

    Marketing

    We talk about the importance of marketing in Top 7 Reasons Why Startups Fail. Suffice it to say, it’s important to keep up with your marketing efforts if you want your company to grow. Many organizations use the cash tied up in their invoices to enhance their marketing efforts, so they can build a healthier business.

    Securing Better Deals or More Work

    Oftentimes, vendors will offer better deals to companies that place larger orders or pay in advance, but you’ll need to have working capital at the ready to lock in a deal. Leverage invoice factoring for a quick cash flow injection.

    Offering Better Payment Terms to Win More Business

    When you know that you’re going to get paid promptly regardless of how long the customer takes, you’re free to provide better terms, such as a more competitive bid or a longer repayment term. Factoring will allow you to do this, so you can improve customer satisfaction and win more business.

    How Invoice Factoring is Being Used to Improve Cash Flow

    What are the benefits of invoice factoring? Invoice factoring works by providing you with an instant cash payout for your outstanding invoices. It shortens the length of time between performing work or delivering goods and getting paid for your efforts. That way, your cash flow is consistent, and your business operations aren’t held back by slow-paying customers.

    Small Business Can Use Invoice Factoring as an Alternative Financing Option to Loans

    Small business factoring is an ideal alternative to business lending in many situations, particularly when cash advances are required quickly. As demonstrated earlier, it works when businesses or business owners don’t qualify for traditional small business loans. However, it’s also beneficial when the organization simply doesn’t want to take on more debt. That might be true if you’re trying to build your credit in advance of a loan application or are trying to minimize your debt ratio for other reasons.

    One of the primary benefits of invoice factoring is its flexibility across various industries. For example, security factoring helps security guard firms maintain stable cash flow to cover payroll and operational costs, allowing them to focus on providing top-notch security services without the financial strain of waiting for customer payments. This industry-specific approach demonstrates how factoring can be adapted to meet the unique needs of growing businesses.

    What Are the Disadvantages of Invoice Factoring?

    With so many benefits to invoice advances, it might be hard to see the downside. However, it’s worth noting that it’s not right for every situation.

    You Must Submit Each Invoice to the Factoring Company to Obtain Funding

    When you work with a factoring company, it’s usually up to you to decide which unpaid customer invoices to factor and when to factor them. That’s usually a good thing because it means you can process all your other invoices as you normally would and only leverage factoring when you have immediate cash needs or when you know a client will pay slowly. However, the flip side of this is that, to obtain funding, you do need to send your factoring company each invoice you want to factor.

    Your Factoring Company Will Have Contact with Your Customers

    The factoring company has the right to communicate with your customers to collect the invoices and to make sure all is OK. Most organizations are familiar with third parties in billing, so it’s generally not an issue, but it is worth mentioning. Make sure that when you select a factoring company, you choose one that is known for its customer service and its ability to work with you and your customers.

    How Much Does Factoring Invoices Cost?

    We dig into the cost of factoring a bit more on our website, but the short version is that it depends on things like the volume of invoices being factored, the total value of factored invoices on a monthly basis, and how long it takes your customers to pay. Charter Capital prides itself on offering some of the most competitive rates in the industry, with some factoring fees as low as one percent.

    Get a Complimentary Rate Quote

    If you think invoice factoring might be right for your small business, start with a complimentary rate quote from Charter Capital.

  • Top 11 Benefits of Small Business Invoice Factoring

    Top 11 Benefits of Small Business Invoice Factoring

    Small Business Invoice Factoring Benefits

    Invoice factoring is one of the most popular cash flow solutions, but all too often, small-business owners don’t hear about it until they’ve already leveraged a less-than-ideal tool or they overlook factoring because they’ve come across some misinformation on the net. On this page, we’ll cover some invoice factoring FAQs and then break down what makes it so popular.

    Factoring FAQs

    To fully understand the benefits of invoice factoring, it’s essential to know the basics, including what invoice factoring is and what it’s not.

    What is Invoice Factoring?

    Invoice factoring involves selling your accounts receivables (unpaid B2B invoices) to a third party at a discount. Known as a factoring company or factor, the third party pays you immediately for the invoices and then collects payment from your customers.

    Is Invoice Factoring a Business Loan?

    Invoice factoring is not a loan. You’re not borrowing money, and there’s nothing to pay back. It’s your customer’s job to pay their invoice.

    What is a Factoring Account?

    Your factoring account allows you to do business with a factoring company. You’ll set it up at the onset of your agreement and then be able to factor invoices according to the agreed-upon terms.

    What Are the Pros of Invoice Factoring?

    Invoice factoring can be a strategic fit for businesses facing rapid growth, seasonal demand shifts, or cash flow gaps caused by slow-paying customers. It’s especially useful for companies with strong sales but limited access to traditional credit. Many small businesses choose factoring over loans because it provides immediate funds without adding debt or requiring long-term commitments.

    Top 11 Benefits of Small Business Invoice Factoring

    Now that we’ve covered the basics, let’s look at how invoice factoring can support your business growth and financial health. Below are 11 powerful benefits to consider.

    1. You Get Immediate Cash Flow

    It’s difficult for small businesses to wait for payment. Invoice factoring works by giving you a quick cash injection by tapping into your unpaid invoices as needed.

    2. It Can Help Boost Ongoing Cash Flow

    You’re in control of when you factor. So, while many small businesses use it occasionally to meet a cash flow shortfall, others factor more often to keep their cash flow steadier.

    3. You Have a Better Chance of Getting Approved

    Financial institutions such as banks that provide traditional loans often deny small businesses because they don’t have good credit ratings or haven’t been in business long. Traditional lenders are often less accessible to small businesses, especially those with limited credit history or inconsistent revenue. Factoring isn’t a loan, so your approval isn’t contingent on these things. The company you work with will be more concerned with the creditworthiness of your customers—the ones they’re collecting payment from. With that in mind, it’s much easier to get approved.

    4. You Can Have Professionals Managing Your Accounts Receivable

    Chances are, managing your invoices isn’t what you do best. It’s just something you do as a part of running a small business. As accounts receivable pros, the company you work with will have more experience managing receivables and tools that make paying invoices easier for your customers, so the process will likely be much smoother, and payments will come in quicker.

    5. You’ll Have Extra Support

    Invoice factoring is not just a financial solution. You’re essentially outsourcing your receivables to an expert. That frees you from the tedious task of chasing money and can improve your customer relationships.

    6. Invoice Factoring is a Flexible Cash Flow Solution

    As mentioned earlier, you’re in control of which invoices get factored. You can set up your factoring account now and not leverage it for months or start using it right away and you don’t have to agree to a long-term contract. This makes it ideal for small businesses that experience seasonal lulls and those with occasional needs.

    7. You Can Grow Your Business with Invoice Factoring

    Once the cash goes into your pocket, you can spend it any way you wish. Many businesses put the funds toward immediate needs, such as payroll, overhead expenses, or purchasing supplies. However, factoring can also be used for growth-related needs, such as marketing, opening a new location, purchasing new equipment, taking on more work, or offering more relaxed payment terms to win a new customer or bid.

    8. You Avoid Taking on Additional Debt

    Not all debt is bad, but businesses that get involved with things like merchant cash advances and lines of credit often find themselves in a debt spiral they can’t get out of. This isn’t a problem with invoice factoring since it’s a no-debt solution.

    9. You Can Manage Cash Flow to Maintain Positive Working Capital

    Simply put, you need positive working capital to ensure you can pay all your own bills. Unfortunately, slow-paying customers can throw a wrench in that, causing small businesses to run out of money despite working hard and efficiently. With cash flow steadied through invoice factoring, it’s easier to ensure you have cash on hand to cover all your operating costs.

    10. Invoice Factoring Protects Your Finances from Delinquent Clients

    Slow-paying customers are damaging to your business, whether that’s through obvious issues, such as running out of cash, or through opportunity cost. Invoice factoring can serve as a layer of protection from these common concerns.

    11. Working Capital Financing is a Few Clicks Away

    When you work with an experienced factoring company, it’s easy to get set up and you can get funded right away. At Charter Capital, we’re even able to provide our clients with same-day funding.

    Expanding Your Small Business with Invoice Factoring

    Leveraging invoice factoring can be a powerful strategy for small business growth and financial stability. It helps owners bypass traditional financing hurdles by providing immediate access to capital based on unpaid invoices, without adding debt or risking cash flow interruptions.

    Invest in Growth

    Beyond covering day-to-day expenses like payroll or supplies, working with an experienced invoice factoring company can give you the flexibility to invest in long-term strategies, such as marketing, opening new locations, upgrading equipment, or taking on larger projects. By turning unpaid invoices into working capital, you can seize opportunities when they arise and keep your business moving forward.

    Cover Inventory Costs

    For businesses carrying significant inventory, factoring can effectively act as one of the top inventory financing options by providing the cash you need to purchase stock without waiting for slow customer payments. This ensures you can maintain inventory levels to meet demand and support growth.

    Get Tailored Factoring Solutions for Your Industry 

    Choosing a factoring partner with industry expertise can make a big difference. For example, staffing agencies benefit from specialized staffing factoring services that address unique cash flow challenges and payroll needs, while freight brokers gain advantages from freight bill factoring designed to keep carriers paid promptly and trucks on the road.

    Request a Quote for Your Small Business

    To see how easy and affordable invoice factoring is, connect with a factoring company. Start by requesting a quote from Charter Capital.

  • Top 8 Reasons Why Startups Fail

    Top 8 Reasons Why Startups Fail

    It’s often thrown around that 90 percent of startups fail. Where does this number come from? Is it legit? And, more importantly, if it is, what can you do to avoid being one of them?

    How Many Startups Fail

    Small Business Startup Failure

    Sadly, this startup failure rate is accurate. Researchers from UC Berkeley & Stanford came together to create the Startup Genome Report a few years back, which revealed that 90 percent of startups do indeed fail, and it’s most often the result of “self-destruction” rather than competitive issues. While the scale may shift in that regard during difficult economic times, the data is clear. Self-awareness and education can go a long way in creating a stable and profitable company. Below, we’ll go over some of the biggest reasons for startups failure, so you can arm yourself with the tools necessary for success.

    Why Startups Fail

    1) Good Idea, Bad Business

    Many small business owners and startup founders start out with a fantastic idea they’re sure is going to take the world by storm but what they envision people wanting during product development and what people genuinely desire aren’t always the same. After postmortems with 101 startups, CB Insights found that 19 percent of companies failed because their products were not user-friendly.

    This is theoretically an easy fix if you’re actively requesting feedback from early customers and taking what they have to say to heart. However, 14 percent of failed businesses don’t hear their customers out, and seven percent don’t even try to pivot when they need to. A further ten percent don’t pivot well.

    “Startups that pivot once or twice raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all,” say Startup Genome Report researchers.

    The bottom line: Listen intently to your customers and be ready to pivot and compromise to meet their needs.

    2) Expanding Too Quickly

    It’s easy to think of expansion in terms of adding more shops or products, but the Startup Genome Report lists several areas in which businesses may expand too rapidly.

    • Customer- Spending too much on customer acquisition and/or overcompensating on lack of demand with marketing and press.
    • Product- Building a product that doesn’t solve a problem, focusing on scalability before product-market fit, and/or adding features that are desired, but not needed.
    • Team- Hiring too many people, bringing in the wrong mix of people/ levels, and/or having more than one level of hierarchy to start.
    • Financials- Not having enough cash on hand to handle expansion and/ or having too much cash, which can result in undisciplined spending.
    • Business Model- Not having a business model, focusing on profit too early, failing to pivot, and/ or failing to examine goals and progress.

    The bottom line: Map out your own business plan ahead of time with clear benchmarks and metrics to meet. Schedule regular progress audits.

    3) Lack of Market Demand

    It’s easier to have a disconnect between product and consumer than one might think. “We had no customers because no one was really interested in the model we were pitching. Doctors want more patients, not an efficient office,” reported a patient communicator in a CB Insights postmortem. In all, their analysts found that 42 percent of startup failures involve a lack of market demand.

    The bottom line: Get to know your audience before launch and identify their pain points. Don’t ever assume you know what they are.

    4) Poor Marketing

    Many startups are so passionate about their product or service that they expect word-of-mouth marketing to create sales. The reality is, their audience may never even learn they exist. Others recognize the importance of marketing, but don’t have the systems and people in place to effectively handle marketing strategy, eventually hitting a wall they can’t overcome. Per CB Insights, issues like these contribute to 14 percent of startup failures.

    The bottom line: Have someone with marketing expertise on your team even at the early stages to help identify your target audience and how to reach them.

    5) Lack of Passion

    There is no denying entrepreneurs are a passionate group, but this passion can become all-consuming and kill work-life balance. Harvard Business Review reports that virtually all entrepreneurs say they experience some degree of burnout, and a full quarter define it as “moderate burnout.” As burnout sets in, passion dies down and so does the small business.

    Other times, business pivots take the startup in a direction the founder never expected. As the creator of a blog commenting system explained to CB Insights, “We didn’t really care about journalism, and weren’t even avid news readers.” This light-bulb moment occurred only after the product was launched, leaving the team to run a new business they had no interest in.

    Issues like these are present in nine percent of failures, per the postmortems.

    The bottom line: Pace yourself and be ready to move in new directions or bring on people who are passionate about what you do if it shifts.

    6) Poor Management Team

    Nearly a quarter of startups fail because they don’t have the right team, while 13 percent fail because of disharmony among the team and/ or investors, per CB Insights research. All too often, this comes down to the management—people placed in managerial roles who may not have the skills and experience to manage teams but do so because startup culture requires team members to wear many hats. Unfortunately, bad management spreads poor morale and damaging practices, which can infect the entire company.

    The bottom line: Ensure your managers have the skills and experience necessary to lead a team. Invest in training if you’re promoting from within or bring on external help if your existing team is unprepared for the role.

    7) Not Placing Enough Emphasis on Customers

    Ignoring your customers and what they have to say is a huge contributor to startup failure. User feedback is a vital part of the startup journey and should be prioritized throughout your business journey. Whether the feedback you receive is good or bad, you should always take it seriously. Good feedback tells you what you should keep doing within your business, and bad feedback gives you insight into what needs to change within your business. By keeping an eye on what attracts customers to your business and what deters them, and adjusting your business strategy accordingly, you can improve your potential client base and create a network of loyal, repeat customers.


    The importance of customers is not just about retaining and attracting new clients. Another common reason for startup failure is that business owners assume that, because they build an interesting website and have a good product or service, customers will come flocking. They forget to take into consideration the trust cost of acquiring the customer (CAC). Contrary to what many people assume, the cost of customer acquisition is actually higher than the lifetime value of that customer (LTV). You need to figure out a realistic CAC and then determine an actionable strategy to ensure that you acquire your customers for less money than they will generate.

    8) Running Out of Cash

    Close to one-third of businesses run out of cash, CB Insights analysts say. Some of this boils down to not having enough cash to begin with or failing to recognize the high costs of business development, but other times, it’s simply mismanagement of cash or struggling with cash flow issues, like slow-paying customers.

    The bottom line: Secure the funding you need in advance and have a backup plan to bridge the gap in case cash issues emerge.

    Get the Cashflow Your Startup Business Needs

    Whether your startup is light on working capital, is coping with growing pains, or needs funds to pivot, Charter Capital can help and contribute towards a profitable business. By leveraging invoice factoring, your company can get paid for its outstanding B2B invoices instantly—no more waiting on customers to pay their bills. Learn more about how invoice factoring works or contact us for a complimentary rate quote.

  • What Working Capital Options Are There for Small Businesses?

    What Working Capital Options Are There for Small Businesses?

    small business working capital during covid

    Small businesses have historically turned to banks to get the funding they need, but traditional funding is expensive, and it’s always been tough to get approval. In the throes of COVID-19, approval rates further plummeted to a mere 11.5 percent, according to the Small Business Lending Index. No doubt, a result of the increasing difficulties small businesses face trying to keep their doors open amid a pandemic and make good on their payments.

    As one of the most economically challenging years on record comes to a close, and small-business owners look to the future, many seek reliable working capital solutions. Below, we’ll explore what’s out there and which solutions are most viable for those persevering through the pandemic and its aftermath.

    Alternative Loans vs. Traditional Loans for Small Business

    There are distinct differences between alternative business loans and traditional loans offered by banks. Whereas the banks have gravitated toward federal programs and have a slew of guidelines they must follow to participate, alternative programs have been able to maintain their community focus by eschewing them. That in mind, alternative business loans are a great option when banks fall short.

    Borrower Requirements

    Banks have rigid borrower requirements. In short, banks are incredibly risk averse, and they often work with SBA loans. It’s hard to qualify for an SBA loan to begin with, but if a borrower defaults on one, the SBA picks up most of the outstanding balance, so the bank isn’t on the hook. Generally speaking, they’re not eager to lend cash unless they’ve got an assurance like that or you’re solid on paper; have a good credit score, have steady cashflow, are making strong profits, etc. Many small businesses simply can’t meet the criteria, and even those which did prior to COVID-19 struggle today.

    Alternative business loans typically have reduced borrower requirements. Alternative funding options rose to popularity because of the obvious gap banks leave behind. There are solutions for virtually every stage of growth, whether you’re still building credit, experience revenue hiccups, or receive payments inconsistently.

    Speed of Funding

    It can take weeks or months to get bank funding. There are lots of regulatory hoops to jump through when you get traditional lending. Suffice it to say, even an SBA Express Loan can take 30-60 days to pay out, while more standard options typically fall in the realm of 60-90 days.

    Funding is generally faster with alternative lending. Each lender and program is different, but there are alternative lenders that can deposit funds in your account the same day you’re approved. It’s quite common for a small-business owner to complete the entire process and have their cash in less than a week.

    Types of Alternative Business Loans

    Because traditional lending leaves small businesses underserved for lots of reasons, there is all sorts of different types of alternative lending options to help fill the gaps.

    Business Term Loans

    The business term loan is what comes to mind when most people think of a loan, even if they don’t know the proper term. In short, a lender provides a lump sum for a specified period of time and the borrower pays it back in installments with interest. Criteria for qualifying for business term loans is rigid. You’ll typically need excellent credit, steady cash flow, and to meet other requirements unless you’re using collateral.

    Lines of Credit

    Just like credit cards, lines of credit are accounts with a predetermined limit that borrowers can draw upon. When the account has a balance, the borrower must make regular payments toward it. Requirements for qualifying are similar to a business term loan.

    Invoice Factoring

    Although technically not a loan, invoice factoring allows B2B companies to sell their invoices to a third party, known as a factor or factoring company. The factoring company gives the business a lump sum payment that covers most of the invoice, then collects from the company being invoiced, and then sends the remaining payment, minus a nominal service fee, to the business. It’s easier to qualify for factoring because the invoice serves as collateral and instant funding is sometimes an option.

    Merchant Cash Advances

    Also known as MCAs, merchant cash advances are typically used by companies that accept credit card payments. The lender, typically the company processing the credit card payments, looks into how much the business earns in credit card payments and establishes a loan amount based on the income. Rather than the business making payments to the lender, the lender deducts a portion of income from future sales to cover the interest, fees, and balance. Some MCAs work like term loans, where the borrower receives a single lump some, while others work like lines of credit and the borrower can draw from their available limit. Because the payments serve as collateral, it’s usually easier to get approved for an MCA but it’s common for borrowers to pay 20 to 30 percent for the privilege.

    Peer-to-Peer

    Sometimes referred to as P2P, peer-to-peer lending allows individuals and groups of people to fund a loan. With today’s modern P2P platforms, individual contributions can range from a few dollars each to well into the thousands and, although these are typically everyday people, more often than not, they’re looking for proof that they’ll get their cash back with interest just like the banks would. Sometimes the platforms set the exact same criteria banks use too. That in mind, it’s not always easier to get a P2P loan than it is to get one from a bank.

    Crowdfunding

    Often confused with peer-to-peer lending, crowdfunding gives the investors an equity stake in the company. Although you don’t have to pay the investors back, they retain their stake indefinitely, meaning they will earn income from your business for as long as it’s producing income. An example of this is Kickstarter. Although the requirements aren’t as stringent as a bank’s, the business owner must essentially dazzle investors enough to get their buy-in and build relationships to encourage contributions.

    SBA Loans

    Small Business Association (SBA) loans actually come from a bank, just like other traditional lending solutions do. That means they’re not really alternative loans, but they’re widely misunderstood, so we’ll cover them here. With an SBA loan, the SBA agrees to pay back most of the loan if the borrower defaults. This gets banks to agree to lend more often because there’s less risk for them. However, the criteria for approval is very close to what you might find from a traditional bank loan. A new business, or one with bad credit, is going to have a hard time getting an SBA loan.

    Equipment Loans

    With equipment loans, the item you purchase is used as collateral, so it’s sometimes easier to get approved. If you need tires for your truck, machines for manufacturing, office items like computers or printers, an oven for your bakery, or similar equipment required to operate, an equipment loan may be ideal. However, you will typically need to pay at least 20 percent of the cost of the item and meet other eligibility criteria.

    Best Working Capital Financing Options for Small-Business Owners

    Coming out of 2020 and throughout 2021, small-business owners are likely to become even more reliant on alternative lending to get working capital than they have in the past. A few of the best working capital financing options for small-business owners are outlined below.

    Funding Circle: Best for P2P Loans

    Offering some of the most competitive rates among online lenders, Funding Circle is a solid P2P choice. APRs range from 12.18 to 36 percent, there’s no minimum revenue requirement, and you can get cash in as little as three business days. However, you will have to have a minimum credit score of 660, plus their process requires a business lien and personal guarantee.

    Kiva: Best for Microloans

    The non-profit crowdfunding platform Kiva offers interest-free loans of $1,000 to $10,000. It relies on the premise that everyday people will read your personal story and want to fund your loan, with each person providing $25. In the background, Kiva actually works with larger lenders and full underwriting teams who fund the loans in a more traditional manner. However, the lenders are more willing to loan because some of their risk is mitigated by people chipping in.

    Accion: Best for Startup Business Loans

    The non-profit Accion provides microloans and general small-business loans ranging from $200 to $750,000 and pair it with counseling and mentoring to make entrepreneurs more successful. Their goal is to help the most vulnerable groups succeed, and as such, they focus on lending to women, veterans, people with disabilities, Native Americans and other minority business owners. The minimum credit score starts at 575 and APR ranges from 7 to 34 percent for most loans.

    OnDeck: Best for Repeat Borrowing

    If you have a credit score of at least 600, OnDeck may be able to get you cash on the day you apply. However, the company has a fixed-fee structure, which means you won’t save anything by paying the loan off early and APRs can range from 9 to 99 percent.

    StreetShares: Best Balance of Rates/Requirements

    Businesses that don’t usually qualify for loans due to limited time in business or low revenue may have better luck with StreetShares. With a minimum credit score of 600, borrowers can qualify for as much as 20 percent of their annual revenue and get an APR somewhere between 8.00 and 39.99 percent.

    Charter Capital: Best for B2B Companies with Invoices

    Offering invoice factoring for a wide range of industries, Charter Capital provides same-day funding without taking on a loan that needs to be repaid. Because factoring relies on the creditworthiness of the customer paying the invoice, even businesses without good credit can qualify and there’s no long-term contracts.

    What Are the Uses of Alternative Loans?

    Alternative loans can be used the same way traditional loans can, though some are set up to help with specific needs.

    • Payroll
    • Equipment
    • Real Estate and Expansion
    • Inventory
    • Vendor Payments
    • Working Capital
    • And More

    How to Obtain Alternative Financing

    Getting started with alternative financing is easier than you might think.

    1) Find out which types of alternative financing are right for you. Use the list on this page to get a better feel for which types work best for various needs and what options are likely to deliver the best value.

    2) Talk to various lenders. See if they will provide you with a free estimate or rate quote, but be wary of companies that do hard credit checks in order to do this. Whereas a soft check won’t harm your credit score, it can be difficult to get approval for a loan if you have recent hard inquiries.

    3) Ask for it in writing. Look over your contract and their proposed rates to ensure everything is in order. Watch for hidden fees and penalties. Try to find options you can pay off early or that don’t require contracts.

    4) Get advice if you need it. Use resources like the BBB and review sites to see what experience others have had with a lender. Talk to other business owners who have had needs similar to yours and have gotten alternative financing.

    5) Compare your options. When you have a group of lenders and packages, compare them together and see which one is right for you.

    Explore Invoice Factoring with Charter Capital

    If getting an instant cash injection without taking on a loan sounds ideal for your situation and you invoice other businesses, get a free factoring rate quote from Charter Capital.

  • Big Companies Are Slowing Supplier Payments

    Big Companies Are Slowing Supplier Payments

    As the credit crunch continues to intensify, large companies are employing strategies to shore up their cash flow constraints by delaying payments to their suppliers.

    In a recent article from the Wall Street Journal, “Big Firms Are Quick To Collect, Slow To Pay”, corporations are attempting to beef-up their collections all while slowing down their accounts payable to 60 days or more. As revenues for large corporations continue to slow in an already weak economy, they are putting the cash flow burden on their suppliers.

    Since many of the suppliers of larger companies are small to mid-market businesses, they may carry an additional burden due to the ever dwindling availability of bank loans or lines of credit. Also, small to mid-sized businesses have little bargaining power when dealing with their larger customers and are forced to accept more lengthy terms. This can have a devastating impact on suppliers that are already strappedAn oil and gas worker wearing a safety helmet and uniform stands in front of an oil pump jack at dusk. for cash.

    As business owners are already struggling with cash flow in today’s economic environment, financial relief seems to be scarce. However, Accounts Receivable Financing is an often overlooked choice for businesses to manage their cash flow. This form of financing (also known as Factoring), is a financial tool that allows businesses to capitalize on the power of their outstanding invoices. Factoring is a valuable mechanism to turn a business’ invoices into immediate cash, enabling them to fund business operations.

    It is not widely understood, but a factoring firm provides funds to its clients based upon its clients’ accounts receivable. Most invoices billed to credit worthy customers can qualify. Banks, on the other hand, must consider more stringent criteria before qualifying a borrower for any type of funding. In most cases, when considering assisting a business based strictly upon its accounts receivable, factoring companies can provide funds when a commercial bank cannot.