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Small businesses and small business owners

  • 9 Things That Might be Stalling Your Business Growth

    9 Things That Might be Stalling Your Business Growth

    9 Things That Might be Stalling Your Business Growth

    Is your business growth stalling? Sometimes, the signs are obvious, like when your numbers plateau. Other times, there are warning signs growth is about to stall or that it’s becoming more challenging to sustain your current rates. While this may be dismaying, the good news is that you’re likely catching the problem before it can cause serious harm. Addressing the issues and applying effective business growth strategies will help.

    Below, we’ll walk you through warning signs and common issues that stall business growth so you can get back on track quickly.

    Signs Your Small Business’s Growth is Stalling

    The signs of growth stalling may be apparent in the late stages, but it isn’t always obvious at the start. Here’s what to look for.

    Sales Efficiency is Declining

    If your top salesperson is no longer meeting targets or is struggling to meet them, a growth plateau is on the horizon.

    You Don’t Have a Single Source of Truth

    If you don’t have solid customer data, including who’s visiting your website, clicking your emails, and expressing interest, or your team can’t access this information all in one place, diminished growth is inevitable.

    Your Customers Are Leaving

    If customers are leaving at high rates or as soon as you attract them, your growth will stall or decline.

    Your Team is Leaving

    Small businesses often have an “us against the world” mentality. Early employees live and breathe the company ethos. When those people start leaving, it’s a major sign that something damaging is happening internally that will likely result in slowed growth if it hasn’t already.

    You Can’t Pay Your Bills on Time

    Cash flow issues can be difficult to diagnose at times. For instance, if your business is growing, you’ll usually have a cash flow gap as expenses climb before revenue does. However, if you’re looking at your cash flow projections and don’t see a breakeven point in the near future, your growth is likely slowing.

    9 Things That Could be Causing Your Business Growth to Plateau

    Now that we’ve looked at some signs of slow business growth, let’s explore some of the most common causes and how to fix them.

    1. Your Business Goals or Plan Are Lacking

    A strong business plan includes everything from a detailed market analysis to your marketing strategy and financial planning information. If your business lacks this or actionable goals that correspond with the data, it’s impossible to know where you are or where you’re going.

    Start by crafting a comprehensive business plan and have it reviewed by others you trust. If you’ve already taken care of this step, continue to update your business plan and goals at least once a year.

    2. Your Business Operations or Processes Are Messy or Inefficient

    Could you explain how critical business processes work to someone outside the business and have them understand it? Would they understand your usual customer flow or who handles what at each stage? If you’re unsure, consider your employee onboarding process. Do people quickly understand who is responsible for various activities or who to reach out to for assistance? If not, you find yourself giving lots of reminders, or your employee handbook is loaded with complex instructions, it’s time to improve your business operations and processes.

    Look at each business process individually and how they come together.

    • Are any processes redundant, and can they be eliminated? For instance, do you have employees rechecking work that your computers are doing?
    • Can you automate any steps either using your current technology or by adopting new tech? For example, are your leads automatically receiving the right follow-ups?
    • Can you outsource non-core tasks? For example, allowing your invoice factoring company to handle collections for you or outsourcing your marketing?

    3. Teamwork is Lacking

    Teamwork is linked to increased employee morale, productivity, profitability, and more. If your team works in silos or, worse, works against each other, your business cannot grow. Invest in team building to bring everyone together.

    Effective team-building activities vary but include things like volunteer work, puzzle solving, and scavenger hunts. The key is to ensure everyone can participate, feels valued, and works together to achieve a common goal so that they bring this energy back to the business.

    Additionally, you may need to make internal adjustments to break down silos. For instance, department heads should meet regularly. The resources and tools each department has available should be known to other departments and shared.

    4. People Are Becoming or Setting Up Unnecessary Roadblocks

    It’s often said that a company’s people are its greatest asset. This is generally true, but sometimes those same people become its greatest barrier to success.

    For instance, it’s normal for department heads to fight for greater budgets. However, if certain team members can’t see the bigger picture and understand why the budget is allocated a certain way and brings animosity to the team as a result, their toxicity will be the downfall of the organization.

    Sometimes, long-term employees are resistant to change as well. For instance, someone might be wary of how new technology will impact customer satisfaction. That’s a fair point, and it’s worth hearing the employee out to ensure customer satisfaction doesn’t falter, but if the concerns are unfounded and that person won’t get on board regardless, their negativity will spread.

     Similar issues are seen with fatigued leadership or employees. After 50 hours of work, productivity falls, according to CNBC. If a person hits 70 hours, it’s as if they didn’t even work 15 of them. Moreover, these additional hours impact sleep, health, morale, and quality of life.

    It’s up to you to ensure you and your team are set up for success and create a team that drives your business forward.

    5. You’re Not Focusing on Customer Satisfaction and Retention

    Customer retention does not get enough press. It’s up to 25 times more expensive to attract a new customer than to retain one, according to Harvard Business School (HBS). Their research also shows that boosting customer retention by just five percent can increase profit by up to 95 percent. Make customer retention a priority. A few tips to help include:

    • Thoroughly onboarding new clients
    • Understanding client expectations
    • Request customer feedback and learn from it
    • Incentivize loyalty and referrals
    • Focus on delivering a top-notch customer experience

    6. You’re Ignoring Your Brand Image or Online Presence

    It’s estimated that 27 percent of small businesses don’t have a website, per PR Newswire. This, alone, is a huge loss of potential business, considering that 99 percent of consumers search for local businesses online, according to Statista. More than a third check multiple times each week.

    Setting up a website is the major step in establishing your online presence. Still, it’s important to note that people are likely talking about your business regardless of whether you have a website. If you want to have any control over the narrative and your brand image, your business should be active across review sites and social media, too.

    7. You’re Not Leveraging Data for Improvements in Strategy, Pricing, and Processes

    Up to 73 percent of data goes unused, according to Forrester. This information could tell you more about what your customers want, how to operate more efficiently, pinpoint equipment malfunctions before a complete breakdown, and more.

    Start by exploring the data sources you already have and exploring ways to leverage the data. You can also work with an operations specialist or data scientist to help you better understand the data you already have and identify trends that may help or how to extract more data.

    8. You’re Starting to Blend in with Your Competitors Instead of Standing Out

    Market competition is a challenge for most businesses. How you distinguish your brand, products, and services from others is a key determining factor in whether prospects choose you over them. 

    Refer to your business plan for information on competitive positioning and ensure you’re infusing each step of the customer journey with the data.

    9. You’re Not Tracking and Managing Your Cash Flow

    It’s estimated that 82 percent of business failures are tied to poor cash flow management, according to Forbes. Make sure you create accurate cash flow projections and develop a budget around business goals. If you find yourself short on cash due to growth, and it’s preventing you from seizing opportunities or covering expenses, ensure you have a backup funding source.

    Identifying and Overcoming Growth Stalls in Business

    Business growth often stalls due to a variety of factors like stagnation, valuation challenges, and a noticeable drop in revenue growth. Key steps to counteract this include diagnosing impending stalls through a comprehensive self-test, streamlining business operations, and identifying root causes. For renewed growth, business owners should reassess their growth strategy, focusing on innovation management, adapting to market changes, and exploring new markets. Enhancing product or service offerings, addressing external factors such as competitive challenges, and investing in new paths to success are crucial. Additionally, tackling issues like systemic inefficiency, and dysfunction in the innovation chain, and understanding customer acquisition dynamics can help prevent standstills. By taking a closer look at business operations, making necessary changes, and focusing on organizational strengths, businesses can effectively get back on track and ensure long-term success and profitability.

    Get Your Business Growth Back on Track with Invoice Factoring

    Invoice factoring unlocks cash trapped in your unpaid B2B invoices. Unlike a loan that gets paid back with interest and fees, factoring provides an immediate cash injection that your client pays off when they pay their invoice. This allows you to address cash flow shortfalls and shore up areas that are stalling your business growth without taking on debt. To learn more or get started, request a complimentary factoring quote.

  • Why Loan Stacking is Business Suicide & What to Do Instead

    Why Loan Stacking is Business Suicide & What to Do Instead

    Why Loan Stacking is Business Suicide & What to Do Instead

    Thinking about accepting more than one business loan? This practice, known as “loan stacking,” may seem like a simple way to get business funding when a single lender doesn’t provide all the cash you need. However, it’s usually a terrible idea that can harm your business for years and may even cause irreparable damage. It is also crucial to consider whether loan stacking is a crime, as this could add legal risks to the financial ones. On this page, we’ll cover the risks when you take out multiple loans and alternatives to loan stacking so that it’s easier to make the right decision for your business’s long-term health.

    What is Loan Stacking and How Does it Happen?

    Only about half of all small businesses that apply for funding receive the full amount, according to the latest Small Business Credit Survey. Obtaining business financing becomes even more challenging when the economy is uncertain or during a lender retreat.

    At the same time, it’s quite common for businesses to apply for loans through marketplaces or request funding from many lenders at a time, hoping to increase the odds of being fully funded. This often results in offers from different lenders. When a business accepts more than one loan offer, it’s called “loan stacking.”

    The business wouldn’t likely qualify for both loans if they were requested independently at separate times. However, because the credit check is performed before either of the loans are accepted, neither loans shows up on a report.

    It makes sense that borrowers are often tempted to accept more than one loan, given how difficult it is to get approved for small business funding. Even still, the risks of loan stacking typically outweigh the benefits, though borrowers may not be aware of the consequences right away.

    Risks of Loan Stacking: Why Multiple Business Loans May Lead to Trouble

    If you’re considering applying for multiple loans at the same time, it’s critical to understand the risks of loan stacking and how it can negatively impact both your initial loan agreement and future financing opportunities.

    Many people start by asking, “Is loan stacking fraud?” or “Is loan stacking a crime?” Generally speaking, loan stacking is not a crime. It is considered fraud if you lie to either lender about the other. However, loan stacking, as the practice is described here, does not involve deception and is therefore not illegal. Even still, it’s one of the worst things you can do for your business for the reasons outlined below.

    Multiple Loans Increase Your Risk of Default

    The strain of debt is already being seen across the country, with nearly one-third of small businesses reporting that it’s challenging to keep up with debt payments, per the Small Business Credit Survey. Two in five owe more than $100,000.

    Lenders understand this, which is why they consider how much debt your business already has and your ability to make payments toward a loan before you’re approved. These steps reduce the default risk, protecting both you and the lender.

    When you stack loans, you’re increasing your payments and your debt ratio, which increases the likelihood of default.

    Loan Stacking May Violate Your Original Loan Agreement

    Lenders often include loan stacking clauses or have guidelines related to collateral. For instance, if you obtain an asset-based loan and leverage real estate as collateral, the lender has the lawful right to liquidate the property if you default on the loan. Most lenders include language in their contracts that indicates they receive payment first if the asset is liquidated. If you have two lenders offering funds based on the same asset, the combined loans likely exceed the asset’s value, meaning one of them isn’t likely to be repaid if you default.

    This situation makes lenders uneasy for obvious reasons, so one or both may consider this a breach of contract and demand full repayment immediately.

    Your Credit Score Will Take a Hit

    Your business credit score is comprised of several factors, including your payment habits, credit utilization, outstanding balances, and ongoing trends. Because loan stacking is most often done by businesses that don’t have strong credit to begin with, your credit utilization and outstanding balances will likely decrease your score dramatically. You’ll also have two new loans rather than one, which can make you seem riskier to lenders. Plus, it’s unlikely you’ll be able to keep up with monthly payments under these conditions, which decreases your score even more.

    As your credit score drops, your future loan prospects do as well. A bad credit score also impacts your trade credit access, interest and cost to borrow, insurance premiums, and rent. In other words, your business will become less profitable, making it even more difficult to manage cash flow. A damaged credit score not only limits access to loans in the future but also makes it harder to secure any loan or line of credit on favorable terms.

    Additional Loans Will Have Higher Interest Rates

    If you don’t receive full funding from a single lender, chances are that you’re considered a subprime borrower. This may mean you have a low credit score or lenders feel you’ll have difficulty maintaining your repayment schedule for other reasons. Businesses that fit into this category pay considerably more to borrow.

    For instance, those with good credit are usually offered business loans with interest rates that top out at around 20 percent. A well-qualified business may even see interest rates of around seven percent. Conversely, businesses with bad credit can see interest rates around 35 percent or higher. You’re also likely to see higher fees tacked onto your loans.

    Let’s explore what a typical loan might look like and what happens when you stack loans. In both examples, your business receives $50,000 with five-year terms.

    Traditional Business Loan Example        

    • Loan Amount: $50,000
    • Interest Rate: 10% (15.9% APR)
    • Loan Term: 5 years
    • Origination Fee: 5%
    • Documentation Fee: $750
    • Monthly Payment: $1,062.35
    • Total Payback: $63,741.13
    • Cost to Borrow: $16,991.13

    Stacking Business Loans Example

    Loan 1
    • Loan Amount: $30,000
    • Interest Rate: 25% (28.98% APR)
    • Loan Term: 5 years
    • Origination Fee: 5%
    • Documentation Fee: $750
    • Monthly Payment: $880.54
    • Total Payback: $52,832.38
    • Cost to Borrow: $25,082.38
    Loan 2
    • Loan Amount: $20,000
    • Interest Rate: 27% (31.79% APR)
    • Loan Term: 5 years
    • Origination Fee: 5%
    • Documentation Fee: $750
    • Monthly Payment: $610.71
    • Total Payback: $36,642.39
    • Cost to Borrow: $18,392.39
    Loans 1 and 2 Combined
    • Loan Amount: $50,000
    • Monthly Payment: $1,491.25
    • Total Payback: $89,474.39
    • Cost to Borrow: $39,474.39

    Traditional Loan vs. Stacked Loans

    Even though the loan amount doesn’t change, the business with stacked loans pays $428.90 more each month because they’re paying additional interest and fees. Over the five-year term, the cost to borrow is $22,483.26 more for the business with stacked loans too.

    You Can Get Trapped in a Negative Cycle of Debt

    As you can see, stacking loans can become very expensive, which is unfortunate because the businesses that stack loans tend to be the most cash-strapped. To keep up with payments, they often seek out additional forms of funding.

    At this point, however, the business is a high-risk borrower. That means it doesn’t qualify for most traditional loans, and the fees and interest are even higher if it does. Many are pushed into costly loan alternatives, like merchant cash advances (MCAs), with APRs that climb to 100 percent or more.

    When faced with these extremes, it is tough to dig yourself out of debt. Sadly, many small businesses don’t and end up closing.

    Alternatives to Loan Stacking for Small Business Owners

    While loan stacking isn’t illegal,  it’s seldom advantageous for your business, often resulting in more harm than benefit. When you’re in a situation where you feel the need to stack loans, it’s crucial to remember that this approach can complicate your existing loan obligations and make it more challenging to manage your finances. Stacking loans means taking out another loan on top of an existing one, which can lead to a tangled web of debt that’s difficult to navigate. Before you consider loan stacking, think about the impact it will have on your ability to pay back your current loans. Often, businesses that stack loans find themselves in a precarious financial situation, struggling to keep up with multiple repayments. If you’re considering loan stacking because you need more money, it’s worth exploring other options. There are alternatives to taking out another loan that might be more beneficial in the long term. It’s important to carefully review your loan contract and understand the implications of adding more debt to your portfolio. Remember, while loan stacking is not illegal, it’s generally bad for your business’s financial health and should be approached with caution.

    Ask Your Current Lender for Help

    Have a frank conversation with your current lender about how much you need and how you intend to leverage the cash. They may have alternate programs or be able to increase your loan amount. Explain the context in which you’ll be using the cash, highlighting your ability to repay the loan, which is a key consideration for lenders. Discussing your financial stability and repayment plans can build trust and might lead them to consider alternate programs that could benefit you. Additionally, if your needs extend beyond the current loan amount, don’t hesitate to discuss the possibility of additional funding. By clearly saying what you need and demonstrating a solid repayment plan, you increase the chances of your lender being receptive to increasing your loan amount or offering alternative financing solutions.

    Explore Refinancing Options

    Refinancing or consolidating your loans into a single loan with a lower interest rate and payment may be a viable solution for businesses that still have good credit and those that have paid down at least some of their debt. Particularly for businesses that maintain good credit standing and have successfully paid down a portion of their existing debt, this approach offers a viable solution. It involves the applicant applying for a new line of credit, which consolidates multiple debts into one, potentially with more favorable repayment terms. This not only simplifies the debt management process but also may provide an opportunity to break free from the burdensome debt cycle. By securing a single loan with a lower interest rate, businesses can align their debt obligations more closely with their ongoing business needs, leading to better financial health and stability.

    Avoid Loan Stacking with Invoice Factoring

    Invoice factoring is a unique funding solution that accelerates payment on your B2B receivables. Instead of applying for a loan, you’ll sell your unpaid invoices to a third party, known as a factor or factoring company. The factoring company then sends you most of the invoice’s value right away. When your client pays, the factor sends you the remaining sum minus a small fee, usually between one and five percent of the invoice’s value.

    Factoring can help you bridge cash flow gaps, so you don’t need to take out loans from lenders. Plus, you have no debt to repay, so it doesn’t have the same negative consequences as loans. It’s particularly beneficial in specialized industries, where steady cash flow is critical for managing operational expenses like payroll and vendor payments. For instance, factoring for security companies can cover recruiting, training, and labor costs even though the client may not pay for months. Similarly, invoice factoring for oil and gas service companies offers a flexible way to maintain steady cash flow. Plus, you have no debt to repay, so it doesn’t have the same negative consequences as loans.

    Request a Complimentary Factoring Rate Quote from Charter Capital

    With decades of experience helping businesses like yours and competitive rates that keep more money in your pocket, Charter Capital can help your business cover expenses and grow without accruing debt. To learn more or get started, request a complimentary factoring rate quote.

  • 9 Proven Customer Retention Strategies for Small Businesses

    9 Proven Customer Retention Strategies for Small Businesses

    9 Proven Customer Retention Strategies for Small Businesses

    If you’ve ever heard someone from your sales team the moment after a sale is closed, the hoots and hollers coming from the whole department make it clear how monumental it is to close a deal. The sales process can be lengthy, and it truly is a team effort to get a prospect to the finish line. Yet, the same energy is not typically seen in terms of customer retention. It should be. On this page, we’ll walk you through why developing strategies for customer retention is one of the most important things small businesses can do and cover nine proven customer retention strategies anyone can apply and get results from.

    What is Customer Retention?

    Each time you gain a new customer, it’s called acquisition. Each time you lose a customer, it’s referred to as attrition. The time between these two events is the retention period.

    Naturally, the greater the span or the longer customers are retained, the better it is for your small business. Customer retention strategies center on this concept – finding ways to keep customers with your business for longer periods of time.

    How to Calculate Your Customer Retention Rate

    Customer retention is often measured on a monthly, quarterly, or annual basis using the following formula:

    Customer Retention Rate = (Total # of Customers at the End of the Period – New Customers Acquired) / Customers at the Start of the Period

    Why Customer Retention Matters

    All too often, businesses focus solely on customer acquisition. While it’s true that your business can’t grow without a steady flow of new customers, all the effort that goes into attracting new customers is wasted if they leave right away. Moreover, your existing customers, not your new ones, are likely greater contributors to your business’s growth and profit.

    For instance, the probability of selling to an existing customer is 60 to 70 percent, while the likelihood of selling to a new prospect is between five and 20 percent, per invesp. Their research further notes that existing customers are 50 percent more likely to try new products and spend 31 percent more. It also costs up to 25 times more to attract a new customer than to keep an existing one, according to Harvard Business Review (HBR).

    For these reasons, businesses that improve customer retention also see higher revenue and greater profit. Just a five percent boost in retention increases profit between 25 and 95 percent, according to Bain and Company.

    The Importance of Retention in Business Growth

    For many small businesses, the key to long-term growth and success is not just about acquiring new customers but effectively retaining the current ones. Retention marketing, often overlooked, plays a pivotal role in boosting customer lifetime value. An excellent customer service experience, combined with a solid customer retention program, can be your secret weapon to keep them coming back. Implementing customer retention strategies that work, especially strategies tailored for small businesses, can significantly reduce customer churn. Engaging with every customer individually, understanding their needs, and promptly addressing customer complaints can create a customer experience that cultivates loyalty. Harnessing customer feedback, employing tools like customer relationship management, providing exceptional customer service, and knowing how to ask for the next customer order in a natural, helpful way are all part of a holistic approach to increasing customer retention rates. As a small business owner, embracing these strategies can improve customer retention and amplify repeat business, enhancing overall customer value. Remember, it’s not just about the first purchase; it’s about creating an environment where customers are more likely to engage with your business again and again.

    9 Proven Customer Retention Strategies for Small Business Owners

    It’s easier than you might think to weave proven customer retention strategies into your everyday activities. Below, we’ll cover nine areas to address, so you can start building a stronger business immediately.

    1. Onboard Thoroughly

    Onboarding is more than just an official welcome into your customer family. The more comfortable someone is with your product or service, and the more they leverage it, the more likely they are to stick with it. Work with your customer service and product development teams to identify new customers’ struggles and areas of low adoption. Then, explore ways to educate newcomers. While some, especially SaaS companies, may benefit more from training, others can address onboarding through educational emails or videos sent at specific intervals after someone becomes a customer.

    2. Develop a Deep Understanding of Your Customers’ Expectations

    Your customers come to you with their own ideas of how your product or service should work, their preferred methods of communication, and how quickly your team should address concerns. The more you understand their expectations and proactively rise to meet them, the less friction your customers will experience and the more likely they are to stick with you.

    3. Encourage Customer Feedback and Learn from It

    Nine in ten customers say brands should offer the opportunity to provide feedback, according to Microsoft surveys. Yet, many don’t request feedback, and more than half of customers say brands don’t take action even if they provide insights.

    Reach out to your customers at critical points in their journey, such as immediately after a sale, during onboarding, and a few weeks or months after. This simple act will make 77 percent of customers view your brand more favorably, Microsoft research shows.

    Net promoter surveys and scores can provide a wealth of information too. These are one-question surveys that say something like, “How likely are you to recommend our product/ service/ brand to a friend/ family member/ colleague?” The customer is then asked to provide a score between one and ten, with ten being the most likely and one being unlikely. Those who answer with a score between one and six are considered detractors. A seven or eight represents a passive answer. Those who provide a rating of nine or ten are considered promoters. A net promoter score (NPS) is calculated by subtracting the total detractors from the total promotors.

    NPS scores are often regarded as the leading predictor of long-term business success. Typical scores range from 25 to 30 and vary by industry. Because the survey takes just seconds to answer, you’re likely to get more responses and can conduct surveys on an ongoing basis quite easily.

    4. Be Responsive, Even When Feedback is Negative

    “Your most unhappy customers are your greatest source of learning,” Bill Gates once said. Use the information they’re entrusting you with to develop your offerings and meet their needs better.

    Regardless of whether you can act on their feedback, always express appreciation for their time and effort. You may not always be able to resolve a concern, but sometimes customers are satisfied simply by feeling heard.

    5. Incentivize Customer Loyalty and Referrals

    Four in five people say they’re more likely to stay with a brand that offers a customer loyalty program, according to Nielsen research. Create a loyalty or rewards program that suits your brand. For instance, you might offer perks for customers who have stayed on a subscription plan for an extended period or award points for each purchase.

    Referral programs can also be a boon for your business and retention. A referred customer is 18 percent more loyal than one who comes to your business through other channels, according to Annex Cloud. Referred clients have a 37 percent higher retention rate and are four times more likely to refer more customers to your business too. Tailor your referral program to your business model. Some businesses, such as professional service companies, tend to do best with programs that offer cash payouts for each referral, while others, such as retailers, usually have greater success by providing discounts and free products for each referral. 

    6. Invest in Employee Development and Satisfaction

    Happy employees create happy customers. Researchers looked at Glassdoor ratings for companies in one HBR study. They found that a single-star increase in employee satisfaction correlates with a three-point increase in customer satisfaction. Loyalty also gets a boost when employees are more engaged.

    Moreover, happy employees will stay with your company longer, which gives them lots of time to build up their knowledge of your philosophies and product, allowing them to serve your customers better and boost satisfaction.

    7. Prioritize Building Trust with Your Customers

    More than 80 percent of customers say trust is an important factor in their decision to support a brand, per Edelman research. Moreover, customers who trust your brand are significantly more likely to promote it, stay loyal, and defend your company if need be.

    Trust doesn’t come easily, however. It’s built over time as people see you follow through on your promises and stay true to your mission. If your brand supports specific causes, share what you’re doing to help. You can also share testimonials and case studies demonstrating times you’ve followed through on your company mission, even when challenging.

    8. Give Your Customers Convenience

    The absence of friction is everything in today’s busy world. Walk through your typical customer journey to identify and eliminate potential friction points. For instance, some brands allow customers to pick up orders rather than have them shipped to speed up timelines. Others provide self-service ordering, scheduling, and payment tools.

    9. Offer Your Customers Better Payment Terms

    If your clients make payments after goods or services are delivered, take a hard look at your payment terms and how they impact your customer relationships. If you can give them longer windows to pay or ease their burden in some way, especially if competitors aren’t doing so, you can win their loyalty for life.

    Consider Invoice Factoring to Reduce Your Accounts Receivable Burden

    Most small businesses can’t afford to wait for payment. If you’d like to offer your clients better payment terms but can’t due to cash flow concerns, invoice factoring can help by providing you with cash for your receivables. With factoring, you sell your unpaid invoices to a third party, known as a factor or factoring company. The factoring company immediately pays you most of the invoice’s value, then waits for your customer to pay. When the invoice is paid, you receive the remaining balance minus a nominal factoring fee.

    Improve Your Customer Retention Strategy with Invoice Factoring

    Charter Capital, a leading invoice factoring company, can provide you with an immediate cash injection to implement the strategies outlined here or allow you to provide your customers with better terms. To learn more or get started, request a complimentary rate quote.

    9 Proven Customer Retention Strategies for Small Businesses Infographic | 9 Proven Customer Retention Strategies for Small Businesses

  • Capitalize on Momentum: 5 Tips for Scaling Your Business

    Capitalize on Momentum: 5 Tips for Scaling Your Business

    Scaling Up a Business: 5 Ways to Capitalize on Momentum

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

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

    Recognizing the Right Time to Scale Your Business

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

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

    1. Strengthen Your Core Business Procedures

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

    Remain True to Yourself and Your Mission

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

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

    Focus on Building a Solid Team

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

    Invest in Your Employees

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

    2. Leverage Technology and Innovation

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

    Make the Most of Modern Tech Tools

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

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

    Consider Outsourcing Certain Tasks

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

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

    3. Emphasize Customer Experience

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

    Create Comprehensive, Updated Customer Profiles

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

    Ensure a Stellar Customer Service Setup

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

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

    4. Understand Your Business Financials

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

    Know What’s Driving Your Financial Decisions

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

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

    Evaluate Your Trade Credit Terms

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

    Explore Invoice Factoring as a Cash Flow Solution

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

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

    5. Enhance Your Marketing Efforts

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

    Experiment More in Marketing and Advertising

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

    Encourage Your Customers to Do Your Marketing

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

    Collaborate with Another Brand for Mutual Benefits

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

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

    Successfully Scale Your Business With the Help of Charter Capital

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

    Scaling Up a Business 5 Ways to Capitalize on Momentum Infographic | Capitalize on Momentum: 5 Tips for Scaling Your Business
  • How to Create a Business Budget That Aligns with Your Goals

    How to Create a Business Budget That Aligns with Your Goals

    How to Create a Business Budget that Aligns with Your Goals

    Ready to take charge of your finances by budgeting for business? It’s probably easier than you think. A typical business budget focuses on just two things: forecast earnings and planned expenditures. Yet, it goes a long way to creating accountability for an organization, allows you to make more strategic decisions, and helps you stay on track to meet your financial goals.

    Unfortunately, nearly two-thirds of small businesses miss this crucial step, according to Small Business Trends. On this page, we’ll walk you through one of the most essential financial skills for business owners: the process of business budget creation, so you can cash in on all the advantages and help you align your budget with your business goals to achieve critical objectives faster.

    Aligning Your Budget with Your Business Goals is Essential

    A business budget can and should be about more than documenting your predicted income and expenses. Business budget planning, or the process of ensuring your budget supports your business goals, offers many benefits. It encourages the meticulous review of income sources, thereby facilitating an accurate calculation of the expected monthly income.

    You Will Spot Wasteful Spending Quicker

    A budget outlines all your business expenses. If you keep your objectives in mind as you review it, you’ll spot mismatches between how you plan to spend and how you should spend to reach your goals.

    It’s Easier to Allocate Resources

    A goal-aligned budget takes the guesswork out of where to apply funds. Cash goes to the items that support your goals.

    You Will Have Money When You Need It

    By design, your business budget puts money where you need it most. A good budget for business also includes a plan to save for unexpected expenses so that you can dip into it during an emergency.

    Collaboration Between Departments Improves

    The more involved your team is in the budgeting process, the more likely you are to break down silos and improve cooperation between department leaders. While you may initially face pushback from departments that want larger budgets, if they truly support the company and its objectives, they’ll quickly adapt to making the most of what they have and finding ways to share costs between departments.

    Why a Business Budget is Important for Startups, Too

    When your business is new, creating a well-structured financial plan early helps lay the groundwork for lasting stability. Unlike established companies with historical data, startups must often work from projected revenue and expenses, making early budgeting essential for managing cash, prioritizing spend, and understanding when to add up all your income versus when to subtract your operating costs.

    A startup budget should include both fixed costs and variable costs, like office rent versus contract labor, that may fluctuate with business activity. Identifying those early lets you track how each portion of your budget supports current operations or growth. It also ensures you’re ready for surprise expenses by building in a contingency fund, even if it’s small.

    Using a simple budget, even from free budget templates, can be a valuable tool to help keep early-stage founders focused on setting financial goals, funding product development, and responding to market shifts. A well-designed budget provides a clearer view of your available runway and supports smarter, more strategically aligned decisions, making it a critical asset for any startup aiming for business success.

    Types of Business Budgets

    There are several types of business budgets that you might use depending on your situation and goals. 

    Operating Budget

    Operating budgets are usually created first and are leveraged by businesses of all sizes to improve operational efficiency. They’re short-term planning tools focusing on revenue, expenses, and profits. For instance, the owner of a staffing company might compare its operating budget every month to see if it’s overspending on supplies. This requires a clear understanding of budgeting principles to ensure effective business budget planning.

    A typical operating budget contains your:

    • Sales budget
    • Production budget
    • Purchases budget
    • Direct materials budget
    • Direct labor budget
    • Manufacturing overhead budget (indirect labor, indirect materials, factory operating costs)
    • Ending finished goods inventory budget
    • Cost of goods sold budget
    • Non-manufacturing budget (R&D, design, marketing, distribution, customer service, administrative)

    Financial Budget

    Financial budgets are often created after the operating budget is complete and are leveraged mainly by larger companies to improve financial efficiency. They’re long-term planning tools that focus on cash inflow and cash outflow. A large manufacturing company, for example, might review its financial budget to determine its value in the context of a merger.

    A typical financial budget contains your:

    • Capital budget
    • Projected cash disbursement schedule
    • Cash budget
    • Pro-forma income statement
    • Pro-forma balance sheet
    • Pro-forma statement of cash flows

    Master Budget

    A master budget contains the operating and financial budgets and all their sub-budgets. For instance, a large oil and gas services company might use the master budget to help ensure managers of all departments are aligned.

    Cash Flow Budget

    Cash flow budgets can be created at any time and are leveraged by businesses of all sizes to ensure cash is being spent wisely. They’re short and long-term planning tools that focus on how and when cash flows in and out of the business during a specified period. This forms a key aspect of the monthly budget, so its accurate estimation is critical for the business’s financial health.

    A trucking company, for example, might use its cash flow budget to determine if it can cover fuel, labor, and other expenses related to accepting a new load before it receives payment from the last load.

    Static Budget

    In the business budgeting process, static budgets are fixed and contain only items that don’t change regardless of revenue or sales volume. A security firm, for instance, might pay the same licensing and bonding costs each year or pay to rent storage space for equipment. The owner may monitor the static budget to identify overspending and static expenses that are no longer needed. It is also in this stage where unexpected costs can be predicted and cash set aside to avoid any disruption in the operations.

    Enhancing Your Budget with Forecasting Tools

    Understanding why financial forecasting is important for your business is an essential first step, but you must also put that knowledge into action with the right tools and processes. Let’s take a look at how it’s done.

    How to Use Forecasting Tools to Improve Your Budget

    Forecasting tools can significantly enhance the accuracy and effectiveness of your business budget. These tools use historical data and market trends to predict future revenue and expenses, providing a more detailed financial outlook. For small business owners, integrating forecasting tools with your budget can help in identifying potential financial challenges and opportunities. This proactive approach allows you to adjust your spending plan accordingly, ensuring that your business remains on track to meet its financial goals. By using forecasting tools, you can create a more dynamic and responsive budget that supports long-term business growth.

    Best Practices for Financial Forecasting in Budgeting

    To effectively use financial forecasting in your budgeting process, start by collecting accurate historical data on your revenue and expenses. Use this data to identify trends and patterns that can inform your financial projections. Next, incorporate external factors such as market conditions and economic indicators that may impact your business. Regularly update your forecasts to reflect changes in your business environment, ensuring that your budget remains relevant and accurate. Engaging your team in the forecasting process can provide additional insights and improve the overall accuracy of your financial projections. By following these best practices, you can create a budget that is both comprehensive and adaptable to changing business conditions.

    How to Create a Small Business Budget

    In the context of business budgeting, certain types of business accounting software can make your budget for you. If you’re already using accounting software, check if it offers budgeting tools too. You can also pick up specialized budgeting software. If neither is available to you or you want to run the numbers yourself, create a detailed budget in a spreadsheet program such as Excel or Google Sheets.

    Identify Your Strategy

    Depending on your company goals, you may want to build a budget based on profit, growth, or cost control. Although all three may be important to you, narrow your focus to the area that matters most and choose the strategy that aligns with it.

    Budgeting for Profit

    If your primary goal is to increase profit, you’ll start with determining your profit goal and then set the budget to support it. In this case, you’ll allocate more of your total budget to items that boost sales without increasing expenses. For instance, a professional services company, such as a business consultancy, might increase the budget for advertising or invest in a CRM to help the sales team automate processes and focus more on the leads that are most likely to convert.

    Budgeting for Growth

    If your primary goal is supporting business growth, you’ll build a budget to help close gaps in your systems, processes, and people. For example, a manufacturing company might budget for equipment that will allow them to boost productivity or earmark additional funds for employee training and development.

    Budgeting for Cost Control

    Sometimes businesses need to focus on cutting costs for a short period due to an economic downturn or temporary market shift. Think of this as more of a selective pruning, as opposed to cutting all possible costs like a business facing financial trouble might do. For instance, a freight broker might set a budget for cost control if a natural disaster impacts key areas it serves, and no shipments are going in or out. In the short term, the freight broker might cut the marketing budget for that region or cut administrative costs due to the lighter workload.

    Review Historical Data and Create Revenue Projections

    If your business is established, explore historical data and your growth rate to calculate your projected revenue. Be sure to watch for seasonal shifts that also need to be reflected on your budget. If you don’t have historical data to draw from, research to see what businesses like yours typically earn.

    Be conservative with these figures when in doubt. It’s better to have a surplus later than discover you’re short on cash because you didn’t meet your revenue targets.

    Estimate Expenses

    Expenses fall into one of three categories: fixed, variable, and one-time. It’s helpful to break these up on your spreadsheet so it’s easier to identify how your money is spent. Again, you can look at historical data to determine your estimated expenses or draft a list of everything you think you’ll pay for and research costs.

    Fixed Expenses

    Often referred to as “overhead,” fixed expenses don’t change from one period to the next, regardless of your sales volume. Examples include your rent or mortgage, insurance, and most loan payments. Traditional employee salaries also fit into this category, though hourly and project-based labor do not.

    Variable Expenses

    Sometimes referred to as the “cost of goods sold,” variable expenses increase with sales volume. Examples include raw materials, supplies, commissions, packaging, delivery, and labor.

    One-Time Expenses

    Things that you don’t pay for more than once or only pay for periodically are considered one-time expenses. Examples include buying major equipment, purchasing a competing business, the cost of relocating, and logo design.

    Map it Out

    If you’re drafting it in a spreadsheet, list each month as a column and place your yearly total as the final column. Then, create groups of rows for revenue, fixed expenses, variable expenses, and one-time expenses, with a totals row at the bottom.

    You’ll likely see mismatches between your goals and anticipated expenses and may even see deficits in your totals. Adjust your budget as needed to ensure it aligns with your goals and keeps you in the positive.

    Perform a Budget Review Regularly

    Small businesses usually start creating their annual budgets about three or four months before the fiscal year begins. Give yourself time to work out the details and find something that fits your goals well. Once complete, review it every few months to ensure you’re on track, reallocate funds if needed, and cut costs if possible.

    The Importance of Regular Budget Reviews

    How Regular Budget Reviews Can Improve Financial Health

    Conducting regular budget reviews is vital for maintaining the financial health of your business. These reviews allow business owners to compare actual performance against budgeted figures, identify variances, and make necessary adjustments. By doing so, you can ensure that your spending plan remains aligned with your financial goals. Regular reviews also help in identifying trends in revenue and expenses, providing insights that can inform future budget planning. For small businesses, this practice can prevent financial shortfalls and support sustained growth by keeping the business agile and responsive to market changes.

    Steps to Conduct Effective Budget Reviews

    To conduct effective budget reviews, start by gathering accurate financial data from your accounting system. Compare this data against your budget to identify any discrepancies in revenue and expenses. Next, analyze the reasons behind these variances and determine if they are temporary or indicative of larger issues. Adjust your budget estimates accordingly and reallocate resources as needed to stay on track with your financial goals. Engaging your team in the review process can provide additional insights and foster a collaborative approach to financial management. Regular reviews, ideally conducted monthly or quarterly, ensure that your budget remains a dynamic tool that supports your business’s financial health.

    Additional Tips for Creating a Goal-Aligned Business Budget

    Now that we’ve got the basics down let’s explore a few tips to make creating a budget easier or more effective.

    Consider Your Long-Term Vision and Goals

    Knowing how to stay focused on business goals, especially when they may seem conflicting or will be achieved in different timeframes, is key. For instance, if you have a short-term cost-control goal, but also have a long-term goal to reach a particular growth stage by a specific date, then you need to consciously funnel cash into growth on an ongoing basis. Don’t shortchange your long-term vision to support short-term goals and budgets.

    Prepare for Unexpected Expenses

    Leave some room in your budget for unexpected expenses. Ideally, you’ll pay a savings account or similar on a recurring basis, just like any other expense, and grow your emergency fund over time.

    Involve the Team

    Businesses can become siloed as they grow. Involving leaders from each department breaks down those silos and opens up discussions about how the groups can best support one another to help the company reach its goals.

    Leveraging Technology in Business Budgeting

    Top Budgeting Software for Small Businesses

    Leveraging technology can significantly enhance the budgeting process for small businesses. Budgeting software offers advanced features such as automated expense tracking, real-time financial reporting, and integration with other business systems. For small business owners, these tools simplify the creation and management of budgets, making it easier to maintain a clear financial overview. Popular software options like QuickBooks, Xero, and FreshBooks provide user-friendly interfaces and customizable templates that cater to various business needs. Using such technology ensures accuracy in budgeting, saves time, and allows business owners to focus on strategic planning rather than manual data entry.

    How to Integrate Budgeting Tools with Your Existing Systems

    Integrating budgeting tools with your existing business systems can streamline financial management and improve efficiency. Start by selecting budgeting software that is compatible with your current accounting and financial systems. This integration allows for seamless data transfer, reducing the risk of errors and ensuring that your budget reflects real-time financial data. Additionally, integrated systems provide comprehensive financial reports that offer deeper insights into business performance. For small businesses, this means having a holistic view of finances, which aids in making informed business decisions and planning for future growth. Implementing these tools effectively can transform your budgeting process, making it more accurate and efficient.

    Bridge Gaps in Your Business Budget with Factoring

    Your business may find itself short on cash at some point despite your best efforts with budgeting. This can happen when a company grows quickly, faces an unexpected expense, business slows, or customers pay slower than expected. Invoice factoring can help you bridge these cash flow gaps by providing instant payment for your B2B invoices. To learn more or get started, request a complimentary rate quote from Charter Capital.

    The 5 Steps to Create A Small Business Budget Infographic

  • 6 Success-Amplifying Small Business Skills Anyone Can Master

    6 Success-Amplifying Small Business Skills Anyone Can Master

    6 Success-Amplifying Small Business Skills Anyone Master

    Investing in developing your small business skills is one of the best ways to support your company. However, with all the jobs you do as a small-business owner or leader, it’s not always easy to know what will have the most impact or where to begin. Below, we’ll walk you through some of the most critical areas to focus on and provide tips to help you get started.

    Essential Business Skills for Thriving Entrepreneurs

    Taking the initial steps to start a business is a bold venture filled with its fair share of hurdles and triumphs. The foundation of a successful business largely rests on the essential business skills that a small business owner brings to the table. From the onset, a blend of hard skills like financial management and soft skills such as adept communication are crucial.

    Successful entrepreneurs often possess a well-rounded skill set that aids not just in meticulous business planning but in navigating the financial landscape, especially during tough times. Your prowess in customer service skills can be a game changer in building and nurturing a loyal customer base, crucial for business development.

    In the business realm, having a solid grip on content marketing can significantly bolster the promotion of your products or services, while engaging communication skills are essential in articulating your business goals to both your team and clientele.

    As your business grows, the need to identify and bridge skill gaps becomes paramount. Many entrepreneurs find that resources like online courses or engaging in mentorship programs can be invaluable for learning and refining the skills needed. Additionally, mastering your time management is essential in managing the workload of a small business, paving the way to succeed as an entrepreneur. Continuous learning and improvement not only make you a better business leader but also identify areas you need to improve, propelling your business to the next level.

    How to Build Your Small Business Skills

    You don’t need to attend college classes to pick up small business skills. Opportunities to learn are all around us.

    Learn Through Trial and Error

    Some people learn best through hands-on learning. For instance, you might have an easier time learning how to manage a new customer relationship management (CRM) program by setting one up and working with it.

    Learn Directly from Others

    If you’re learning independently, Charter Capital Insights covers various topics relevant to small businesses. You can also explore podcasts and books for small-business owners. When you’re ready to branch out, consider joining professional organizations or finding a formal mentorship program.

    Observe Patterns

    You can also learn a lot by watching others. For instance, if you have a favorite business leader, you may pick up new things by learning about their history and watching how they behave. You may want to watch competitors too. For example, keep an eye on what the company’s owner says on social media and watch business posts. Bear in mind, however, that just because they engage in a specific activity doesn’t mean their efforts are fruitful. Watch for signs that something is successful before trying to emulate it and use their failures to shorten your learning curve.

    6 Small Business Skills Anyone Can Master

    Now that we’ve covered the basics, let’s look at some specific small business owner skills you can pick up.

    1. Financial Management Skills

    Around 40 percent of small-business owners consider themselves financially literate, according to Intuit. Roughly 80 percent manage their business’ finances. If you fall into this category, your business’s health depends on your financial management skills. Even those who have someone else assisting should know the basics to gauge the success of that person, understand what’s happening, and be able to make suggestions that align with business goals.

    Cash Flow Management

    It’s not a lack of profit but cash flow concerns that often pose a problem for small businesses. An estimated 82 percent of business failures can be traced back to poor cash flow management, according to the National Federation of Independent Business (NFIB). Business owners must know how to predict cash flow accurately, budget accordingly, and identify working capital options before cash is needed. For example, invoice factoring can help make cash flow more predictable and accelerate cash flow on demand.

    2. Customer Service, Marketing, and Sales Skills

    Many people view customer service, marketing, and sales as wholly different things. While they are typically managed independently, no area can perform at its peak unless the other areas are strong. 

    Customer Service

    Strong customer service is the cornerstone of your business. Nine in ten people are more likely to complete an additional purchase after having a good customer service experience, according to MailChimp. Good customer service boosts sales, loyalty, and your reputation too. 

    Marketing

    Half of all small businesses do not have a marketing plan, according to Search Engine Journal. Without a plan, it’s impossible to know what strategies to deploy or if your efforts deliver ROI. Furthermore, you can’t support sales efforts if marketing isn’t aligned. Plus, effective marketing can also reduce or eliminate many customer concerns.

    Sales

    You’ve probably heard the phrase “can’t see the forest for the trees” before. It refers to getting so caught up in the details that you don’t see the big picture. When it comes to sales, being too far on either end of the spectrum is a concern, though. You must be able to see the small-picture details, like what happens with individual prospects, and the big-picture details, such as how many deals your team is closing. However, you should also understand the middle ground, which includes things like your sales funnel, how long it takes a typical lead to convert, and what your prospects want from you both now and once they become customers. Armed with this information, your marketing team is poised to make a difference at every stage of the customer journey.

    3. Communication Skills

    Business communication skills come into play whether you’re asking a customer to place their next order or smoothing out employee concerns.

    Verbal and Written Communication

    Nine in ten employees say their boss lacks communication skills, Inc. reports. The issues are varied. For instance, 57 percent say they don’t receive clear directions, and 39 percent say they don’t receive constructive criticism. Others don’t seem to get any communication at all. More than half say their boss doesn’t make time to meet with them, and an almost equal number say they refuse to talk to their subordinates.

    To nail the basics, start dedicating time to chatting with employees and getting to know them. Acknowledge when they’re doing well and the contributions they’re making. From there, you can begin working through things like constructive feedback that can help them improve.

    Negotiation Skills

    Negotiation isn’t about getting things done your way or convincing someone to accept your solution. It’s about creating value and developing a win-win situation for everyone involved. You’re probably already doing this so much that it’s second nature. Still, it tends to fall by the wayside when something is explicitly viewed as a negotiation, such as when closing a sale or working out a vendor contract. Home in your negotiation skills to make these interactions as smooth as all the others woven throughout your day.

    4. Management and Leadership Skills

    Although management and leadership skills are often thought of as interchangeable, they’re quite different in practice. “Management is doing things right; leadership is doing the right things,” as Peter Drucker said. One is process-oriented, and the other is inspiration-oriented.

    General Management Skills

    As a business owner, you must know which processes will produce successful outcomes for your team and be able to teach people how to replicate them.

    Delegation and Time Management

    Your workload will grow as your business grows, so to have any semblance of work-life balance, you must be prepared to delegate. If you’ve done well with general management, your team will already be comfortable with best practices and ready to step up to the plate. That way, you can develop business goals and focus on big-picture tasks while your team manages daily operations.

    Leadership and Team-Building Skills

    Your team looks to you to decide how to behave. Because of this, you must embody the values you want your team and business to convey. Explore team-building activities that will provide an opportunity to knock down barriers between you and your staff as well as between the different departments of your company.

    5. Planning and Problem-Solving Skills

    It may seem like planning and problem-solving skills are hardwired in a person. That’s not necessarily true.

    Strategic Thinking and Problem-Solving

    Developing your problem-solving skills can be fun. For instance, something as simple as doing puzzles can boost strategic thinking and problem-solving skills, the NYU Dispatch reports. Consider turning it into a team-building exercise, Time suggests. Escape rooms are ideal. Crossword puzzles have also been shown to bring people together in a way few other activities can.

    Project Management and Planning

    Planning doesn’t always come naturally, and knowing what variables might impact your timeline is tricky unless you’ve been through a process before. However, you can find greater success in these areas by working with a mentor and studying how others perform similar tasks. If you’re using a project management tool, you can also connect with their service team. Some provide training or additional resources at no cost.

    6. Networking Skills

    Developing networking skills will expose you to new opportunities and help you build connections that can help your business grow. Plus, it can help eliminate the sense of isolation business owners often feel. You may want to join groups dedicated to networking or public speaking to start so that you can develop your skills naturally around like-minded individuals. Once you feel confident, try joining professional organizations and attending conferences to practice and hone your skills more.

    Build Your Small Business Skills with Help from Charter Capital

    Building your business acumen skills can be fun, and you can do it over time. If a lack of working capital prevents you from seizing an opportunity to learn, invoice factoring can provide you with the cash you need to upskill and strengthen your business. To learn more or get started, request a free rate quote from Charter Capital.

  • 10 No-Nonsense Ways to Build Small Business Credit

    10 No-Nonsense Ways to Build Small Business Credit

    10 No-Nonsense Ways to Build Small Business Credit

    You’re already ahead of the curve if you’re trying to build small business credit. In all, 45 percent of business owners aren’t even aware they have a business score, per Small Business Administration (SBA) research. Seven in ten don’t know where to find information about their score, and eight in ten don’t know how to interpret it.

    We’ll walk you through that information on this page, provide some business credit tips, and show you how to build business credit correctly.

    Building a Strong Business Credit Profile: Your Path to Financial Trust

    Starting the journey to build business credit is a fundamental stride every small business owner should take to lay down the financial bedrock of their new business. Your business credit score is a reflection of your company’s creditworthiness, which can significantly influence your ability to secure a business loan or a line of credit. Unlike your personal credit score, a business credit score is tethered to your business’s financial behavior.

    Initiating this journey involves a few important steps. Firstly, it’s crucial to register your business and open a business bank account. This not only helps in keeping your business and personal finances separate but also is a significant step to establishing credit for your business. Acquiring an employer identification number (EIN) is essential as it’s required by the Small Business Administration and helps credit bureaus identify your business.

    The cornerstone of building your business credit is to ensure that all business-related transactions, right from credit cards to lines of credit and loans, are conducted through your business bank account. It’s advisable to open a business credit card and use it wisely; timely payments on this card will reflect favorably on your business credit report.

    Furthermore, it’s advisable to apply for business loans or a business line of credit that reports your payments to the credit bureaus, specifically the three major business credit bureaus. This, along with ensuring you pay your bills on time, will help in building a good business credit score over time.

    Your credit profile is like your business’s financial resume, and having a good credit score can open doors to better financing options. Ensure to monitor your business credit by reviewing your business credit report regularly, rectifying any discrepancies, and keeping an eye on your credit utilization rate to keep your credit in good health.

    Lastly, maintaining a business phone number and physical location of your business can further enhance your credit profile. These steps are not exhaustive but are a robust way to establish and build business credit, laying a strong foundation for your business’s financial future. By adhering to these guidelines, you’re not just building credit; you’re building the financial credibility and health that can help your business flourish in the long run.

    What is Business Credit?

    You’re probably at least a little familiar with your personal credit score. This is a number assigned to you by one of the three main credit bureaus: Equifax, Experian, and TransUnion. All three use the FICO score algorithm to determine an individual’s credit rating. FICO scores can be anything from 300 to 850, Experian reports. If you have a score of 670 or greater, you’re considered to have “good credit.” If you’re at 740 or higher, your credit is “very good.” A score of 800 or more is “excellent.” The average score presently sits at 714 but changes with the times. For instance, it plummeted to just 686 in the wake of the 2008 recession, FICO notes.

    When you do things to demonstrate that you’re responsible with money and the risk of non-payment lessens for a potential lender, your score goes up. Your score can be checked under a myriad of situations. For instance, a lender will review it when you apply for a loan. Many service providers, such as power and phone companies, will check your credit before agreeing to bill you after services are rendered. Sometimes prospective employers will even check your credit before hiring you.

    Business credit is similar. It’s a measure of how well you’ve historically managed cash, which many entities use to gauge the risk of lending to you or doing business with you.

    How Business Credit Works

    Equifax and Experian are still major reporting bureaus when moving into business credit reporting. However, the third major entity is Dun & Bradstreet (D&B). The scale used to measure credit is a little different too. 

    Whereas your personal credit score will fall between 300 and 850, business credit scores run on a scale of 0 to 100. You’ll have to have a business credit score of at least 80 to be considered “low risk.” Anything from 50 to 79 is considered “medium risk.” If you miss that threshold, you fall into the “high credit risk” bracket.

    Most entities concerned about your credit score will look exclusively at your business credit score. However, some will use your personal credit score under certain circumstances, and others will check both, then use the lower of the two to determine your risk.

    Things That Impact Your Business Credit Score

    • Payment habits
    • Credit utilization
    • Outstanding balances
    • Total number of trade/ payment experiences
    • Ongoing trends related to the above
    • Public records regarding your credit or debts
    • Business demographics (size of business, years on file, etc.)

    Why is it Important to Build Business Credit and Maintain it?

    It takes a considerable amount of time to build new business credit. Even established businesses will need 12 to 18 months to improve their scores, according to SBA research. Because of this, building business credit fast is challenging, if not impossible. Instead, you should always work to boost and maintain a high score. It’s unlikely that you’ll be able to correct your score in time if you wait until it’s a determining factor for something you need. A few things that your business credit score impacts are covered below.

    Funding Approval

    Just 53 percent of businesses that apply for funding receive the amount they need, according to the latest Small Business Credit Survey. A total of 21 percent don’t receive any funding at all. This aligns with SBA data that shows 20 percent of business loans are denied due to business credit. In other words, your score can be the sole determinant of whether you qualify for a loan if you need one.

    Trade Credit Access

    Many vendors and suppliers are happy to bill you after goods or services are delivered and allow you some time to pay the balance. However, this is usually contingent on whether your business has good credit.

    Interest and Cost to Borrow

    Even if you manage to qualify for a loan with less-than-ideal credit, your interest rate will be higher. That means you can pay considerably more to borrow than you otherwise would have.

    Insurance Premiums

    Insurance companies will typically look at your credit to decide if they’ll offer you a policy and to determine your premium. Those with bad credit may be denied or will often pay considerably more.

    Profitability

    Businesses that don’t qualify for loans often turn to costly forms of lending and troublesome debts that are hard to pay off. This, paired with increased borrowing and premium costs, can seriously eat into your profit.

    Funds Management

    When businesses don’t have strong credit, the business owner often pays out of their own pocket or obtains financing in their own name. For instance, 46 percent of small business owners use their personal credit cards for business expenses, according to the SBA. When funds are comingled this way, it’s difficult to split them apart for tax purposes. You may be placing your personal assets at risk too.

    10 No-Nonsense Ways to Build Small Business Credit

    Now that we’ve covered how business credit works and its impacts, let’s explore how to establish business credit for the first time and how to build and maintain it.

    1. Register Your Business

    The first step is to decide which business structure is best for your company. Your business structure impacts the laws that apply to your company and how you pay taxes. It also affects your access to funding. Because of this, it’s a good idea to consult with a business attorney if you’re unsure which one to select.

    Most businesses will need to register with state and local governments next. In rare circumstances, such as if you intend to operate as a non-profit or are creating an S corp, you’ll also need to file with the IRS.

    2. Apply for an Employer Identification Number (EIN)

    Most businesses must also apply for an Employer Identification Number (EIN) with the IRS. Per SBA guidance, you should apply for an EIN if your business:

    • Operates as a corporation of partnership
    • Pays employees
    • Files tax returns for employment, excise, or alcohol, tobacco, and firearms
    • Withholds taxes on income, other than wages, paid to a non-resident alien
    • Works with certain types of organizations, such as non-profits and those involving trusts, estates, real estate mortgage investment conduits, farmers’ cooperatives, or plan administrators

    While this won’t directly improve your credit score, it’s essential for doing business in many cases and will likely be a requirement if you need a license to operate too.

    3. Check in with the Credit Bureaus

    Reach out to Experian, Equifax, and Dun & Bradstreet to make sure they have accurate information for your business and get a copy of your credit report from each.

    If you haven’t done so, request a D-U-N-S number from D&B. It’s a unique identifier, similar to a social security number or EIN, but issued only by Dun & Bradstreet. It’s linked to the credit score they give you, known as a PAYDEX score. Obtaining a D-U-N-S number is essential when establishing business credit because D&B doesn’t score you until you have one. Many entities, from lenders to vendors and even the government in some cases, won’t work with you unless you have a D-U-N-S number.

    Once you’ve run a preliminary check and ensured all information on your credit reports is accurate, revisit your reports once a year to check for errors. You can check back more often when proactively taking steps to boost your credit score, but remember that it typically takes 12-18 months to see improvement. Don’t expect large swings every month.

    4. Consider a Business Credit Card

    A business credit card can be a great business credit builder. Many rely on your personal credit score rather than your business credit score to determine approval, making it easier for some to qualify. Plus, your credit score will get a boost if you make all your payments on time.

    However, the catch is that many business owners don’t keep up with their payments or spend more than 30 percent of their available credit and carry large balances month-to-month. This approach can actually harm your credit and is usually a very costly way to borrow. Plus, many people find themselves in the trap of only paying interest each month and never getting the balance down. If you habitually do this with your personal cards, it might be best to skip opening one for your business when you’re trying to improve your score.

    5. Pay Your Creditors Early

    Paying on time isn’t enough if you’re trying to build business credit. You must pay early. If you pay on the due date, the best PAYDEX score you can get is 80, as Forbes reports. If you’re triaging your bills and trying to decide which to pay early, targeting the larger balance may be better too. D&B considers the balance when adjusting your score. For instance, a $10,000 invoice paid early will boost your score more than a $1,000 invoice paid early. Equally, your score will take a bigger hit if the $10,000 invoice is paid late than it would have if the $1,000 invoice were paid late.

    6. Avoid Judgments and Liens for Your Business

    Avoiding judgments and liens may sound like an easy way to build business credit, and it is to some degree, but 54 percent of businesses report having trouble covering operating expenses, and 32 percent say paying debt is difficult, per the latest Small Business Credit Survey. A few tips that may help in this respect include:

    • Avoiding debt
    • Budgeting carefully
    • Managing general contractor relationships well

    7. Monitor Your Credit Usage

    When trying to build credit, small-business owners often overlook the importance of keeping balances low. Ideally, you want to keep your credit utilization below 30 percent. This means you’re not using more than 30 percent of the funds available on financial tools like credit cards and lines of credit. Spending more than this can make you look like a risky borrower.

    Additionally, you should maintain a debt-to-income ratio of no more than 50 percent. If you exceed this, lenders will be concerned that you can’t afford more debt.

    Both these things can negatively impact your overall score too. Keep an eye on your usage and debt ratios and make changes if they start to climb.

    8. Borrow from Lenders that Report to Credit Bureaus

    Many assume that all payments are reported to credit bureaus, but this isn’t always true. Some lenders don’t report at all, while others only report when something goes wrong. To make sure you’re getting credit-boosting power from every payment you make, ensure any lender you borrow from reports your timely payments.

    9. Establish Trade Lines with Your Suppliers

    Suppliers who offer you a line of credit or allow you to pay after goods are delivered can help you in two huge ways. First, anyone you have financial transactions with can report you to credit bureaus like D&B. So, if you have a good relationship with yours, you can simply ask them to report your history and get an automatic boost.

    Additionally, vendor financing options don’t usually appear on reports as lines of credit. Although people who check your reports can see the invoices owed, any “borrowed” funds don’t count toward your credit utilization. This can make you look like a more appealing borrower when applying for a loan.

    10. Build Small Business Credit with Invoice Factoring

    Invoice factoring may be the best way to build business credit because it offers many benefits. For instance, you can use your factoring cash to pay your invoices on time or early and leverage factoring to stabilize cash flow, so it’s easier to manage your money. Plus, you don’t always need a credit check every time you factor. This is different from a loan and is a crucial distinction because credit checks can hurt your score for some time. Lastly, factoring provides debt-free funding. It’s an advance on your B2B invoices, and the balance is cleared when your client pays their invoice, so there’s nothing to pay back. That keeps your credit utilization and debt ratio lower and makes managing your cash easier.

    If it sounds like invoice factoring can help solve some of the issues holding you back from having the business credit score you deserve, contact us for a complimentary rate quote. 

  • Good Debt vs. Bad Debt for Small Businesses: What’s the Difference?

    Good Debt vs. Bad Debt for Small Businesses: What’s the Difference?

    Good Debt vs. Bad Debt: Small Business Guide

    Is debt negative or positive for a small business? With the average small business carrying around $195,000 in debt, per Experian, and business debts skyrocketing in recent years, according to the Federal Reserve, it’s a question worth asking. However, the answer isn’t always clear-cut. On this page, we’ll explore how business debts work, go over some differences between good and bad debt, and cover how to get out of business debt if you’ve found yourself in an unfavorable situation.

    What is the Difference Between Good Debt and Bad Debt?

    Let’s begin by addressing the big question: “Is debt positive or negative?” It can actually be both. The key difference between good and bad debt is what it does for your business.

    What is Good Debt?

    Generally speaking, a “good” debt benefits your business in one or more of the following ways:

    • Can potentially increase the net worth of your business
    • Can potentially increase your net worth
    • Has future value

    Additionally, some signs a funding solution might be good include:

    • Low-interest rates
    • Minimal start-up costs and origination fees
    • No annual fees
    • Manageable installments
    • Payoffs that can be made quickly

    Furthermore, taking on good debt can boost your credit score as long as you keep up with your payments. That means you’ll have access to more loan options and better rates as you continue to strengthen your score, so your business saves money on big purchases like real estate and equipment.

    What is Bad Debt?

    A “bad” debt, on the other hand, has the potential to damage your business in the long run. This includes debts:

    • For items that are consumed or depreciate
    • That don’t add to your or the company’s net worth
    • That could potentially leave you with nothing to show for your payments

    Additionally, some warning signs of bad debt loans include:

    • High-interest rates
    • Expensive start-up costs or origination fees
    • Annual fees
    • Unmanageable installments
    • Payoffs that are difficult or impossible to reach

    Examples of Good Debt for Small Businesses

    Based on the definitions, you may already have some idea of what a good business debt looks like. Some examples include:

    • Mortgages that provide you with an asset in the form of real estate
    • Small business loans used to help expand your business or operate more efficiently

    Going by the definitions provided earlier, revolving credit and credit cards could fit into the good or bad debt category as well, but it depends on how you use the cash, the terms of the agreement, and your ability to pay off the debt quickly.

    What to Consider When Making a “Good Debt” Investment

    Before you take on debt you consider to be good, ask yourself the following questions:

    • Is this debt going to help my company grow stronger? Will it add value to my business and/or boost cash flow?
    • Am I paying the least amount possible to borrow?
    • Am I using historic data and realistic projections to determine my ability to pay the loan back?
    • Have I spoken with a tax specialist to determine which options are best to lower my tax burden?
    • If I’m using the cash for something like inventory or supplies that will allow me to accept more business, am I going to earn enough to pay the loan off and still profit?
    • Are the fees and interest for this loan reasonable? If not, do I have a solid exit strategy that will allow me to pay off the debt quickly to avoid excessive fees?

    Examples of Bad Debt for Small Businesses

    Now, let’s look at some bad debt examples your business will probably want to avoid. These include:

    • Credit cards and lines of credit with high-interest rates that won’t get paid off immediately
    • Merchant cash advances (MCAs) with high fees and unpredictable repayment schedules
    • Short-term loans intended to be paid off within 30 to 90 days that come with excessive interest rates and fees

    Avoid Bad Debt: Making Informed Financial Decisions for Small Businesses

    Navigating the financial landscape of small businesses can be challenging, especially when trying to discern the difference between good debt and bad debt. While good debt can help you build wealth, foster growth, and potentially improve your credit score, bad debt can drag down your business, burdening you with high-interest rates that stifle progress.

    Take for example, credit card debt. Credit cards can be valuable tools when used wisely, offering opportunities to manage cash flow and even earn rewards. However, high-interest credit card debt can quickly become a problem, especially if you can’t pay off your balance in full each month. This type of debt is often considered bad debt because of the potentially crippling interest rates associated with it.

    On the other hand, a mortgage or business loan might be seen as good debt. This type of debt, especially when it comes with a lower interest rate, allows businesses to invest in assets that can appreciate over time, like real estate or essential equipment. But even mortgages can shift from good debt to bad debt if the home prices decline or if the loan used is beyond what the business can afford, leading to potential financial struggles.

    Another point of concern is student loan debt. While education is invaluable and can open doors to numerous opportunities, much student loan debt without a strategic repayment plan can hamper one’s financial situation.

    Furthermore, while some consider auto loans and certain types of debt like “good debt” because they enable essential purchases, it’s crucial to keep in mind the repayment terms and interest rates. High-interest loans, for instance, payday loans, are often considered bad debt because of their exorbitant costs and potential to plunge borrowers into a debt spiral.

    Experian, a renowned credit reporting agency, and other financial institutions, such as the Federal Reserve Bank of New York, emphasize the importance of debt management. Their reports and studies highlight the consequences of poor financial decisions and underscore the importance of understanding what’s the difference between debts that can boost net worth and those that detract from it.

    Lastly, for small business owners contemplating taking on more debt, reviewing the annual percentage rate (APR) and evaluating if the debt used to finance specific ventures will have a positive or negative impact in the long run is crucial. After all, the ultimate goal is to leverage debt to foster growth, not hinder it.

    What to Know Before You Take on Bad Debt

    Business owners often know that taking on certain debts can hurt the business. For instance, if the loan comes with high interest and/or fees, and those are disclosed before signing, the long-term implications of accepting the loan are fairly clear.

    The problem is that the solutions that businesses turn to when they’re cash-strapped and need to make payroll or cover inventory don’t generally fall into this category. That’s when people look into “quick money” solutions like revolving credit, MCAs, and short-term loans.  In these cases, the total amount that will be paid isn’t always clear. Sometimes it’s not even known because the amount is dependent on how much the business owner chooses to put toward the debt each month.

    Moreover, because the cash isn’t going toward something that will grow the business, and the underlying issue that caused the cash shortage isn’t addressed, it’s almost a guarantee that the business will run into the same cash flow shortfall later. Only, the next time, it’s responsible for additional debt payments from the first loan too. This is how businesses get caught in a debt spiral, and once you’re in, it’s very difficult to climb back out.

    Businesses dealing with this kind of financial pressure—especially those facing federal tax issues—may benefit from exploring how to finance a business with an IRS lien through invoice factoring, which offers a non-debt alternative to regain control of cash flow.

    How Much Debt is Normal for a Small Business?

    Again, the typical small business presently carries $195,000 in debt. While that might be “normal,” it doesn’t necessarily mean that this level of debt is appropriate for your business. There are three common ways to evaluate business debt.

    Ability to Make Monthly Payments

    Simply put, if making the monthly payments on debt impact the business’s ability to cover other expenses like payroll, the business is carrying too much debt.

    Debt-to-Income Ratio

    Calculating a debt-to-income ratio similar to the one used in consumer markets may also be helpful. To calculate yours, add up all expenses you pay each month and divide the figure by your gross revenue, then multiply by 100 to get a percentage. An ideal rate is 30 percent or less. Anything over 50 percent means the business has an unhealthy level of debt and needs to take immediate corrective action. Businesses that land between 30 and 50 percent should work to reduce their debt.

    Debt Service Coverage Ratio (DSCR)

    DSCR works similarly to debt-to-income ratios.

    The formula is as follows: DSCR = Earnings before interest, tax, depreciation, and amortization (EBITDA)/annual loan payments

    A 1.0 ratio signifies that the borrower is at the breakeven point. They can pay their debt but would be in trouble if their financial situation changed. Anything less than that means the borrower will likely default. Anything higher signifies the borrower can handle the current debt load and may be able to handle more. Banks, for example, sometimes require that businesses maintain a DSCR of 1.25 when applying for a line of credit, Investopedia reports.

    Managing Your Debt: How to Get Your Business Out of Bad Debt

    Knowing the difference between good and bad debt can help you make smarter decisions when your business is short on cash, but what if you’re already in a difficult situation or caught in a debt spiral? The following business debt management tips can help.

    Stop Taking on New Debts

    Immediately stop taking on new debts. Taking out additional loans to cover expenses, even emergency expenses, will make it that much harder to correct the situation.

    Analyze Your Budget and Financial Statements

    You need to have a firm grasp on your revenue and expenses, as well as overall cash flow. Modern accounting software can take the guesswork out of this and help you identify when you’re likely to have a cash flow shortage so you can take steps to avoid it, and when you’ll have additional cash on hand to put toward debts.

    Consider Consolidation

    More than a quarter of small businesses applying for loans are doing so with the hope of refinancing or paying down debt, the latest Small Business Credit Survey finds. If you’re wrestling with high-interest loans, consolidating into a single payment with a lower interest rate is usually a good option, provided you qualify. You can also refinance a high-interest loan to reduce your payments and interest. Either way, be sure to crunch the numbers in advance, as you’ll generally pay fees to obtain the loan, and those can sometimes mean you’ll pay more to pay off the new loan than you might have if you’d just paid down your debts faster.

    Triage Your Debts

    Review all your current debts and find out what you’re paying for each one every month as well as what your interest rates and any recurring fees for each account entail. Generally speaking, it’s best to pay off loans with the highest interest/ greatest cost to borrow first. With this in mind, you’ll want to funnel every penny you can into your most expensive loan first until it’s paid off, then move to the next most expensive loan.

    However, it can be disheartening to chip away at debt every month and not feel like you’re making progress. If you feel like the above approach is going to cause you to lose momentum, pay off your smallest balance first instead. When it’s paid off, funnel the money you would have put toward it to the next smallest balance. With this approach, the amount of extra money you’re putting toward a debt each month snowballs, so you can see the progress a little more clearly. You’ll likely pay more over the lifetime of the loans to use this approach, but if it keeps you motivated to pay off your debt, it’s a worthwhile expense.

    Renegotiate Your Terms

    Sometimes creditors are willing to renegotiate their terms. You don’t need to wait until you’ve missed a payment to ask. Just start calling creditors and tell them your business is experiencing hardship and needs to make changes. Some will offer to wait for payments or reduce payments. That can be helpful if you’re struggling to pay each month or they’re low-cost, and you want to put extra cash toward high-cost loans. However, it will increase the total amount you pay to borrow and increase the time it takes to pay off the loan.

    The better outcome is to see if creditors are willing to lower your interest rate or skip charging interest for a period. Provided it won’t impact your credit rating, you can also ask about debt forgiveness and whether the company is willing to forgive a portion of your debt if you can pay off the remainder in one lump sum.

    Every company will pitch different solutions, so stick with it and see what you can accomplish that will help you get your debt paid off quickly.

    Get Debt-Free Small Business Funding

    Debt-free funding is helpful whether you’re already overwhelmed by debt or are trying to make smart financial decisions to ensure your business doesn’t wind up with too much bad debt. Invoice factoring is one example of this. Rather than taking out a loan, your business simply accelerates payment on its B2B invoices by selling them to a factor at a discount. You get cash upfront to cover expenses and grow while the factoring company waits on payment. The balance is cleared as soon as your client pays the factor, so there’s no debt to pay back.

    If it sounds like factoring is your ideal solution to avoiding bad debts or getting yours paid off quickly, get a complimentary rate quote from Charter Capital.

  • How Referral Partnerships Can Help Your Business Thrive

    How Referral Partnerships Can Help Your Business Thrive

    How Referral Partnerships Can Help Your Business Grow

    Marketing and sales teams have an uphill battle. The average person now sees up to 10,000 ads each day, per Zippia research. It’s hard to cut through all that noise. Plus, a typical sales cycle takes anywhere from six to 12 months, according to Anyleads. Because of this, a typical sales rep makes around 45 calls each day trying to nudge prospects toward the finish line, HubSpot reports. But, there is a way to reduce or eliminate these challenges: referral partnerships.

    What Are Referral Partnerships?

    A referral partner is someone who recommends your business to others, usually in exchange for some type of compensation. Businesses that want to maximize the value of the partnership landscape will create a formal referral partnership strategy.

    Referral Program vs. Referral Partner Program: What’s the Difference?

    Many businesses have a referral program for their clients. In these situations, the client is asked to recommend the business to friends and family. They’ll often receive discounts, free gifts, and other perks for participating or for each referral they provide.

    Referral partner programs aren’t dissimilar in concept. However, the people making the referrals are not clients and don’t use products or services provided by the company, so most programs provide monetary compensation for each referral.

    Referral Program vs. Referral Partner Program: Which is Better?

    Both referral programs and referral partner programs can deliver serious ROI and help your business grow. Therefore, it’s ideal to incorporate both into your business and marketing strategies.

    Referral Partner vs. Affiliate: What’s the Difference?

    Affiliate programs are a form of digital marketing in which a third party, known as an affiliate, promotes a product or service for a business and provides a link for website visitors to click on. Compensation structures vary. Some businesses pay a commission for each site visitor that comes from the affiliate, while others don’t pay out unless the visitor signs up or purchases something.

    Affiliates don’t generally have a relationship with the person they’re sending to the business or the business. Instead, they usually create content about something related to the business or product and include their affiliate link in the text.

    Referral partners have relationships with both the business and the person they’re referring, exponentially increasing the value of the referral.

    Referral Partner vs Affiliate: Which is Better?

    Both referral partner and affiliate programs can benefit a business. However, affiliate programs are more effective for brands that sell tangible products than those that offer service delivery. Affiliate programs are also geared more toward one-off interactions, whereas referral partner programs are long-term engagements with deep ties. Therefore, referral partner programs are better for building a brand and growing a company overall.

    Benefits of Referral Partnerships

    Good referral partner programs offer benefits to both the business and the referral partner.

    Benefits for the Business Receiving Referrals

    Referral partner programs provide benefits at every stage of the buyer’s journey, so businesses that leverage them grow stronger and more quickly.

    Brand Building

    Word-of-mouth marketing has a positive impact and is up to 100 times more valuable than paid media, according to HubSpot research. Roughly half the population agrees that interactions with people like friends and family are their top source of brand awareness. Plus, 84 percent trust recommendations from friends and family more than anything else, per Nielsen. In other words, businesses that want to create awareness for their brand, products, or services will have more success with referral programs than with anything else.

    More Leads

    Businesses get what they put into their referral partnerships. Those that work with their referral partners and nurture the relationships will see the number of sales leads they receive climb exponentially.

    Increased and Faster Conversions

    People are more likely to make a purchase when they are referred by a friend, Nielsen reports. Because referral partners have a relationship with both the business and the person being referred, they’re also more likely to refer people who are good candidates for the products and services being offered. This means the lead is more likely to convert and will convert faster.

    Stronger Client Loyalty

    Referred clients are 18 percent more likely to stay with the brand, according to HubSpot.

    Greater Client Spend

    Just a one percent increase in retention can deliver a 20 percent increase in annual revenue, per HubSpot research. The lifetime value of individual clients skyrockets too, with referred clients generating 16 percent more revenue than their counterparts.

    Improved Profitability and Accelerated Growth

    All these things mean brands with referral partner programs are far more likely to grow faster and be more profitable than their counterparts.

    Benefits for the Referral Partner

    Referral partners also benefit greatly from participating in referral partner programs.

    Compensation

    The commission varies by business and program. However, it’s quite common for referral partners to receive several hundred dollars per referral as a flat payment or receive a percentage of the revenue generated by their referral as compensation. An active referral partner can easily earn thousands with a single company.

    Stronger Client Relationships

    Referral partners often have clients of their own who come to them and ask for recommendations. It’s a huge relief for them to be matched with a trustworthy business. It saves the client time too. Plus, once the client is onboarded with the company and has a good experience, that reflects on the person who referred them. It’s advantageous to participate in multiple referral partner programs so that you always have a trusted business you can refer clients to for any given situation.

    Reciprocal Referrals

    Oftentimes, businesses that provide referral partner programs are happy to refer clients to you as well, so your business grows too.

    How to Participate in Referral Partner Programs

    Now that we’ve covered what referral partnerships are, how programs work, and what some of the benefits are, let’s explore how to get involved with companies as a referral partner.

    Find Referral Partner Programs You Want to Join

    Because you should only partner with businesses you trust, and you’ll need to know about the products and additional services to effectively promote them, it’s generally better to connect with businesses you already have some tie to. Consider reaching out to some or all of the following:

    • Businesses that refer to you
    • Businesses/ vendors you work with
    • Businesses your clients already work with
    • Businesses of friends and associates

    Learn About the Business and Program

    Find out what criteria the business looks for in a good prospect or which clients they can help and why. This makes it easier for you to refer selectively and make mutually beneficial introductions.

    Also, ask about program details, such as how and when you’ll be compensated for referrals too.

    Share Details with Authenticity

    Referral partner programs are powerful because they’re built on relationships and trust. Therefore, you must recommend the business in a way that feels natural to you.

    Touch Base with the Business and Your Referral After

    Find out how the experience went for your referral and share the feedback with the business, so they can duplicate successes and take steps to improve as needed. Also, follow up to ensure you’re being compensated per the terms of your terms of the partnership agreement.

    How to Create Your Own Referral Partner Program

    Be strategic when you create a referral partner program to ensure you’re maximizing the value of each partnership and develop a program that produces ROI and boosts overall business success. The steps below will help as you plan yours out.

    Determine How Your Program Works

    Start by drafting some ideas on how you want your program to work.

    Who

    Strategic partnerships are key. Identify who might make a good referral partner. Businesses that share your audience are a good start, as are vendors and businesses you recommend to your own clients. You may find potential partners through trade or industry organizations and at industry events as well. Sometimes businesses even onboard competitors as referral partners. The arrangement can work if they sometimes get leads that they can’t help, but you can.

    What

    Identify the specifics of what your referral partners should do and how you plan to compensate them. It may be helpful to reverse-engineer your compensation structure to ensure you’re turning a profit after compensation is awarded. To do this, determine how much revenue a client generates for your business over their entire time with you, then subtract any sales and retention expenses.

    Where

    Consider what type of geographic region you want to target with your referral partner program.

    When

    Define any times involved, including the start date for your program and when you plan to reevaluate how it’s working.

    It’s also a good idea to determine the period after a referral is made in which the partner will receive credit. For instance, should the partner only receive credit if the person signs up within 90 days of the referral? Or, would it be better to set a 30-day timeframe in which the referral must start the sales process, but not necessarily close? Or, are you going to give the referral partner credit even if the person doesn’t contact you for years? The average length of your sales cycle and the average number of leads your business generates will come into play with these decisions.

    Why

    Outline why referral partners should want to work with your business. Consider benefits beyond compensation.

    How

    Work out the logistics of your program based on the remaining steps below.

    Create the Technical Processes and Assets

    Get processes and assets in place before you launch or promote your program to ensure everything goes smoothly. You’ll learn more about these components as we move forward, but some things you should consider setting up in advance include:

    • Marketing assets to use with referral partners (website landing page, program signup form, prospect emails, etc.)
    • Partner onboarding assets (demos, partnership agreement, etc.)
    • Marketing assets referral partners can use to promote you (flyers, brochures, social media posts, emails, landing pages, etc.)
    • Tracking (how you’ll track leads generated and the success of individual referral partners as well as the program, as well as commission payments.)
    • Marketing automation workflows (email list segments, nurturing messages, onboarding follow-ups, etc.)

    Train Your Team

    Once everything is set up and you’re ready to start creating referral partnerships, train your team on how the process works and the benefits for both parties. Once they get a feel for how it works, they can start nominating potential referral partners too.

    Find Potential Referral Partners

    Start finding specific candidates based on the methods and groups you chose to target earlier. Compile them into an email list and treat them just as you would a sales lead. Begin with an introduction, nurture them, and give them information about why they should become a referral partner.

    When someone expresses interest, book a meeting to go over program details in depth and provide them with a brief product demonstration, if applicable. Take time to answer all their questions. Remember, this person is going to serve as an ambassador for your brand, so they should be knowledgeable and excited to participate.

    Make Partnerships Official

    When your prospect is ready to start referring, make the referral partnership official by signing an agreement that outlines the obligations and expectations of both parties.

    Equip Referral Partners for Success

    Provide your new referral partner with an onboarding kit that includes all the marketing assets they need. This ensures your branding stays consistent, makes it easier for them to promote you, and can aid in tracking referrals. Some assets you may want to provide include:

    • Unique links they can share that allow you to link their referrals to them.
    • A landing page they can send referrals to and/or a form they can use to provide you with contact details of their referrals.
    • Emails they can send to their clients.
    • Social media graphics and copy they can use to promote you.
    • Flyers or brochures they can give out.

    Track Individual Referrals and Thank Referral Partners

    If you’re using marketing and analytics software and have a CRM, the entire tracking process can be automated. If not, find a way to document and track referrals, so you can tell how referral partners are performing as well as gauge the success and ROI of your program as a whole.

    Because referral partnerships are relationship-based, it’s also a good idea to touch base with partners as their referral goes through the sales process. Pick up the phone and thank them when a referral connects with your company. Let them know when the sale closes and when to expect their commission as well.

    Don’t leave referral partners in the dark if a lead goes cold or stops progressing. Explain what happened and, if the lead wasn’t a good fit, let them know why. Even if things went south, communicate with gratitude to keep the relationship strong.

    Continue Nurturing Your Relationships

    Just as it’s important to nurture the relationships you build with your clients, it’s important to nurture relationships with your referral partners too. If possible, send them regular reports demonstrating their contributions and commissions earned. Send emails to keep them in the loop about things happening with your company or any special offers you’re giving new clients now that they can use to entice prospects to contact you. Share success stories from other referral partners to keep the excitement and momentum going or tips that can help them maximize their commission.

    While you don’t want to overwhelm them, most referral partners will welcome an email like this once or twice per month. Monitor your email engagement rates to determine what your partners respond to most and to determine the ideal cadence.

    Marketing Strategies to Promote and Scale Your Referral Partner Program

    Building a solid referral partner program is only the beginning. To create a successful referral partner program that drives business growth, you need a marketing strategy designed to attract the right partners and scale results over time. Begin by identifying your value proposition — why your products or services are worth recommending to potential customers. Then, communicate that clearly across all channels where your potential clients and referral partners spend time.

    Leverage your existing networks, including existing customers, vendors, and industry peers who already trust your brand. Highlight how the referral partnership program works, who it’s a fit for, and the potential to earn a commission through a referral fee. Showcase success stories to establish credibility and signal a mutually beneficial relationship.

    Use digital tools like email campaigns, social posts, and landing pages with referral links to invite qualified partners. Consider joint marketing with your most engaged referral partners — co-branded webinars or case studies can generate higher conversion and build relationships with referral partners. A well-promoted referral program becomes a cost-effective marketing strategy compared to traditional methods, delivering qualified leads through strong referrals from trusted voices. With the right approach, it can be a game-changer for your business.

    Refer and Earn with Charter Capital

    Do you know business owners or decision-makers who can benefit from fast and reliable funding? We welcome the opportunity to meet them and appreciate your referrals.

    As a Charter Capital referral partner, you’ll automatically receive monthly commission payments for a portion of the revenue generated from your qualifying referrals along with a monthly earnings report. Apply to become a Charter Capital referral partner to learn more or get started.

  • Employee Burnout is Driving Turnover and Business Startups

    Employee Burnout is Driving Turnover and Business Startups

    Employee Burnout Fueling Turnover and Startup Boom

    We’ve all heard terms like “quiet quitting” and “The Great Resignation.” They’re part of a greater problem fueled by employee burnout and work-related stress. Yet, something good may be arising from this so-called epidemic: a growth of entrepreneurship. On this page, we’ll walk you through the latest data on employee stress and burnout, plus provide tips for launching business startups and preventing employee burnout and turnover.

    The Growing Concern: Employee Burnout

    Even if you’re not personally impacted by burnout, chances are you know someone who is. Half of all employees and 54 percent of managers say they’re presently experiencing burnout, according to CNBC. Nine in ten have experienced burnout in the past year, and three-quarters say they’ve felt burned out at their current job, per Zippia.

    Whereas most hoped burnout rates would subside as pandemic concerns waned, that doesn’t seem to be happening. Although rates declined a bit in 2021, burnout has again soared to the same levels seen at the height of the pandemic, Aflac reports.

    Symptoms of Burnout

    “Burn-out is a syndrome conceptualized as resulting from chronic workplace stress that has not been successfully managed,” according to the World Health Organization (WHO). The main characteristics of burnout include:

    • Feelings of physical energy depletion or exhaustion
    • Cognitive weariness and emotional exhaustion
    • Reduced professional motivation, effort, or efficacy
    • Increased mental distance from one’s job
    • Feelings of negativism or cynicism related to one’s job

    Causes of Burnout

    Burnout has six main causes, per Harvard Business Review (HBR) research:

    • Unsustainable workload
    • Perceived lack of control
    • Insufficient rewards for effort
    • Lack of a supportive community
    • Lack of fairness
    • Mismatched values and skills

    Burnout is Fueling Job Departures

    Burnout is the number-one reason people leave their jobs, Zippia reports. In all, 40 percent of workers who have recently left their jobs cite burnout as the cause.

    Preventing Burnout as a Company

    One of the biggest issues is that many businesses don’t realize burnout is a problem for their company. Despite record-high burnout rates, 55 percent of companies say burnout doesn’t impact them, per Quartz. Furthermore, 21 percent of employees say their company doesn’t offer a burnout alleviation program, and 70 percent say their employer doesn’t do enough to prevent burnout, according to Zippia. Businesses interested in addressing or preventing burnout in their organizations can apply the following strategies.

    Trust employees and productivity-tracking software.

    With the rise in remote work, employers have become less trusting that employees are devoting adequate time and energy to work. Microsoft describes this as “productivity paranoia.” The tech giant notes that although productivity signals like hours worked and meetings accepted continue to climb, employees are feeling more pressure to prove they’re working. This increases stress and often causes employees to work more hours than are healthy or required.

    Help the team prioritize.

    In all, 81 percent of employees say they want help prioritizing their workload, yet just 31 percent of managers assist with this, CNBC reports. With no clear prioritization, employees feel pressured to do it all or push themselves toward unreasonable goals.

    Set universal objectives.

    If employees are in similar roles, use the same metrics to measure their success regardless of whether they work in-person, remotely, or hybrid. This helps team members know what to focus on and can reduce productivity paranoia.

    Give each employee 15 minutes per week with their direct manager.

    Jennifer Moss, author of “The Burnout Epidemic: The Rise of Chronic Stress and How We Can Fix It,” says asking open-ended questions and focusing on helping employees meet their objectives in a weekly 15-minute meeting is essential, CNBC reports. Ask questions like:

    • How was this week?
    • What were the highs and lows this week?
    • What can I do to make things easier for you next week?

    Institute mandatory time off.

    Many companies are now instituting mandatory time off, the New York Times reports. The strategies vary by company. For instance, some shut off email forwarding on the weekends to ensure teams are refreshed on Mondays. Others designate one day per month as an extra day off. Some shut down for a full week or give rolling week-long vacations to ensure everyone gets a break without shutting down the company.

    Focus on engagement and team-building activities.

    Explore ways to engage remote teams and identify team-building exercises everyone can do together. This can help reduce workplace isolation, improve camaraderie, and boost morale, all of which can help reduce workplace stress and combat burnout.

    Burnout is Fueling Entrepreneurship

    New business formation soared 42 percent over pre-pandemic levels last year, according to Gusto. Their research shows 1,590 Americans launched new businesses last year. Around half left their jobs to do so, and burnout was cited as the most common reason.

    Life After Burnout: Tips for Starting a New Business

    Whether you’re launching a business as a new full-time career or establishing one as a side hustle, following a few best practices will lay the foundation for success.

    Develop a full business plan and goals.

    A business plan is essential, even if your new venture is something like consulting on the side within your area of expertise. Developing a business plan will help you think critically about where you want to go and what steps you need to take to get there.

    Consider starting small.

    Around ten percent of startups are keeping their employee count very limited, per Gusto surveys. Businesses start out stronger and tend to rank higher in areas like customer satisfaction that ultimately drive successful outcomes when employees are carefully selected.

    Have a plan for working capital.

    Although 23 percent of entrepreneurs represented in Gusto surveys say no capital was needed to start their businesses, the vast majority need some funding to get off the ground. Small businesses have historically been underserved by traditional lending channels and startups, with limited time in business and revenue, face more challenges. In addition to this, banks are raising the bar for funding even more due to economic uncertainty. It’s no wonder that 63 percent of businesses say they had to dip into their personal savings to launch.

    Regardless of which group you fit into, chances are that you’ll need funding at some point, even if only to cope with growing pains as your company scales. Identify options, such as invoice factoring, that can provide you with working capital in the early stages.

    Focus on cash flow.

    It’s not a lack of profit, but rather cash flow management issues, that are responsible for most business closures. Learn the basics of cash flow management and explore common cash flow management mistakes to fortify your business.

    Consider partnerships.

    Businesses with more than one founder outperform those with a sole founder by 163 percent, according to First Round research. Having a good partner by your side also spreads the workload and can reduce stress. Additional benefits can be gained by working with other businesses and startup programs that elevate your processes in specific areas or that can help your business grow.

    Scale with Charter Capital

    If your small business needs capital to create programs to reduce employee burnout and turnover, or you operate one of the country’s latest business startups and need cash to grow, Charter Capital can help. We accelerate funding on B2B invoices to put cash in your pocket now without adding to your company’s debt. Plus, we work with new businesses across a variety of industries, including transportation, security firms, consulting and service firms, and many more! Request a complimentary rate quote to learn more or get started. In the dynamic world of work-related stress and corporate culture, we are here to help you navigate and succeed, empowering the growth of entrepreneurship and lessening the risk of employee burnout.