Avoid Wasting Money: Small Business Tips

Avoid-Wasting-Money-Business

All businesses (unless they’re non-profit) have one thing in common: they all need to turn a profit.  The easiest way to turn a profit is to avoid wasting money as a small business. So read our tips to learn more about how to save and grow without spending money

Unsure of how to take your business from good to great? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a FREE thirty-minute consulting session. 

4 Ways to Avoid Wasting Money as a Small Business

To start, the first step is to understand what a “deal” means to you.

1. Deal or No Deal?

Often, we as small business owners are bombarded with advice, especially when it comes to deals.  Not all of this advice is bad, however, but whether something is a deal, only you can decide. 

Importantly, the biggest mistake many people make is to focus on price versus value.  In other words, if you focus on the value it provides to your small business, you avoid wasting money. It’s a shortcut to long-term success, in many ways.

Have you ever bought something cheap, and it broke or didn’t do the job, etc., only to have to buy something else?  I think we all have.  But, it teaches us a great less about value.  Value is a measure of quality for a given price.  Granted, value is tough to measure because quality is tough to gauge.  But, the key question is really ‘will it do the best job at that price level’?

2. Minimize Impulse Buying to Avoid Wasting Money as a Small Business

Let’s face it.  We all buy on impulse.  It happens.  There are many who will say “never buy on impulse”.  While that’s great in theory, we all know it’s going to happen.  The key is to minimize it.  So, when the urge hits, take a breather and ask, do we or I really need this?  Therefore, if you are buying something, you should have a reason, even if it’s just to treat yourself.

3. Have a Reason to Buy is a Great Way to Avoid Wasting Money as a Small Business

Building on the last point, you can avoid wasting money as a small business by ensuring that all your purchases have a purpose.  Some small business owners are really good at this.  In contrast, some aren’t.  If you fall into the latter category, then, it’s helpful to make a list of what you spent for a week, 2 weeks, or a month.  Next to each purchase, put a check if it had a reason.  Count how many checkmarks you have.   Granted, it’s a bit tedious. But, it’s a good tool to help track and train new spending habits.

4. Find the Hidden Inefficiencies

Look, most small business owners didn’t start their businesses because they had business degrees.  So, it’s likely that there are some hidden inefficiencies in a small business that are wasting money.  To avoid them, it can be helpful to analyze your business model once and awhile. 

It’s so easy to get caught up in the day-to-day running of the business, you may not even notice that inefficiencies have crept in.  For instance, continuing to use a given service because you forgot to cancel it.  Or, for example, paying bills late because you were too busy to get to it. It’s things like that which can save you from mistakes that will cost you in the future.

Therefore, It’s often helpful to get some outside advice as they can look at your business from an unbiased perspective. Once you have identified the issues, you can avoid wasting money as a small business.

In summary, if I haven’t convinced you by now that these steps are important, maybe this will: 82% of businesses that fail, do so because of cash flow issues. So, let’s work together to prevent that.  

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

The Secret to Attract & Retain Small Business Talent is Revealed

Attract-Retail-Business-Talent

In our post, “3 Ways to Get the Best Talent More Often”, we cover how to recruit talent. In this post, we reveal the secret of how to attract and retain talent in your small business.

While small businesses can’t hold concerts, have a free cafeteria, or other major perks, we can be as creative and personalized as we want. And, that’s the secret to attract and retain talent. What keeps people motivated and dedicated is not their salary, but the intangibles. Luckily, as a small business, we can be flexible. Because we can be flexible, we provide our employees with benefits tailored specifically to their needs. This can be an asset in attracting and retaining talent. Let’s go through a few examples. 

Your business is doing well. But what’s next? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a FREE thirty-minute consulting session. 

First, Use Location Flexibility to Attract & Retain Talent as a Small Business

While some jobs require employees to physically be at one location, others don’t. Therefore, for those positions, offering location and time flexibility can be a great way to attract and retain talent. Why? It’s because people can choose when and where to work so that they fit their lives. Normally your work schedule dominates your life. But, in this case, your life guides your work. It’s an incredible perk. For instance, it’s very attractive to working families where childcare is an issue. Therefore, ask them when it is important to be in the office. If they can get their job done from home part of the time, let them. 

Second, Build a Team Where Everyone Feels Valued

Remember the team picnic or barbecue? Simple things with events and food can be powerful tools.  These can ensure that people feel bonded. Humans are social creatures. As a result, relationships are one of the most powerful tools to attract and retain talent, especially in small business. It doesn’t need to be a big event, just something your employees would enjoy. Ask for opinions and involve the team in planning it. It not only helps the inner workings of the business, but helps the company grow as well

Third, Attract & Retain Talent as a Small Business by Not Setting Hours

One of our key tools to attract and retain talent is providing work-time flexibility. For instance, we allow our team to set their own hours. It takes some time to adjust. You still need to set fixed times to review progress, like how we have weekly calls at a fixed time. During the call, each employee reviews their weekly status report with their manager. Businesses waste time, brainpower, and creativity by strapping people to a desk for 8 hours a day. 

Finally, Get Creative

Importantly, take the time to get to know your employees. Because by getting to know them, you can uncover what they value. And, what they value, likely others like them will value. Thus, it starts to build a self-sustaining culture. If you will want to delegate to your employees, it is helpful to make sure they like the environment they all work in. Importantly, it makes it someplace people want to work. In other words, that’s the true secret to attract and retain the talent you want. For even more information, Forbes has a number of great articles on attracting & retaining business talent, but for a more personal touch, come to us  

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us. 

Use Social Media to Improve Small Business Customer Service

social media customer service

Social media interactions can make or break a small business. So, here are some simple ways to use social media effectively to improve customer service in your small business. If you are looking for help, please contact us for more information.

Unsure of how to take your business from good to great? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Customers Expect a Quick Response

For instance, ½ of Twitter users expect a response within an hour, a recent study reported. 4 out of 10 Facebook users expect the same. Therefore, timely responses are key. Importantly, if you wait more than an hour, you risk disappointing a large portion of your customers. As a result, your small business customer service suffers. Because social media is so immediate, it can help to improve small business customer service greatly.

First, Using Social Media to Improve Customer Service Response Times

Where Social Media Chatbots can Help Customer Service

When a customer sends you a message, it’s important to address it quickly. Often, people use Facebook Messenger or Twitter, and they expect a response within an hour. That’s why chatbots are so important. It’s relatively simple to set up a frequently asked question trigger. The chatbot can use these triggers to help deliver a timely response. For example, if your business often gets questions about your services, the chatbot can deliver custom responses based on a generic term “services” or “what do you do”.  In addition, they can be triggered off of a specific service item.

Chatbots are a Quick Fix not a Solution

This approach can be used across a number of simple questions. However, if the question is more complex for instance, you should program the bot to have a live operator take over. Chatbots are good, but the can seem fake. If relied on too heavily, they can do more harm than good.

Second, Don’t Argue. You Won’t Win

As Michelle Obama said, “When they go low, we go high.”. Always keep your head. Regardless of how insulting or false a review may be, always take the high road. As tempting as it may be to take the Donald Trump approach, it rarely succeeds. For example, it can make you look petty, vindictive, and defensive. While it may grab people’s attention, the potential damage to your brand is significant.

Use Social Media to Bridge to Your Benefits

Instead, think of it as an opportunity to re-sell your benefits. So, if someone didn’t like what you did, ask them why. Importantly, it makes them feel heard and defuses the situation. Also, you may learn something new. If you can solve their problem, awesome. For instance, they may edit their review, or at least take the sting out of the original. Finally, every comment allows you to repeat your benefits.

An Example Interaction of How Social Media can Improve Customer Service

For example, let’s consider this interaction:

User: Product X sucks! It’s a waste of money! Don’t use it!

You: I’m sorry that you had a bad experience. Might you tell us why you feel this way?

User: It’s so complicated to use. I spent 30 minutes trying to make it work, and it’s still not running. I wasted $X on something I can’t use.

You: Typically, each box contains a step-by-step guide. Attached is a copy in case yours was missing. We’d be happy to set up a time to walk you through it. When it is set up properly, we believe Product X can provide [benefit], and we want to make sure it’s doing that for you.

User: Thanks! I never saw the guide. This is much clearer.

User: I used the guide and got it to work in 5 minutes. This was awesome. 

You: We’re thrilled that…[repeat benefit]

Avoiding a Bad Review

These interactions are critical. They not only affect your ratings and search engine rankings but also help your brand and reputation. Therefore, it’s important to be friendly, empathetic, and human. More importantly, if the bot is chatting, it has to sound human and not artificial. Otherwise, even the best responses can sound canned. As a result, even if it resolved the customer’s problem, they are less likely to react as positively as you would like.

Lastly, Utilize User Groups as a Social Media Tactic to Improve Customer Service

A user community can be very helpful in providing a balanced response from multiple sources. For instance, members have a way of self-policing other members. Also, they can provide supporting and independent points of view. You will need to set guidelines and have a bot filter, but they are worth the effort. Finally, having a moderator can help ensure that the group runs smoothly.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Get Capital Without Getting Clobbered

Get-Capital-without-Getting-Clobbered

As we said in our post, “Small Business Lending is Booming”, the market is awash with capital. Just because you can get capital, doesn’t mean you should. It can be risky, and some loans are more dangerous than you might think So, how can you get capital without getting clobbered?  

In fact, Kabbage just got $200M in funding to support its AI-based small business loans. When the market is saturated with capital, lenders start making riskier loans. Riskier loans mean higher interest rates, for example. Follow our three simple steps to know how to say afloat. 

Unsure of how to take your business from good to great? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a FREE thirty-minute consulting session. 

First, can you grow faster than the interest rate being charged?

How do you know? Simple, what’s does your business plan project? Don’t have one? Write one.

Right now, small business lenders might be more willing to allow less thorough plans or none at all. You might think that’s a good thing, but it’s not. Remember, if you can’t grow faster than the interest rate, you’re losing money. Defaulting on easy capital is just as damaging as defaulting on hard. In other words, that’s the first way you can get capital and get clobbered.

A business plan requires a business model. Your business model can tell you whether or not you have a good chance to grow at the rate you need to grow in order to beat the interest rate. With one, you’re much more likely to be able to get the right capital without getting clobbered.

Second, how is your credit?

It’s unlikely that you will qualify for a low-interest rate with a small business lender if your personal credit score is less than 700. We’ve heard of lenders now willing to give capital to people with scores as low as 600.

While it may sound like it’s a great thing to give people a chance, unfortunately, it’s not.  They’re not going to give you the capital for free. A lower score will mean higher levels of interest. 

This takes us back to our first point. You can get clobbered if you get capital at a rate which is higher than you can grow. If you can, you would be better served to fix your personal credit before you seek capital.

Having a high credit score is the second thing that can help you get capital without getting clobbered.

Lastly, What’s your debt cash ratio (DCR)?

Your what? This is basically a fancy term which looks at how large of a loan you can reasonably afford based on your size.

See our post “Small Business Lending is Booming” for the formulas to do the calculations. If you fail those fitness tests, then perhaps you should explore other options.

Being overleveraged is the final way you can get capital and get clobbered. It limits your options later if there is a downturn or a slowing of your growth. Since you’ll still have to pay back the debt, you’ll have less cash on hand for everything else.

You can really get clobbered if you gave any personal guarantees to get that capital. Why? Because now your personal possessions are at risk. If you’ve been in business less than 2 years and/or you lack collateral to offset the debt, you may be forced into this position.

Being properly leveraged is the final way to get capital without getting clobbered.

If all of this has made your head spin, you’re not alone. Unfortunately, this is really important to understand. The last place anyone wants to be is swimming in debt from a small business lender. 

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

To Grow Faster Than Your Competition? Focus on Your Current Customers

grow-faster-than-your-competition

Did you know that “only 6% of [the small] businesses [surveyed] are focused on retaining customers.”?  That’s the finding from a survey conducted by The Manafest. 94% of your competition is focusing more on new clients, instead of nurturing the ones they have. And, that’s a mistake you can use to grow faster than them.

Your business is doing well. But what’s next? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Why Focus on Your Current Customers to Grow Faster than Competition?

According to Small Business Trends, 60 – 70% of existing customers are likely to buy from you again. In contrast, the success rate with new customers is 5 – 20%. Think about it. You are 3 to 15 times more likely to get a sale, and you have to spend nearly nothing to get it. 

Don’t Waste Money Like Your Competition

94% of small businesses are spending their digital dollars inefficiently.

Customer acquisition can be an expensive endeavor. It takes money and time to generate interest, direct people to your website, and then motivate a customer to buy one of your products.

– The Manafest
grow faster than competition

While all these spends are important to brand building, they aren’t as likely to yield the return on investment like focusing on your current customers. Therefore, you grow faster than your competition by allocating your spending more wisely.

It Takes A Balance to Grow Faster than Your Competition

You can’t focus solely on existing customers. 30-40% of them will not buy again. So, you will have to replace them. Thus, it is important to understand your marketing/sales funnel. Building a solid marketing plan can help you map out each step.

For instance, let’s say we have 1,000 customers. We want to grow by 20% so we can grow faster than our competition. What should we be thinking about in our marketing plan?

Let’s walk through this example. First, we want to grow by 20%, so we need to have 1,200 customers. 

1,000 exiting x 120% = 1,200

Next, if we make a solid effort with our current customers, we should keep 700.

Repeat: 70% x 1,000 (existing) = 700

Therefore, all we need are 500 new customers.

1,200 (goal) – 700 (repeat) = 500 (new)

Now, let’s assume we have a sales success rate of 10%.  Therefore, we would need 500 divided by 10% or 5000 new prospects.

While 5,000 new prospects might seem like a big number, it’s a lot less than if we had to try to get 1,200 new ones.

1,200 / 10% = 12,000

In fact, it’s 40% less!

It probably costs you and your competition about the same amount to get a new prospect. Consequently, by focusing on existing customers, you could grow faster than your competition and spend significantly less.

In summary, having the right balance between focusing on your current customers and gaining new ones is the best way to grow faster than your competition while spending the same or less.

Therefore, having a repeat strategy is a key element to any successful marketing plan.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Why Small Businesses Fail While Others Succeed

Why-Small-Businesses-Fail

Why do some small businesses fail while others succeed? We would like to build on the point raised in Mr. Nugid’s article “Avoid These 4 Big Reasons Small Businesses Fail” in Inc. magazine. Plus, we add others we’ve learned based on real-world experience helping small businesses.

Feeling like your business isn’t going the right way? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Small Businesses Fail due to lack of sufficient capital

We’ve seen small businesses fail for this reason, over and over. It generally falls into two camps: first, a business who has been in business for less than 2 years, and second, a business, who waits too long before applying.

Small business who fail because they have less than 2 years experience

We had a young woman entrepreneur who was struggling with her business. She was profitable, but it was coming at the expense of her salary. So, this wasn’t a long-term solution.

Like most entrepreneurs, she was playing multiple roles. When she was selling, she’d gain clients. But, to service those clients, she’d have to stop selling. Therefore, she was seeing a seesaw effect in her cash flow. The obvious solution was to split the role to ensure constant and predictable cash flow.  

You would think this would be a slam dunk, right? Profitable, proof of concept, good personal credit, etc. Wrong. As we’ve discussed, in our post “What’s Holding Women Back”, and several others, we discuss the bias in the banking industry.

New businesses without personal guarantees or collateral will struggle, and women and minority-owned business will struggle more. I wish there were a ready-made solution for this, but there’s not. Maybe this will change as we discuss in our “Small Business is Booming Post”. But for now, you are typically left with two choices, enter the alternative lending market, or provide some personal guarantee.

Small business who fail because they wait too long

We had a client who had an amazing green concept. He secured an initial round of equity funding, but he didn’t use it wisely.

He was an idea guy and had a terrible time focusing. He hated numbers and analysis, which eventually was his downfall.  He never took the time to understand his cost structure. 

So, his profitability varied wildly from customer to customer. In some cases, it was so bad he was basically paying the customer so that he could perform the service. Unfortunately, we didn’t get to him until he made the biggest mistake possible. He entered the merchant cash advance market.

In our post, “Why You Should NEVER Use Merchant Cash Advances”, we go into great detail about these sharks. But, the moral of this story was that he waited until he was desperate to look for capital. Thus, this is why he failed.

Lack of Addressable Market

Mr. Nurgid highlights this as one of the key reasons small businesses fail. Maybe, that’s because he deals with credit card processing. In contrast, we have not seen this be as big of a factor as the lack of differentiation.

Small Businesses Fail Because of Lack of Differentiation

Now, this we have seen as a major cause of why small businesses fail. We would break this into two groups: first, lack of a clear positioning, and second, poor marketing execution.

Lack of a Clear Positioning

In our post, “4 Simple Steps to Write a Successful Marketing Plan”, we cover positioning in more detail.  We also offer tools that can help you build one.

A good positioning defines what’s unique about your brand within a competitive context. It’s a simple formula: For [customer], who are [demograhic, geographic, etc. subgroup], [Business] is the ONLY [category] that provides [benefit]. That’s because of [support point 1] and [support point 2]

For instance, we had a Dermatologist client who was struggling to gain patients. She operated in the crowded cosmetic market, where you can get a Groupon a day for a Botox special.

With physician overhead, they couldn’t compete and win on price. They needed to stand out, or they were headed out of business. So, we started with their positioning.

After much research and discussion, we came up with the following:

For women and men over 40, who want to look younger and more refreshed, Derm A is the only practice in NYC neighborhood, that provides the best quality cosmetic results possible. That’s because we employ only board-certified physicians and surgeons. and these physicians have a long track-record of amazing transformations.

See the difference. People don’t want Botox for $7/unit if they aren’t going to look great. This changed the game for them. It was no longer about price, but about results.

Poor Execution

This is a major problem that causes many small businesses to fail. Small businesses didn’t start their businesses because they had degrees in marketing. So, this shouldn’t come as a big surprise.

Getting your message heard by the right audience is challenging to do on a small business budget. In our post, “5 Ways to Grow Your Small Business Without Spending a Penny”, we discuss some options to consider.

Poor execution generally comes from poor planning. For instance, we had a client who was spending all his money in search and social media advertising. This was a problem for him for two reasons.

First, he was offering services in a very crowded space. In other words, the number of people competing for the same keywords was very high. Second, he was getting a terrible ROI.

While search, Facebook, etc. can be effective, they are usually not efficient spends for small businesses. At $1-$2/click. and standard conversion rates, you are paying $50-$100 per conversion.

After going through the “4 Simple Steps to Write a Successful Marketing Plan” with him, which was much more targeted and less expensive.

Poor Hiring

On this point, we agree.  We just lived through it. Poor hiring can cost you dearly, and waiting to fire them can add to that cost. 

This is always a mistake.

According to the U.S. Department of Labor and reported by HR Exchange Network, the average cost of a bad hire is at least 30 percent of their first-year salary. In other words, a bad mid-level hire who makes $75,000 per year will cost you $25,000 and who knows how much wasted time. Let them go.

Inc

For instance, we had a client who kept a toxic employee for too long. This person caused several strong performers to resign. So, not only did they waste his salary, they had to recruit and train several new people.

Small Business Fail by Scaling at the Wrong Time

This is an incredibly tricky situation. If you build scale too soon, you can burden yourself with unnecessary costs. But, if you scale too late, you can burden yourself with unnecessary costs due to overtime and inefficiencies. So, when is the right time to scale your business? We share our thoughts and examples in our post “3 Signs that You Are Ready to Grow Your Small Business”.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Google Small Business Portal: Gimmick or Value-Add?

Google Small Business Portal

In June 2019, Google launched the Google Small Business Portal.  We were intrigued by it, so we gave it a try.  Here’s what we learned.

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

What is it?

This quote from Anthony Ha from Techcrunch sums it up well.

So, on the new site, they can enter their company name and website (assuming they have one), then answer a few questions about their business and their goals. Google will then create a customized, prioritized list of actions, which may involve launching ad campaigns, or building up their online presence, or installing Google Analytics.

Techcrunch

Is it a Gimmick of Value Add?

The truth is, it is both. Here is a quick slide show of what it looks like:

Regardless of the options we chose, we wound up with the same recommendations. 

Google Small Business Portal Value-Adds

Google Analytics is definitely a value-add for any small business. It can be a very powerful tool if you have the time to learn it and use it. G-Suite is both a value ad and a gimmick. It depends on your business. If all you need are the basics, G-Suite is awesome. If you need more powerful tools, G-Suite is the poor man’s substitute to Microsoft, in our opinion.

Google Small Business Portal Gimmicks

There is a static flow that you need to follow if you want to get all the suggestions. In other words, when we tried it, if we didn’t sign up for G-Suite, we couldn’t go any further than the first page. As we mentioned, G-Suite is great, but it’s just not great for us. The next step was Google Ads, which is definitely a gimmick. While search advertising can be very useful, it’s not always right for everyone. If you’re a small business, you’re likely not going to rank highly, and therefore will have to pay more per click. While $1-2/click doesn’t sound that bad, if only 2% (industry average) actually convert, you will be paying $50-$100/lead.

Should you use Google Small Business Portal?

If you are Ok with what G-Suite provides and want to explore or can afford search advertising, it’s a very user-friendly guide to Google’s products. However, if you don’t necessarily want to spend money on Google’s products, you won’t get very far in the guide. Given Google Small Business Portal’s forced path, we are luke-warm about it. The hype was much better than the actual experience.

However, as a small business, the Google Small Business Portal may help you raise brand awareness, which was on the “4 Simple Steps to Write a Successful Marketing Plan

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Why You Should NEVER Use Merchant Cash Advances

NEVER-use-Merchant-Cash-Advances

A merchant cash advance is a form of financing that should be avoided like the plague. Over the years, we’ve seen a number of struggling businesses fall victim to these predatory lenders. Don’t be one of them.

Feeling like your business isn’t going the right way? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Merchant Cash Advances are NOT loans

When they reach out to you and position their products, they sound like loans. They look like loans. But, these are NOT loans.

In the aftermath of the financial crisis, banks were cutting back on lending just when small businesses needed cash the most. Companies such as Yellowstone stepped in. They got around lending regulations by calling what they did “merchant cash advances,” not loans

Bloomberg

Even judges will admit there is very little distinction between the two, but unfortunately, there are very big differences in the consequences.

They know all the selling tricks in the books

They hire anyone who can sell, and scruples of those agents are highly questionable.

The best brokers earned tens of thousands of dollars a month, former employees say; others slept at the office, fought, sold loose cigarettes, and stole from each other.

Bloomberg

The most notorious tactic is the bait & switch. It typically starts with an unsolicited fax or e-mail offering a large loan at a low rate. Once you respond, they generally say that in order to qualify for the bigger loan, you have to accept a smaller amount and make a few payments as a trial. Then, the hammer falls.  For example, Bloomberg reports on one poor couple.

The advance turned out to be for $36,762, repaid in $800 daily debits from their bank account starting the day after they got the money. This would continue for about three months until they’d repaid $59,960. But when he followed up the next month to inquire about the status of the bigger loan, he got no response.

Bloomberg

Merchant Cash Advances can have APR (annual percentage rates) of up to 400%

Say what? Yes, that’s true. It’s usury at its worst. Because they are merchant cash advances, the percentage rate in the forms they send you are NOT the APRs. For example, one of our clients reached out to us after getting themselves into trouble with Yellowstone Capital.  According to Bloomberg, they are one of the worst.

In that agreement, Yellowstone stated a “specified percentage” of 25%. It sure looks like an interest rate, right? Wrong. It’s definitely not. In the agreement, they state the amount given and then, the amount owed. Thus, they’re betting on you not knowing how to do the math, and mistakenly assuming the specified percentage is the interest rate.

For instance, this client was paying $19,000 in interest in 6 mos. on a $40,000 advance. In no universe, does that equal 25% APR. In other words, if you do the math, the APR was around 120%. Another client came to us, after getting into trouble with a loan with an APR of 67%.

In the Bloomberg example for instance, the APR for that loan was 350%. In comparison, our clients got off easy although it nearly bankrupted them.

Merchant Cash Advance lenders can ruin you

The most damaging way they can affect you is through an obscure law called confessions of judgments.  To obtain funds from these merchant cash advance lenders, you usually sign a clause agreeing to a confession of judgments. What is it? It’s a way to collect a debt without the fuss of a trial. How do they work? Bloomberg has a great graphic.

NEVER use Merchant Cash Advances
Merchant Cash Advance Confession Judgment Process

Within a few days, your bank accounts can be drained. Liens will be put on any of your accounts receivables. Liens can also be put on your personal assets if you signed any personal guarantees for the advance. While not enforceable in all states, it is a well-used tactic in New York State, where these laws are enforceable. Because of this, most of these lenders are based in New York. And, if you read the contract in detail, you will undoubtedly find that the contract states that it will be governed by the laws of New York State. 

As the chart shows, the use of this tactic has skyrocketed since 2014

Never Use a Merchant Cash Advance

Why isn’t anything being done to stop merchant cash advances?

There is action in Congress, but the government process is slow. Plus, it faces an uncertain future in the Trump administration.

Velazquez, chairwoman of the committee [House Small Business Committee], and Roger Marshall, a Republican from Kansas, have introduced a bill that would ban confessions of judgment in business loans. Ohio Democrat Sherrod Brown and Florida Republican Marco Rubio have made a similar proposal in the Senate.

Washington Post

What’s the moral of this sad story?

Get help before your financial situation makes you desperate. Merchant cash advance lenders prey on the hopes of small business owners who are having financial difficulty. We have written several posts that can help us find the right financing for you: How to Take the Pain Out of Getting a Loan”, “Securing a Loan: Top Tips for Small Business”, “Small Business Lending is Booming”, “Best Small Business Loans & How to Qualify for Them”, and “How to Avoid Looking Stupid When Talking to Banks”.

As Shane Heskin put it beautifully in the Washington Post article, small business owners aren’t bankers and lawyers.

“My clients are very good at what they do. They know how to fix a boat. They know how to install a sink,” said Shane Heskin, a lawyer at White & Williams LLP in Philadelphia who represents small-business borrowers. “But that doesn’t mean they know how to read a contract in 8-point font. It doesn’t mean they know the legal ramifications of signing a confession of judgment.”

There are plenty of sources for help.  We cover them in our post “How to Learn about Business for Free,” and we can help you with much more than just that.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

5 Ways to Grow Your Small Business Without Spending a Penny

Grow-your-small-business-without-spending-a-penny

Many small businesses cannot afford the cost of expensive marketing campaigns.  So, how can you grow your small business without spending a penny? Here are 5 ideas that we’ve used.  Hopefully, they will help you too.

Feeling like your business isn’t going the right way? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

First, Get to Know Your Neighbors

Make a list of businesses near you that have similar clients or customers as you do. It’s likely that you both have a shared interest in growing your businesses. So, why not leverage them as your natural allies? Something as simple as exchanging business cards can be an effective tool. Human beings naturally work on the principle of reciprocity. It could be as easy as offering referrals, or offering discounts to each other’s customers. It’s old school, but it can help grow your business without spending a penny.

Second, Help a Reporter Out (HARO) = Free Press

HARO is a service by Cision, which curates reporters questions.  It sends an e-mail out 3 times a day from Monday through Friday.  In each e-mail, reporters ask questions regarding specific topics.  If you are knowledgeable in that given area, you can reply with an answer.  This has been an effective tool for both ourselves and our clients. It’s an awesome tool to help grow your business without spending a penny.

Third, Social Media

Granted, to get the most out of the social media sites, you may need to spend some money. But, if you are willing to invest the time and energy, you can still generate a decent following for free. The trick is to post content that is interesting to people. The choice of social media depends on the business. Some, like ours, benefit the most from LinkedIn. Others, however, with a more consumer or visual bent, may do better with Facebook or Instagram. If you have the time and energy, these sites can help you grow your business without spending a penny.

Forth, Google My Business

Notably, this is best for businesses with a physical office or store where it services their customers. You can create a free website, advertise your hours, and showcase your business with photos. Also, it allows you to respond to customers directly. It helps with SEO, too. It’s one of Google’s best tools for helping you grow your business without spending a penny.

Lastly, Review Sites

Finally, review sites like Yelp or Craigs List, for instance. Yelp reviews can help drive SEO, which can help you connect to customers who don’t know anything about you. Sure, it takes time to respond to the reviews. But, it provides you an opportunity to be proactive about issues and positively promote your brand. Best of all, it’s free so you don’t have to spend a penny to grow your small business.

To get the most out of any of these vehicles, you need a comprehensive marketing plan. We offer some free tools to help you build one, and we’ve covered how to write one in our post “4 Simple Steps to Write a Successful Marketing Plan”.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Best Small Business Loans & How to Qualify for Them

Best-Small-Business-Loans

Getting the best small business loan for your business is often critical to a business’ success. The question is, which are the best for you, and how do you qualify for them?

Getting a small business loan can be critical to the economic growth of a company, but financing remains elusive for more than a quarter of small U.S. firms

National Small Business Association

Your business is doing well. But what’s next? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Business Loans Best for Small Business

The best type for your small business depends on the age of your business, your profitability & trends, and how you plan to use the money. We cover a lot of these topics in our blog post “How to Avoid Looking Stupid When Talking to Banks”. So, we won’t go into as much detail here.

Lines of Credit – Best Loan for Small Business Working Capital

In simple terms, a line of credit is very much like a credit card. A bank agrees to lend you up to a certain amount, at a certain interest rate. You do not get a lump sum of cash, and only pay interest on the outstanding balance. Aside from a slightly lower interest rate, it operates almost identically to a business credit card.

Loans – Best Loan for Small Business Capital Purchases

There are two common types of loans. First, the traditional term loan is when you borrow a fixed amount and pay it off over a fixed period, at a fixed interest rate. These are generally used for purchases of large ticket items, like equipment, for instance. Second, the short-term loan is when you need to borrow a relatively small amount of money to cover a short-term need.

For example, a seasonal business that needs to purchase goods prior to the start of their busy period. The difference between the two is the term loan term is in years, while the short-term is in months. For term loans, the SBA loan is the go-to choice. We speak to this at length in our post “How to Avoid Looking Stupid When Talking to Banks

Invoice financing

These are very similar to short-term loans, but in this case, there is some bill (invoice), which is used as collateral. For example, a service business who has to pay its service providers before they are paid by their clients. Alternatively, a manufacturer who has to pay for the production of its goods before the retailer pays them. If you have a business that is functioning optimally, you should be able to cover these gaps on your own. They should be used sparingly. Their overuse can signal a struggling business.

Merchant cash advances

For completeness, I am putting them here. But, they should be avoided at all costs. They are akin to payday loans. They offer predatory rates for quick cash. These exist, but I do not recommend them. 

Where to get the Best Small Business Loans

Generally, the best place to get a small business loan is a bank or banking service provider like a Lending Tree, for instance.  Credit unions are another great source for loans, but they tend to be more risk-averse. They do offer more competitive rates, so they are worth exploring. Finally, there are alternative loan providers. 

Alternative loan providers are generally peer-to-peer or direct lenders. They generally operate online.  Their applications are easier, eligibility requirements are more forgiving, and you get the money fast.  However, you pay for this flexibility and speed with higher interest rates. They usually come with some personal guarantee, so some of your personal assets may be at risk.

How to Qualify for the Best Small Business Loan

We’ve covered this topic in a number of posts: “How to Take the Pain Out of Getting a Loan”, “How to Avoid Looking Stupid When Talking to Banks”, “Small Business Lending is Booming”.  So, we won’t go into all the details here.

Know how much you need and where you’ll spend it. Be Realistic.

No one is going to write you a blank check. In “How to Avoid Looking Stupid When Talking to Banks”, we go into this topic in detail.

Clean-up your personal credit

If you have a credit score lower than 700, your options are limited. We discuss this in detail in “3 Key Hacks to Getting a Small Business Loan”, “How to Avoid Looking Stupid When Talking to Banks”, “Small Business Lending is Booming”.

Have a solid business plan

This supports the first point. We explain how to do that in “4 Simple Steps to Write a Successful Business Plan” and “5 Steps to Take When Analyzing Your Business”. The business plan is how you sell your idea to the lender. Plus, it’s how you support your use of funds.

Be informed & look for the right match

Making sure you are asking for the right product from the right lender is key. We discuss this in “How to Avoid Looking Stupid When Talking to Banks”.

In summary, to find the best small business loans, and to ensure that you can qualify for them, you need to do your homework. Following the steps provided should make things easier. Also, there are great free and paid services that can help you through this process as it is time-consuming and cumbersome.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.