Crowdfunding for Small Business: What to Know

Crowdfunding

Should I use crowdfunding for my business? Since we get this question all the time from clients, especially those who are struggling to get traditional financing via bank loans, we created this simple slide show. It helps us all get on the same page so we have a more productive strategy call.  

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.

If you put the effort into your campaign, crowdfunding can be a helpful tool to use in raising funds, especially if you are having trouble with traditional banks. The one caveat is the amount is limited, as we said the average award is less than $10,000. So, if you need more, you’ll likely need to pull from a couple of different methods. 

And if you have more thoughts about crowdfunding or are curious about how to achieve it for your own business, ask us! We would love to help you, however possible.  

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.

Our Top Calculated Risk Small Business Growth Tips!

calculated risk

Risk-taking is scary. But, it’s hard to grow without taking them. So, what are the top calculated risks tips for growing your small business? Read on and see to learn more about what calculated risk is and how to deal with it. 

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.

Defining Calculated Risk

Calculated risk means clearly outlining where hidden risks lie and having some sense of the degree and magnitude of those risks. We’ve used this simple, but effective tool to help guide us when we evaluate an opportunity:

A chart depicting calculated risk in a business

Our Top Tips!

Before taking any major risk, we recommend these three simple tips. They will help you complete the chart above. 

Google it!

Before deciding, it is a good idea to do some research. You’ll need this data to help you assess the likelihood of a risk occurring, and what the true downside might be. It can also help you with uncovering steps to mitigate the risk if something does happen. Don’t go crazy with research, but at least take a little time to understand the probability, cost, and how you might manage the impact. Otherwise, you might not be ready to grow when the time comes.

Phone a friend

Humans are by nature bad risk-evaluators. We tend to give more weight to things that are familiar and give less weight to those that are common. A classic example is shark attacks vs. car driving. Most people fear getting attacked by a shark when it’s significantly more likely that they will be injured in a car. Therefore, it’s a good idea to pull in another knowledgeable party such as an advisory board or another kind of friend to weigh in on how you rated your risks. 

Don’t Forget Your Mitigation Steps

Risks are less scary if you have plans in place to deal with them. Developing mitigation steps during a crisis is never as effective as creating them with a calm mind. Always ask yourself, what can I do if this happens? If l lose a client, what could I do to make up the difference? If I lose capitalhow can I recover? And more questions like this.

Calculated Risk Is a Part of Growth

Everyone has experienced risk in some fashion. It’s how you deal with it that matters. If you have taken the steps above, I can guarantee you will be more prepared to deal with them. I can also guarantee if you don’t any risks, your chances of growth are very slim. 

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.

Revenue Going Up but Profit Staying Flat – Our 3 Fixes

revenue fixes

Controlling your business’s revenue is key, and it is something that has to be fixed before it is too late. In fact, thSmall Business Credit Survey (SBCS) found that 57% of small business had profit growth in 2019, but even though revenue was up, there was a ZERO percent change in those reporting a profit. See what caused this and some insights on how to fix it, especially if you are hoping to expand your business in the future. 

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.

The Statistics for Revenue and Profit

Nearly 6 out of 10 small businesses saw increased revenue, and a third of them added people to their payrolls. Young people and young companies saw the greatest growth. Finally, around 3 out of every 4 owners reported cost increases in the past yearSo what can be done about this to fix revenue? And how can you hope to grow your business if you can barely make it maintainable in the present?

The Issues Holding Back Profit

Labor cost

3 out 4 respondents reported labor cost increases in the past year. With the new regulations on minimum wage and overtime rules, this trend is likely to accelerate in 2020. If it is hard to attract and retain talent, how can you afford employees?

Access to and cost of capital

A little of 4 out of every 10 surveyed reported needing capital for their companies. More than half of them sought funding due to a financial short fall, which is the worst time to seek capital, as you are likely to have to pay increase interest due to your financial position

Fixes for Your Business Revenue

1. Increasing prices to cover at least some of the costs.

About half of the companies that experienced cost increases, raised prices to cover the increased cost. These firms were twice as likely to see profitability growth than those who did not raise price (SBCS report). With low inflation, it may not be possible to pass along costs, but there may be a way to reduce the amount of product for same price. For example, smaller serving sizes at restaurants.

2. Increasing efficiencies

Here’s a place where you may have your best chance. Are there any labor-intensive processes that could be automated or delegated to other people? If so, this is the area where you might want to focus so that you can cut the labor time and thereby cost. 

3. Access to better capital

If you expect to need cash for operating expenses, investment, or to cover a short fall, it’s best to seek that capital before you need it. We have a whole set of posts dealing with these issues of getting capital and loans. Depending on your specific case, you may want to check them out. If you wait until a crisis hits, the likelihood of you getting the amount you need goes down dramatically. Finally, make sure your personal credit is above 680, better if its 700. Poor credit history is one of the major stumbling block to accessing affordable capital.

Fixing Your Business Revenue Is Necessary

We often talk about the need to grow your business to succeed for the future. But possibly more important than that is surviving on a day-to-day basis. If you are worried about your business revenue, that’s understandable! But we are here to help. 

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 Q&As To 2020 Small Business Changes: Part II

2020 business change

In our previous post, we discussed how minimum wage changes and overtime laws are going to affect your business in the new year. Now, let’s move onto our next three Q&A for 2020! And remember that if you have more to ask, contact us to get more information! 

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.

QUESTION: What’s Up with the New W-4 Forms?

The IRS has new W-4 forms in 2020. The changes have to do with the way tax is being withheld. It’s more of an administrative headache than a huge cost, especially if you do payroll yourself 

ANSWER: How to Deal with the New W-4s

This only applies to new employees. Your existing employees are not impacted. If you do hire a new employee, they will have to complete the new form. If you are using an automated payroll system, this change should be merely different paperwork. If you do payroll manually, then the IRS has complied a new calculator to figure out the right withholding. 

QUESTION: What Is the Deal with Plastic Bags?

A growing list, too long to enumerate, of states, counties, and cities have passed legislation prohibiting, restricting, or ‘taxing’ plastic bag use. This is a trend that will likely continue. 

ANSWER: The Writing is on the Wall for Plastic Bags

Plastic bags are quickly going the way of the dinosaur. Not immediately, but I wouldn’t plan on them having a long life. It’s probably time to start to think about how to switch. It’s also a potential upsell for branded portable tote bags. For now, they can be used, but expect to have to manage the additional cost via one of the methods mentioned above.

QUESTION: How Will California’s Gig Worker Law Affect Me?

You may be thinking that “hey, California is a quirky state and has a number of weird laws that won’t affect me”. I’d caution that thinking. The labor laws that govern this area are from the 1930s. They are woefully out of date. California is likely the canary in the coal mine. California’s AB5 law put strict limits on who can and cannot be considered an independent contractor. It will force companies, not only in California but also those who use contractors from California to decide whether or not to hire these people as part-time employees or face fines and court challenges.

ANSWER: It’s the Beginning of the End for the Contractor

California is not the only state acting. There is legislation is pending in both New York and New Jersey. We’ve discussed the proper classification of workers in a number of posts like “We Use Gig Workers, Why You Should Too” and “A Simple Way to Classify Workers in Small Business. It’s our opinion that this is just the tip of the iceberg. We strongly encourage you to take action now, especially if you are in a ‘blue’ state. Even in the red states, I don’t think this model can last forever. States are losing too much money in payroll taxes: unemployment, disability, etc. to allow this to continue. When a state is strapped for cash, I’d expect that this will be one place they look for revenue.

Any more Q&As for 2020?

There are a number of big changes that hit 2020. If you haven’t taken action to manage them, now is the time. And if there are more Q&As you have for us, ask! We would love to make another update for this post in the future as well.

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 Questions and Answers To 2020 Small Business Changes: Part I

2020 business changes

As small business owners, there are a number of changes to manage in 2020. As the decade moves on, we’ll have to learn some new skills and information. Over the next two posts, we will go through five of the questions I have heard so far in 2020, and our answers. Today, an introduction and our first two questions!

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 Changing?

As of the beginning of the year, a quarter of the states have raised the minimum wage. In addition, new federal overtime laws go into effect. If that wasn’t enough there are new W-4 forms that employers must use for new employees. New recycling laws are in effect, which require an upcharge on plastic bags. Finally, we have California’s AB5. I’m sure you have lots of questions, so let’s jump right in with the minimum wage and overtime laws! 

QUESTION: How will the minimum wage increases affect me?

There is a national movement to increase the minimum wage to a livable wage. This varies by state, but if you live in New York, New Jersey, California, Illinois, Massachusetts, Oregon, or Washington DC, you can expect an incase in 2020. If you don’t live in these states, don’t think you’re in the clear. There is momentum behind this movement, so I’d expect even the red states will eventually see increases.

ANSWER: you have three options

There are three options, which are not mutually exclusive. These options are to cut costs in other areas, to raise prices to cover the increases, or to increase efficiencies. Your best bet is likely a combination of all there

1. Cutting Cost

Are there ways to cut costs in other areas to cover the expenses. Most small businesses don’t operate with large margins. Therefore, this option may be limited. But, it’s worth the exercise to see if there are other areas within the business where you might be able to shave a few pennies.

2. Increasing Prices

With inflation at historic lows, it is a challenging time to raise prices. Raising prices is never a fun experience for owners, but they are a necessary evil. You may not be able to recoup the full labor cost increase, but every penny counts.

3. Increasing Efficiencies

Here’s a place where you may have your best chance. Are there any labor-intensive processes that could be automated or delegated to other people? If so, this is the area where you might want to focus so that you can cut the labor time and thereby cost. 

QUESTION: How will new overtime laws affect me?

As of January 1st, workers earning under $684 per week or $35,568 a year must be paid overtime. This is up significantly from the previous threshold of $455 per week. For labor heavy industries, like food service, retail, and manufacturing, this will likely have a major impact on labor costs. 

ANSWER: How to deal with the new overtime laws

There are the same 3 three options above. In addition to those, you have two others: limit time or increase wages to above the threshold.

a. Managing Time

it would be wise to invest in a time management software or some system to help track hours in real time. This way you can alter schedules as needed. If you experienced overtime in 2019, you may want to look at hiring additional part-time staff during the busy season to avoid this in 2020. For some, this may not be practical. In a tight labor market, it’s often hard to have a reserve of part-time employees.

b. Raising Wages

This only makes sense if you have employees near the threshold. This was such a large increase of ~$12,000 per year that it’s not practical for everyone. 

Next Time in Our 2020 Questions and Answers

In our next post, stay tuned discussion of W-4 forms, new environmental concerns, and gig work confusion. See you next time!

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.