Bank Fear Gets in the Way of Loan Approvals

If approval rates are at record highs, why are businesses still struggling to be approved for small business loans? It’s usually for two reasons. First, there is a significant amount of fear of banks. It’s not surprising. Bank speak can be intimidating. The second reason is less than stellar credit history. These two problems can combine to create small business growth issues. 

Today, we will look like a second example of of how ProStrategix helped people get loans. Unlike yesterday’s protagonist, Phil, today we will look at Amy and how she dealt with her light fear of dealing with bankers. Recent interest rate decline means that now is great time for loan approval rates, especially if you can qualify for a good one. And that’s how we got involved with Amy. 

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.

Amy's Story

Having fears of banks can damage your wallet in the long run

Amy operates a small, but highly profitable salon. Amy built her business for a twochair beauty salon with 4 stylists, and now she oversees a 5chair salon with even more stylists. In those 4 years, Amy’s business has nearly tripled. She had built a very successful formula and brand at this location and had outgrown her space. When we met, she was considering expansionBut, she wasn’t 100% sure exactly how best to go about that kind of growth.

Amy was cautious with her spendingbeing careful with getting capital. While she was an amazing businesswoman with phenomenal intuitive business skills, she didn’t have any formal business training. So, “banking stuff” took her out of her comfort zone. 

Numbers and bankerspeak was intimidating to her. She is a bright woman. She just did have the formal training so it’s only natural to feel a bit out of place when bankers are speaking in jargon you don’t understand. All professionals speak in code. It’s not intentional. It’s just how they were taught. After using it so much, they forget that it’s not the way most people speak. Even when confronted and confused by other professional jargon, they fail to recognize it. A doctor is likely as confused by banker speak as a banker is by doctor speak. 

How We Helped Amy Conquer Her Bank Fear

Amy was in ideal candidate for an SBA loan

Unlike many of her peers, her training wasn’t as costly so we student loan debt wasn’t crushing. In fact, she had nearly all of it paid off. Her personal debt was low, and she had excellent credit. In addition, she has a successful track record. These are just the type of businesses the SBA program was designed to help. 

hacks for business loan

We went straight to the smaller banks

With a loan debt load and excellent credit score, we knew the smaller banks would be more than happy to help her get over her fear of banks. We just needed to get her application and business plan in order so we could streamline the process and get her the capital she needed relatively quickly. The SBA loan process is slow, so the better prepared you are, the faster it will go. Plus, her capital needs were modest <$100K to open another studio.

Loan approval can be influenced by fears of banking

Amy was approved on her first try. The SBA backed ½ of the loan, which meant the Amy only had to guarantee ½ of the cost of the loan, which is a much lower burden on the businesses. We applied in June, and she had funds in August, which is almost record time. Amy’s bank fear has all but disappeared ever since.

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.

Loan Approvals Are at Record Highs. Don’t Let Credit History Hurt

If approval rates are at record highs, why are businesses still struggling to be approved for small business loans? It’s usually for two reasons. First, there is a significant amount of bank-phobia. It’s not surprising. Bank speak can be intimidating. The second reason is less than stellar credit history. 

Across the next two days, we will look at two examples of people we at ProStrategix helped to get loans. It is something quintessential to succeed in the long term. Today we will look at the story of Phil, who had made some decisions earlier in his business that left him with poor credit. The good news is that in smaller bank or alternative lenders, the trend is much better. In fact, approval rates are over 50%.

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.

Phil's Story

Phil operates a small, but growing catering company. His niche was in providing untraditional services (food choice, attire, etc.) for Millennials and Gen Z’ers. Phil was able to provide less transitional graduations and weddings to his audience. Phil’s own youth is part of the reason for his success. While that’s helped him with his small business, it’s hurt him a bit too. Phil is a people person, who has a lot of friends and likes to hangout with them. It’s part of how he gets business, but it’s expensive in NYC. Plus, like his peers, he was heavily burdened by student load debt. He need money to expand, but banks weren’t willing to work with him. Understandably, he felt stuck and frustrated.

How We Helped Phil's Credit History

Personal Debt is Painful in More Ways than One

Phil’s case is all too common, especially for people in their 20s and 30s. Student loan debt is crushing. In fact, the average student owes nearly $40,000. While these rates are typically low, they are a millstone, even if you never miss a payment. Most business owners don’t realize that their personal debt level impacts their access to business capital.

We Skipped the Big Banks

With this debt load and his good, but not excellent (750+) credit score, big banks couldn’t help him. It’s not worth the time or hard inquiry on his credit report. We worked with an alternative lender, who specializes in cases like Phil’s. Phil has a strong payment history. Phil was in business for more than 2 years. Phil only need a modest amount (<$100 K). Luckily, a bit more than half of the applicants are approved. Typically, SBA loans are the loans of choice. They reduce the risk for both the lender and the borrower. 

“The U.S. Small Business Administration (SBA) is the largest economic development agency in the world,” says SBA New York District Director, Beth Goldberg. “With an annual credit line of more than $30 billion allocated by Congress, SBA guaranteed loans help bridge the gap between small businesses that lenders might turn away and those who are able to start or grow companies with financing.”

A Clear Plan Won the Day

It was perfectly smooth sailing, but with a solid plan with proven business model, we were able to get Phil approved. Small business owners often look at business plans as a formality. In this case, it really made a difference. Like I said, Phil is a non-traditional guy. He was able to show that in his application. His plan captured the essence of his brand beautifully. Without it, I don’t believe the bank would have understand his unique benefit and its appeal to his target.

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.

Fast-Growing Businesses: 3 Things They Get Right

We’ve been in the small business sector for over 25 years, and it’s safe to say that the environment has evolved and changed dramatically in that time. Yet with all of these changes, there are a few trends we can’t help but notice, namely when it comes to small business successes. We’ve seen three things that fast-growing businesses get right, time and again. They are: 

      1. Talent – People are your #1 asset. As machinery and materials were the drivers of the Industrial Revolution, people are the driver of the Digital Revolution. Those who have a competitive edge with talent win. There is a little caveat I would add. It’s not always the best talent on paper, but the more often the best talent that works as a cohesive team.
      2. Staying Current –Most fast-growing companies begin as agents of change, but then, human nature sneaks in. A reluctance to change in hard-wired into human nature. You need to have a natural curiosity and desire to always want to learn more. This can go back to talent. Hiring younger workers can enfuse an organization with new ideas. 
      3. Showing up – Do what you say you are going to do. Prove your value quickly both internally and externally. 

To help you understand how these successes work, we want to introduce you to Jake. 

    1.  

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.

Jake’s Story – A Fast-Growing Business and a Rocky Future

Jake runs a tech company. He started out a small start-up that grew quickly. This rapid growth put strain on his team. When we met him, he was concerned about keeping up the pace of growth. His team was starting to show some symptoms of burnout, but he didn’t have the time to set aside to think about how to fix it. 

People are your #1 Asset

Clients often ask how can you keep costs to a reasonable level while keeping people happy? Hiring and retaining talent is hugely important, as it was to Jake. The golden rule that employers tend to forget is that people stay for the intangibles more than the money. Money is important, but other things can matter more, such as: 

      • Flexibility 
      • Sense of belonging 
      • Clear and copious recognition 
      • Transparency 

When we talked to the team, we found they felt that Jake was running short on recognition and transparency. When we shared that with Jake. He was open to the feedback. It was clear to us that it wasn’t that he did want to do. He just didn’t have time to breathe with his business growing so fast. 

Mistakes are Opportunities to Learn

Mistakes happened infrequently as Jake’s team got stretched too thin. The team was getting frustrated with each other. They were frustrated for a good reason. Mistakes had a domino effect. One is mistake from someone meant more work for someone else. This was adding to the tension. When we worked with the team, we used this as an example. The mistakes were a symptom of the larger problem. They needed more people. We used this as an opportunity to learn the root cause of the mistake, so we could fix it.

Empowering People to Make Decisions Makes Them Feel Like They are Part of Something Bigger

This is often a scary proposition to business owners. It’s your baby. How can you trust it to someone else? Luckily, Jake did have this problem. He had clear rules for delegation, and his small business’s team felt that they had the ability to make decisions. This is the key to keeping your business growing fast. Delegation is about setting boundaries and accountability. Allow someone to make a decision means they need to know they are responsible for the outcome. It doesn’t need to be draconian or punitive, but it does need to be enforced.

Jake’s Solution

It was pretty clear that Jake was doing a lot of things right. His business wouldn’t have been growing so fast if he wasn’t. However, it was also clear that he needs to hire if he wanted to maintain his trajectory. We recommended and created a hiring plan for him, which we helped him execute. We created job descriptions. Posted them on several hiring sites. Screened applicants. Finally, we recommended those to bring in for a formal interview. Jake hired two people, who were desperately needed, and his business continues to thrive. 

Summary

The key takeaway from Jake is acting before the strains from growth become highly visible. It’s easier to cure a disease if caught early. The same is true in fast-growing businesses. The longer you wait the more repair work is need, and the harder it is to expand. But Jake was able to find his problems and come out stronger overall. 

How Small Businesses Can Struggle in This Economy

struggling business economy

Small business struggle in a strong economy for two simple reasons: talent and time. Not time in the sense of hours in the day, but burnout. Low employment numbers mean small businesses have to think about recruiting talent differently than in the past. And added to that, burnout is real and can make you far less productive than you want to be. Regardless of economic conditions, the rate of which small businesses close is remarkably consistent, and you can read on to see the signs to be aware of.

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.

Let’s Start at the Beginning

To appreciate what’s going on today, we have to start at the beginning of this 10-year business cycle. In 2009, we were just beginning to emerge from the most disastrous economic crisis to hit the country since the Great Depression. As a result, small businesses were struggling, and there was a significant drop-off in small business creation. Some major stumbling blocks included access to capital, decreased profits, and a reduced ability to hire. In fact, it was the first time in a long time when small businesses were employing less than ½ of the total U.S. workforce.

That’s a nice history lesson, but it misses some important facts. Fewer businesses were started during the period between 2009-12. Given that the rate of businesses closing is typically constant, fast-forward 3-7 years after the recession and we’re left with a gap. So, there was a lag in the tightening of the labor market. Now, the gap has closed and the competition over workers has increased.

Health Care and the Affordable Care Act

So much has been written about the ACA or ObamaCare. But, the truth is we will never know its true impact because it never was fully implemented. From its inception, significant roadblocks and intentional sabotage makes any clear read impossible. What is true is that the cost of employer-sponsored health care has dramatically increased, peaking in 2017. Because of all the smokescreens and gaslighting from all the vested interests, we still don’t have a clear picture as to why. We only know that the cost of offering benefits has increased the cost of hiring new employees. Hopefully, HRA changes will help alleviate

Hopefully, HRA changes will help alleviate some pressure, but providing health care to our workers is still a major issue. On the campaign trail, several proposals are on the table. Whether or not they have a chance of seeing the light of day will depend heavily on the 2020 election.

Burnout

Burnout is a very real and very constant reality that most small businesses struggle with at some point. But, is exiting the right solution? Perhaps for some, it is. But, we would challenge that perspective for all. Selling your business is an option. However, to do that, the business needs to be structured so it can function without the owner. If the owner is the business, then our options are limited. It requires us to stop thinking like we’re a mom-and-pop shop. Instead, we need to think as if we were a small corporation with systems, process, and structure. These entities can exist long after the owner decides to exit.

Possible Solutions to Help

Let’s look at three possible solutions that may help small businesses struggle in a strong economy.

Talent

If we can break out of our conventional thinking, there are several ways small businesses can be creative when offering packages to new hires. Yes, people are motived by money. But, they are motivated more by feeling valued.

Healthcare

When it comes to health care, there is no simple solution. Since conditions vary widely from state to state, the right solution for your business will require some research. The options to consider SHOP, group policies from a private provider, or adopt the HRA approach.

Burnout

We are less likely to burn out if we have a clear exit strategy. We know what we want the business to be. In addition, we structure it so it can eventually run without us as owners. It’s easier to value a business like this. It’s easier to sell it. Most importantly, it easier to leave when you’re ready.

struggling paycheck to paycheck

How to Handle the Small Business Economy

Small businesses are subject to the whims of the economy. The relationship, however, isn’t always clear. The economy being on the rise doesn’t necessarily mean that small businesses feel the benefit. However, knowing what to do to prepare for an economic boom can keep your business afloat and above the competition.

Unretirement: The Secret of a New Workforce

unretirement

I have a term for you that you will start hearing more and more over the next few years: unretirement. The title explains itself really, with the idea being that retirement is no longer a necessity. Now, you can keep your small business expanding beyond what you may have thought possible in the past, staying in charge past when people may see you as “expired.” Because why stop doing what you love because of something as arbitrary as age?

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.

What Is “Unretirement?” Exactly?

As I’ve gotten older, that evil ‘R’ word kept creeping closer. I spent a lifetime of gaining knowledge. Am I to toss that away and sit in a home and wait to kick it? No, I don’t accept that. So, instead of thinking about retirement, I started to think about unretirement. My little 5-foot tall Italian grandmother worked with her sisters until she was 90. It gave her purpose. So, I used her as a model and started ProStrategix. 

The amazing thing was I’m not alone. Listening to an interview with Chris Farrell from NPR’s Marketplace was really eye-opening to me. 

It is time to shift the conversation about aging away from Social Security, retirement, physical decline, and an economic crisis, [and] focus on boosting the odds of healthy, active, and purposeful aging through working longer- including launching an entrepreneurial venture. Older minds who are involved in a community are happier.

Chris Farrell, interviewed on the Small Business Radio Show

So. What to do with this information?

Bam, Unretirement – A Whole New Workforce 

If a small business was willing to look past the stereotypes, this could be a real opportunity to access experienced workers. Age discrimination is a real issue, and people who want to work are often not hired at large companies. Think about it. Since when have you had someone with 20 or 30 years of experience in your market want to work at a small business, knowing it comes with a smaller salary? I bet the answer is never.  

It is a talent pool that is underutilized and underserved. So let’s think about ways to change that and to expand both your employee base and audience.

Unretirement – A Whole New Set of Entrepreneurs 

I was amazed by the statistic Mr. Farrell shared. 

For the first time, 25% of all business are started by people who are 55 to 64 years old. These older entrepreneurs are turning their passion into a business. What is different for these people is that many of these new entrepreneurs start to focus on a business with a purpose rather than just earning more money. 

Farrell, SBRS

Speaking as a Gen X’er, I know that I can be a little cynical when it comes to baby-boomers. However, it seems that they and I are sharing the same goal: work because you like it, not just because you need to. So let’s embrace these new employees for your market.

Working Longer May Keep Us Happier 

As we live longer, the traditional model for retirement really doesn’t make sense. We should embrace the idea of unretirement. Age has value if the aged are willing to learn and adapt. When I think back to my grandmother, who was born in 1914 and died in 2014, I am amazed at how much change she experienced. But in the end, she managed to evolve and adapt. If she could do it, why can’t we? 

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 Benefit from Your Small Business Size

use size to advantage

A problem that many of our clients at ProStrategix present is that they find their company’s size to be a disadvantage. Maybe your business is struggling against a large company for the same customers? Or maybe you are feeling like a David facing a Goliath. But here’s the thing: your business’s size can be the biggest success. Here are five ideas for how to look at the positive side of being a smaller business.

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.

5 Ways to Use Our Small Size to Create a Business Advantage 

Growth is something you should plan for and that you may soon need, but don’t ignore how your small business’s size can help you now.

1. Create Unique & Targeted Experiences

Make the experience for your customer unique. We don’t have the bureaucracy. For instance, if you’re a gym, how can you make it feel like a family or clique? Anyone can go to a mega gym, but your clients choose to join you. Why? Well, you’re one of the cool kids. Encourage bonding with your trainers, staff, etc. Relationships keep people coming back.

Even a clinic could do the same. Is your staff welcoming? Do they know your patients by name? If they know there’s a backlog, do they take the time to explain to the patient why? Our size allows us to build experiences where people can feel valued, not a number.

2. Customize for Your Clientele

You’ve created experiences that are unique to your own company, but you can also customize and personalize to your existent audience. We can use our small size to create an advantage for our small business. Personalization and customization take time, which is a precious resource. You can’t make every experience personal, but we can avoid the canned “one size fits all” approach. While marketing automation can be a godsend, it can also be a killer on this point. Where you can, the more you can personalize the experience the better. 

3. Be Flexible 

Building on the first two points, experiences and customization are two examples of flexibility. We can use our flexibility to create an advantage for our size of small business. How?

  • Less red tape
  • Provide faster decisions
  • More personal contact
  • More!

Also, don’t forget to reward and recognize your staff when they exhibit flexibility in servicing a customer or client.  

4. Listen to What Your Clients Want 

We’ve talked before about screwing up the sale. Think about this: how many times have you been at a big box retailer searching for something or someone to help? And when you do find them, how many listen? Like, really listen.

Don’t be that business. You’re small and have a dedicated staff that wants to be there working with you. Listen to your customers and help them help you. That can only help you grow in the future. 

5. Be Creative! 

We don’t have long chains of review and approval. Let’s use that to create an advantage for our small business. If you’ve done all of the 4 steps above, it’s probably not that hard to think of creative ways to make things better. If you know your customer on a personal level, and you’ve been listening, they’ll tell what they need. Jump on it.  

It’s Hard to Compete, but Your Size Can Be Your Biggest Advantage 

It will take resources, time and change to bring all of these steps to life. We know that’s the case too. It’s taken us time to figure it out ourselves too. We’ve created a base who feels welcome. They recommend us to others. They feel they’re being heard, and you are being flexible to their needs. So, it’s likely reciprocity will kick in, and they will volunteer ideas. 

All of the five above steps are interrelated. We’ve helped a number of businesses differentiate themselves using these steps, and you can do the same too. The size of your small business doesn’t mean the end of your business, and it will only grow with you as the business grows too.

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 Quick Steps to Get Results for Your Small Business

Small business wins

As small business owners, we don’t have the resources in time or money to waste. You didn’t start your business wanting it to fall apart. To help you, here are 5 ways we’ve gotten results for our own small business quickly. While we can’t guarantee the same results for you, they are based on sound business principles that have proven successful repeatedly. Plus, they may help you as well as they helped us.

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.

Blogging allows people to find your website easier

There are several ways to build your brand. Obviously, we believe that blogging is one of them. It helps you connect with your target audience. It helps improve search rankings. It’s nearly free. It’s time-consuming, sure. But, it also forces you to stay up to date with what’s going on in your market, and what matters to your customers.

Ashley Lipman for Lobster Digital Media has some helpful guidance on how to blog better.

2. Get Over Review Phobia

Second, reviews can really help. Reviews help establish your reputation and help build credibility. Websites like Yelp and Google show customers what they need to know about your company. It matters to get results that help your small business grow.

We know that it’s tough to ask for a review. Even we still struggle to ask for honest feedback. But, we found Jason Yormark’s NetBlaze post to be helpful.

3. Social Listening

Finally, we’d be remiss if we didn’t talk about Social media and social listening. Yes, social media is a crowded morass where you need to shout to be heard, but if you are smart about social the importance of the insight. ​listening, you can find what your customers care about, resulting in success for your small business In our posts about marketing content and about how to learn about marketing from politics, we speak about 

social listening

the importance of the insight.  Smart social listening can improve your chances of being heard since you will be speaking about what your customers care about.

4. Cultivate Influencers

Why do big brands, like Pepsi, use celebrities? They want to tap into that celebrity’s fans. Simple. We can’t afford celebrities, but we all have a micro-influencer we know. It’s about building relationships and seeing how you might be able to help each other.

On the smallest scale, it’s your local business community providing referrals for each other, getting everyone the results they want. On a larger scale, TopRank Marketing outlines some good suggestions.

5. Don’t Screw Up the Sale

You might scoff at this, but it’s not always common sense to everyone. Have you ever forgotten to follow-up with a client within a few hours? Maybe, been just a little too pushy and turned someone off? Perhaps, you just sold too much and didn’t listen? If you’ve done any other these things, you likely screwed up the sale. If you want more detail, we recommend you read SmallBiz Tech’s post.

For the Results You Can’t Guarantee, Bring Your Small Business to Us

If you want to get results quickly for your business, these 5 ways are a good place to start. There any many others, and we’ve found these to be the most helpful to us. If you want to learn more or if you think your small business needs more targeted tips, that’s where we can step in and 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.

The New SBA Bill: What You Need to Know

SBA legislation

The SBA reauthorization bill is making its way through Congress. This legislation may be a boom for entrepreneurs in the technology, biotechnology, medical, and any other research-intensive industries. So learn what you can do to prepare. And tell us if you will need help in managing your small business before it is too late.

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.

R&D Funding Enhancements is the Potential Biggest Boon for Entrepreneurs

Senator Mark Rubio (chairman of the Small Business and Entrepreneurship Committee in the Senate) said during a recent speech at Cape Canaveral

[Access to] “patient capital” [for] “the new industries, the new ideas that fuel sustainable, long-term growth, and it comes particularly concerning when it is not happening in sectors that are critical to our national security and our national economic security.”

“We view it as an opportunity not just to conduct oversight and our proper role to reauthorize, but also as an opportunity to modernize and sort of adjust the SBA to the 21st century needs of our country, and to sharpen it as a tool that serves our national interest,” There are some provisions in the current bill that would enable the SBA to provide capital for R&D intensive industries. It’s unclear if it will make it into law, but it is encouraging.

Marco Rubio spoke about investments and entrepreneurship for small businesses in Florida recently.

Concern From Abroad – SBA Bill Could Level an Unfair Playing Field

There has been concern highlighted in Congress about foreign government subsidies, namely China, negatively impacting domestic markets. This isn’t Trump slapping on tariffs willy-nilly. This is a bit more grounded in reality.

“When a Chinese train-maker, whether it’s for urban mass transit or whatever, bids on a project, they are going to be able to undercut any domestic competitor, not to mention any international competitors, because they don’t have the same profit motives that our companies would,” Rubio said in the interview. “They are prepared to bid on projects that make no financial sense because they want to dominate that industry.”

“We are not competing against private-sector firms. We are competing against companies with the full backing of the Chinese government,”

– Sen. Marco Rubio

It’s unclear what the SBA’s bill can do about this situation, but it is encouraging that there is recognition. Subsidies do alter the economic realities that small businesses and entrepreneurs face which is important for everyone to know.

A Bill Strengthening Small Strengthens the Community

The Small Business Administration helps to protect small businesses and campaign for their needs in congress

Nealy ½ of Americans work for small businesses. There simply isn’t a group that is more closely tied to the communities they serve and expand. Congress has talked about strengthening the competitiveness of small businesses against large corporations and foreign competition, though not much has been done. There has been some draft language in this legislation that could help improve access to capital, reduction of security threats, as mentioned in our post about small business cyberattacks. However, no one can say if they make it into the final bill, or whether they are able to deliver what they promise.

In summary, there are a lot of potentially beneficial programs and initiatives in the SBA reauthorization bill. There are reasons to be hopeful, especially if you are in the medical and or technical fields and are looking to expand beyond what you assumed were your limits.

How to Avoid a Common Small Business Mistake

Common Small Business Mistakes

After years of helping clients, we’ve found that the most common small business mistake is poor cash flow management. Cash flow is one of the key financial documents you should monitor and keep up to date. Your accountant can help you. QuickBooks or other software can do it for you. If both make your head spin, we can help you too.

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 We All Should Care about Small Business Success

Every business has ups and downs when it comes to cash coming in. Customers pay late. Things get delayed. Projects start late. The problem is we all have monthly costs, such as rent, payroll, etc. going out regardless of how much is coming in. That’s what results in people living paycheck to paycheck, or being forced to be overly thrifty with their money. Cash flow management is developing a strategy that creates a buffer so you always have enough to weather these fluctuations.

“[The most common small business mistake] owners make is that they don’t understand their cash forecast, and business can be going very well, but you can run out of money,”

— Karen Mills, the former administrator of the U.S. Small Business Administration (SBA) during President Barack Obama’s presidency in Yahoo Finance

In 2017, small businesses created 1.7 million new jobs. That number rose to 1.9 million in 2018, and another 1.9 million in 2019. There are nearly 31 million small businesses in the US, which employs about ½ of the US workforce. When cash flow falls apart and you face this mistake, your small business is more likely to fall behind. Karen Mills hit the nail on the head when she said that small businesses “…create a path to the American dream, so it’s not only part of the economy, but it’s part of economic mobility.”

How to Manage Cash Flow to Avoid this Common Mistake in your Small Business

Here are four easy tips to learn how to easily combat this mistake in your small business.

1. Know You Average Billing Cycle

What’s a billing cycle? It’s the average time between the date you send an invoice and the date the cash is available in your bank. Available is important because it can take a band 1-2 business days to clear a check. During that time, that cash is NOT available for you to use. Typical billing cycles are between 40-70 days. Cash flow is important for most aspects of business management

2. Keep Enough Cash on Hand

In an ideal world, you would have enough cash on hand to cover your expenses over your average billing cycle. In plain English, you should have enough money in the bank to cover 2 to 3 months of expenses. Now, no one lives in an ideal world, so what can you do?

3. Have a Backup Plan

For many, this takes the form of a line of credit. A line of credit is when a bank agrees to loan you money up to a fixed amount. The interest rate is usually variable, meaning it is set based on the Federal Reserve rate plus some fixed percentage. You would treat this as a regular loan, with TWO major advantages.  First, you take only the amount you need. Second, you can pay it off early

 

Lack of cash on hand always causes problems

First, you take only the amount you need. Second, you can pay it off early without penalties. Most term loans are lump-sum payments. They also tend to carry early payment penalties. This is why lines of credit are much more preferable to loans when dealing with short-term cash flow problems.

4. What to Do if You Can’t Get a Line of Credit

Lines of credit are hard to get. You need stellar personal credit. Plus, you need to be in business for at least 2 if not 3 years. We’ve gone into depth about the challenges you face getting loans and how to avoid them. So if you can’t get a line of credit, your best bet is to get a term loan. It’s not ideal, but it’s better than running out of cash. However, if you don’t qualify for a line of credit, you’re not likely to qualify for a term loan.

We review the alternatives in our post “Denied a Small Business Loan? Try Alternative Lenders”. But always remember, the time to ask for a loan is when you have money in the bank. Don’t wait until you have a cash flow emergency to do it, and NEVER take a merchant cash advance. You’ll only make your problems worse.

In summary…

…to avoid the most common small business mistake, always keep your cash flow forecast up to date. We know that’s more easily said than done, and that it pulls you away from doing what you love. Fortunately, you can turn to us for 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.

3 out of 4 Small Businesses Were Successes Last Year

Small Business Success

According to SmallBizTrends, 3 out 4 of small business reported that they were successful last year. Were you one of them? If so, you have some planning to do. If not, you may have some fixing to do. 

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 Success of Small Businesses is Key to Continued Economic Growth

The success of small businesses is extremely important to the overall economy of the U.S. because of their sheer volume. The Small Business Administration (SBA) puts the number of small businesses at 30.2 million for 2018. In other words, that’s 1 small business for every 5 Americans.

So, What About 2019?

When 3 out of 4 small businesses are growing, that’s great news, right? Yes and No. All economies are cyclical.  So, it is important to understand the projected trends as well. As we mentioned in our blog “The Hidden Risk in the Spike of Small Business Optimism”, the forecast for 2019 remains strong.

In fact, “(74%) also say they expect their business to grow in the next six to 12 months. This is a 12% increase from the 2018 survey.” (SmallBizTrends).

Small Business Success is forecasted to continue for 2019 and beyond

The respondents from the 2019 small businesses were optimistic overall about their future, and the future of the economy as a whole.

Confident in Their Small Business Growth

77% say they are confident their business is going to grow in 2019, a 2% increase from 2018. But close to half of those, or 34.2%, say they are very confident.

Confident in the economy

The confidence also extends to the overall economy. More than two thirds (68%) say they are confident about the economic conditions of the U.S. in 2019. The same percentage of owners feel this way for the next two to three years about the U.S. economy.

What are the most common growth strategies for small business success?

Half said “Improving customer satisfaction and loyalty”, which is consistent with our post “Want to Grow Faster than Your Competition? Focus on Your Current Customers”.  So, it seems successful businesses are doing just that.

1/2 were expanding their customer base

Slightly less than half said finding new customer segments. In “4 Simple Steps to Write a Successful Marketing Plan”, we discuss some tips on how best to achieve this goal. Expanding your customer base can be challenging if you don’t do it right.

1/3 were providing new products

Similarly, about a third said “creating new products and services”, which is also covered in “4 Simple Steps to Write a Successful Marketing Plan”. But, equally important is to communicate the benefits of these new services.

1/4 were expanding locations

A quarter of businesses are looking to expand to new locations. In our post, “4 Tips for Expanding Your Business into New Markets”, we cover how to do this in detail.

Small business growth requires capital

Regardless of what they plan to implement, in most cases, they will need funding. In “Small Business Lending is Booming”, and “How Not to Sound Stupid When Talking to Banks” we share strategies that can help if you are looking for financing. 

In the survey, roughly 4 in 10 are tapping into personal savings to fund growth. Personally, I think that’s a mistake. If they could qualify, they would be better off leveraging those savings as collateral.  However, that’s a personal decision each business must make.

What if you were the Quarter of Businesses that Weren’t Successful?

Not everyone wins every year. If you struggled, it’s time to take stock. We suggest that you start back with the basics.

Time to Get Back to Basics for Small Business Success

Business Model

In “5 Steps to Take When Analyzing Your Business”, we talk about how to take a hard look at your business model to see what’s working and what’s not

Business & Marketing Plans

Once you’ve identified the issues, then it’s time for a new business and marketing plan. Both “4 Simple Steps to Write a Successful Business Plan”, and “4 Simple Steps to Write a Successful Marketing Plan” can help you get started

When writing those, we suggest reading “5 Proven Methods for Accelerating Small Business Growth”, and “5 Ways to Grow Your Business Without Spending a Penny”.

If you’re still struggling, both are free “Want to Learn About Business for Free” and paid services, like ProStrategix, that can help.

In summary, the outlook for small business success looks good. If you are successful, you should be planning for more growth. See “If You Don’t Plan for Growth Now, You’ll Hate Yourself Later”. If you are not, you at least have the wind at your back.

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.