Why So Many Start-Ups Fail..

Every entrepreneur has a vision of where they see themselves 10 years from now. While it’s nice to dream big, it’s not possible (yet) to jump into the future and have a large corporation at your fingertips. Personally, I would like to be the CEO of an up-and-coming business that is built towards the future. For that to happen I have to continually remind myself to follow these suggestions.

Outsource

Small business owners often believe that doing all the work themselves (marketing, sales, business development, accounting, legal, etc.) is the best and most cost effective way to manage a business. This might have been true in the past, but there is a reason that so many of these specialized positions are well paid.  They do their jobs better then any entrepreneur can, and in the long run they will make your company stronger.

Let’s use online marketing as an example; while you could go around promoting your website to various blogs, newspapers, social media outlets and emails, marketing companies have the right tools and contacts to drive the most traffic to your website. They know the ins and outs of an industry that is growing everyday and can really boost sales with an effective online marketing campaign. While costs may seem high in the beginning, this is where I suggest you look at the bigger picture and how spending now will impact future sales.

Embrace Change

This can be taken in many different ways; as times change, so must your business. We’ve seen this all too often with corporations that have relied on their brand recognition and their products to maintain sales year after year. For some of these company’s they will continue to shrink because they were not able to adopt as the market continued to shift. As much as you might want to resist change, it will come at your own demise.

Change can come in almost any part of a business, whether it is employee’s, location, marketing, or even customers, embracing change is an important part of development for any business. While change is not always good, it can create an opportunity to learn from these mistakes and hopefully build a stronger business.

Value Your Customers

It’s easy to forget about the customers you have when you are trying to find new ones to add. But it is just as important to maintain your current customers as it is to add new ones. It is important to build relationships with each and every customer so that they not only feel valued, but also feel like they are adequately taken care of. Don’t just worry about getting the sale, try and help your customer in other areas of their company so that you can build a higher level of trust. The more your customer trusts you, the harder it will be for them to leave, even if they can find a better price elsewhere.

While these suggestions can not guarantee that your business will be successful; these tips can help overcome the many hurdles involved with owning a small business. While there are more obvious tips to running a successful business, my objection was to focus on some of the areas we might take for granted. If you have any additional questions about running a business or would like to speak to me about some of your business problems, feel free to email me at mwong@ablebusinesscredit.com.

Cheers.  

When the Bank Says No..

When businesses need money, the first call is to the banks. They offer affordable rates and long term solutions for businesses that are approved. But where should businesses look to if the banks say no?

“My company is only 2 years old and the bank says I have not been around long enough”

This is a story that several new business owners tell when they are looking for financing for their business. They might have great sales and a strong business plan, but the bank is fairly strict on handing out money to new start-ups. Banks like dealing with businesses that have been around for 10 years and have a model that keeps them consistently in the black. While your business builds toward getting approval from the banks, alternative financing can be an affordable option that does not affect the future growth of the company.

“So what can I do?”

A great option for businesses that are growing rapidly is, alternative financing. Whether it is financing receivables, hard assets, equipment, inventory, or even purchase orders; they can all be secured by the lender to provide financing. Through a revolving credit facility or a loan against the asset, financing options are readily available for business plans that make sense. One of the biggest benefits of alternative financing is the flexibility it can provide to any client. It is well documented that banks require several covenants, while alternative lenders can be very lenient on how funds are dispersed.

“How will this help my company?”

For businesses that are running successfully but are stretched out for cash, this is a great solution to help financially manage growth. While most businesses look at raising equity as a more viable solution, it can be a much more expensive in the long run. While alternative financing is often considered expensive debt; it is considered very cheap compared to raising equity. By raising equity, you add an additional shareholder and funds that can be used towards the business. However, if profits for the company begin to grow, they will be shared based on percentage of ownership. In most cases, adding an additional shareholder to the company entitles them to decision making power based on the ownership they have in the company.

While alternative financing might seem like a costly endeavour in the present, we try to advise clients to look into the future. We see alternative financing as a temporary solution for growing businesses and a bridge to businesses whose payables and receivables do not line up.

Feel free to send me an email if you have any questions or would like additional information. 

Why Factor Your Receivables..

Factoring is a quick and easy way for businesses to access cash that is waiting to be paid by customers. 30, 60, and 90 day credit terms are an expected practice for companies in the b2b market. By offering credit terms to customers, you build stronger relationships and gain market share that can ultimately drive sales. But while cash is tied up in accounts receivables, future business might have to be put off until these receivables are paid off. This is where factoring can be an effective financing tool to bridge the gap between payments and collections.

While rates and advance amounts vary for each client, financing can be priced as low as 0.75%/30 days and up to a 95% advance upfront. But more importantly, by factoring your receivables your business will have more flexibility and a less strenuous time managing growth.

If you can have the opportunity to work with the bank for financing, we say go right ahead! Banks offer the most affordable options and if your business can get approved, great; but banks tend to be very stringent on businesses they choose to approve and companies who are factoring are hoping to eventually fall under that criteria. Anyone who has ever dealt with a bank also knows it’s a long and slow process to get funding. It can often take months before funds can be withdrawn. If your business is looking for quick cash, alternative lenders can often setup accounts in as quickly as a week and provide same day funding.

Factoring is often perceived as an expensive form of debt, but it is a relatively cheap alternative in comparison to raising equity. While equity is a solution that does not cost the company money, it dilutes the overall value of each shareholder. So if a company is growing and profits are expected to increase, it may be a more viable solution for them to factor their receivables.

So next time your business is strapped for cash, consider factoring some of the receivables that have been aged >30 days.

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