Businesses

5 Ways to Increase Your Business’s Customer Retention Rate

What’s your business’s customer retention rate? If most customers only make a single purchase, you’ll struggle to grow and expand your business. Statistics show that an average of 80% of a business’s sales come from just 20% of its customers. Therefore, you should consider the following tips to increase your business’s customer retention rate.

#1) Offer Exceptional Customer Service

The single most important thing you can do to increase your business’s customer retention rate is to offer exceptional customer service. By going above the expectations of customers, you’ll set your business apart from its competitors — all while encouraging customers to stay with your business and make additional purchases in the future.

#2) Create a Loyalty Rewards Program

Another way to retain more of your business’s customers is to create a loyalty rewards program. In the most basic sense, a loyalty rewards program is any program that rewards customers for making additional purchases. You can use a basic points-based system, for example, in which customers are rewarded with points for making purchases. Customers can then redeem these points for discounts, free products or services or other items.

#3) Reach Out to Existing Customers

Something as simple as reaching out to your business’s existing customers — whether by phone, email, social media or elsewhere — can help you achieve a higher customer retention rate. If a customer forgets your business, it’s unlikely he or she will return to make additional purchases in the future. Therefore, you should proactively reach out to existing customers with relevant marketing messages.

#4) Offer Limited-Time Promotions

Of course, offering limited-time promotions can entice your business’s existing customers to make a purchase and, therefore, increase your business’s customer retention rate. Regardless of what products or services you sell, consider creating promotions that are only good for a limited period of time. When customers see these deals, they’ll feel more inclined to take action so that they don’t miss the opportunity to save money.

#5) Encourage Referrals

You can even use referrals to increase your business’s customer retention rate. If a customer is happy with your business, ask him or her for referrals. Any new customers referred to your business may stay with your business for a long period of time after receiving a recommendation from a friend or family member. These are just a few ways to increase your business’s customer retention rate.

Have any other customer retention tips that you’d like to share? Let us know in the comments section below!

Don’t Let Insufficient Capital Hinder Your Business’s Success

If you’re in the process of starting a business, you’ll need to raise capital. All businesses need money to make money. Unfortunately, though, far too many entrepreneurs lack the necessary capital to launch and run their business. And without capital, you’ll face an uphill battle when attempting to turn your vision of a profitable and successful enterprise into a reality.

Nearly 4 in 5 Small Businesses Fail Because of Insufficient Capital

To put the important of raising capital into perspective, one study found that 79% of small businesses fail because of insufficient capital. In other studies, the number of failed businesses associated with insufficient capital is even higher.

The Impact of Insufficient Capital

How exactly can insufficient capital affect your business’s future success? Regardless of what your business does — or what you intend to do with your business once launched — you’ll need capital to execute its operations. If you’re launching a retail clothing store, for example, you’ll probably have to lease a storefront, purchase inventory and insurance, hire employees. If you’re launching a professional landscaping business, you’ll have to purchase lawnmowers and other equipment as well as insurance — and those are just a few of many related expenses.

Without capital, or without enough capital, you’ll also struggle to grow and expand your business after launching it. Lack of capital restricts businesses growth, preventing them from expanding into new markets and scaling their operations.

How to Raise Capital for Your Business

You can safeguard your business from problems such as these by taking the time to raise a sufficient amount of capital. First and foremost, however, you must determine exactly how much money your business needs. Review your business plan while paying close attention to your business’s financial needs. You probably won’t be able to determine exactly how much money your business needs, but this should give you a general idea.

After determining a general idea of how much money you need to start and run your business, you should explore some of the finance options. If you have money saved in a personal bank account or checking account, you can always tap into it. Alternatively, you can seek a business loan from either a bank or alternative lender.

When applying for a business loan, consider whether the loan is secured or unsecured. If it’s secured, you’ll have to use collateral to obtain it. If it’s unsecured, you won’t have to use collateral.

Have anything else that you’d like to add? Let us know in the comments section below!

Are Business Cards Still Useful?

If you operate a small business, you might be wondering whether you should invest in a set of business cards. With the advent of the internet and digital media, paper-based business cards have become less common. As a result, some business owners assume they are no longer useful or relevant. While business cards aren’t as popular as they were several decades ago, however, they can still help your business in several ways.

You Can Hand Them to Potential Customers in Person

When you encounter a potential customer who’s contemplating purchasing your small business’s products or services, you can give him or her one of your business cards. Not everyone owns a smartphone. And if a potential customer doesn’t have a mobile device, he or she may not remember your small business’s name or contact information. A simple solution is to give potential customers a business card.

They Project Credibility

Business cards also project credibility. Customers and potential customers will view your small business as being more credible than its competitors if you give them a business card. You can create custom business cards using your small business’s logo, color scheme and other visual brand elements. Upon seeing this highly professional design, customers and potential customers will feel confident knowing that your small business is credible and legitimate.

Educates Potential Customers About Your Business

Business cards can contain more than just your small business’s name; they can include other relevant information such as your small business’s photo number, address, email address, website address and hours of operation. As a result, they are highly useful for educating potential customers about your small business.

You Can Leave Them Behind

A benefit of using business cards that’s often overlooked is the fact that you can leave them behind. Many restaurants, for example, hold giveaway drawings using business cards left by their customers. If you dine at one of these restaurants, you can place your business card in a jar for a chance to win a prize. Most importantly, though, other patrons may see your business card inside the jar, thereby giving your small business additional exposure.

They Are Inexpensive

Finally, business cards are relatively inexpensive, so they won’t hurt your small business’s finances. You can often purchase up to 500 custom business cards for as little as $50, essentially making them 10 cents a piece.

What are your thoughts on business cards? Let us know in the comments section below!

Is Accounts Receivables Financing a Smart Funding Solution?

It’s a paradox that countless business owners encounter: You need money to make money. If you’re starting a business, you’ll need to purchase goods and services to get your operations up and running. If your business allows customers to pay after their product has been delivered or their service has been performed, however, accounts receivables financing may offer an effective way to fund your new business.

What Is Accounts Receivables Financing?

Accounts receivables financing is a commercial funding solution that involves borrowing money from a lender while using your business’s accounts receivables as collateral for the loan. To better understand accounts receivables financing, you should first look at accounts receivables.

Basically, accounts receivables are invoices for money owed to your business by your customers. If you’ve sold a product or service to a customer and are awaiting his or her payment, you can use that invoice as collateral for a secured loan. If you don’t pay back the loan, the lender can claim ownership of the invoices and, therefore, seek collection from the respective customer or customers.

Accounts Receivables Financing Pros

Accounts receivables financing can ease the burden of securing capital to fund your business. Lenders are particularly cautious regarding the businesses to which they lend money, especially if that money is in the form of an unsecured loan. With unsecured loans, the lender is essentially hoping that the business doesn’t fail. If the business fails, the lender may not recoup the loaned money.

Accounts receivables financing, however, is a form of secured lending, so it’s easier to acquire than other, unsecured loans. When you apply for accounts receivables financing, you provide the lender with rights to your business’s outstanding invoices in the event you don’t follow through repayment.

You’ll also find that accounts receivable financing offers low interest rates. In many cases, the interest rate for an accounts receivables loan is less than 5%.

Accounts Receivables Financing Cons

On the other hand, accounts receivables financing isn’t viable for all businesses. If your business demands payment from customers upon delivery or completion of the purchased goods or services, you may not have any outstanding invoices, in which case you won’t be able to use accounts receivables financing.

But if your business collects outstanding invoices, accounts receivables financing could be a smart decision. As revealed here, it’s easy to obtain and offers low interest rates.

What do you think of accounts receivables financing? Let us know in the comments section below!

5 Things to Consider When Applying for a Business Loan

Do you need money to fund your small business? If so, you might be thinking about applying for a loan. A business loan is undoubtedly an effective way to cover the expenses associated with starting and running a business. But not all business loans are the same. When applying for a business loan, you should consider the following to ensure you choose the right type of loan.

#1) SBA or Non-SBA

There are both Small Business Administration (SBA) business loans and non-SBA loans. SBA business loans are backed by the SBA, so they typically have lower interest rates and are easier to obtain than non-SBA loans. Therefore, you should inquire about an SBA business loan when contacting banks. You can still check out non-SBA business loans, but you’ll probably get a better deal with an SBA business loan.

#2) Secured or Unsecured

You’ll also find that business loans are either secured or unsecured. Secured business loans require the use of collateral, whereas unsecured business loans do not require collateral. With a secured business loan, in other words, you must provide the bank with one or more assets to be used as collateral, such as real property. If you don’t pay back your business loan, the bank can claim ownership of the collateral.

#3) Interest Rate

Whether you choose an SBA or non-SBA business loan, pay attention to the interest rate. If you’re looking to acquire an SBA business loan, you can expect an interest rate of about 8% to 10%. For a non-SBA business loan, interest rates can range from 10% to 20% — sometimes even higher.

#4) Personal Guarantee

You may discover that some banks require you to make a personal guarantee when applying for a business loan. With a personal guarantee, you are essentially guaranteeing that you will personally pay back the loan, even if your business goes under. Banks are more likely to give you a business loan if you offer a personal guarantee, but it could expose your personal assets, including your cash savings, to your business’s liabilities.

#5) Term

Finally, consider the term when shopping for a business loan. Of course, “term” refers to the length of the loan. While terms can vary, most business loans have an average term of three to 20 years. Generally speaking, the longer the term of a business loan, the lower the payments will be. But the downside to choosing a business loan with a long term is that you’ll have to pay it back over a longer period of time.

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How to Lower Your Small Business’s Overhead Expenses

It’s a disheartening statistic to say the least, but the Bureau of Labor Statistic (BLS) reports that over half of all small businesses are forced to close their doors after just five years. While a small business can fail for dozens of reasons, high overhead expenses is often a contributing factor. Thankfully, though, there are ways to lower your small business’s overhead expenses and, therefore, increase its chance of long-term success.

Use Paperless Documents

How much money does your small business spend on paper documents. A report published by The Paperless Project suggests U.S. businesses spend over $120 billion on paper documents and forms each year. Regardless of what type of small business you operate, you’ll probably use paper documents and forms in your operations. Depending on the nature of these documents and forms, however, you may be able to switch to a digital format instead. Tax forms and pay stubs, for example, can often be sent to employees digitally, eliminating the need for paper.

Compare Rental or Leasing Prices

Not surprisingly, one of the biggest overhead expenses encountered by small business owners is renting or leasing a store or building. While you can’t eliminate this overhead expense, you can often lower it by shopping around. Explore several prospective locations for your small business, and when you contact the owner or landlord, inquire about the rental or leasing cost. With a little work, you may discover a better location for your small business that costs less than your current location.

Choose Highly Effective Advertising Tactics

Advertising is also considered an overhead expense, so you should choose your advertising tactics carefully. Avoid using mass-volume advertising tactics that expose your small business to a large, generalized audience. Instead, choose targeted advertised tactics that allow you to reach your small business’s key demographic of potential customers. Not only will you spend less money on targeted advertising; you’ll generate more revenue from it.

Cancel Nonessential Services

Go through your small business’s bank statements and credit card statements to identify any nonessential services. Maybe you’re paying for a landline that you rarely use, or perhaps you have two internet services when you only need one. Either way, you should consider canceling nonessential services to save money on your small business’s overhead expenses.

Have anything else that you’d like to add? Let us know in the comments section below!

5 Mistakes to Avoid When Starting a Small Business

Are you planning on launching a small business? According to the Small Business Administration (SBA), there are over 28 million small businesses operating throughout the United States. Unfortunately, though, statistics show that one in two small businesses fail within five years. It’s frustrating when you invest your time, money and energy into starting a small business, only for it to flounder. While there’s no foolproof way to ensure your small business is successful, you should take action to avoid making the following mistakes.

#1) Not Creating a Business Plan

Just because you’re starting a small business and not a medium- or large-sized business, you still need a business plan. A business plan offers a detailed roadmap your small business’s plan for success. Furthermore, many banks and lenders will request your business plan when seeking a loan or funding.

#2) Overlooking Goals and Objectives

Don’t forget to set goals and objectives for your small business. Without goals and objectives, how will you know if your small business succeeds? Far too many entrepreneurs dive headfirst into a new venture without taking the time to set goals and objectives. As a result, they place themselves at a disadvantage to their competitors.

#3) Using the Wrong Business Structure

Another mistake that entrepreneurs are guilty of making is using the wrong business structure. As you may know, there are several tax-based business structures from which to choose, some of which include sole proprietorship, LLC, corporation and partnership. Generally speaking, a sole proprietorship is the worst structure because it offers zero protection of your personal assets — home, car, personal savings, etc. — from your small business’s liabilities.

#4) Hiring the Wrong Employees

If you’re going to hire employees for your small business, you need to hire the right employees. Some small businesses hire the first candidates who submit an application. It’s only until later when they realize their mistake. Failure to selectively choose the most skilled and qualified employees will only hinder your small business’s ability to grow and generate sales.

#5) Taking on Too Much Debt

Your small business may incur debt during its initial launch stage — and that’s okay. However, you should be conscious of how much debt your small business incurs and take appropriate measures to minimize it. For example, consider using equity-based funding, such as venture capital or private equity, instead of debt-based funding like a bank loan.

Have anything else that you’d like to add? Let us know in the comments section below!

Secured vs Unsecured Business Loans: What’s the Difference?

When seeking funding for your business, you’ll probably come across business loans. Offered by both government-backed banks and private lenders alike, business loans are among the most common type of funding vehicle used by businesses. You can get loans as small as $5,000 or as big as $500,000 — sometimes even larger. Not all business loans are the same, however, and it’s important to consider whether it’s secured or unsecured.

Unsecured Business Loans

An unsecured business loan is money loaned to a business that doesn’t require the business to use collateral. When you apply for an unsecured business loan, the lender will run a credit report to see if there are late payments or other delinquencies. Additionally, the lender may evaluate your business plan to further gauge your ability to pay back the loan. If you meet the necessary criteria, the lender will approve your application and give you the business loan.

Secured Business Loans

A secured business loan, on the other hand, is money loaned to a business that does require the business to use collateral. Some lenders are skeptical of loaning money to businesses, especially if those businesses have bad credit or no credit. Rather than rejecting their application for a loan altogether, lenders may require the use of collateral to secure the loan. Collateral is essentially something of value that the lender can use as a financial recourse in case the business is unable to pay back the loan. Common examples of collateral include real property, business equipment or even accounts receivables.

Which Should I Choose?

Now that you know the difference between unsecured and secured business loans, you might be wondering which funding vehicle is right for your business. There are advantages and disadvantages to both types of business loans. Unsecured loans don’t require the use of collateral, so you don’t have to worry about losing those assets if you fail to pay back the loan. On the other hand, unsecured loans are more difficult to obtain because they have a higher risk for lenders.

Secured loans are easier to obtain, and in many cases, they are the only option available for new businesses that are just getting off the ground. The problem with secured loans, however, is that you may lose any assets used as collateral if you don’t pay back the loan.

Have anything else that you’d like to add? Let us know in the comments section below!

How to Increase Your Business’s Cash Flow

Cash flow is an important metric to look for when analyzing your business’s finances. Defined as the movement of money — income and expenses — it provides an accurate overview of your business’s ability to pay liabilities. If you spend significantly more money what you make, this suggests that you won’t be able to cover debt and other liabilities. You can increase your business’s cash flow, however, by doing the following.

Explore Different Insurance Solutions

According to LegalZoom, insurance is the single biggest expense associated with running a business. Regardless of the type of business you operate, it probably needs insurance. Rather than choosing the first insurance company that offers you a deal, shop around and get quotes from multiple providers.

Go Digital

There are certain documents that can (and should) be stored in digital format instead of printed. U.S. businesses spend millions of dollars each year on printer paper, most of which is discarded in the trash. Before printing a document, ask yourself if you really need to print it. Perhaps you can save it on your computer to save money on stationary and increase your business’s cash flow.

Invest in Marketing

You have to think of marketing as an investment: It costs money, but like any smart investment, it can help your business make more money in the long run. A study conducted by Neilsen found that the average return on investment (ROI) for marketing was 9%. This means for every $1 you spend to promote your business, it will yield $1.09 in sales. Of course, certain marketing channels offer higher ROIs, and you can optimize your marketing campaigns so that they reach your business’s specific audience. The bottom line is that you should invest in marketing to increase your business’s cash flow.

Collect On Outstanding Invoices

Does your business have one or more customers who haven’t paid their bill? Outstanding invoices such as this are a common problem for businesses that accept post-service payments. By performing the service upfront, the business is counting on the customer to pay the bill. And if the customer doesn’t pay, the business will have to write off the bill as bad debt. To prevent this from happening, you should proactively contact customers with outstanding invoices to request payment. If a customer can’t pay the full bill, discuss a payment plan that can fit his or her budget.

 

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5 Ways to Improve Your Business Credit

Regardless of what your business does or sells, you’ll probably need capital to fund its operations. While some business owners use their own personal money for business-related expenses, most seek loans or lines of credit from a lender. But if you’re thinking about applying for a loan or line of credit, you should focus on improving your business credit. Without good credit, you’ll struggle to get approved. So, consider the five following tips to improve your business credit.

#1) Check Credit With 3 Major Bureaus

First and foremost, you should check your business credit with the thee major reporting bureaus: Dun & Bradstreet, Equifax and Experian. These are three most commonly used bureaus for business credit. Go to each of their respective websites and create an account for your business to view your business credit. If you see any false information listed, file a dispute to have it removed.

#2) Use Credit to Pay for Expenses

Don’t use your business’s checking account to pay for business-related expenses. Rather, use a line of credit. Like personal credit, your business credit will grow the more you use it. If you use your business’s checking account, on the other hand, it won’t offer any benefit to your business credit. Always use credit to further build your credit.

#3) Pay on Time

Of course, it’s important that you pay your pills on time, every time. Some business owners neglect to pay their bills on time, believing they’ll incur nothing more than a late fee. While most lenders and creditors charge fees for late payments, they may also report these late payments to the three aforementioned credit bureaus, thereby hurting your business credit. If you can’t pay a bill on time, contact the creditor or lender to see if they’ll allow an extended grace period.

#4) Keep Balances Low

Try to keep your credit balances as low as possible. You want to have low revolving credit with high limits, as this indicates to other creditors and lenders that you pay your bills. Rather than paying the minimum amount due, make larger payments to keep balances low.

#5) Don’t Close Credit Accounts

Finally, avoid closing your credit accounts. Even if you rarely or ever use them, keeping them open will strengthen your business credit. When you close a credit account, other creditors and lenders will see that you have less open credit, which could hurt your efforts to get approved for a new credit account.

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