Posted by Stephanie Valentine on Jun 30, 2009 in
Small Business Cash Flow 
What’s overhead? Not just the roof. For a small business overhead is usually the debt hanging over the small business owner’s head. Actually, overhead is the ongoing general cost of running your small business, and can include items like the cost of carrying inventory, office supplies, payments on equipment, and the cost of service providers like accountants and lawyers.
In the last few articles I’ve discussed ways small business owners can increase their cash flow into the business, by converting accounts receivables into cash. In this article, I outline four ways to decrease your company’s overhead. These simple solutions can help your business preserve cash, and stay solvent.
Decreasing Small Business Overhead
1. Barter with Others
Trading products or services with other businesses is one way to reduce your overhead. I often use this approach in with my small businesses. I may trade my writing services or web-design work for graphic design services or legal advice from another company. Bartering works well so long as both parties have goods or services of equal value to trade. If you’re not sure how to go about bartering, check in with your local Chamber of Commerce, which may already have a barter network in place.
2. Reduce Inventory
The cost of carrying inventory makes up a large percentage of the overhead for many small businesses. While it’s essential to provide your clients with what they want, there are ways to do that while trimming your inventory. First, review your inventory to identify which items are hot-sellers and which have been sitting on the shelf gathering dust. Next, locate the items that generate the best profit for your business. Finally, trim the low-profit and slow-selling items from your inventory. You can even turn this action into a benefit that can be conveyed to your customers. Turn an inventory reduction into a “specialization.” For instance, one gift store business reduced inventory by carrying only products made by indigenous people around the world. The resulting reduction in overhead has allowed the business to expand their marketing efforts, and the increase in cash flow is the overall result.
3. Renegotiate the Cost of Regular Business Services
Most small business owners are too busy to price-shop, but you’ll find that you can negotiate lower costs for regular services your business buys by doing just a little price shopping. Call around and get three to for quotes for regular business services, including insurance, long distance phone service, equipment maintenance, and delivery services. Once you find the best rate, go back to your current supplier and suggest they meet the price. If they refuse to do so, consider setting up an account with another, less expensive service.
4. Join a Buying Co-op
Buying in bulk is always less expensive. Many small business owners are now forming buying co-ops to purchase office supplies and equipment in bulk. For instance, many office supply stores offer discounts for buying paper, ink, or toner in bulk. If you don’t already have a buying co-op in your area, call up a few of your fellow small business owners and create one from scratch. You can also call your local Chamber of Commerce to see if a buying co-op exists in your area.
Reducing small business overhead is really a matter of paying attention to the details. Often, the savings you get from renegotiating your insurance policy or buying in bulk may not seem like much, but if you add up all the small savings you’ll find that your average annual savings can be significant. These days, when cash is vital to business survival, pinching pennies where you can is often the difference between a thriving enterprise and a bankrupt business.
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Photo credit: Office Supply Construction
Tags: barter, cash flow, inventory, small business overhead
Posted by Stephanie Valentine on Jun 25, 2009 in
Small Business Cash Flow 
In my last blog post I talked about three simple ways to improve your small business’ cash flow, including prompt billing, avoiding slow and no-pay customers, and asking for your cash sooner.
Now I have three more ways you can increase the cash flow. More specifically, these methods help you turn accounts receivables into cold hard cash that your small business can use today.
3 More Ways to Increase Cash Flow Into Your Small Business
Some of these cash flow strategies may take a little time to set up, but you’ll find that the resulting positive cash flow will be worth the effort. By implementing these strategies, you’ll be joining the thousands are small business owners who are looking at resourceful ways to get paid sooner.
1. Make It Easy for Your Clients to Pay
It’s only logical that your clients will pay you sooner if you make it easy for them. Here’s how. First, when you establish a relationship with a client, state your payment terms and options up front. Let your clients know whether you accept cash, checks, credit cards, and online payments.
Second, start accepting credit cards. As your clients begin experiencing their own cash flow crunches, they will want to manage their cash flow by using credit cards to pay for services. By accepting credit cards, you will increase your chances of being paid in a timely fashion. These days, small businesses ranging from plumbers to accountants are accepting credit cards–and seeing an upsurge of cash flow as a result. Although you will have to pay 1-3% to a credit card processor, the increase in your small business cash flow make the fees worth paying. Remember that 90% of business failures are due to cash flow.
Third, consider accepting online payments through services such as PayPal, Verisign, Quickbooks, or Authorize.net. Your clients are every bit as busy as you, and by allowing them to pay online, you allow them to handle payment at a convenient time, which may not be during regular business hours.
2. Don’t Be Afraid to Ask for Your Money
Studies show that friendly reminders, along the lines of, “Did you get my bill and when can I expect payment?” can significantly increase payment rates. Before you start asking for payment, be sure that you have made your payment terms clear at the outset of your relationships with your clients. Next, use software to track the age of various accounts receivables so that you can easily list late-paying clients, and start calling with friendly reminders. Finally, if necessary, consider using an outside collection agency for extremely delinquent accounts. Use this option with caution, as you may negatively impact your business relationship with your late-paying clients, or others who know those clients.
3. Balance Your Client Base for Steady Cash Flow
Depending on how you typically bill for products or services in your business, you can create a steadier cash flow by using different payment structures for different clients. For instance, if your business is seasonal or experiences fluctuations in cash flow, consider switching some clients over to a retainer-basis so that the monthly cash flow is steadier. With a retainer, you offer your client a certain amount of products or services for a fixed fee per month. To encourage clients to switch over to this method, consider throwing some bonus products or services into the mix or offering a slight discount. While this might cut into your profit margin a bit, you will get the benefit of steadier cash flow every month.
It can take some time to implement these strategies. For instance, if you decide to accept credit card payments, you will need to set your business up with a merchant services company. Similarly, if you choose to move some of your clients to a retainer basis, you’ll need to spend some quality time with those clients to persuade them that a retainer is a win-win solution. However, you’ll find that if you invest this time and effort up front, your bank balance will reflect a much healthier cash flow, which is crucial in today’s tough economic times.
Have you got some resourceful methods for increasing the cash flow into your small business? Care to share?
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Photo credit: Pay Me!
Tags: billing, business failure, increasing cash flow, payment terms, small business
Posted by Stephanie Valentine on Jun 24, 2009 in
Small Business Cash Flow 
What do 90% of business failures have in common?
Lack of cash.
Cash is king. According to Dun and Bradstreet, 90% of business failures happen because of poor cash flow. In today’s fragile economy, maintaining a strong positive cash flow for your small business is more important than ever.
Cash Flow Basics for Small Business
Well, duh, right? Any high school economics student can tell you positive cash flow is important to a small business. But knowing about cash flow and keeping a positive cash flow for your business are two different things. So what do you need to consider when it comes to your business’ cash flow? Three factors affect cash flow:
- Accounts Receivable (cash flowing into your business)
- Accounts Payable (cash flowing out of your business)
- Overhead Expenses (a subset of accounts payable)
In this article I give you three ways to increase the cash flow into your business.
3 Ways to Increase Cash Flow into Your Business
If you accounts receivable records look good, your business cash flow should be good, right? Wrong. A positive accounts receivable column only helps your business if you can convert your receivables to cash. Your business’ accounts receivable is a listing of money owed to your company. But being owed and having cash in hand are two different things. So how do you turn accounts receivable into cash faster for your small business?
1. Bill Promptly and Accurately
Another “Duh!” suggestion, but you might be surprised at how many small business owners are guilty of neglecting regular and prompt billing, viewing it as another paperwork hassle that goes on the back burner. If your small business doesn’t bill promptly, start now. Assign an employee to handle this task if necessary. When working on long-term projects, arrange to bill monthly for work-in-progress and ask for a deposit before you start the project. Also, be very careful and detailed in your billing. Nothing strains a good business relationship like billing errors. Review your bills for errors and omissions before sending them out.
2. Avoid Slow or No-Pay Clients
You might be amazed at the kinds of clients who are slow to pay, or totally delinquent. According to Dun and Bradstreet, the worst slow-pay offenders are large businesses, those with 500 employees or more. On average, these businesses take 62.7 days to pay up, more than 4 weeks past normal 30-day terms. Here’s the other shocker: the most common no-pay offenders are clients who owe $500 or less. Apparently, these clients feel that this amount of cash is insignificant, and don’t feel guilty about not paying up.
Before you take on a new client or extend credit to a client, do your homework. You can do a credit check on all new clients using an outside agency, or request credit references and do your own checking. Another option is to call other businesses that do business with your client to learn whether the client pays on time. If the potential client turns out to be the slow/no pay type, don’t take them on. In lean economic times it may seem crazy not to accept all the business you can get, but clients who don’t pay up can seriously and negatively affect your cash flow. Not only will you wait endlessly to get paid for goods and services already delivered, but you will also spend a lot of internal resources tracking delinquent accounts and chasing your cash. The best policy is: “Just say no!”
3. Plan for Fast Cash
There are two ways to get your clients to pay up sooner. First, you can negotiate short payment terms when you contract with a client. These days, many small businesses are asking for and getting “net 15″ terms. See which if your clients might be open to these terms. Second, if you’re not comfortable asking for “net 15″ terms, you can offer clients a discount for early payment. Offer a one to two percent discount for paying within 10 days. While you’ll be losing a little cash to the discount, you’re overall cash balance will be a lot healthier.
These three simple strategies for cash flow management can be the difference between your small business operating in the black or becoming one of the business in the 90% failure bracket.
Do you have your own unique ways of preserving or increasing the cash flow into your business?
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Photo credit: Stimulus Package
Tags: billing, business failure, increasing cash flow, payment terms, small business
Posted by Stephanie Valentine on Jun 23, 2009 in
Small Business Cash Flow 
Horses. Murder. Mystery.
Those are the usual components of a Dick Francis novel. Dick Francis, once the Queen of England’s steeplechase jockey, is one of my favorite novelists. Why? Because he writes about two things I love: horses and solving mysteries.
If you’re a small business owner you’ll probably like books by Dick Francis, too, even if you’re not a horse freak like me. Actually, let me rephrase that. If you are or want tobe a successful small business owner, you should love Dick Francis novels … or other kinds of mysteries.
Successful small business people share one thing in common with the main characters in Dick Francis novels: a love of solving mysteries. Look around at some of the people who founded tiny companies that are now huge: Sam Walton of Sam’s Club, Gordon Moore of Intel, and Michael Dell of Dell Computers. They all love the process of tackling and solving problems.
Throwing Down the Gauntlet - Are You a Problem Solver?
Last night I was so inspired reading Robert Kiyosaki’s “Increase Your Financial I.Q.” book that today I am going throw down the gauntlet to all you small business owners out there: I challenge you to become more successful than you ever dreamed in your small business by focusing on one thing–solving problems.
This may sound silly, since business owners always seem to be solving problem, or at least fighting fires. But firefighting and problem solving are two different things. Firefighting is simply running around and dealing with whatever is most urgent in your business. Solving problems means developing final and permanent solutions to problems that plague your small business. Firefighting gives you a small period of peace. Problem solving brings your business a solid revenue stream, real profit, and a solid financial base. In other words, a permanent sense of success even in rocky seas.
Small Business Problem Solving in Today’s Economy
What kinds of problems do small business owners deal with in today’s economy? To start with, see if this list resonates with you:
- cash flow crunch
- lack of credit
- increased global competition
- failure to find or keep good employees
- clients with shrinking budgets
Sound familiar? Sound bad? It’s not. Here’s the good news. While everything may be topsy turvy in the financial world, one thing is for certain: all of these problems are amazing opportunities for you to learn how to solve problems.
I know, it sounds kinda like your mother telling you that eating vegetables is “good for you.” On the face of things, it doesn’t very exciting, does it?
But being a seasoned problem-solver is the on asset you can count on, no matter what the financial markets do. In fact, it’s the one reason Robert Kiyosaki gives for being certain that he will survive any financial disaster of any magnitude. He’s survived numerous personal financial disasters, so he knows that no matter what happens to the world economy or his business finances, he’ll survive just fine. He’s got his Sherlock Holmes skills to fall back on.
So … having said all that, I’ve had to ask myself, “Am I willing to see problems as opportunities to learn? Do I love a good mystery, even if it’s not in a book?” For me, it’s a resounding “Yes!” I love cracking the code on a good mystery. I’m as stubborn as a mule in that way. Problems that crop up in my life have a way of sticking in my craw, and I just can’t let them go until I get them solved.
Here’s a good example: I wanted to learn how to sell retail products over the internet. When I first got started, I knew next to nothing about selling on the internet. I just dove in and hoped for the best. I got lots of nothing, for months, even years. Today, seven years later, that business produces a steady passive income stream and is mostly “hands off.” That income pays all my monthly bills, so I can work on cracking the next code.
Are You a Sherlock Holmes for Your Small Business?
What about you? Have you got that Sherlock Holmes propensity for solving a good mystery? Maybe you don’t go looking for mysteries to solve, but that doesn’t mean that you can’t become an excellent problem solver for your own business.
To help find your inner Sherlock Holmes, the coming articles are going to focus on helping you, the small business owner, become an effective problem solver for the biggest problems plaguing your business today. The first stop on this mystery train will be … drum roll … cash flow.
Cash flow is king, so stay tuned to see how you can solve any cash flow problems that your small business might have!
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Photo credit: Sherlock Holmes
Tags: cash flow, sherlock holmes, small business problem solving
Posted by Stephanie Valentine on Jun 12, 2009 in
Small Business Marketing 
Young folks are energetic, enthusiastic, and have energy to spare, right? Just look at any five-year-old and you see what I mean. They expend more energy in one hour than I might spend all day.
It turns out that the same principle of Youth = More Energy applies to small business and social media. According to email and direct mail marketing provider Vertical Response, startup companies (or younger small businesses) tend to be more energetic and enthusiastic than more established small businesses.
No big surprise there, but the statistics make for an interesting read. Plus, if you are the owner of a more mature small business, this might motivate you to get involved in social media, even if you join with caution. Read the article on the Small Business Search Marketing website:
Small Business and Social Media: Experience vs. Enthusiasm
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Photo credit: SF critical ass
Tags: small business, social media, startup
Posted by Stephanie Valentine on Jun 11, 2009 in
Small Business Marketing 
Social media is still in the early adoption phase where small business is concerned. Yes, a lot of small business owners are getting involved in social media. No, widespread adoption isn’t happening … yet. Without the mega-bucks marketing budget that large businesses have, small business owners are taking their time getting acquainted with social media. Social media takes a lot of one resource that most small business owners lack: time.
But, as always, there are bleeding edge early adopters out there, testing the waters, occasionally getting eaten by sharks (sad, but true), and pioneering the way for the rest of the masses. What are these folks doing?
According to a study by Sage Software and AMI-Partners, at least 260,000 small businesses in the U.S. and Canada are using social media as a marketing channel. Find out how these early adopters are using social media, and then see if you might want to start getting your small business involved.
Social Media and Small Business Getting Acquainted Slowly
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Photo credit: strawberrysoup
Tags: early adoption, small business, social media
Posted by Stephanie Valentine on Jun 10, 2009 in
Small Business Marketing 
Hmmm … good question. Maybe, maybe not. Most experts would agree that small businesses marketing directly to consumers can definitely benefit from participating in some form of social media. But what about small businesses that market directly to other businesses? Should they take part in social media?
Jean Van Rensselar of Smart PR Communications argues not. She says it’s a waste of time. In a controversial article, Jean proposes that a B2B prospect is far different than a B2C prospect (i.e., an individual consumer). She lists 7 ways in which B2B prospects are different, and why this market segment needs to be marketed to with far more care and concern. She also defines why social media is quite inappropriate for this market segment.
Her article has generated a raging storm of comments, some of which strongly disagree with her point of view, others of which totally agree. The bottom line is that if your business markets primarily to other businesses, Jean’s article is worth a read. The comments are worth reading, too. They are, if anything, just as valuable as the article itself. Get the B2B social media scoop here:
B2B - Skip the Social Media Marketing
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Tags: b2b, b2c, Jean Van Rensselar, social media
Posted by Stephanie Valentine on Jun 9, 2009 in
Small Business Marketing 
To many small business owners, viewing a Tweet-stream is like trying to look for a specific drop of water in Niagara Falls. Translation? Totally overwhelming. Totally impossible. The Tweets come fast and furious, and finding ANYTHING, never mind replying to someone, is like a nightmare come to life.
But there is hope! You, the small business owner, can learn to navigate Twitter with some semblance of dignity and order. As part of this week’s ongoing focus on small business and social media, I suggest you read this insightful article by Corey Perlman on the Mplans.com website:
Should a Small Business Use Twitter?
This cogent article gives small business owners a very simple step-by-step plan on how to use Twitter. Best of all, the plan is do-able, even for the firefighting head honcho. The plan is designed to help small business owners get their feet wet in Tweetville, and figure out whether Twitter is right for their business. Corey suggests using the plan for three months before making a decision. Sounds like a good plan to me.
Sound good to you?
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Photo credit: Twitter6
Tags: small business, Twitter
Posted by Stephanie Valentine on Jun 8, 2009 in
Small Business Marketing 
So … social media has a lot of small business owners scratching their heads and going, “Huh?” It’s, like, maybe something we should do, but it’s also, like, so confusing! There’s no doubt that social is the new hot thing, and that companies like Dell are taking huge advantage of it’s reach.
But is social media really within the reach of most small businesses? What about Mom and Pop shops? Is social media effective for local promotion?
That’s up for debate. Some experts say, “Yes! Go for it! Get on the social media bus while it’s still in the station.” Other experts are far more hesitant, and advice small businesses NOT to get involved in social media unless they have the time and resources to do it consistently.
Every small business is unique, and ultimately it’s up to you, the small business owner, to decide whether social media is a viable marketing channel or a bunch of hype on which you should not waste precious resources.
To Help You Decide …
Every good decision needs good data. To help you decide whether social media is your cup of tea, I’m dedicating this week’s blog posts to links that provide you with some thoughtful insight on the subject. Let’s dive in!
To get you started, here’s an article about New York drain-cleaning company that is making use of YouTube to promote their services. Specifically, the company (called A$49.95 Any Sewer or Drain) is running a contest that involves the use of videos on YouTube. One recent content invited people to come up with a video and jingle for the company. Read about this small business’ interesting approach to social media on the Small Biz Trends blog:
Unclog My Drain: Making Viral Marketing and Videos Work for Local Small Businesses
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Tags: small business social media marketing
Posted by Stephanie Valentine on Jun 5, 2009 in
Small Business Marketing 
Why Social Media Manager Isn’t a Real Job
I was relieved to read a recent blog post from Chris Brogan, Mr. Social Media himself and one of my heroes. In his post, Getting Back to Your Desk, Chris talks about how social media is starting to move away from the “gee whiz” factor and starting become a more stable part of the marketing channel. In other words, it’s just another channel through which businesses can reach out to their people, like direct mail and email.
One salient point Chris makes is that social media is a tool, like your fax or email. He says being a social media manager is like being the email manager or fax manager - you are naming yourself after a tool. Who wants to be just a tool?
It’s a great rant, worth reading, and probably a relief to all those small business owners running around thinking, “Gosh, I really need to get on social media, but I don’t have time. Oh well, I’ll get to it next week!”
Read Chris’ post here.
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Photo credit: Financial Aid Podcast
Tags: Chris Brogan, social media
