Managing the Cash Gap for Small Business Owners

In the small business world, even a temporary cash flow shortage can result in major problems. With razor-thin margins and the constant financial demand of running a business, it should come as no surprise that 29% of small businesses close due to running out of cash. A whopping 60% say that cash flow contributed in some way to their closing.

While it’s the frightening reality of being a small business owner, there are steps that you can take towards managing your cash gap. This helps you plan for the lean times and overcome potential pauses in your income.

Defining the Cash Gap

From the moment that you pay for your inventory until it’s sold, you’re dealing with a cash gap. In order to keep your small business open, this cash gap must be filled with either financing or your cash cushion that you’ve established.

These cash gaps can be exacerbated by any number of things, including drops in sales, an unexpected repair, customers that pay late on their invoice, and the seasonal nature of your business. When these expenses begin to compound on each other, real problems with cash flow begin. Small businesses often seek out short-term loans during these situations, but high interest rates and big payments can leave you strapped for funds.

Managing the Cash Gap

Creating a sustainable plan of action for dealing with your cash gap could save your business in a worst case scenario. Try these tips for establishing your cash gap solution:

Maintain a Cash Flow Statement Every Month

As with all financial planning, you must have a clear view of your monetary situation before you can start making major changes. Start with a cash flow statement at the end of each month. Keep track of how much money came into your business, how much was spent on your  business, and how much profit you had at the end of the month. This can help you understand where your major cash gaps might be in a month, and allow you to plan for those times.

Avoid Unpaid Invoices

Unpaid invoices for B2B sales is a major issue with small businesses, especially when those invoices are consistently late. The first step in avoiding this problem is getting familiar with the person who pays you within the other business. In doing so, you have a frontline resource to finding out what the problem is in case of delays.

You should also clearly establish when and how invoices will be paid. Many businesses nowadays forgo the paper check and opt for payments through an invoicing service or direct deposit. If that’s the case, set clear rules for when payments should be sent, keeping in mind weekends and holidays.

For example, a payment sent to your account on a Friday may not hit your account until Wednesday or Thursday of the next week, whereas a payment sent on a Monday could hit your account on Wednesday of the same week. Instead of setting a due date, consider a rule like “the last Monday of every month.” This can help ensure that you get your money in the most timely manner.

Create a Cash Cushion

It’s hard enough for a small business to pull a profit, and for some, the idea of establishing a savings account is laughable. That being said, it is an absolute necessity to have a rainy day fund for those times that something goes wrong. Even if it’s just a few thousand dollars, keeping cash aside can prevent you from seeking additional financing for something like an HVAC repair or a seasonal slump. It can also allow you to seek out investment opportunities that you would not have access to otherwise, such as special promotions on inventory that you typically purchase for full price or participation in a local marketing endeavor.

Being the owner of a small business is a rewarding and exciting experience, but a lot of frustration and fear can come with it.  Finding ways to manage the cash gap can help you reap the rewards of your business without the anxiety of worrying about how you’re going to pay your rent next month.

4 Ways to Improve Customer Experience

We all know the Golden Rule: “Do unto others as you would have them do unto you.” While this adage may seem like something cliche we learn in elementary school, it’s really a great place to start when crafting your customer experience strategy. If you were purchasing your product or service, how would you want to be treated?

The Value of Customer Service

In an increasingly digital world, where human interactions often go by the wayside for the sake of convenience and efficiency, customers are seeking out businesses that make them feel good about their experience. Creating a positive customer experience, whether you conduct your business online or in-person, is critical to the sustained health of your company. No matter how incredible your product or service is, people want to be treated well. Neglecting that fact can lead to major trouble.

If you’re trying to think of creative ways to boost your customer experience, start with these easy tips:

Begin with empathy in mind

When speaking to people about your business, or when listening to their comments or concerns, step outside of your own perspective and see what they’re seeing. Are you treating them like they’re human, or just another sale? Are you listening with intention, or are you waiting to get a word in? Letting people know that they are valued and heard creates incredible bonds between you and your customer base.

Be passionate about your business

People are social animals, ones that feed on the emotions of those around them. If you are enthusiastic, passionate, and positive, customers are more likely to act in turn. You can’t “phone in” warmth and excitement. You must genuinely be in love with what you do and the people that engage with your product.

Solicit feedback and act on it

Too often, feedback is asked for, but businesses chalk up negative comments to picky customers. Remember: Without those picky customers, your business is not sustainable. Once you get feedback that offers suggestions or negative reactions, actively work with your team to decide what the next step is in fixing the problem, and communicate that with your customers.

For example, if you sell homemade wrist watches online, and customers have commented that the strap tends to break after being exposed to water, the answer is not, “Well, don’t expose it to water.” The onus is on the business to fix the problem, or continue to deal with upset buyers. Only one of those options can keep your business open.

Invite your customers to take part in the product or service’s journey

Be transparent about sources, methods, and the team that you work with to deliver the goods. In doing so, two things happen: People trust that you’re telling them the truth about what they’re buying, and you give a face to your company. It’s easy to be rude and distasteful to a company that exists solely behind a screen. Creating a genuine voice can help your customers remember that you’re just regular people trying to solve a problem, not a faceless entity who intentionally set out to get their money for a subpar product.

Perhaps most importantly, a positive customer experience absolutely depends on your ability to take criticism in stride. That doesn’t mean creating a script that walks you through solving a problem or ignoring negative feedback. Instead, it means being open, honest, and authentic about your want to help build bonds between your business and your customers.

How Do Brick and Mortar Stores Thrive In The Age Of Amazon?

Adaptation in the Amazon age can seem to be a behemoth of a task. With Amazon pulling in $1 billion in sales on its best day last year, for a whopping $141.92 billion in total sales in 2018, brick and mortar stores are left shaking in their boots. Even giants like Wal-Mart are struggling to compete, and have adapted their game plan to offer services like grocery pickup and free home delivery.

Although online vendors and brick and mortar stores both provide immense benefits to their customers, lately the latter have struggled to compete, and finding the right ways to market them is key to surviving. Your physical space offers a genuine human connection and the opportunity to make a name for yourself within a community. Take advantage of these unique circumstances.

Don’t be afraid to sell online, including through Amazon

You know what they say: Keep your friends close and your enemies closer. Use a combination of marketing through your physical store, a third-party marketplace like Amazon, and your own website to push your product into the collective consciousness of those seeking the solutions your business offers. This multi-pronged approach is your best bet for bringing in revenue.

Offer the warmth and attention that Amazon can’t

Brick and mortar store owners have a unique opportunity when it comes to forging strong, personal connections with the people who walk through their doors. Whether you’re a local clothing boutique or a fishing gear retailer, you get to have conversations and share opinions about your products that Amazon will never be able to replace. Sure, online reviews bring back repeat customers, but warm and genuine conversation that helps a customer choose the products that are best for them is a marketing tool that Amazon doesn’t have in its arsenal.

Brick and mortar is instant, Amazon is not

Amazon is convenient, but there’s something to be said about instant gratification. When shoppers walk into your store, it’s because they’re not willing to wait 2-3 business days to receive the product they are looking for. Use this as an opportunity to upsell and promote products. Impulse purchases are real– There’s a reason stores put the candy bars by the checkout line.

Find your product niche

In 2018, Etsy was up 20.4% in sales from the previous year, with total revenue reaching an all-time high of $132.39 million. Why? People are willing to pay more for handmade, artisan goods that appeal to their particular tastes. For example, this Sherpa pullover costs only $22.94 on Amazon, but the exact same brand and product costs $39.99 on Etsy because it comes with a monogram. Capitalize on your product niche and market to the kinds of people that you know are willing to buy it.

Keeping the doors of a brick and mortar store open in the online era is hard work, but it isn’t impossible. The secret to success lies in your ability to treat people like people, not just another shopper. It’s a tool that can form strong bonds and create a thriving repeat customer base that seeks out your unique products and helpful insight. That’s something Amazon just doesn’t have.

5 Ways Small Businesses Can Reduce Their Overhead Costs

Have you heard the saying, “It takes money to make money?” It means that there are things you have to invest in for your business, from office space to technology. For a small business with razor-thin margins, there may not be much money to invest. Often, it can take a few years before a small business is even able to turn a profit.

While this sounds bleak at face value, there may be things that your small business is spending money on that could go back into your pocket. Reduce overhead costs with these 5 money-saving tips:

Start by evaluating your office space needs

In most cases, your storefront is probably making up the bulk of your expenses every month. Keep an eye out for better, cheaper space, especially if you’re currently working in more space than you need. If you’re concerned about going too small, look at your staffing. Are there people who could work from home? Do you have an abundance of unnecessary stuff that makes the office feel homier, but isn’t critical to your success? Weigh the pros and cons of reducing your rental costs vs. maintaining the current status quo.

Get rid of your landline

Unless you have a very specific reason for having one, it’s eating into your profits. Between VOIP services, which establish a phone line through your pre-existing networking service, and phone apps that allow you to partition off your phone into a “work” number and a “personal” number, there’s no reason to keep this waste of profits around.

Investigate sources before buying wholesale

Prices constantly fluctuate as wholesale companies attempt to compete with one another. Don’t get too comfortable ordering through just one supplier. Jump around as costs adjust. Sticking with an automatic monthly shipment may be easier, but shopping around is cheaper.

Advertise creatively online

Who are you trying to target with your small business? If the answer is locals, then you’re in a great position to advertise through Facebook, Instagram, and even Snapchat. Unless you’re attempting to target demographics outside of your service zone, there’s really no reason to spend money on ads that go beyond that. One of the most popular ads recently was a homemade, low budget spoof for an animal shelter in Atlanta, Georgia. Their video was shared on Facebook by nearly 500,000 people. Let your creativity and personality do the talking, and save money on marketing at the same time.

Use open-source software alternatives

Seek out legal, free alternatives to expensive programs. These often have the same power and features as big-brand software, without the big-brand “tax.” Open-source software also allows you to edit your own copy, inserting code and creating features that help adapt it to your needs.

Small businesses can reduce their overhead costs by maintaining the same creativity and innovation that helped them open their business in the first place. Keep an eye out for new opportunities to invest back in yourself with cost-cutting measures.

5 Employee Engagement Trends to Bring Into Your Business

Understanding the relationship between employer and employee is a ticket to a stronger, more productive team. Long gone are the days when people stayed in jobs where bosses reigned over their wards with an iron fist. Today, the emphasis is on sensitive, caring, and professional relationships amongst all parties involved.

Making engagement your priority can help you align all employees’ goals with the common goal of the business. They say that teamwork makes the dream work, and that’s certainly true when it comes to running a successful company. Every person needs to work towards success to make it happen.

How can you keep your employees engaged? Start with these simple steps:

1. Conduct surveys to rank current levels of engagement

It can be hard to be vulnerable and allow people to anonymously tell you how they feel, but no pain, no gain. And, as difficult as it might sound, do not take it personally. You need to know how people are feeling in order to get better. Conducting surveys is a great way to do that. Look for common trends in commentary and work on those areas first. The rest will fall into place as trust and respect grows.

2. Listen to every person

Celebrate good ideas, and even good attempts at ideas. Let everyone know that they are heard and valued. Most importantly, give credit where credit is due. If every decision is handed down from “on high,” there’s little opportunity for buy-in. People want to feel like they are a part of the solution, and when they are allowed to feel that way, will seek out bigger and better ways to create those solutions.

3. You must be empathetic and compassionate

Notice that this doesn’t say “Be a pushover,” but excellent employee engagement stems from a feeling of being in the trenches together. Losing a day of work so that a father can stay home with his sick child might seem like a hit to productivity, but it will pay back dividends when that same employee is willing to put in the extra time for you when you need it most.

4. Give people the tools they need to get the job done

It may feel like there’s always a new tech trend that costs more money, but if it saves your team time, energy, and resources, it may be worth it. You can’t expect employees to pay for the tools they need to do the job you’re asking them to do. That’s a one-way ticket to resentment and unwillingness to go the extra mile to get the job done right.

5. Create a workspace that fosters togetherness

Take down the cubicle walls, create team work spaces, and lay out some snacks. It might seem silly, but if work is a place where comfort and productivity come together, you’re creating something incredible in terms of employee engagement. Ask around about the kinds of spaces that people like to work in best, then do what you can to create them.

Employee engagement is an important step in building the teams and the business that lasts for the long-haul. Create an environment where people are valued and treated as more than a means to an end, and you can flourish in ways you never thought possible before.

8 Tips for Hiring New Employees in a Start-Up Environment

Behind every successful business is a team of talented people who are passionate about what they do. In the world of startups, where 30% fail in the first two years and 66% in the first ten, a powerful team is imperative to the continued viability of the business. When hiring new employees in a start-up environment, keep these 10 tips in mind:

  1. Hire someone as soon as you can. Money is going to be tight in the beginning, but the moment that you hire out some of the work that a startup requires, you’re going to have way more time to focus on the big picture.
  2. Create and follow your own mission and value statements. Be ready to explain what is important to you and your new business because it can sometimes be the only bargaining chip that you have before profits pick up. Share your world-changing vision, and watch people hop on board.
  3. Don’t neglect potential in favor of experience. Take the time to talk to your employee,not just at them. Give them the time and space to share what they can bring to the team and keep a keen eye out for people who are looking for something more than a job, but rather an opportunity to do something great that they happen to get paid for.
  4. Invite the whole team to sit in on interviews. Crafting a productive and professional culture is absolutely imperative, especially if you have a small team. Let everyone have a chance to share their opinion. They might notice good (or bad) in a person that your perspective doesn’t let you see.
  5. Network just as hard as you expect your new hire to. If you’re seeking someone who’s already getting their feet wet every weekend at field events, you need to be at those events too. You can’t expect to meet people passionate about the work that you do if you don’t put yourself in situations to meet those kinds of people.
  6. Brag about your clients. There is prestige in working with well-known companies and clients, especially if those working relationships are going well. Don’t be afraid to pull out your own portfolio and share some of the work that you’ve been doing with some of your favorite customers.
  7. Make your new hires feel wanted. Invite them to field events, praise their good work, and put a Keurig in the office. It seems small, but human beings thrive on positive attention and affirmation. Don’t be afraid to dole out the genuine compliments and special opportunities, as it makes the growing pains hurt a little bit less.
  8. Create an onboarding process and stick to it. Ensure that everyone who joins your company has a similar experience and that they’re receiving the same information. Certainly train your current employees on their role in onboarding and hold them to those expectations. It’s everyone’s job to ensure that new hires feel welcome and informed.

Hiring new employees in a start-up environment can feel like an impossible treasure hunt. Be creative and thoughtful during the process to find the diamonds in the rough. It’s going to be worth it when their skills, experience, and creativity help improve and amplify the success of your business.

What Your Small Business Can Do to Keep Taxes Low This Spring

Taxes are complicated enough for an individual. Adding in the additional complication of owning a small business can cause stress, anxiety, and concern over whether you’re fulfilling all of your tax obligations.

Additionally, a large tax bill can take a toll on the razor-thin profit margins that small business owners often contend with. Your small business may be missing out on huge deductions if you’re not handling your business operations in a tax efficient manner.

With Tax Day rapidly approaching, here are 5 considerations you can keep in mind for the next tax year.

1. Consider restructuring your employee reimbursement plans.

Accountable plans are reimbursement structures that have been approved by the IRS. If you pay your employees for work-related travel and expenses, you can claim these payment as non-employee income while still deducting them from your taxes. This means that you’ll save on employment taxes and lower your overall taxable income.

As of 2017, employees are no longer allowed to deduct miscellaneous unreimbursed expenses, so establishing accountable plans is a positive for your business and for your employees.

2. Deduct Machinery and Equipment From Your Taxes

Along with the aforementioned tax law change, another big code amendment increased the amount of money you can deduct for machinery and equipment from $500,000 in 2017 to $1 million in 2018. Small business owners can strategically spread this deduction out across several years, helping to offset the rate of depreciation and start-up costs.

This works as your tax bracket increases. Those in the 12% bracket now may be in the 22% bracket in the future. In that situation, a $10,000 deduction for machinery would save you $1,200 in taxes this year, but $2,200 in the future.

3. consider your options about carryovers

Sometimes referred to as carryforwards, these allow you to apply an unused portion of a tax deduction to carry over into a future year’s tax return. When you decide to use a carryover option, keep track of that information so that you won’t forget to apply the deduction. Your accountant should automatically keep track of (and apply in the future) the following types of carryovers:

  • Capital losses
  • Business credits
  • Home office deduction
  • Operating losses up to 80% of taxable income
  • Charitable contributions

4. Offer Employees Fringe Benefit Plans

You can reduce taxable income by offering employee fringe benefit plans that are not subject to taxation. Those types of benefits will allow you to offer your employees, amongst many other benefits:

  • Health insurance
  • Adoption assistance
  • Employee stock options
  • Group term life insurance
  • Health savings accounts

While it seems like a lofty undertaking, understanding the parts of the tax code that affect your small business can save you a lot of money. Taking the time to discuss your options with your accountant or research deductions yourself pays dividends.

Planning for Life After Selling Your Business

There’s no way around it: Selling your business can be absolutely devastating. Unfortunately, it’s often a necessary and beneficial move for both you and the business. It’s not often enough that we, as business owners, discuss the emotional attachment that we have to our hard work. That’s why planning for life after selling your business is so important.

The Grieving Process

You’ve likely heard something about the process of grieving a loss: Denial, anger, bargaining, depression, acceptance. When you’re in the middle of preparing for your business transition, it’s not uncommon to experience these emotions.

It might begin with denial that’s it time to begin transitioning. You may pour more time, energy, and resources into the business in an attempt to make it work for you and your family. You might (metaphorically) slam the door in the face of potential buyers or investors.

Anger can take hold at any time, and you may question why the time has come to transition. You might be angry at yourself, the market, the people trying to walk you through the process.

Bargaining often goes hand-in-hand with anger. You may try to cut deals with yourself. You might think things like, “Well, I’ll just stay in for one more year and see where I’m at then,” or “I’ll definitely like the next purchase offer that comes along, so I’ll hold out for something better.”

Depression is hardest step to deal with. It can feel like you’ve abandoned your life’s work, or that you’ve let yourself down. It may take a toll on your ability to sleep, care for yourself and your loved ones, and care for your business.

Finally, comes acceptance. At this point, you’ve decided that transitioning out of your business is the right move to make. The good news is that transitioning doesn’t have to be an abrupt action. The better news is that working with an exit coach can make the transition easier to confront. Your exit coach can help you create a plan that works with your expectations for exiting, from valuation to the final sale.

Contact us Today

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Strategic Planning for the Upcoming New Year

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Though it’s only October, there’s no denying that the new year is coming swiftly upon us. Soon enough, business owners will be wrapped up in the whirlwind of the holidays. While spending time with loved ones is important, so is strategic planning for next year.

Getting a head start on evaluating your business will let you enjoy quality time with family and get a great start in 2019. Check these 5 items off your to-do list:

1. Perform a SWOT Analysis

Take time at the end of the year to complete a SWOT (strengths, weaknesses, opportunities, threats) analysis and use the data to drive your strategic planning. Compare the results to the strategic plan you set at the beginning of 2018, then decide what parts worked and what parts didn’t. Take an honest look at where you are, where you want to be, and how you plan to get there. The safest way to take a journey is with a great roadmap, and a SWOT analysis can help you create one.

2. Make a Plan to Renew Your Knowledge

If you’ve already had training in strategic planning, or you’d like to start from scratch, the new year is a great time to seek out resources, trainings, and conventions to help you get started. Working with a business coach can give you incredible access to expertise, as well as a sounding board dedicated to helping you achieve the goals you’ve set for your business.

3. Keep an Eye Open for New Talent

Around the holidays, other business owners can start to get distracted. Stay sharp and keep an eye out for talent that would be swooped up quickly any other time of year. Make a real hiring push during the holidays, and you’re sure to see talented recruits that are looking for work.

4. Create Your Budget

This one’s pretty obvious. At the end of the year, create your budget for the following year. Spend time looking at where your money went the year before, and if those expenses were worth the investment. If not, the new year is the perfect time to start weeding out unnecessary expenditure.

5. Make a Resolution to Roundtable

Though it seems cliche, the magic of the holidays just might be what it takes to follow through on your 2019 resolution. One of the best resolutions you can make for yourself and your business is participate in a business owner roundtable. The goal of the business owner roundtable is to bring together a small peer group. Once everyone is laser-focused on the goals, the focus shifts to the hot topics on every business owner’s plate, including demystifying financials, developing key performance indicators, and strategic planning.

Want to make a professional resolution that will change your life? Work with a business coach. Catalyst Group ECR can help you get off on the right foot in 2019, with advice and coaching for every strategic planning decision that you make. Get in touch and learn more about how a business coach can improve the life of your business.

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Contact us now for a consultation, or find out more about our custom-tailored coaching programs.

Want to Move Up? Start By Developing Strategic Planning Skills

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As you move up in your career, the cognitive abilities that you need to possess increase. Everything from your ability to handle conflict to your creativity will have to evolve along with the responsibilities you’re asked to take on. Strategic planning is one of the most invaluable skills that you can develop. It allows you to think about what the future might hold, then create strategies to tackle those challenges and opportunities with finesse and foresight.

You can start to develop these skills yourself by focusing on these three growth techniques:

1. Set Aside Time to Think and Create

Companies like Google and 3M set aside time every week, about 20% of working hours, to allow employees to work on any project that they would like to. It does not have to be work related, just productive and passion-driven. From that time, products like GMail and sticky notes were developed.

What does that mean for someone developing strategic planning skills? It’s a great way to flex your “muscle” a little, without the pressure of performing a particular task set to a particular deadline. Give leaders in your business the time to work creatively and watch them bloom. Give yourself the same privilege. Once everyone is comfortable with their projects and passions, invite people to share and collaborate. This encourages creative thinking and can lead to even more productivity.

2. Observe and Empathize

If you really want to develop strategic planning skills, it pays dividends to spend time observing your employees and “walking in their shoes.” Too often, business leaders spend their time delegating tasks and dealing with paperwork. While those are important functions of a business, take the time to see the ins-and-outs of everyday life at your company.

While doing so, ask yourself and others questions like, “What’s not working around here?” and “Could this process be made easier?” Even if nothing changes today, it’s can change in your 2-, 5-, or 10-year plans. Being aware of issues before they really become issues and dedicating yourself to improving upon them is a critical piece of strategic planning.

3. Create a Culture of Learning

Encourage yourself and others to constantly seek new information. It doesn’t even have to be specific to your field! Read travel journals, explore forums or websites about topics you’re interested in, or spend some time on YouTube learning a new skill. While this may seem like it’s not work-related, a huge portion of learning something new, like a hobby or skill, requires problem solving and perseverance.

Those soft skills can translate to hard results once you implement them into work-related projects. Think about grade school and learning reading comprehension skills. While it may have seemed that those were isolated skills at the time, we use inferencing, foreshadowing, and our understanding of figurative language everyday to understand the world around us. The same can be said for learning other skills, like creative thinking. While your ability to whittle or paint might never come in handy in a boardroom, your ability to remain patient in the face of frustration will.

The best way to develop strategic planning skills is to work with a coach who has the expertise and experience to help you grow. Catalyst Group ECR works with individuals to help them realize their potential and experience growth in their focus areas. Through one-on-one meetings, we work with the business owner to build a sense of community and rapport that provides a foundation for growth. We would love to hear from you, and help you start your journey towards developing strategic planning skills.

Contact us Today

Contact us now for a consultation, or find out more about our custom-tailored coaching programs.