Business and Finance Tips

Have you read the papers lately? There’s a recession! Shocking! Of course, most small businesses wouldn’t have known that without our brilliant media telling us as much – ha! In fact, they were able to even tell us when it started – December 2007. Well, now that we finally know what most of us have felt for the past year or so, what do we do about it? We hunker down and position ourselves stronger than ever.

There are a couple of areas that you need to be very smart about when you consider what to cut. Be very careful about your marketing budget and your customer service.

Marketing is a critical lifeblood to your business but it seems that every time the economy goes south, small business owners start looking at advertising and marketing as a variable expense that should be slashed. Think very carefully about that. It might sound simple but if you zig while your competitors zag, you will be in better position not only during the recession (higher visibility) but after the recession (customer loyalty).

That brings us to the other very important area of consideration for your small business during a recession – customer service. Layoffs might be the first instinct for many small businesses but be very careful not to impact your most valuable asset – your loyal customers, who may be adversely affected by layoffs that impact customer service. See above – if we’re eating in to our competitors market share during a recession, we need to have exceptional customer service so those new customers stay with us.

Of course, a recession may be the best time to re-evaluate your Web efforts and strategies. Are there opportunities for you to expand your business through the Web? Can you create a customer loyalty program online and leverage that email file that you haven’t done anything with yet? Get creative. When times are great, we tend to get complacent. When things get tough, we need to get creative.

So, you might be asking “where do I cut?”. The difficult reality is that you may need to accept lower profit margins during a recession while your top line suffers. Be patient. Weather the storm. Harken back to the early days of ‘beans and rice’ when you first started your business. Hopefully, you won’t have to get that dire but accept the fact that you, as the owner, may make a little less this year. Consider it a reinvestment in your business. Don’t be stubborn and think that you ‘deserve’ to make as much as you did last year and therefore you must cut expenses in order to maintain your profit or draw. That is irresponsible and short-sighted.

What if you have shareholders to answer to? Be upfront and vigorously defend your decision to defend marketing, advertising, and customer service budgets. They may suffer as well with smaller profits this year as well – you’ll have to sell them on reinvestment now in the form of lesser profits rather than risk the long-term health of the business by being greedy today. You have to reassure them that things will improve. After all, a recession is cyclical so they will soon get a return on their investment.

If you do have to cut staff, take a close look at activities that you may be able to outsource – or maybe insource to your family. Administrative and bookkeeping tasks might be easier to outsource or have a family member chip in on in the short-term while you tighten the belt. Not ideal, but it’s also not a bad idea to periodically bring family members closer to the business to learn the ropes a bit in case you suffer a short-term disability where they may be called into duty.

Tough times can be lonely for small business owners. This may be your first experience in the weak portion of the business cycle. As a business owner, no one is going to tell you what to do and you are expected to be the one to set the direction. If you have doubts as to what you can do to survive a recession, don’t be afraid to ask other owners what steps they have taken. Sharing this information is beneficial to everyone because no one wants to throw in the towel. Think opportunity instead of challenge.

For those small business owners who think they were ignored in the new stimulus bill (American Recovery and Reinvestment Act of 2009), think again. While the debate continues to unravel as to “who gets what and whether it is enough”, one thing is certain: more money is coming in the direction of small businesses through the U.S. Small Business Administration (SBA). Remember, this is the agency responsible for the outreach, licensing, and implementation of, you guessed it, money into the pockets of small businesses. This is done through private licensed lenders who have agreed to join the SBA program. In other words, if your local community bank has a commercial loan department, it might very well have a SBA department which makes these loans. They are called SBA loans because the Federal government will reimburse, to a certain percentage, defaulted loans, thereby giving incentive for the private banks to loan more money. Net effect–more loans will be available for small business concerns. This is a continuing article (20 in all) on the subject: Help. Is anyone out there loaning to small businesses anymore?

Before we talk about how much more money is available to the SBA under the stimulus package, let’s look at the current status of one of the popular SBA loan programs. There is a loan program out there and SBA lenders are actually making loans currently: the Community Express Loan Program. This gives unsecured small business loans between $5,000 and $50,000 with very little paperwork, answers typically in two days, interest rates presently at 7.75%, funding and two weeks, and monies wired directly to your business account. There are still lenders participating in this program, although Congress has failed to make the program permanent and still has a 10% cap on the number of loans.
Enter the Obama stimulus bill. Let us look how it affects this program and small business lending as a whole.

So should we be excited by the stimulus package? Isn’t it all too customary in a new spending bill for a government agency to receive more funds? Not at all as to the SBA. During the Bush Administration tenure, they could easily have renamed the agency the ISBA (Ignore Small Business Association). As they were making “sound bite” statements to the press of how they were helping small business, they were arrogantly trying to dismantle it, or when they were in a better mood, just cutting the budget.

The point is we have a new administration that actually likes small businesses. Remember these are additional monies over and above the SBA’s current budget . As we all know, budgets are determined in approximately March of each year (assuming Congress has the good graces to agree) to be used for the next year. The SBA has already received their budget. This is whipped cream placed on the top of that small business cake.

And we are not talking about token amounts here. Here is how the additional monies are broken down:

1. 375 million for temporary fee reductions or elimination on SBA loans and increased SBA loan guarantees, up to 90% for some loans. Translation: When a borrower gets a SBA loan they pay a SBA loan guarantee fee which goes to Washington and used as a war chest to pay banks if there has been a default. That guarantee fee, depending upon the loan, is currently between 50% and 85%. There is a possibility that some loan programs can now be increased to a whopping 90% guarantee. If a borrower no longer pays these fees, the money has to come from somewhere, and in this case it is taxpayers’ money which is subsidizing those fees.

2. 255 million for a new loan program to help small businesses meet existing debt payments. Translation. You have a loan secured by fixed assets or real estate and want to refinance it, either to lower payments or put more money in your pockets for expansion.

3. 30 million for expanding SBA’s Micro Loan Program, with $6 million to help finance new lending and 24 million for technical assistance grants to Micro lenders. . Translation: Under the Microloan program, the Federal government loans blocks of money to the Microloan lenders who then reloan it, at higher rates, to the deserving communities and small businesses and usually collateral is required.

4. 20 million for streamlining the SBA lending and oversight process with new technology. Translation: The streamlining process will make it faster and more efficient to process loans and oversight is to monitor SBA licensed lenders–make sure they are acting for the benefit of small businesses and complying with the program guidelines.

5. 15 million for expanding SBA’s surety bond guarantee program. Translation: If you are a building contractor and have to take out a performance or payment bond on a project, you need substantial assets to secure the bond. This will help getting your hands on that needed bond and be able to secure the contract.

6. 25 million for staffing as to the new programs.

7. 20 million for the Office of Inspector General. Translation: To inspect and audit the licensed SBA lenders.

Although one could make the argument this new law is “too little too late”, we have to give our current administration a chance to do good things with this fresh money. And don’t forget the mindset of the SBA lender. Although they are not as wildly quixotic as stock market speculators, their purses open and close based upon the mood of the country. We want them to be as comfortable as possible when we walk toward them for money.

Small business owners may find selling awkward or difficult at best. Here are some tips and sales techniques to help understand the process.

Sales is not a dirty word. People seek answers to problems and if you provide a quality solution at a fair price, delivered on time and willingness to service after the sale, the buyer and seller each win. This is key to making repeat sales.

A sale is identifying a need (problem) and offering a suitable product or service (solution), yet there’s more.

You know the value of what you offer, so how do you convince a prospective customer? Understanding the psychology of what happens during the sales process requires empathy. You need to know what the prospect is thinking. Here are a few sales tips with answers to that part of the mystery.

Tip #1

People buy based on emotion more often than reason. They purchase what they want, not necessarily what they need. First impressions are crucial, so your initial approach must establish a professional image. You have 5 seconds.

Tip #2

People will buy from someone they trust. Your credibility must be evident, and how you open after those critical first 5 seconds will often determine your success. Do not try a hard sell up front. Avoid talking about the weather, current events, or the latest joke. It is time to listen. A brief introduction is usually enough which gives the prospect a chance to explain their business and situation.

Tip #3

People are not looking just at you. What you have, what it does, and how it will help doesn’t matter until you understand fully what they want. If you start out with an open ended question, you show respect for the buyer’s time, and a willingness to listen. Any question that may be answered “yes” or “no” won’t work. Open ended means you begin by asking or stating something like “Please take a moment to explain your business and a few details about what you need.”

Tip #4

People will open up if given a chance. Do not dominate the conversation until you understand what they want. Be prepared to paraphrase what you hear, and then offer your solution. Your message needs to be direct and to the point to establish the benefits of what you offer. Anything that you can do to create a mental image of your solution and the benefits to the customer shows you care more about them than the sale.

Tip #5

People are usually sold before you ask for the order. Many are presold in those first 5 seconds explained in Tip #1. If you listen first, restate what they have said, and then explain your solution in terms of the benefits, it’s time to ask for the order. A small business owner may not be comfortable here. My advice is simply state “I want to do business with you. From what I have learned, I’m ready to help, so let’s get started today.”

Tip #6

People will forgive mistakes if you remain honest. Establish trust, and openly admit errors if mistakes are made, and your customers are more likely to remain loyal. Have a plan when things go wrong. React quickly and state what happened, what you are doing to resolve any problems, and how long it will take. How you handle mistakes will be remembered by your customers a lot longer than what went wrong.

Tip #7

People will not forgive a dishonest salesperson. A sale is not about tricking someone into something they don’t want or need. This is an important and tough rule: Be prepared to refuse an order if you realize your solution just won’t work. In any sales situation if you perceive an opportunity to sell, but doubt the results of your product or service, consider your long term reputation. Credibility lost is nearly impossible to regain, so give your customers the truth up front.

In conclusion, the value of placing what your customer wants, or needs, ahead of your sales quota or personal interests will help you succeed. Repeat sales depend on a business relationship where you care about your customers. Adapt your thinking to solving problems instead of selling something. The best salespersons are still those who are good listeners.

Let’s face it; these are some tough economic times. As as small business owners, these may be some of the toughest times many of us have faced. However, that does not mean you cannot prosper. In fact throughout history, economic times tougher than this have always presented business owners with plenty of opportunities to grow and prosper. It is all a matter of having the right mindset, putting your fears aside, and taking the necessary steps to promote your small business even more. Incorporating some of these small business advertising tips can certainly enhance your profitability and help carry you through these tougher times.

One of the mistakes that I see so many small business owners make is when the economy gets tight, they decrease their advertising or stop altogether. That is the worst thing you can do for your business. One of the reasons is because your customers or prospects may be a little more conservative with their money, so the extra effort of calling additional attention to yourself and your business will pay off. People are still willing to spend money for the things that they want or need but sometimes they require a bit more convincing so they feel the product or service they are about to purchase is really worth it. Now more than ever, it’s not a matter of price so much as it is value.

Your customer or prospect can justify a very expensive service if it provides real value to them. This value can be in the form of something that saves them time or money, both of which are valuable commodities. Even more importantly, the value they perceive can be something that makes them look or feel really good about themselves. Anything you can do to enhance your company’s image or increase the perceived value of the product or service you are offering will greatly benefit your marketing efforts.

Another advantage of increasing your advertising and marketing efforts during lean economic times is simply because less people are doing it. So what that means is there are less advertisers competing for your prospects’ attention and wallets. Because there are fewer advertisers in the market that means publishers and other media outlets will be hurting for business. This means you can often get discounts and bargain rates that you might not otherwise be entitled to. These publishers need to stay in business just like you do and selling advertising space is how they generate their revenues. You will find they are often quite willing to strike a deal with you to earn your business.

Since your customers and prospects are more conservative with their buying habits, the use of coupons during tougher economic times has traditionally increased. People are looking for bargains and good deals, but there are a few things to keep in mind. First of all, don’t cheapen your business or the product or service you offer. If you are concerned about giving up too much of your profits, you can still present a very enticing offer without cutting into your bottom line too much. This is accomplished by adding value to the offer rather than chopping the price. Think in terms of what you can offer that will increase the perceived value of your product or service without adding a lot of real costs. Often times adding some type of personalized service that will only cost you some additional time will add a great deal of value in your customer’s mind.

Depending on your market or customers’ buying habits, the most effective type of coupons for your business might be ones that do indeed offer a price reduction. If that is the case for your business, by all means don’t offer wimpy coupons. For me personally, that just says I’m really not worth that much to your business. A 5% discount really does nothing to attract my attention unless it is on a very expensive item. Do not think in terms of a one-time sale but rather the lifetime value of that customer. In other words, if you establish a good relationship and serve that customer really well, the amount of direct income they could bring to your business could be significant over the course of years. Of course you also have to factor in the amount of income that could be derived from other customers that they refer to you. So giving a little more discount upfront can certainly pay off in the long run.

Initiating and managing a small business needs proper planning, coordination, talent, intelligence and primarily strong capital management skills. To start up and maintain a business, a budding entrepreneur needs adequate capital support for which he/she often resorts to small business loans. In order to promote small businesses many banking as well as non-banking companies have come up with various small business loan schemes to satisfy the diverse needs of their customers.

SBA Loans: The United States Small Business Administration (SBA) offers a variety of loan programs for small business owners.

Basic 7(a) Loan Guaranty program serves the start-up and existing small businesses and other commercial lending institutions. These loans are provided by participating lenders, which mostly comprises of American banks as well as some non-bankers who are associated with SBA 7(a) program.

The Certified Development Company (CDC) 504 Loan program is targeted for those small businesses that wish to acquire real estate/ machinery/ equipment for expansion and modernization purposes. These small business loans are provided in a long-term, fixed-rate financing basis by Certified development companies set up to facilitate the growth and development of their communities and regions.

Microloan, a 7(m) loan program supports the financial needs of small businesses and not-for-profit child-care centers. This loan program can be availed to fulfill the working capital needs and other needs like inventory, furniture, fixtures and other machinery/ equipments. Under this program the small business companies can get a short-term loan of up to $35,000.

Loan Prequalification program offers loans up to $250000 for which the loan applications are scrutinized and sanctioned by SBA themselves. Rather than depending on the applicant’s assets, the program primarily focuses on the overall character and reliability of an applicant.

Secured Loans: The amount of such loans directly depends on the value of the assets held by an applicant. In case of any failure in repayment, the applicant’s assets may be forfeited to the lender. Due to increased security of money lend under this scheme, the small business owners can avail of benefits like better rates and better repayment options. Apart from that a longer repayment period cuts down upon the monthly repayments helping the small business owners to manage their finances in a better way.

Unsecured Loans: These loans are without any security/ collateral and are focused entirely on the character and reliability of an applicant. However, the rate of interest in this case is considerably higher than the other options.

Bad Credit Loans: Small business owners with bad or poor credit history can go for Bad credit loans. Under this scheme the lenders may charge a higher rate of interest because of the increased risk associated with the money lend due to the applicant’s poor credit history.

Small business loans for Woman: Due to an increase in women leading small businesses, many banking and non-banking institutions are providing special loans that supports women financially to fulfill their business objective along with some additional benefits.

Small business owners can also go in for business cash advance, which is a better and easier method of finance support. Unlike loans, a business cash advance does not require a security or a collateral. The repayment solely depends on the future credit card sales of your product and the loan amount is repaid automatically through Visa/ Master cards sales. As the repayment is directly dependent on the revenue earned by the borrower through the credit cards sales, a business cash advance scheme is preferably a much better alternative than small business loans [http://1rstfunds.com/].