Business Finance – What to Look Out For

From credit cards and crowd funding to IPOs and VCs, there are a dizzying number of financial instruments that entrepreneurs can use to start up or grow their businesses. With such a vast array of options, it is more important than ever to choose the right instrument for the job. In the world of finance, this is referred to as structuring your business’s finances. Choose the wrong structure, and your business can sink into a bottomless pit of debt and despair. Choose the right structure, and you can build a business empire.

Debt or Equity?

Whether you need $5 or $5 million, there are truly only two forms of finance: debt, which is money that is borrowed, or equity, which involves giving up a portion of ownership in your company. The first step in financing your business is deciding whether to use debt, equity, or both. The choice typically depends upon your personal preference.

If you happen to like being in complete control, then debt is your best financing option. This will provide you with the funding you need without having to answer to anyone. However, it will also leave you deep in the hole right out of the gate; a situation that may be less than appealing.

If you have a company with heavy equipment or real estate that can be used as collateral and you would prefer to maintain full ownership, then debt financing is suitable for you. In such a situation, acquiring debt financing will not be a problem, because lenders like seeing these types of assets.

The leases and loans used in acquiring these assets are usually backed by the equipment itself. In fact, most equipment manufacturers provide built-in financing. However, traditional banks are also excellent sources for loans that are backed by these tangible assets. In either case, the loan or lease term should at least equal the lifespan of the asset that is backing it.

Conversely, obtaining financing through equity also provides businesses with major advantages. When you issue equity in your company, you reduce your stake in the company, but you improve your credit worthiness and do not over-extend yourself.

Equity financing can be obtained from many sources, such as venture capitalists, angel investors, or mezzanine investors. The latter involves the combination of equity and debt to fund business startups or growing businesses, which is a very common form of financing for growing businesses.

Using debt and equity together is essential in achieving maximum growth in your business. Equity provides assets, and banks look for assets when facilitating lending. Equity gives you added leverage, because banks can use the equity money itself as collateral and shareholders or business partners can use their credit scores for additional borrowing.

In Finance, Timing Is Everything

Purchasing a business is a long-term investment. Thus, most of the money raised for the purchase of the business should be long-term as well. This usually equates to the use of equity, because repayment to equity partners usually does need to take place until the business is liquidated or sold. However, long-term capital can also come in the form on long-term loans, which is the reason why a number of entrepreneurs finance the startup or growth of their companies with funds received from 30-year mortgages. For strictly commercial loans, businesses typically do not qualify for 30-year loan terms. Even with the involvement of real estate, loan terms of 15 to 20 years are the industry norm.

Of course, in many cases, long-term money is completely the wrong solution. If a growing business needs access to fast cash in order to meet payroll, purchase office equipment, or buy supplies, then taking out a 30-year mortgage makes absolutely no sense. For short-term capital needs, revolving credit lines, credit cards, short-term loans, peer to peer lending, and factoring are all better options.

Banks are often the best sources of revolving credit lines, short-term loans, and credit cards. However, with interest rates as low as 6% and 36 month terms, peer to peer lending is also an appealing option. Factoring provides a flexible financing option as well, and this is achieved through corporate finance companies and specialty lenders.

Regardless of where you seek out funds for your company, just remember the golden rule that short–term loans should be used to meet short-term needs and equity or long-term loans should be used for long-term needs.

Watch Your Numbers

Whether you acquire capital from giving up equity or using a credit line, all of the capital you raise comes with a price. Loans and credit accounts all have interest rates. Short-term loans and credit cards usually have the highest interest rates. On the other hand, long-term loans backed by collateral have the cheapest rates.

It’s difficult to calculate the cost of giving up equity, but even the most patient of investors will eventually want their money. At first equity may seem like the way to go, but since each investor receives a stake in the overall value of a company, it usually ends up being the most expensive financing option in the long run.

Regardless of the interest rate, it should always be lower than the expected return. Never invest money in any business project that will not generate enough profit to take care of the loan payments, including the interest. You want to compare the overall price of the loan or loans to the projected yearly profits, and also compare the monthly loan payments to the monthly cash flow.

Analyzing all of these factors will help you determine the viability of the business. In the end, you have to understand your numbers and know that you will still be able to afford the deal long after signing on the dotted line.

Hiring Staff: What to be aware of

Establishing a business is truly a feat and an accomplishment. Once you have secured the necessary funds and determined a plan of action, you will also have to hire staff members. As you are piecing together this team, what are some things you need to keep in mind and be aware of?

Determining Your Pay Rate

If you try to determine a pay rate after you have started the interview process, you could end up with a troublesome situation. Reviewing the material at the Australian Government’s Fair Work page can help you to accomplish this goal. You may wish to set different rates depending upon the candidate’s experience and work history. Whatever the situation may be, most potential employees like to know what they will be paid early on in the process. It is professional for you to tell them. After all, the arrangement has to work for both parties.

Creating a Less Stressful Experience for Yourself

While you do have a small business, you might have a large number of applicants. Applicant tracking software is a type of tool you can use to narrow down the possibilities. For example, let’s say that you want to hire employees who have two years of experience or more. The software tracking system would automatically eliminate anyone who does not fit that requirement. Of course, this tool is useful only for those who have strict requirements for the positions. Otherwise, you could accidentally eliminate a really excellent and qualified candidate for the position.

Narrowing Down The Pool

Background checks are another tool to help you eliminate the potential candidates. If something appears on the background check that is not appealing to you, then you can forgo the interview with that particular candidate. After that, you will need to begin the interview process for the remaining candidates. Of course, you should find a person or people who meet the qualifications that you set forth, but you also must get along with the employee. Establishing rapport and creating a productive working environment are both important, and they can really impact your business happenings.

Understanding The Legalities

Before you make the final decision on who to hire, you should understand the legal implications of having employees. The Australian Government’s business website outlines this important information. According to this page, you must, “find out what wages and employment conditions apply to your staff,” “register with the Australian Taxation Office (ATO) to deduct tax from their wages,” “set up employment records,” “pay superannuation” and “comply with occupational health and safety laws.” Failure to comply with one or more of these rules and regulations could mean a lot of trouble for the future of your business and its success.

Establishing a Professional Environment

Perhaps you have some old coworkers who are interested in becoming a part of your business, or maybe you feel that you really have great chemistry with some of the new employees. No matter what the circumstances are, you need to act in a professional manner and have people sign contracts. This is not done only to protect them, but it is also for the benefit of you and your business. You should discuss the stipulations and information to include with your attorney to ensure you are doing everything in a proper fashion.

Setting Clear Guidelines and Requirements for the Job

Hiring a person to do one job and then constantly demanding that he or she do another can be troublesome for the business as a whole. When employees begin their jobs, they should know exactly what is expected of them. A clear list of duties is useful. You may wish to provide a certain schedule or to work with the employees to craft a plan. Whatever the case may be, you do not want to confuse the staff. Sending them all in different directions could mean that your business really suffers in the field of cohesion.

Choosing Clear Pay Dates and Schedules

Remember, even when you have employees who dedicate all of their time and who love the job so much, they still want to know when they are going to be paid. Do not hide this information. When they start to work for you, letting them know the days on which they will be paid is the professional way to handle these situations. Furthermore, you must stick to these dates. Paying employees late is completely unacceptable. You must take the responsibility to ensure that everyone has their pay checks on the appropriate dates.

Creating a Pleasant Work Environment

Once you have hired the staff members and you have discussed all of these important details with them, you want to ensure that these individuals stay a part of your team for years and years to come. To accomplish this goal, you must create a pleasant work environment. This could mean that you offer generous holiday time and sick days, or you might take the company out for dinner once in awhile. Whatever the case may be, focus your goals on creating an environment where employees are happy to go to at the start of each work day.

Hiring staff members might seem a bit overwhelming at first. This is especially true when you are brand new to the business world and have never done this before. However, as long as you are willing to keep some important tips in mind, you can ensure cohesion and success throughout the process.

Marketing your Business Offline

When running a business, most people turn to the Internet to find customers. While there are plenty of excellent ways to find potential clients online, one should not neglect their offline marketing plan. When developing an offline marketing strategy, one can find customers who otherwise would go to a competitor. Here is a quick guide for an entrepreneur who wants to develop a sustainable and successful offline marketing strategy.

Define market: Just like with any plan to get customers, one must define and understand their potential market. Luckily, one should have no difficulty in understanding their market when they do enough research and dig a little deeper. This step is crucial, and entrepreneurs often gloss over this step on their way to getting their company started. Fortunately, when looking at a variety of metrics, one can define their market and begin to develop their marketing strategy.

Where: Now, after a business knows their potential customers, they must know where to look. For example, a business selling to older folks may want to explore traditional and accessible advertising methods. On the other hand, when marketing products or services to a young crowd, one should use a different approach. When defining the market and knowing where to look, one can begin to develop their solid long-term strategy to bring in clients.

Business card: When getting started, one should start the process slowly and methodically. The first step every entrepreneur should take is to print out a simple and concise business card. Then, one can give out their business card at conferences or anywhere he or she pleases. Without a doubt, when having a conversation with a potential customer, it is pertinent to hand them a business card. With this information, a prospective client will have a solid reminder about the company or product.

Phone book: Some young business owners think that nobody uses phone books anymore. Now, they are not popular like in the past, but they can be an effective way for a company to reach people. In fact, plenty of people, young and old, open their Yellow Pages to find a local company. This is an inexpensive way for an organisation to obtain customers who live in the area. The great thing about the Yellow Pages is the value. One can recoup their investment quickly since one paying customer will likely justify the cost of the small investment,

Signs: When placing a sign on the window, one can gain a valuable customer without spending a significant amount of money. Some business owners in a professional setting scoff at this idea as they think it is tacky. In reality, a small and well-placed sign can attract foot traffic or fellow business owners. Ideally, the sign should simply state the purpose of the business. Remember, keep it tactful and do not make it an advertisement; the sign should inform people what the business provides.

Conferences: Depending on the nature of the business, one should bring their show on the road to garner interest in their product. This is beneficial for a new company that offers something more than the average organisation offers. When running a convention show booth, one should hand out products and discuss, in detail, their product. When doing this, one can convince people with deep pockets to buy the product or even invest in the business. Without a doubt, a company with confidence must go to trade shows and conferences.

Push to online: When providing a business card or company information, one must inform customers about their online presence. To do so, when handing out business cards or discussing the company, one should point potential customers to the website or Facebook page of the company. When involving the two strategies, one can get the most out of their plan and bring in plenty of new clients.

Promotions: Many entrepreneurs set up a promotion plan but fail to garner enough interest in their product or service. To excite potential customers, one should have no qualms in giving away their products to interested parties. Ideally, an established business should offer steep discounts or a free item. On the other hand, a new organisation may want to give their product away. With a well-run promotion campaign, one can attract strong interest in their brand and idea.

Recruit current customers: When a business owner has happy and loyal customers, he or she must exploit this thoroughly. To do so, one should offer current long-term clients an incentive to refer people. Fortunately, the incentive does not have to be expensive or huge. In fact, when giving the referring party a coupon or free product, one can gain a customer without a large investment. This is a perfect offline marketing strategy for a company that wants to branch out and reach more potential customers.

Track: When running a promotion or marketing plan, one should track their results. To track results, one should ask new customers how and where they heard about the business. When taking this step, an entrepreneur can save money and improve his or her marketing strategy.

With these tips, one can build a practical and long-term marketing strategy that gets results. Luckily, these tips are easy to follow and inexpensive. In the end, when following these ideas, one will gain exposure for their business and end up bringing in plenty of loyal customers.

What’s a business plan and why do you need one?

When starting a business, some new entrepreneurs simply start selling their product or service to willing customers. While the temptation is great, one should slow down and take time to build upon their idea. When writing out a plan, one can do wonders for the long-term viability of a company. Here is a brief description of what a business plan is, and why every new entrepreneur needs one.

Long or short: One can create a short or long plan, and it will depend on the size and complexity of the organisation. For example, a landscaping company will not need a long and drawn out synopsis of their organisation. On the other hand, a financial services company will need to write out a thorough and detailed strategy.

Make money: The most important part of the plan is how the business will make money and what product and service they will provide to customers. When laying out this step, one does not need to go into explicit detail. However, when a potential investor or partner reads this section, they should have a solid idea on how the company will turn a profit. This step should be easy since a new entrepreneur should have a solid idea on what product or service the organisation will offer.

Structure: Next, one should list the structure of the organisation. This can be easy for a small company with only one or two owners. Of course, one should not skip this step as it will help the organisation avoid problems in the future if there is ever a doubt to the organisational structure. To get started with this step, one only needs to list the owners of the company and their main functions. This should be a straightforward and uncomplicated task and a new company should not have to spend too long setting up this part of their strategy. Of course, one should not just list the very basic information about owners and management. Instead, the plan should list the qualifications of everyone involved.

Current finances: The finances of a business are extremely critical especially when the company wants to attract an investor or partner. When laying out the financials, one must go into explicit detail and list the current cash on hand as well as any profits or losses. If the business is not well-established, it is possible for one to follow this step later. Of course, ideally, one should fill out the financial information now since it will help the entrepreneur avoid any confusion in the future.

Marketing plan: A business cannot succeed without a serious and practical marketing plan that will get results. Without this, most small business owners will fail to attract more than a few customers. In reality, when creating a strategy, the marketing plan is the most important step one must follow. To create a marketing strategy, one must lay out, in explicit detail, how the business plans to attract customers. To interest investors or partners, one should list all strategies that they plan to use. For example, most business owners will use online and offline marketing resources. When writing an impressive and detailed marketing plan, one can have a great chance at success.

Risk: Most entrepreneurs hate thinking about the possibility that their idea will ultimately fail. This is a mistake since a serious investor or potential partner will want to see a risk analysis of the business. For this step, some smart companies outsource this task to someone who possesses the necessary qualifications. Either way, one must include all the potential risks and shortcomings of the plan. Without this, a company will never draw an investment or loan from a lending institution.

Most entrepreneurs will create a concise business plan without realising the full implications. Sadly, when creating a short plan without all the necessary information, one will have a hard time attracting partners and investors. Not only that, the strategy is just as important for current owners. Often, when conflicts or questions arise, owners will need to consult their plan for guidance. Without a doubt, one must develop a serious business plan that includes all the pertinent and necessary information.

Marketing your Business Online

When starting a business, one needs to set up viable online marketing strategy. This should include a multifaceted approach that will enable a company to attract a wide range of visitors to the website. Unfortunately, most entrepreneurs, in a haste to build their empire, neglect to create a solid and viable long-term Internet marketing strategy. When this happens, the business will suffer and will have a difficult time in rising to the top. Luckily, the average person can run a solid online campaign by following a few basic tips. Here is a quick guide to marketing a business online.

Domain: Most people, when buying a domain name, do not take their time to think of the full implications. This can lead to huge problems in both the short and long run. For starters, one should try to buy a instead of a .net or .org. Remember, when going to a website, most visitors will instinctively use the address. When choosing the name, the business owner should choose a URL that corresponds to the business name and product. With this, one will have an advantage in the search engine optimisation arena. One must remember to take the time to choose a solid domain name since it will be exceedingly difficult to change after establishing the business.

Website: When creating the website, one should tread carefully. The Web pages should contain plenty of information relevant to the business or product without trying to push customers into spending money. The design and layout of a website is also important when it comes to marketing. To keep customers happy, one should set up a website that is both easy to navigate and understand. Not only that, a business should establish a separate site catering to tablet and smartphone visitors. Finally, one must remember to create a smooth and seamless transition for the buyer. Without a doubt, a serious business must have a decent website with compelling content.

SEO: To get started, the business should know what keywords they are targeting. For example, a business selling shoes should target keywords related to shoes, sneakers and other related terms. Ideally, one should note all the keywords and their popularity. To check the popularity, one can use the free keyword tool that Google provides to customers. Then, one should write their website content with the main keywords in mind. When creating the pages, one should also make sure to use LSI keywords. These are words that are similar to the main keyword. With this, the website can gain traffic from obscure search terms. Of course, one should do more than write solid and informative content. A company should also develop a serious and sustainable link-building campaign for the website. To do this, the company should create blog posts on other sites and get links from reliable and well-known sources. With a well-run SEO plan, the business will bring in plenty of website traffic without spending too much money. My advice for SMB would be to hire a professional SEO company because they will deliver faster results and save you time to run your own business.

Advertisements: When using advertisements, one can get traffic to their website from day one. The best way to gain visitors via advertisements is to use Google Adwords. With this system, a company can buy relevant and targeted ads. This is a great short-term solution since a company will have to wait a long time for their SEO plan to bear fruit. Remember, when buying ads, one must make sure that the ads work for the business. Sometimes, they will not and a business owner will just waste money.

Social Media: With Facebook and Twitter, a company can gain valuable website traffic and gain in the SEO results. To get started, one should sign up for accounts at both social media sites. Then, one should fill out their profile and start posting. Ideally, a business should post a few days a week. When posting on Facebook and Twitter, one should share relevant and interesting information about the product or business. To get the most out of social media, one should answer all the questions from interested and current customers. Without a doubt, social media is the perfect medium for someone who wants to gain traffic both in the short and long-term.

Tracking: When running an online business, one must track visitors and their habits. Fortunately, even a person inexperienced with technology can install Google Analytics. With this programme. a company can see where visitors come from and what the last page they visited. This can help the website owner determine where he or she needs to improve the Web pages. Sadly, many business owners skip this step; when one does not track visitors, the company will have a hard time knowing how to improve the site.

Review sites: A lot of people use their computer or smartphone to check reviews of a business. When the reviews are bad, some visitors will run to a competitor with better reviews. For this reason, a company must actively watch and respond to complaints or praise. Remember, plenty of potential clients will do a quick Google search to get an idea on a business or product.

When following these tips, one can build an online presence that will get results. Luckily, these tips are easy to follow, and even a person who is inexperienced with marketing principles or technology should have no difficulty in building a solid long-term Internet marketing strategy that will get results from day one.