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Tag: Business Plan

Effective Debt Management for Colorado Businesses: Strategies to Navigate Economic Challenges

As rising interest rates and inflation slow the economy, many companies are struggling to pay back debt. Listed below are few best practices for navigating the current environment.

READ: How Do Interest Rates Impact Real Estate Investing? 

Be proactive

Communication is the key. Yes, it can be a tough conversation with your creditors, but the result will be far better than if one waits.

Gather trusted advisors like your CPA and business attorney, formulate a plan, then schedule a meeting with your creditors. Many local non-profits like the SBA, Small Business Development Centers and local Chambers of Commerce can be a great cost-free or mostly-free resource for advice.

Short-term loan modifications and/or accommodations are usually in everyone’s best interest. Everything is a trade-off for both parties so be willing to give something in return.

Build trust

Tell it like it is. Provide your creditors with realistic projections and updated financial data. By creating a realistic forecast and plan, you are addressing the challenges you can control. This will create a lot of goodwill with your creditors.

If your lender feels they cannot trust you, or that you may be deliberately concealing information, they will likely not wait to act, nor will they advocate for you. Ultimately, it may cost you your company.

READ: Financial Forecasting Insights from Founder and Fractional CFO, Dan DeGolier

Vendors

Your vendors are often providing their own credit to your business in the form of trade terms. Meet with them often and let them know you are doing everything in your power to stay current. Hiding from vendors creates more stress and won’t make the problem go away.

You might be surprised; even partial or reduced payments can go a long way toward maintaining trust and keeping your trade terms from being cut off.

Perform a 13-week cash flow analysis

This is the “go-to” cash flow metric and an important tool in the turnaround industry. The purpose of the 13-week cash flow analysis is to show where an entity’s cash is being generated (cash inflows), and where its cash is being spent (cash outflows), over a specific period of time.

Why 13 weeks? There are four 13-week periods in a calendar year. Essentially, it’s a deep dive into one quarter and an essential tool for crafting a turnaround plan.

READ: How Businesses Can Increase Cash Flow Predictability

What would you say it is you do here?

Presenting your lender with a well-thought-out business review plan may buy you time and build credibility. Most businesses in distress display more than one of the following external or internal signs of trouble.

  • Ineffective management or missing management pieces.
  • Over diversification or not enough diversification in product or service.
  • Poor pricing model and low gross margins leading to low or no profitability.
  • Weak financial controls.
  • Weak operational controls.
  • Poor lender and vendor relationships.
  • Market lag or change.
  • Precarious customer base — too concentrated or unprofitable clients.
  • Even ultra-fast growth is often a (funding and operational) problem that needs solutions.
  • Family vs. business matters.
  • Operating without a formal business plan.

Is it time for alternative lending?

The current environment is making traditional bank credit harder to obtain. Alternative lenders can be a good short-term bridge (1-3 years) back to more traditional bank credit while providing more flexibility to recover. Alternative lenders often trade off charging a slightly higher interest rate for giving entrepreneurs more freedom. Essentially, you’re paying for three things that can be effective tools for recovery:

  • Flexibility: Generally a lack of strict financial covenants and cash flow requirements.
  • Availability: Usually this means higher advance rates than a bank will consider, as a percentage of the value of your collateral.
  • Scalability: This is the ability of a business owner to very quickly increase or decrease the size of their loan facility or revolving availability as their business recovers. This is usually achievable with very little additional underwriting and can be approved much quicker than a Bank loan — think days, not weeks or months.

 

Andrew Wilhelmy headshotAndrew Wilhelmy is VP of Business Development for the Western U.S. at Seacoast Business Funding. Seacoast Business Funding provides up to $30 million in fast, flexible, and economical non-bank working capital lines of credit to growing companies and businesses looking for turn-around funding utilizing their Accounts Receivable and Inventory.

Navigating Economic Downturns as a Business Owner: A Guide to Sustained Growth

Small- and medium-sized enterprises account for 90% of the U.S. business population. And when the economy takes a nosedive, as it’s doing now in some sectors, many of these companies can suddenly feel like a drummer who’s lost their rhythm — there’s a beat, but they aren’t hitting it. Instead of a coordinated symphony of growth, there’s a disjointed scramble just to keep pace.

Economic downturns can be either a slippery slope that knocks a flourishing company off its feet or a unique opportunity to pivot and continue to thrive in totally new ways. Flexibility is essential in business, and being ready to throw plans out the window to make deals happen is crucial.

So, let’s roll up our sleeves and dive in. We’ll explore the principles behind sustainable growth and discuss strategies for keeping your company afloat and thriving when the economy takes a turn. Spoilers — it’s about being nimble, creative and committed to meeting needs, even as those needs shift. 

READ: Preparing for Economic Downturn — 4 Tips for Colorado Business Owners

How well are you expressing your business identity?

First things first — are you clearly communicating your business offerings? As a publicist who spends much of my time decoding messaging to help companies better illustrate their services to key targets, I regularly see a gap between how companies think they’re being perceived, and how they actually are. It’s easy to get caught up in the way you talk about your business, but changing your viewpoint can be seriously effective. 

For instance, a few years ago, our clients often asked us for recommendations on graphic designers, SEO agencies and web development firms when we actually offer those services. Understanding that we weren’t communicating that clearly to our targets prompted a recent rebrand (and company name change) that has since helped us grow those areas by orders of magnitude in the last 18 months. 

In short, don’t play hide and seek with what services you can provide. Did your company design a snazzy new rebrand for a business? Be loud, be proud and say clearly, “Hey, we do that!” Leave no room for clients to seek additional services elsewhere. When the tides begin to shift, be sure to look inward to audit your own offerings and take advantage of any gaps. 

READ: Boost Your Organization’s Impact with a Successful PR Strategy — A Guide for Purpose-Driven Businesses

Position yourself as a “need,” not a “want”

Your business isn’t just providing a product or service — it’s solving a problem. As the old saying goes, “Your customers don’t want a quarter-inch drill – they actually want a quarter-inch hole.” Did you know nearly half of companies fail due to a lack of market demand? That’s why understanding your market is essential. If there’s a gap between what’s needed and what you provide, it’s time to close it and take hold of these missed opportunities for growth.

Audit your company messaging to ensure you’re speaking directly to your target audience. Use language they can connect with and make sure the value of your solution is evident. I’m here to tell you that while landing the New York Times is great, you might see more direct value in speaking to a group of highly targeted “buyers” through opportunities in a trade publication. Know your audience and meet them where they are.

A persuasive message isn’t always enough on its own — you need to back it up with proof.  By showcasing tangible results, whether it’s through success stories, case studies, demonstrations, awards or more, take the initiative to assure potential customers that you’re not just talking the talk but also walking the walk.

READ: 4 Easy Tips to Avoid Missed Business Opportunities

The right people, the right clients, the right approach

My dad always told me, “Sometimes you’re the big wheel and sometimes you’re the little wheel. Never forget what it feels like to be either.” It can be easy to get caught up in things when you’re doing well. Maybe your billable rates no longer work for one of your early clients so you’re inclined to replace them with your newer, larger clients — but the clients who stuck by you when you were starting out are the ones who helped you grow. Stay loyal to them, and they’ll be there to lend a hand when the economic winds change.

A business cannot survive without the right people and the right clients. A CNBC poll found that an alarming 52 percent of the respondents stated labor quality was their most significant problem. With this data in mind, stop and take a good, hard look at your team. Are the right people in the right seats on the bus? Are you able to adapt skill sets to meet services that are in demand (in our case, our designers work on everything from websites to infographics to presentations – depending on the needs of the client and the project)? Remember: A solid, well-fitted team isn’t just a luxury. It’s a necessity for success.

It’s time to think outside the box, get creative with hiring strategies and consider solutions like downsizing the office footprint, offering hybrid or remote opportunities and seeking out contractors or interns. Be wise, be resourceful and your cash reserves will thank you. 

READ: 5 Tips for Building a Strong Company Culture in a Hybrid Work Environment

Balancing the scales

Navigating the delicate relationship between your company’s resources (staff) and its demands (clients) is not just critical — it’s an art form. Think of your business as a scale with employees on one side and clients on the other — it’s your job to ensure each side is weighted equally. Your business will quickly suffer if one side becomes unbalanced. Whether the market is rich in opportunities or lacking them, creating a customized plan that aligns with industry trends is vital to achieving sustainable growth. Just as an idle staff is a drain on company resources, disappointing client expectations due to inadequate staffing will hurt your ability to keep current clients and add new ones. 

Last but certainly not least, know your industry inside and out. When the first-year failure rate in the professional, scientific and technical services industries stands at a scary 19.4%, you need to know the industry and target market like the back of your hand.

Sure, there’s no quick fix for economic downturns. Still, these turbulent periods test our resilience and resourcefulness, demanding us to adapt to survive or be washed away by the tides of change. While a slow market may be daunting, it also provides a unique but challenging opportunity for growth and transformation. Remember, it’s not the strongest that survive but those able to adapt. 

 

Melissachristensen Vpofpublicrelations 1Melissa Christensen is the Vice President of Public Relations at Comprise.

Batten Down the Hatches: Fine Tune Your Small Business Plan for Any Economic Environment

In recognition of the more than 33 million small businesses in the U.S., we are sharing helpful best practices to fine-tune your small business plan to weather economic shifts. 

Responsibly manage your business debt

Interest rate changes have significant impacts on business lending. To effectively manage your debt, consider these financial tactics before applying for a business loan: 

READ: Higher Interest Rates — What Does It Mean for Consumers, Bond Investors and the Stock Market?

Convert floating debt

Consider converting any floating-rate debt to fixed-rate debt, which flips the mindset from short-term financing to a longer-term solution that may be more suitable for your small business paln. Although many borrowers use their investment portfolio as a natural hedge for floating-rate debt, it may still make sense to lock in a low, fixed-rate now for any variable-rate debt you may have.

Consolidate debt

If your company has extensive overhead costs with bills and outstanding balances, debt consolidation could be a smart strategy to move existing debt into one streamlined payment. Debt consolidation can potentially provide a longer repayment period and/or lower interest rate — both of which can help improve available liquidity. 

Clean up your credit and tax liens

A tax lien is the government’s legal claim against your property when you fail to pay a tax debt. Make sure your credit and tax debt are up to date and tidy to ensure you’re getting the best rates available. 

Transition from alternative lending sources to conventional

If your business has alternative financing on the balance sheet, but you’ve been able to stabilize your profits and expenses, now may be the right time to convert your debt to more traditional loans and lending. 

READ: How Colorado Businesses Can Benefit from Nontraditional Funding and Private Equity Firms

Be honest with your banker

This may seem obvious, but you’d be surprised how many business owners inaccurately fill out loan applications whether intentionally or inadvertently. Filing for bankruptcy or having a tax lien is not an automatic disqualifier in the application process. With that in mind, it’s better for your relationship with your banker to be transparent about details. 

Strategies to improve income

If cash flow is top of mind, take inventory of your equipment and see if there is anything old or outdated that can be sold, refinanced or salvaged. Also, spend time reviewing your assets to determine how they can help the business work smarter and improve liquidity with your small business plan in mind.

If your business is inventory-based, assess your supply regularly and consider buying in bulk or shopping around to get the best purchase price. Another option is to restructure your pricing to align with the current market, inflation and competitors. However, be wary of aggressive price increases to avoid upsetting your current customer base. 

Another way to improve cash flow is to streamline your accounts payable and accounts receivable processes. Review timing, steps and ways to reduce your business bank account churn. 

Combat supply chain challenges

Small and large businesses alike are being impacted by supply chain disruptions like slow manufacturing and delayed shipping. As a result, we continue to see increases in shipping costs, storage expenses, delivery delays and logistics issues.

To combat the supply chain challenges, consider ordering material further in advance than typical so you can more confidently predict what you need. This can impact upfront costs, but can also help assuage concerns about products, parts and shipping timing. 

Implement employee-retention strategies

With unemployment in the U.S. at 3.5%, it’s important as a business owner to develop employee-retention strategies to not only keep your employees but ensure they are happy in their roles. With nearly historical lows and despite some recent softening, the labor market remains competitive.

READ: Navigating the New Era of Employee Engagement — Everything You Need to Know

Here are some financial considerations in today’s labor market: 

  • Invest in and strengthen your current team through talent development, wage reviews, internal promotions and hires to help retain your current workforce. 
  • Recognize that hiring costs have increased and plan accordingly. If raises and promotions are not in your small business plan, focus on benefits to make up any difference in salary or hourly pay.
  • Embrace the hybrid home-office schedule and provide flexible work environments. Consider how the work-from-home shift can help you cut costs if your industry allows for virtual or asynchronous work.
  • Be shrewd in your resourcing forecasts knowing you may not have the upper hand in resignations and new hire negotiations.

Maintaining an effective small business plan requires an immense amount of discipline and perseverance, even in the best economic conditions. In today’s volatile environment, this is more important than ever. As a business owner, you must be willing to adapt to any changes that come your way and pivot to ensure your business is successful. Strategize and plan well by having a strong relationship with your banking partner, managing your debt, improving cash flow, finding alternative financing options and focusing on employee retention.

 

Jake Hymes HeadshotJake Hymes is the senior vice president, director of small business at UMB Bank.

Turn Your Part-Time Gig into a Full-Time Business

Your side hustle may not be just a side hustle. It’s a passion. Perhaps it’s even a calling. No matter how you define it — it’s already making you money, earning the attention of clients and competitors alike, and taking up more of your time than you ever imagined.

Does that mean, though, that you’re ready to make the leap? That it’s time now, to turn your part-time gig into a full-time business?

Explore more, how to determine if you’re ready to make the move from freelancer to entrepreneur. As well, discover tips to help ensure the transition is a successful one.

Are you ready to make the leap?

From Side Hustle to Full-Time Business

There’s no doubt about it, freelancing is big business in the United States. In fact, it’s estimated that by the year 2027, nearly 90 million people, or slightly more than half of the entire U.S. workforce, will be freelancing.

Not all of those freelance gigs will translate into successful full-time businesses, however. So how do you know if your side hustle has the makings of a thriving enterprise?

The first test is to understand the difference between freelancing and entrepreneurship.

When you’re freelancing, for example, the priority is the work and the money you can make from each gig or project. You’re directly, and perhaps even solely, involved in producing the goods or delivering the service.

When you’re an entrepreneur, however, the focus is on the business, on setting up systems that will do the work and make you (and your employees and investors) the money. This means that odds are, you’re often going to be at least one step removed from the production or service delivery process.

Are you ready to become an entrepreneur?

Instead of doing it yourself, in other words, you’ll likely spend a lot of time training and then leading others. It’s a bit like going from being the soloist in an orchestra to being the orchestra’s conductor.

Thus, if you’re thinking of turning your side hustle into a business, then you need to be prepared to play a very different role regarding the work than you now play as a gig worker.

However, if you find that you’re ready for a change, and you’ve already built up the resources, the market interest, and the clientele to support a startup, it may well be time to take your work from a side hustle to a full-fledged money-making enterprise.

Define Your Niche

As a freelancer, you probably grew accustomed to taking gigs wherever, whenever, and from whomever they came. However, that model probably isn’t going to serve you well as a business owner.

Instead, if you want your startup to not just survive, but to grow, then you will need to be clear about exactly who you are serving and why. To put it in the language of business, you need to define exactly what the value proposition of your business is.

To figure out your company’s unique value proposition, you need to determine exactly what need your company is meeting or what problem it is solving in its target market and for whom.

What problem are you uniquely solving?

Once you understand the “what,” the “why,” and the “for whom” of your startup, you’ll be able to tailor not only your business model but also your marketing, product development, and service delivery strategies accordingly.

On the other hand, if you can’t answer these questions, then this may be an indicator that you haven’t targeted the right idea yet.

After all, if your freelancing has you doing everything from tuning pianos or giving music lessons to writing jingles, that could be an indicator that there’s not enough market demand to sustain a business built around any of these services. True, the gigs may provide enough money to feed your family and keep the lights on, but it may not be sufficient to sustain a roster of employees or to entice and recompense investors.

Get Your Financial House in Order

If you’ve determined that you have both the motivation and the market to transform your gig into a viable full-time business, then it’s time to start taking stock of your finances. One of the most significant obstacles aspiring entrepreneurs face, is funding.

In addition to tapping into any savings you might have squirreled away from freelancing, you might consider applying for a small business loan. Your history of success as a freelancer may, indeed, go far in reassuring potential enders that there is a strong market for the product you intend to provide.

The same is true if you hope to finance your startup by securing investors. The key, however, is to have a detailed and viable business plan, as well as a great presentation that makes an irresistible case for why would-be investors would risk their money supporting your endeavor.

What’s your business plan?

The Takeaway

You love your freelance work, but you’re ready for a change. You’re ready for new challenges and greater growth. In short, you’re ready to turn your side-hustle into a full-time business. The key to this transition is to ask the right questions, do your market research, define your strategy, and establish a strong financial footing.

(Learn more about worker definition, laws, and resources in Colorado, at: CDLE)

 

Noah RueNoah Rue is a journalist and content writer, fascinated with the intersection between global health, personal wellness, and modern technology. When he isn’t searching out his next great writing opportunity, Noah likes to shut off his devices and head to the mountains to disconnect.