It’s guest post week again and I’m glad it is because this post is coming to you while I’m in beautiful Puerto Vallarta, Mexico. While I’m busy trying to get a tan, we’ll hear from the folks over at MTX Contracts about when a business owner should consider buying instead of renting the property s/he uses for the business. Here’s the post: Continue Reading
We all know that building a business can be SUPER STRESSFUL! In this week’s guest post, Yazi Jepson gives us some tips for how make sure it doesn’t all get to be too much, not just for us, but for the employees that we manage. Here’s Yazi: Continue Reading
It’s guest post week here on New Venture Mentor and today we’ll hear from Bea Maiz, who shares an infographic created based on an article by Thomas Oppong, about the makings of an entrepreneur. Here’s Bea: Continue Reading
It’s guest post week again. Today we’ll hear from Marian Sparks with some tips for how to save money on packaging and shipping costs at your small business. Here’s Marian:
If you run a business—no matter what your product is—you will need packing supplies. It doesn’t matter if you ship products to customers on a daily basis or you occasionally send out recognition gifts to your employees—having the right packing supplies on hand will save you time and money.
The key to saving money is to plan ahead and buy in bulk whenever possible. Don’t buy one box or one padded envelope or one container of shipping peanuts. Look back over the previous year to see how many boxes (or containers) you sent out. You can use that number as a baseline to order this year’s shipping supplies. Make sure you have a storage closet where you can keep the supplies dry and intact until you need them. And always ask for a bulk discount. It can’t hurt.
And remember, if you get the discount, make sure to mention it during your performance review. Bottom line: Quantifiable discounts are meaningful accomplishments.
If your company regularly sends out breakable items, make sure you stock up on bubble wrap, peanuts, and newsprint paper. (Newsprint paper hasn’t been printed on. Since newspaper ink can rub off, many people don’t like to use it. If you do end up using newspaper, make sure your breakable item won’t absorb the ink.)
For extra security, and if your item is small enough, double box it. For example, if you send out glass picture frames, first wrap in newsprint and bubble wrap. Then place the wrapped frame in a box that is just large enough to fit it. Wrap that box in bubble wrap and place it inside a slightly larger box with packing peanuts. That should protect it.
If you regularly send oversized items, it’s best to take them apart and wrap each individual piece carefully before packing into a mailing box.
If you can’t reduce the item in size, you might want to invest in custom boxes. If boxes are manufactured specifically for your product, then there will be less room for shifting around in the box and possibly breaking.
If custom boxes aren’t in your budget, invest in boxes that are slightly larger than the item you’re shipping. You need to make certain that there is room for bubble wrap and cardboard reinforcement, if necessary. Assume your item is breakable and pack it accordingly. (After all, everything is breakable at some level.)
Employee Recognition Gifts
If you run a business that isn’t customer-driven, you still have employees. And every once in awhile, you probably send out employee recognition gifts. Whether these are company mugs or paperweights or even tins of popcorn with your logo, if you’re sending them out yourself, you’ll want to have enough boxes to send to each employee. (Make sure you have a few extra boxes just in case you forgot the recent hires.)
Again, having the right sized boxes on hand will save your lots of aggravation.
Or maybe your company isn’t the kind to send out key chains or company-branded Frisbees, you’ll still need to mail out employee information. New employees might need a company handbook and depending on the size of your company and all your policies and procedures, it might be more than can fit in a letter-sized envelope. Make sure to invest in larger manila envelopes that can hold all the necessary information without tearing.
Don’t forget that boxes and padded envelopes are available from the Post Office. These may work for some of your needs, but remember that they aren’t branded with your company information—and they do require that you use a specific level of mail service.
While the free items from the Post Office are handy and budget-friendly, ask yourself if this is the business image you want to project. Would it be better to invest in padded envelopes or boxes with your company’s logo? It’s an easy and effective way to advertise your brand.
If you are a brand-new business or a start-up on a tight budget, there’s nothing wrong with recycling boxes. Take mailing boxes you’ve received, clear off the old label and anything that associates it with another company.
If you’re creative, you can use the recycling to your brand’s advantage. Your customers and employees will appreciate what you’re doing for the environment, so make sure you call it out.
Make sure to do your research because there are many package and box suppliers out there. Ask yourself a few questions in order to find the one that’s right for you.
- Do I need more than one type of box?
- Is my product breakable? Do I need plenty of bubblewrap on hand?
- Do I want labels to show my company logo?
- Do I have the resources to pick up the supplies or do I want them delivered?
- Will I be ordering online or going to a brick-and-mortar store?
- Can I order tape in addition to boxes?
- How much weight can the boxes hold?
So, no matter what type of business you run, saving money on packaging supplies will help your bottom line. And ordering those packaging supplies in bulk and having them on hand will make you more effective.
Marian Sparks is a freelance writer and a warehouse employee from Los Angeles, California. With her expertise in corporate merchandising, packaging supplies, and warehouse duties, she has acquired the knowledge to publish informative articles to avid readers in the industry. During her free time, she enjoys learning, researching new topics, and writing.
And don’t forget to support me as I rappel down the side of a 35-story building in downtown Chicago to raise money for minority and female entrepreneurs!
Advertising is an important aspect of any business strategy, especially when it comes to small businesses. As a small business owner, you need to figure out how to promote your company and get the consumers’ attention. Although this can sometimes require a lot of investment, you can still find low-cost, but effective marketing ideas for getting your business to the top. Owning a start-up means a lot of expenses and a limited budget, so you’ll be happy to hear that some of the following advertising options won’t cost you at all.
Creating a Professional Website
Nowadays, it’s impossible to expand and advertise your business without going online and building a website. Even if you don’t possess all the necessary skills, this has never been easier! All you need to do is find a free website builder and you’re good to go. If you really have no idea what you’re doing, you can either browse the Internet for a tutorial, or seek help from your friends, since the chances are that one of them will know how to create a website. Just one additional tip – when you get down to business, make sure not to build a website that is too complex to use, but follow the principle “the easier, the better”.
Starting a Blog
Another marketing strategy that anyone can afford is blogging. Similarly to creating a website, even if you don’t have experience in the area, you can easily find guides for starting a business blog. Once you start blogging, you should try to be consistent and publish on a regular basis. Feel free to write about various topics, from business-related to entertaining. This is a perfect opportunity to keep your customers up-to-date and in touch with you.
Joining Social Media
Social media play an important role in advertising, and, according to the statistics, 97 percent of the global businesses use social media for marketing. Depending on the nature of your business, you can create a profile on a variety of different social media platforms, including Facebook, Instagram, LinkedIn, Pinterest and Twitter. Once again, you should be active and post different materials regularly; otherwise, you’ll be forgotten in the sea of other posts.
Running Facebook Ads
The estimates show that there are more than 1.79 billion Facebook users who are active on a monthly basis, which makes Facebook a prolific platform for marketing. You don’t need a lot of investment for running a Facebook ad – with a limited budget you can reach out to consumers who differ in gender, age, education and interests. Even if they don’t immediately contact your company, they might like your page and become your potential consumers.
Content marketing is a strategic approach that has been embraced world-wide. This marketing strategy differs from the others in that it focuses on creating interesting and relevant material, rather than simply promoting a product or a service. This way, you are able to address the problems and issues of your customers and help them find the solutions. The key feature of this marketing approach is content, so make sure that yours is interesting, of high quality and based on credible information.
You don’t need to create high-budget commercials in order to gain public attention. All you need is creativity and a well-developed plan, and the rest is just following the steps. Just find decent equipment, develop a scenario and start filming. During post-production, you can add some filters or cut out the parts that you don’t like. Afterwards, you can upload the commercial to YouTube. This won’t cost you a dime, and, with little effort, your commercial can go viral!
Producing an Email Newsletter
This is a great way of staying in touch with your current customers and contacting the potential ones. However, make sure not to send them ads; otherwise, your email will end up as a spam. Instead, inform your customers about the latest happenings and provide them with valuable information. You want to establish a relationship that will make them think of you when they need your type of product.
Distributing Flyers and Business Cards
Distribution of printed material is a great opportunity for promoting your business locally. This is another strategy that doesn’t require a sizeable amount of money. You can develop your own design for flyers and business cards and opt for custom printing to create unique material. When it comes to distribution, you can hire some students to hand out the material, or you can do it yourself with the help of your friends and family if you have enough time.
LinkedIn is a great business platform where you can connect with other companies and potential business associates. You can form a LinkedIn Group with the businesses from the same industry and share your interests. Additionally, you can even use this platform for posting about job openings and recruiting employees.
You don’t have to spend a fortune on promoting your business as long as you use some of these strategies efficiently. Find out which marketing approaches work for you and then focus on implementing them in a creative and innovative manner.
Emma Miller is a Sydney based writer with a degree in marketing. Interested in digital marketing, social media, start-ups and latest trends. She’s a contributor at Bizzmark blog.
And don’t forget to support me as I rappel down the side of a 35-story building in downtown Chicago to raise money for minority and female entrepreneurs!
*GUEST POST* Today we have a guest post from David Janes of NCC Home Learning about the potential of event marketing as a means to help boost your organization’s bottom line. Here’s David:
Trading conditions have been tough with the global financial crisis of 2007 to 2008 kicking off recessions in many countries, including the U.S. in 2007 and the U.K. in 2008.
For many businesses, this meant that their bottom line was under pressure and they were squeezed to within an inch of life. As profit was hard to come by, investing in new products services was low, if not non-existent and all budgets were squeezed, including the marketing budget.
Thankfully, the global financial crisis seems to be fading (yay!) but your bottom line – the income you have left after paying all your expenses– may need a concerted marketing effort to get it back to a healthy level.
There are many ways of boosting your business profits. Event marketing is one of them. With an understanding of how events work, along with the effort, energy, and organisation needed to ensure events are successful, events can become a useful marketing tool for your organization.
What is Event Marketing?
Themed exhibits or displays, presentations on a product, service, or cause, or in-person engagement and networking are all examples of event marketing.
These events can be online, such as webinars, or offline such as breakfast networking events. Some companies host or sponsor several of these kinds of events. They could be the perfect means of raising brand awareness for your business, which will have a direct knock-on effect on your bottom line.
But Why Event Marketing?
The modern consumer demands more today. They have a higher expectation of how and why brands engage with them – here’s a hint: it’s not just about selling.
The consumer wants information about you and your product or service. They want information on which they can base their buying decision. They want a clear sense of what it will be like to buy from you and interact with you. The expectation is that brands will have character, personality, and a ‘voice’.
Thus, to increase your bottom line with event marketing, you need a strategic combination of offline and online events.
The Impact of Event Marketing
To make an impact, an event must be memorable for all the right reasons.
The desired impact depends on the goals of the event with most businesses wanting their event to be more than just an advertisement for their business or brand. They want to create a lasting, favourable and powerful impression of all that the business can deliver.
Event marketing allows people – your customers – to connect with you and for you to connect with them.
Not all events are created equal. What started out as a great idea, can easily fall flat, earning you heaps of nothing but criticism. Alternatively, with the right event in the right place, with the right goals driving it, you have an instant success on your hands.
And beware – one, ad hoc event is not going to show your customers and fans what a great company you are. If you think event marketing is a cheap option that will bolster your flagging bottom line overnight, you need to think about the concept in a wider, broader sense.
How Event Marketing Impacts Profits
Companies choose to participate in event marketing for different reasons – a small business may want the exposure that a live webinar can offer, but a larger company may need the face-to-face interaction that comes with a trade show.
Overall, a business wants an event to connect with people in a way that inspires them to look to their company to buy. Here are some of the top reasons to consider event marketing:
#1 Brand Awareness
Establishing and building your brand is essential for growing your business and your profits. An event allows you to cultivate and express this identity.
Through events, either online or offline, you can create the perfect venue through which to share your thoughts and ideas, in the way that you want to present them. Events also give you a listening tool too.
#2 Lead Generation
Want more customers? Where are your potential customers? Focusing the event in the right location places you firmly in the eye-line of prospective customers. They may have already expressed an interest in what you do and who you are; the event can confirm that you are the right organization to do business with.
#3 Customer Engagement
There is no doubting that events offer an unparalleled level of customer engagement. There is no substitute for positive and personal interaction that builds loyalty.
Every wizened marketer knows that the biggest return of investment on their marketing budget is retaining and growing their existing customer base.
#4 Educate and Inform
Most people attend events to be educated and informed. Add to this the healthy dollop of networking, and you have an event that is useful, practical, successful, and – just as important – memorable.
Types of Event Marketing
From webinars, to live streaming events, to tradeshows, to conferences, to networking, to seminars, there is a whole raft of marketing events that your business can host and sponsor, both online and offline.
This article was written by David Janes, a member of the Outreach Team at NCC Home Learning. David helps hundreds of students every year to upskill in key business areas.
And don’t forget to support me as I rappel down the side of a 35-story building in downtown Chicago to raise money for minority and female entrepreneurs!
Lack of reliable cash flow is one of the biggest (as well as one of the most concerning) challenges that a new business owner can face. Unfortunately, it’s also among the most common problems facing many new business owners, especially those who own small to mid-sized businesses.
After all, most new businesses don’t have an abundance of excess cash for covering ongoing expenses like rent, utility bills, labor, and supply costs; instead, they rely on incoming cash from customers to cover those expenses.
The problem arises when customers take 30, 60, or even 90 days to pay up, as per their invoice agreement. While this many not be a problem for larger, more established businesses with a large financial cushion, the same can’t be said for most newer, smaller companies. Many business owners – especially novice ones – don’t have the luxury of waiting up to 90 days for their invoices to clear. They have real business expenses that need to be paid right now.
Fortunately, cash flow management problems are rarely a death sentence for budding businesses. Invoice factoring (also called accounts receivable financing) is an effective, flexible, low-risk funding solution for business owners who need to convert their outstanding invoices into quick, usable cash.
What is invoice factoring?
Invoice factoring is when a business sells their customer invoices that are due and payable to a third-party firm, called the “factor.” The factor pays the business quick cash in exchange for the right to collect payment from the business’s customer in the future, plus a fee.
In other words, the business gets to receive the cash they’re owed immediately, rather than waiting 30-90 days for the customer to pay up, and the factor gets to receive payment from the customer in the future, plus an agreed-upon fee from the business.
Here’s how it all works:
Step 1: You engage in a factor agreement During this step, you will need to ensure that you’re comfortable with all of the terms outlined in the agreement, and be wary of any possible red flags like hidden fees, long-term contracts, or monthly minimums.
Step 2: The factor arranges everything with your customers. Once the agreement is settled, all future payments from your customer will be sent directly to your factor (since you will have already received your payment from the factor long before your customer sends their payment).
Step 3: You make sales. Continue to generate business and earn sales from your customers, per usual.
Step 4: You provide goods and services to your customers. Similarly, you will continue to provide goods and services to your customers just as you always have.
Step 5: You create the invoices. Once your customer receives your goods or services in full, you will generate invoices that outline the dollar amount they owe you. You’ll need this in order to receive payment from your factor.
Step 6: Keep documentation. In addition to keeping track of your invoices, you’ll also need to keep track of any relevant supporting documentation, such as signed proof of delivery for goods purchased by your customer.
Step 7: The factor pays a % of the advance payment straight away. When you’re ready to receive your cash advance, you’ll need to submit your invoices and supporting documentation to your factor along with your request. They will then pay you an agreed-upon percentage of the face value of the invoice – typically 75-80%. The remaining percentage of the invoice (minus the fee) will be paid to you by the factor once your customer pays them.
Step 8: The factor pushes invoices to your customers. Depending on the conditions you agreed to, either you or your factor will contact your customers to remind them of their pending payment and the due date.
Step 9: The customers pay, with the money arriving at your factor. Since you’ve already received an advance payment from the factor, your customer’s invoice payment will be sent directly to the factor.
Step 10: The factor pays you the remainder of the advance request. Now that the invoice advance has been paid off by the customer, the factor will pay you the remaining balance of the invoice, minus the fee. Now that all payments have been received by all parties, the process is complete!
Benefits of invoice factoring
The key benefit of accounts receivable financing is that business owners don’t need to wait the standard 30-90 days to use the cash they’re owed – they can use it right now, as soon as they need it. In many cases, it only takes a day or two for the business to receive their cash from the factor, giving them peace of mind by knowing that they’ll always have the cash on hand to pay their employees and cover other expenses.
Many factors also offer expert support and guidance in collecting payments from slow-paying customers. This can reduce stress for all parties, as well as lead to improved customer relationships on your behalf.
Best of all, invoice factoring comes without all of the risks and complications of traditional bank loans, and doesn’t add any liability to your business’s balance sheet. It’s also less pricey than many other short-term funding options, like merchant cash advances.
Negatives of invoicing factoring
Invoice factoring is a cash flow management solution for business owners who:
- Need cash quickly
- Need to solve short term cash flow problems
- Don’t qualify for a traditional loan (since the factor judges your customer’s creditworthiness, not your own)
- But it also has negatives…
Invoice factoring may not be the right solution if you’re looking to receive extensive funding or long-term funding, or if you require a lengthy repayment period. It’s also worth noting that invoice factoring is not a viable solution for businesses who do not invoice their customers, such as B2C businesses.
Of course, it’s also cutting into your profit margins straight away, as you sacrifice greater revenues for the guarantee of cash flow. If you’re in a position where you’re overly reliant on invoice factoring, then you really need to look at the overall health and standing of your business.
In the end, choosing how to finance and fund your new business venture is not a decision that should be taken lightly.
Gage Price is the founder and president of MP Star Financial, a regional factor and asset-based lender located in the Cleveland Metropolitan area. Since his company began in 1995, Gage has advised countless businesses struggling with cash flow issues.
It’s guest post week and today we’re hearing from Drake Nicholson about the importance of Instagram. Despite the fact that I know IG is a high-ROI marketing tool for a number of business types, I have literally never used it, so it’s good that Drake pitched this guest post to me or y’all would have never gotten the dish on Instagram here at New Venture Mentor. Anyway, here’s Drake. Enjoy.
The advent of social media networks has changed the way businesses market their products and services. Businesses are now able to reach a lot of people without shelling out a ginormous amount of money. Using or not using any social media platform can be a big deal breaker for business people.
There are a lot of social media platforms at present and among them is Instagram. This is one of the most popular platforms out there with over 500 million active users. Instagram caters to around 95 million image and video posts daily. With all these stats, businesses can take advantage of using Instagram services.
Instagram, the modern Agora
The Agora was a gathering spot in ancient Greece. At present, you can say that Instagram is the Agora for people who want to see great pictures and videos taken by individuals. If your business does not have a presence in this “gathering place” then you are missing the perfect opportunity to get noticed by over 500 million people using Instagram.
The amount of user also determines the usage of the network. In recent years it has been estimated that 70 percent of the Instagram users check their account at least once a day and may spend around thirty minutes on the platform. The potential of your business is surely limitless on Instagram.
Show yourself on Instagram
By using Instagram services, your enterprise, whether it’s big or small, will have the chance to get noticed not only by local users but international users as well. Instagram makes this possible through hashtags and geotags. Geotagging means that you can put a geographical identification to the things you post on the network. When a user sees the post, they can pinpoint the exact location where the post was taken or posted. Used in conjunction with hashtagging, it becomes one perfect marketing tool.
The hashtag in social media acts as a quick search link for similar topics which are being discussed in Instagram. This will help users discover accounts and also pick up followers. Wouldn’t it be good for a business to be discovered and followed by millions of users?
The power of creativity
Another reason why it is important for your business to market using Instagram services is that it gives you the capacity to compete with big companies by just being creative with your posts. You no longer need to pay for a huge amount of advertising money just to contend with other businesses. You just need to post things which are visually appealing and give it the right tags. You can then promote your product to the world. Furthermore, Instagram gives you the flexibility to either post things originally or with its beautiful set of filters which can make your images more vibrant and interesting. There is no hassle, and everything happens in an instant.
Mingle with potential clients
Once you get the attention of users by using Instagram services you can then interact with them through comments. Users can comment on your posts, and you can do the same thing with theirs. The thing is the more interaction in your posts the better it is for your business. Interaction will help raise your posts trend and get your company more attention. Also, with the use of tags you can target which of the users will be interested in your products or services
If you are not yet sold on using Instagram services for your business then now is the time to think differently. The world is changing, and most people are now heading to the internet to look for the things that interest them. Everything is now heading online, and Instagram is the perfect platform to kickstart your business.
Drake Nicholson is capably competitive in industry content writing that suits the needs of every business. He can spice up your marketing campaign with the necessary content and then incorporate it into BuyRealMarketing services.
It’s guest post week again and today we’ll hear from Stephanie Lynch of HowMuchIsIt about some of the most commonly overlooked business expenses for new startups or small businesses that can really throw a wrench in your financial plan if you don’t remember to include them in your budget. Here’s Stephanie:
If you have always thought about starting your own business and being your own boss, good for you! It’s a great adventure that can reap a lot of rewards.
However, before you jump in, you will want to understand some of the costs you will experience, regardless of the industry you’re in. To help you better budget for these unexpected situations, here are 10 costs many small business owners often don’t think about.
#1 Permits and/or licenses to operate legally
In order to do business with your community, you more than likely will need a permit and/or license to legally run your operations. These requirements will vary by state the municipal area, so it’s best to talk with your local government or even do a search to see what kind of costs you’ll incur.
#2 You may need more office space
If you think you can run your business out of your home, that’s great; however, keep in mind some cities will forbid you from doing so. Businesses that often don’t have customers should be more than fine, but if you have a salon or any other sort of business which will have customers coming through your door, you may want to look into the local zoning regulations to avoid costly fines. If it is, indeed, forbidden, you will want to think about the office space costs in your area.
#3 Benefits to lure in great employees
When you hire an employee, you will have to more than likely pay more than their salary. You will also have to pay their medical insurance, training and any other benefits you may want to include. Remember, you don’t want to skimp on your benefits because this is what usually lures great employees to work with you. If you fail to offer a living wage and/or great benefits, you may see a high turnover, which in turn, can lead to higher costs since you will have to constantly re-train the new people.
#4 Insurance to protect your assets
Your business, whether it’s in an office or in your home, will more than likely need to be insured. At the very minimum, you will want some sort of employee liability and public liability coverage. It’s also a good idea to include illnesses, injury and property insurance. To learn more about what kind of insurance would be good for your business, it’s best to talk with a local insurance broker.
#5 Payment delays – you don’t always get paid
This is a hidden cost that irks many small business owners. Whether it’s a check your client forgot to send or a three-day delay because of a credit card payment, you may not get the payments when they are expected. Because of this, it can hurt your bottom line and may even cause some problems when you need to pay the insurance or rent bill – something that always needs to be paid on time.
#6 Using a professional service to help free up time
Running a business, regardless of which industry you’re in, is going to take a lot of work. What you may find out down the road is that you would rather outsource some of the things you do such as payroll or even cleaning the office. Each service, of course, will add up, but if you look on the positive side of things, it will free up more time for you to focus on your business.
#7 Credit card fees
If you want business, you will have to accept credit cards in today’s technological era. Sure you can accept cash and checks only, but you can bet on losing a lot of customers who want to pay with their credit card. Depending on the credit card being used, plan on spending at least three percent in fees.
#8 Time is money
I know this isn’t an expense per se, but you still have to value your time. In the beginning, you’re going to invest a lot of your time to make your business work. The problem, however, is when you break down the time spent, you could be getting less than a $1 an hour. While this can be discouraging at first, you have to picture it as an investment. As you slowly invest your time, you should hopefully see great returns in the future, creating a wage that surpasses what you’ve always dreamt about.
#9 Conferences and trade shows
Conferences and trade shows are a great way to network with like-minded individuals, but 99 percent of these shows will cost you money. Plus, you can’t forget about the airfare and hotels during your stay. While this is technically an optional expense, it’s something most business owners don’t think about down the road when they want to either show off a product or meet with others.
#10 Equipment repair
Sure, you have the new copier, computers and fax machine, but what about 10 years down the road? Anyone who has dealt with technology will always tell you that you should plan on replacing these gadgets every five to 10 years. While you may be budgeting for it now, you can’t forget about budgeting for new supplies and equipment in the future.
Stephanie Lynch is a freelance writer who also operates Howmuchisit – a cost-helping database. She is dedicated to helping consumers find out what unknown things cost in life.
It’s guest post week again. Today we’ll hear from Ian Dawkins of Blue Anchor SEO:
Starting your own business with little more than a great idea and a lot of determination is something that has always been a big dream for some entrepreneurs. People are often told that it takes years before you will even begin to see profit if you start a business of your own, which can scare many people away from actualizing a great idea. There is a large market for small business or start-up investment that can be seen on sites such as CMC Markets as many investors can see the advantage of coming into a small business before it becomes big.
One of the biggest problems that small businesses and startups face is capital to be able to expand or grow a business to the stage where they can begin making real profits. Some business models require that there be sufficient capital for any trade or commerce to begin. Without that initial investment, many businesses fail before they can be given the chance to succeed.
A key part of the business plan and the CEO’s job is to ensure that there is enough capital to achieve the business’ goals. The CEO must be able to keep track of the current capital and understand whether that is going to be enough for the current business plan.
The valuation of a business does not change over time if nothing much has changed. This means that what was first needed as far as capital is concerned a year ago does not change over time unless certain milestones have been reached. Some businesses mistakenly believe that just because there has been some progress in their company, but not a major milestone, that their company is now worth more. A milestone is considered a time in a company when the major company goals have been achieved and now they are looking for further investment to complete another stage of a larger business plan.
As an example, a software company’s milestones may look like the following:
- The progression from the seed round of investments – The major difference here is the removal of the major risk factors for investors. This can come about through the hiring of a key member of the team, overcoming a major technical obstacle, or development of a prototype. Customer reactions to a product that has been designed can also be a risk reducing factor.
- Beta testing and customer approval – An important step for a software company could be when it takes its product into beta testing and receives a positive response from its testers or customers. A key factor here is the validation from the customer, not just moving into the beta testing phase.
- Shipping of products – Once the product has started shipping and customers have paid, it can be an excellent time to expand and find more investors. Positive feedback from the client is important here.
- Market fit issues – Once the product is on the market, it may become clear that other features are required that may require hiring additional personnel or slightly redesigning the product. This can be cause to find more investors.
- The business has scaled well but the next step is required – After the initial response has been good and the business model is working, it is time to scale up and accelerate your company’s growth through further investment.
One of the biggest problems facing small businesses and start-ups is not being able to reach their milestones before running out of capital. An effective and realistic business plan is important to avoid this situation from happening, including adequate market research.
It is the CEO’s job to ensure that early spending is kept to a minimum to ensure that the initial investment that helped to start the company is not wasted by trying to do too much too fast. The hiring of additional sales staff before the product is finished is an example of a waste of the investors’ money in the initial stages of the company. Investors are on the lookout for these situations and will avoid investing.
The CEO also needs to know when milestones are hit and it is time to look for further investment into the growth of a small business or startup. Knowing when to find investors will not only make finding investors easier but it will also increase the valuation amount your company has.