How to Increase Customer Engagement with a Loyalty Program

A new customer is good for business, but it is repeat customers who make the business a success. Once a client has purchased your product, what strategies do you have in place to promote customer retention? One strategy to consider is a customer loyalty program to reward returning customers every time they make a purchase.

Many small business owners wonder if a loyalty program is worth the financial and time investment; however, it costs companies seven times more to acquire a new customer than to retain an existing one. In fact, 51 percent of the top 100 retailers in the US have a type of customer loyalty program. The retailers who offered rewards programs earned two to three times as much annually as the retailers who didn’t have a loyalty program in place. Based on the research, loyalty programs are highly effective.


Types of Loyalty Programs

There are different ways to create a loyalty program, and the one that’s right for you depends on your specific industry.


Points System

A points system is the most common type of customer loyalty program. Credit card companies are famous for offering reward points to customers, but many other businesses do so as well, such as Bloomingdale’s, Walgreens, Gilt, Best Buy, and more. This is done by offering repeat customers points for money spent. The main caveat to this type of loyalty program is not to make the conversion difficult or hard to understand, which many companies inadvertently do, or place strict limits on point redemptions, such as blackout dates. A simple and efficient program would offer 1 point for every $1 spent.

It can be advantageous to offer points not just for purchases, but also to encourage customers to market your business. You can reward clients who share your site’s link, write a review on a social media site, bring in new customers or check into your business online.


Member Only Cards

Another way to promote customer retention is to utilize member only cards that give access to exclusive discounts and promotions. CVS offers a free ExtraCare card that tracks customers’ purchases to suggest items based on their shopping history, as well as offer store coupons and other membership rewards.

Customers need to provide contact information to receive a member only card, which allows the brand to communicate with them via coupons, announcements and sales, thereby actively encouraging customer retention.

A disadvantage is that some individuals may forget or lose their card or coupons, which is why many retailers have created apps for members. By setting up an account on a store’s app, customers can access exclusive coupons and promotions on their phone without having to keep track of a physical card.


Punch Cards

Punch cards are good options for businesses that offer inexpensive products or services that are needed often. A customer is rewarded with a free item or another perk after receiving all the punches on the card. Businesses that can benefit from punch cards are carwashes, hair salons, fast food restaurants, children’s indoor playgrounds, etc.

The problem with punch cards is that they are small and made out of paper, so they often get lost or damaged. Instead of giving out punch cards, consider keeping track of your customers’ purchases on your end by creating a digital punch card through a customer retention management (CRM) system. This software allows business owners to enter and track clients’ information and alert them about their transactions and points through text messages.


There are many ways business owners can increase customer retention with loyalty programs. However, setting up and advertising these rewards is a financial investment not many small business owners can afford. A small business loan from IOU Financial can help in purchasing the required software and other materials to increase sales with a loyalty program.

6 Ways Overstocking Costs Your Small Business

When you are running a small business money is often tight. Companies need to make sure they allocate their cash strategically, because too much spending in one area can cause shortfalls in others.

One costly mistake can be overstocking inventory and materials. In a merchandising company, inventory represents the goods that will be sold. For a manufacturing company, overstocking can result from buying too many raw materials and components. In either case, overstocking can create several unwanted costs that can overwhelm the savings that comes from buying in bulk:

  1. Storage costs: When you have a large amount of inventory or raw goods on hand, you need sufficient space to hold the materials. That translates into leasing, buying or building storage facilities and warehouses, which must be secured, powered, insured and staffed. If you create additional warehouse space, you might see an increase in your transportation costs as well.
  2. Deterioration: Many things can go wrong when you have an overstocked warehouse. Often times, your merchandise and raw materials wait longer before they are removed for use. This is a critical problem for items that can spoil, such as foodstuffs, agricultural goods, pharmaceuticals and anything with an expiration date. In addition, every time an item must be moved, it is subject to damage that can ruin its value. Overstocking items can result in additional movements and staging that can lead to wastage.
  3. Shrinkage: The more materials your small business keeps on hand, the harder it is to guard it all. It’s easier for a worker to steal an item when it’s one of many, since its loss is harder to recognize. To help prevent shrinkage, you will have to spend extra money on security precautions. Any way you slice it, shrinkage is costly.
  4. Obsolescence: You might get a great deal on a huge order of some item, only to find out that it has gone out of style before you can sell off your excess inventory. Fads come and go, and the public can be fickle. Furthermore, you don’t want to get stuck with an item when a new, improved version is announced that makes your current inventory obsolete.
  5. Economic downturn: A recession can happen at any time, and with it a downturn in demand. They last thing you want is to be stuck with too many raw materials just as you cut back on production. That’s exactly what can happen if you buy too much at one time. Overstocking is the enemy of just-in-time manufacturing, which is the best way to keep your production in sync with demand.
  6. Unbalanced spending: Overstocking means over-allocating working capital to inventory and raw goods. You then might find yourself short of funds to finance the purchase of equipment, facilities and other capital goods, as well as to pay other expenses and liabilities. For example, you might order extra raw goods in anticipation of increasing production, and then realize you’ll need more trucks to transport the goods. If you can’t afford to buy the trucks you’ll need, your extra raw goods won’t increase production, but they will boost costs.

Sometimes, it does make sense to buy in unusually large amounts, such as when you are certain that all of the purchases can be used quickly to increase sales. If you find yourself short on working capital but want to take advantage of a great deal from a supplier, contact IOU Financial for a quick and easy commercial loan to tide your business over until you turn your purchases into sales.

5 Common Mistakes You are Making with Your Business’ Money

It’s a small business owner’s fear: making bad money decisions as soon as you start your business or turn a profit, losing assets, and ultimately going under. So how do you know where to effectively spend your money, where to cut costs, and how to budget? In other words, how do you know if you are making mistakes with your business’ money? Below are 5 common mistakes you can make early on with your small business’ money and how to fix them.


  1. Spending money on unnecessary décor.

Everyone loves to have nice things, but nice couches, computer desks, chairs, pictures, water features and plants all add up. Be simple, and design with a scalable mindset. Depending on your business, provide the necessities to operate and eliminate the over the top showroom look for now. Keep your space simple and functional, not flashy.


  1. Paying high advertising costs.

Save the funds you might otherwise spend on a newspaper, magazine or TV advertisement and instead set up social media profiles and a website with a clear message and call to action. With a strong social media presence and encouraging word of mouth, you can do a lot of advertising in-house without having to spend a lot of money. Grow through networking at trade shows and chamber events. Need additional tips on knowing how to invest in marketing with your limited dollars? We have some more tips on how to produce big results with your small marketing budget.


  1. Forgetting to negotiate.

Negotiations are vital in business. Always search for the best deal, best quality and an overall good product. Look into at least 3 options before spending your cash, and be your own advocate, just like you would if you were searching for services as a consumer. The business world has a multitude of connections for you to take full advantage of. Don’t forget you can increase your odds of a good deal by partnering with and maintaining a good relationship with your vendors.


  1. “Giving away the farm.”

A big misconception is that you need to offer up a deal to get clients. Promotions, coupons or free services often don’t lead to repeat customers. They lead to one timers looking for a bargain. Be cognizant of your offerings to get business. If you discount too steep you may lose money, and you want to focus on attracting clients who are in it for the long term.


  1. Expanding too quickly.

Expansion is positive, but you need to plan for added costs, regardless if you are online-based or running out of a brick and mortar store. Grow your local base and cash reserves for a year before taking on any more expenses. When it is time to expand, test the waters and start slow. For new brick and mortar locations, ensure the distance is within a days’ time back and forth from your home base. If you are online, ensure that your website and inventory can hold up to the new traffic in your new target market.


The underlying rule is that keeping a budget and sticking to a plan will keep money from going out the back door. When you think of the money you bring in don’t forget about the potential costly mistakes you may be making with your money along the way too!


If you need help tracking your spending, get a Business Budget resource to help you track and analyze your spending. Share with us your thoughts on what ways you have found to not make the same spending mistakes.

Slow Season Business Tips for Hair Salon Owners

Hair salons have peak and slow seasons, just like most other small businesses. Typically, a decline occurs in the summer, when warmer weather keeps clientele outdoors, according to Salon Today. With children out of school, most families travel or spend more time at home and don’t have the time to stop by the hair salon. However, the slow season is no time to rest for the salon owner. Take advantage of those empty appointment slots by using your time to develop creative ways to promote your small business and prepare for the busy season.


Think Outside the Box

Creative strategies can prove to be extremely advantageous during the slow months. Consider ways in which you can encourage walk-ins and increase repeat sales.

  • Utilize social media, such as Facebook, Pinterest and Instagram to share photos of your work and advertise any specials.
  • Have “pop up sales” and offer discount prices on hair treatments or merchandise (hair shampoos and creams) for a few days. Announce the sale on social media, on your salon’s website and on the outside of your salon. Individuals are incentivized by good deals, and may make time for a hair appointment to save money even if they weren’t planning for it.
  • Word of mouth can be the best advertising; create a referral program where you reward your existing clients for bringing in new business. You can offer a free blow dry with a paid haircut or a discount on the next treatment for any customer who brings in a friend.
  • Diversify your services by offering classes. You can teach people how to braid hair, how to give themselves the perfect blow-out, or how to curl hair with their straightener.


Improve Operations

During the months that you are booked solid, you likely do not have the time to improve your daily operations. Utilize the free time that you have during the summer to organize your salon.

  • Take stock of inventory to determine what new items you need to order to prepare for the busy season.
  • Clean out your stock room to make everything easy to find.
  • Evaluate the condition of your salon and consider making improvements to improve the space, such as adding more sinks for hair washes or a larger waiting area.
  • Don’t just focus on the inside of your salon; find ways to improve operations online as well. Contact an online marketing professional to discuss marketing campaigns that can help you reach a wider audience. You may need to redesign your website or invest money into advertising to boost sales.


Train Staff

During the slow season, you may have had to let some of your staff go, but don’t forget to prepare for the busier months. Give yourself enough time to find experienced salon staff that specializes in the services you offer, such as haircuts, hair coloring, keratin treatments, etc. You may want to give each employee a trial period to verify skills before committing to hiring them when times get busy.


Need funding to make some of your new ideas a reality, or just help with your cash flow, before things get busy? Contact IOU Financial for information about small business loans and how to get pre-approved for a loan in 24-hours.

The Benefits of Good Budgeting for Your Business

If you’ve been managing your budget on the back of an envelope, you are denying yourself a powerful tool that can make the difference between your small business’ success or failure. A proper expense budget not only serves as a roadmap for how you will be disbursing funds, but it also functions as a reality check by tracking your actual cash outflows against your projections. Good budgeting lets you objectively gauge whether your business strategy is working and highlights areas that need improvement.

Budgeting and Tracking Expenses

For the typical small merchandiser or manufacturer, the first step in creating a proper expense budget is to tease apart the costs of goods sold from your other operating expenses:

  • Costs of Goods Sold (COGS): These are the costs that are directly related to the items you sell. They include the payroll costs of direct labor, purchases of raw goods and/or inventory, purchases of directly related non-inventory items (like lubricants and packing materials), outside services used to help produce or sell your product, as well as other direct costs. Most of these costs are fixed, but the inventory purchases will obviously vary from month to month.
  • Operating Expenses: All the expenses that didn’t go into COGs are budgeted and tracked as operating expenses. These include the payroll for administrative and support staff, non-inventory materials not directly related to the production of goods (such as office supplies), outside administrative services, rent, utilities, travel & entertainment, and loan Everything except utilities can be considered a fixed cost.

The difference between your sales revenue and COGS is your gross income, whereas you have to subtract your operating expenses and taxes to figure your net profit.

Benefits of Tracking Expenses

Here are four good reasons to adopt proper budget tracking:

  1. Streamline areas of overspending: By tracking your actual expenses, you know immediately whether you are busting your budget with overspending, and if so, by how much. You then have two options. The first is to revamp your operations so as to streamline your overspending. This might mean changes to the sources and amounts of inventory and non-inventory items you purchase each month, as well as the size of your payroll, your use of outside services, and the amount you spend on travel & entertainment. The second option is to increase your budget for items that can’t be streamlined. Most businesses use both of these strategies to keep spending in check.
  2. See how your cash flow is affected with fixed vs. variable costs: You have immediate control over your variable costs, but fixed costs take time to change. If you see a lot of cash flying out the door due to high fixed costs, you can start planning ways to lower those costs. For example, you might want to find ways to cut your rent or your payroll. When too much money is being spent on variable costs, you can take steps to cut costs right away.
  3. Analyze spending patterns over time: Budget tracking helps you recognize trends. For example, inflation may increase the cost of your raw materials in a steady, predictable way. If that’s the case, you can incorporate this information into your budget going forward. Budgets also help you recognize seasonal spending patterns, which are extremely important in planning how much cash you’ll need on hand for the upcoming period.
  4. Realize areas of new opportunity for investing time and money: You might find that buying inventory in larger batches lowers your price per unit, but that you’ll need to enlarge your storage facilities to take advantage of this cost break. A budget will help you discover and plan for this and many other opportunities to lower your costs and/or increase your revenues. It can also show you when it makes sense to borrow money to finance your business’ growth.

Convinced? IOU Financial is making it easier to create and track your expenses by offering our free Business Budget Smart Sheet. Simply fill out the short form to download the planner, which is extremely adaptable and easy to use. Don’t delay, because the sooner you organize your budget, the sooner your business will reap the many benefits of tracking your spending!

Top 4 Things to Do When Your Staff Size Doubles

It’s official: your small business is a true success. You have the leading edge against your competition, your business is growing and you’ve jumped from a couple employees to more than you imagined. While this is exciting it is also scary if you don’t know what steps to take. What to do next? Managing new employees while continually growing your business is hard work.  In this post you can learn the top things to implement right away when you double your staff size.


  1. Adopt a Policy and Procedures Guidebook

Each company should have a document available for all their employees outlining company expectations.  Think of this as a rule book that has clear and concise guidelines of what you will and will not tolerate as a business. This is a vehicle for you to ensure commitment from employees as well as create a standard to follow. Have employees sign a document of understanding after they read it. This will benefit you and the employee in the long run.


  1. Hire a Human Resource Manager

If you are adding more staff, make sure to set aside a position for HR. Every small business should have that one person to filter employee concerns, challenges and daily requests. Having an HR representative is a vital piece of employee satisfaction in the workplace. HR can mediate and act as your conduit to more effective communications with your employees. If you’re on a budget and can’t hire a full time, in-person staff member, you can find plenty of virtual HR companies who can work with you to help support your new, growing staff.


  1. Offer benefits

The costs of healthcare and other employee benefits are skyrocketing, but offering employee benefits can help you attract new talent and retain existing staff. Employees that have medical benefits often find that perk too valuable to lose, so they stay longer in the job. In addition to healthcare, consider offering 401k matching and/or profit sharing. 3%, 4%, or even 6% company matching helps and goes a long way. It keeps people working as they see their retirement grow. It is a win-win situation when you have employees that are appreciated.


  1. Conduct Training

New staff want to know how to do their jobs well. Empower your employees to be their best by training them on their specific roles and minimize overload. It’s also important for new employees to learn about the history, mission, goals and future forecast of the company they work for, so training is a great time to share your business’s story. Remember, these folks are new, but they have value to add to your growing business right away.

By taking these steps you are setting up for success as you task out the next move for your growing business. Employee satisfaction, consistency and communication are vital in expanding, and it is important to remind yourself why you are growing and why you are where you are today. Ultimately, success will continue if you hire the right people for your team and treat them well.

Need to get your ducks in a row before your business’ busy season? Let IOU Financial help you secure additional capital so you can hire during your slow season, get employees trained, and serve more customers when demand is high!

Expensive Small Business Credit and How to Avoid It

The longer you’ve been in business, the more likely you are to know that credit is necessary for a small business to operate. It allows for expansion, improves profitability and increases operational efficiencies. It also makes it possible for smaller businesses without big bank accounts to meet their daily expenses when they have a cash crunch. While credit is essential to a small business’s operations; it is equally important for small businesses owners to consider the cost of their credit. (You didn’t think the cost of credit was the same for everyone, did you?)

One of the important factors that affect the cost of credit, is time. Many small businesses need quick credit decisions, and they often don’t have a long credit history or major assets to use as collateral to receive credit. As a result, they end up paying more than they should to access secure funds when needed.


The Cost of Expensive Credit

While credit is necessary for small business growth, expensive credit isn’t worth using. Paying excess interest and fees to access credit can counteract the benefits achieved from obtaining credit, and can actually ruin a small business’ financial position rather than improve it.  The common credit options available to small businesses include merchant cash advances, credit cards, lines of credit, and loans. Merchant cash advances, credit cards, and lines of credit may be more accessible to small businesses, but they have major pitfalls: they are prime examples of expensive credit.


Types of Credit for Small Businesses

A merchant cash advance is a quick way for a small business to get desperately needed cash, particularly by those with bad credit or lack of a credit history. While merchant cash advances are beneficial in that approval is somewhat easy, the fees on these cash advances can be astronomical, and can even continue to cost you money after your balance is paid. They should only be used when a company is in a major bind.

Another option for obtaining credit is using business credit cards. These are not ideal for making larger purchases, because they commonly have high interest rates, but are instrumental in establishing credit that isn’t tied to your personal accounts. Credit card debt can serve up a double whammy when it comes to costs because if you don’t pay off the balance each month, the interest compounds. For example, if you charge $5,000 on a credit card with a 20% interest rate and make a $100 per month payment, it will take you 100 months to pay off the debt and you will end up paying back $10,900!*

Another, slightly better option than the already discussed options is a line of credit. A business line of credit provides you with capital to draw upon to meet a variety of business needs. However, it is harder to gain approval for a line of credit than a high interest credit card, and definitely more difficult to access than a merchant cash advance. With a business line of credit, you can draw it down as needed to access more capital. Lines of credit are meant for short-term expenses, and are not intended to be used to fund large one-time purchases, because interest and fees need to be paid based on the amount that has been accessed. Paying off these (typically) large monthly sums immediately after receiving your line of credit can put a strain on the business owner who is trying to manage daily cash flows. Usually the term on a line of credit is shorter than a conventional loan and the interest rates are higher.

For small businesses (in terms of cost) a bank loan is one of the best sources of financing. However, two major downfalls of a bank loan is convenience and accessibility. Big banks often take a long time, sometimes many months, to evaluate a business’s loan application. This can include weeks or months of preparation for the business owner to submit the documents required by the application process. For small businesses, even after waiting all of this time their loan request can still be denied due to lack of credit history, not enough revenue, or imperfect credit. If the loan application is eventually approved, the funds often arrive too late to be used for what the business originally intended. Fortunately, there are other options for small businesses.


Finding Faster, More Affordable Sources of Funds

For businesses that are seeking a faster application process, affordable payments in smaller increments, and with a more flexible set of requirements, is a small business loan from a company that specializes in lending to small businesses. At IOU Financial, we specialize in small business loans, and offer a no risk application, instant pre-approval, and easy daily payments. We understand how important the speed of credit decisions can be and that you may not have perfect credit or a long history to back up your request. We will look each business’ unique situation, make a full decision in under 24 hours.


*interest calculation

Timing and Scenarios to Consider Before Giving an Employee a Raise

In today’s environment, employees tend to feel as they are working WAY harder than they have in years past. They are taking on additional responsibilities and feel under compensated. For companies in the position to use raises to reward and retain employees, the common question is often, “When is the right time to offer an employee a raise?” Ultimately it’s your job as a business owner or manager to identify the right time to initiate that dialogue. Small businesses can’t afford to just give away money, so we’re presenting the following scenarios and times that indicate a raise could add to your bottom line when other employee retention ideas just wont cut it.


Three Scenarios to Consider Before Offering a Raise:


  1. Longevity and Loyalty

Employees with proven commitment and long-term loyalty are great candidates for a raise. They help your small business grow because they have continued positive attitudes and focus driving business in the door and not out of it. Before making your decision, have a discussion with the employee about their long-term goals within your company. Don’t wait until it’s too late (a resignation letter) before evaluating important team members that have demonstrated their value.


  1. Innovative Employees

Do you have an employee that routinely steps outside the box to help make the workplace more productive? Is there a member of your team that spearheads new ideas and concepts on their own without shying away from the additional responsibilities involved? This type of employee is self-motivated, driven, and confident. Reward the mindset of goal orientation. Innovation is something that continually drives companies to develop better products, bring in great ideas and help ride the waves of an up and down market. Set an example that being motivated and results-driven is rewarded in your small business.


  1. Employees’ Consistent Results

Does your organization have that one sales person that consistently blows their quotas out of the water? Is there an employee that is always on top of their metrics? Maybe you’ve consistently received high praise about a specific employee from customers. Pay attention to specific feedback and achievement of goals among team members over time to identify employees that aren’t just a flash in the pan, helping to ensure you’ll get a great return on the money spent on a raise. Sales people are particularly performance and money motivated, so monitoring progress towards goals allows you to define additional compensation-related incentives.


Three Key Opportunities to Offer a Raise:


  1. Employees’ Annual Review

Raises mean more when they are awarded less frequently, but often enough that they might be on employees’ minds. An employee’s annual review is a perfect (albeit conventional) time to discuss compensation and consider a raise. It’s when you both reflect on the past years’ work and the value the employee has had on your company. When a positive employee review illustrates proven results, successfully handling additional responsibilities, and team-oriented thinking, a raise is one way to reward and foster that type of work ethic. A raise tied to a performance review can also help motivate your employee with an increased sense of their value and improve their job satisfaction.


  1. Hiring Additional Employees

If you’re accomplishing the goals you’ve set for yourself, hopefully, your small business is growing. As such, you’re going to need more staff. While you might be juggling budgets to find the funds to expand the headcount, don’t forget about the folks who have been holding down the fort while responsibilities continued to increase. These employees have been carrying extra weight, probably working beyond their original job duties, and are responsible for putting your company in a position to grow the team. Before hiring that next employee, consider giving these key performers a raise because you will be relying on them to train and help new staff learn the ropes. Offering this raise rewards those who are going to continue to share the growing pains right alongside you.


  1. Promotions

When employees think promotion, they’re usually thinking more money too. When employers think promotion, they’re probably thinking about increased productivity and additional value to their company (and yes, more money). When an employer offers up a promotion it says the employee’s work is highly valued and that management is confident that they will succeed at the next level. Of course, the next level comes with additional or different types of responsibilities, which often means a new level of salary, making it the perfect time to offer up a raise. It is a great reinforcement and return on your employee investment.


With even the most optimal situation, triple check to ensure you have the funds to provide a raise that is sustainable. Give your employees a roadmap to achieve future raises. Give yourself time to evaluate employee performance by making it part of your annual review process, and maintain consistency and fairness.


If you know you need to increase the salary of a few key employees, but need to stabilize your cash flow to make that happen, consider a small business loan from IOU Financial. Many small businesses use working capital to hire more staff, and give promotions when needed.