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3 Factors that Can Make or Break a Business Expansion Plan

Business expansion is an exciting endeavor for any small business owner. Taking this step means that you have successfully sold your product or service, and it has been well received by the public. You now know that scaling your small business up could bring in some real profits. However, many small businesses fail after their first or second year because of their lack of planning.

Before you try to secure financing, take some time to reflect honestly on whether you will be able to maintain sufficient funding, execute the right marketing campaign, and hire the right employees. Without planning for these three factors, you could find that your attempt at business expansion creates a drain on your limited resources.

 

Sufficient Funds

It takes money to make money, and your expansion project will need funds to ensure your business continues to grow while maintaining normal operations. Calculate how much capital you would need to ensure your added revenue from expansion will make up for the costs associated with the project. Crunching the numbers will help you avoid either taking on too much debt or finding yourself short on funds. For information about the right questions to ask about your business’s cash flow and how to start securing financing, check out “3 Steps to Plan for Successfully Expanding Your Business.

 

The Right Marketing Campaign

While you may have had success with word-of-mouth referrals or small online campaigns to generate initial profit for your company, you will need to inform customers of the changes you are making to drive more traffic for your business. A targeted marketing campaign can help grow demand for your products or services, and even a small budget can make a big impact. Don’t know where to start? Check out our recommendations for getting the most out of your small marketing budget. If you don’t have the time or expertise to coordinate a campaign yourself, consider hiring a marketing professional or a PR firm to create and spearhead this marketing campaign for you. If you opt for this route, make sure to budget for these costs when you lay out your business expansion plan.

 

Experienced Employees

While you may have started your small business out of your garage with one great idea, make sure you plan ahead for hiring. Spend some time reflecting on your own strengths and weaknesses so you know when to ask for help. Depending on your area of expertise, there may come a time when you will need to hire managers to run certain aspects of your business so you can focus on new product development or customer acquisition.

Skilled and hard-working employees can often mean the difference between success or failure because you have to delegate tasks as you grow. Take interviews seriously and hire individuals who show high levels of drive to help your business succeed. Don’t overlook the dollars and cents of hiring as well. Taking time to estimate and plan for the costs for hiring staff can be just as important as getting the right employees in the door.

 

Taking on a business expansion project needs to produce a significant revenue boost to ensure the time, money, and energy are all well worth it. With some planning ahead and estimating the costs of things like hiring and marketing, you can set yourself up for success.

For more tips about how to jump start your expansion, contact one of our Small Business Loan Consultants. We are here to sort through your ideas and see how you can get financing to make your goals a reality.

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Banks Aren’t Lending: Kevin O’Leary Interviews DaVinci’s Pizza Owner

Today’s small business owner can struggle for months with a bank to receive the smallest amount of financing. Kevin O’Leary understands small businesses and got involved with IOU Financial to ensure small business owners always have access to affordable capital!

O’Leary interviewed Jason, owner of DaVinci’s Pizza, who waited for months only to be denied by a bank for a loan. When Jason found IOU Financial – he was approved and funded in under a week!

If you are a small business and working capital is the only thing holding you back from expanding, give IOU Financial a call. We can help restaurants expand their seating area, retail stores grow their product line, doctors update their equipment, and so much more!

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Cash Flow Assistance for a Growing Small Business

Specializing in LED lighting and solar electric panels, Ohio Valley Electric has tripled its growth in the past years.  With five-plus years in business and an A+ BBB rating since the start, John, the owner, counts his success to always going the extra mile for his customers. “We started the business to help people, and when customers send you a payment in the mail and attach a thank you note; it makes all the hard work worth it,” said John.  solarpanels

Recently, the Indiana-based company sought additional working capital from IOU Financial. “Turn around for us on large jobs is often weeks or even months from ordering product to completion.  This causes our funds to become too tight to operate on,” explained John. The IOU capital allows the small business to finance the jobs that come its way in a proactive manner. “IOU gave us the funds to order material for existing jobs, as well as money to get our message out to more people,” said John.

“IOU seemed to be more flexible then the other people we talked with.  As a small business, you need to work with people that are flexible and helpful,” explained John.  “Some places require so much time to go through the process, and as a small business owner, time is too important for me to waste.”

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Maximizing Profits With Better Inventory Management

How Inventory Management Can Make or Break Your Small Business

All small businesses are focused on driving sales in order to boost revenue, but businesses that sell goods rather than services have the unique challenge of managing their inventory in a way that maximizes their profits. Small business owners rely heavily on the profitable sale of inventory to grow and stay in business. Gross margin — the difference between an item’s selling price and its acquisition cost — can be affected by several factors, both internal and external. How a business owner thinks about and handles inventory decisions and accounting can affect the bottom line, and it involves more than just deciding what to buy and when. Here are four of the most important factors related to inventory management:

  1. Economic Environment: It’s always wise to run a tight ship, but never more so than when the economy slows down. When sales slow down due to the economy, a “tight ship” means buying or making only enough inventory that can be sold in a relatively short time period. If the economy turns inflationary (costs of goods increase faster than expected), consider talking to your accountant about “LIFO” inventory management. Using a last-in, first-out inventory costing approach allows your cost of goods sold to mirror the most recent inflationary price hikes. This can benefit your business because it can lower your taxable income and income taxes.
  2. Market Environment: Today’s taste may be tomorrow’s waste — that’s the way it can go with a fickle consumer base. When some of your inventory goes out of style, your best move is often to mark down prices and take an accounting loss. The result is you restate your inventory value at the lower of cost or market, which in this case is market value. The benefit to your business by doing so, is that it boosts your COGS (cost of goods sold) and thereby cuts your annual taxable income — or even hands you a net loss for the year. Either way, it reduces your tax bill. You might have to write off inventory because of external factors like product recalls, boycotts, obsolescence, bad publicity and tariffs, to name a few.
  3. Shrinkage: Shrinkage – no, we’re not referring to George Costanza here — theft, spoilage, damage, short shipments, misplacement are all big enemies of profits. Fight back with cycle counting, in which you perform a daily physical count of a different part of your inventory. Repeat the cycle until you’ve surveyed all of your inventory, then begin again. The advantage is that you’ll detect shrinkage much sooner than if you had waited until the end of the year to perform an inventory check. The sooner you discover a problem, the sooner you can address it. If you uncover an issue, some potential ways to address it include adjusting your storage and security procedures, changing management or security personnel, finding new suppliers, or at worst, fire a dishonest employee.
  4. Inventory Tracking: Even if you’re running a small business, you can still consider automating your inventory tracking from inception to sale. High-tech features such as bar code scanners and radio frequency guns can track all movements of your stock items, allowing you to establish a perpetual inventory system saving you buckets of time that can be invested elsewhere to grow your business. Making investments in inventory tracking pay off with timely, accurate information about goods on hand and COGS. You also might be able to delay or reduce time spent on physical inventory counts. To maximize your benefit, take the extra step to integrate the information into your accounting and procurement systems.

 

Just remember, inventory management is all about maintaining and maximizing your margins. Being mindful of your economic or market environment can help you plan ahead, and implementing proper tracking can help you use all your inventory to its full potential.

Would additional working capital help you optimize your inventory management? IOU Financial is here to help. We offer business loans up to $150,000 that allow you to keep the right amount of inventory you need on hand, and establish the tracking you need to manage it effectively.

3 Tips on Social Media Presence for Your Small Business

3 Tips to Build a Stronger Social Media Presence for Your Small Business

While in the initial phases of starting your small business you may have created a Facebook or Twitter page without giving it much thought. Now that your company is operating smoothly, you may be looking to expand, and a stronger social media presence could be just the place to start. Social media plays a huge role in your SEO, customer service and outreach, competitive advantage and more.

Here are three important tips for kicking your social media presence up a notch:

  1. Be consistent – Consistency, in both the frequency of your posts and positioning of your content, is key when talking about anything on social media. Why? Social media is time sensitive, and consistently having content is how you build your brand, allow customers to see what you have to offer, and let  potential customers get to know you better. By posting consistently, you will be staying top of mind for customers and giving them special insight into your day-to-day business.  A good way to help yourself stay consistent is to write down a short plan that includes how often you plan to post and what kinds of content or offers are the best fit for your page. Updating this plan each quarter helps ensure your content remains fresh in the eyes of your audience.
  2. Engage with your audience – It’s imperative that your content is not only consistent, but engaging. Give thought to who your followers are and what topics are relevant to them so your content is more likely to be clicked on and shared. You can inform them of a helpful product or service, ask a question that entices them to start a conversation, or provide a quote that will strike a chord. Make sure each post provides a way for your audience to take action, whether that is clicking on a link back to your website or leaving a comment. And when people comment and engage with you, don’t be shy—reply to direct messages, comment back, and like their posts. It’s important to remember that social media is a two-way street.
  3. Don’t neglect reporting – Take time each week to check the built-in reports each platform has to offer. Almost every dashboard can tell you who you are reaching when, and whether or not they are clicking on and engaging with your content. Use this data to improve your content and adapt to your audience. For example, if you see that a peak in engagement typically occurs after 7pm, that’s the time to post your most important content. Maybe you notice that a new demographic has started following you, providing you with an opportunity to start offering targeted specials. Reporting can even help you track how often your competitors post and how engaging their posts are.

The power of social media for your small business should never be underestimated. Once you have committed to consistency, engaging content, and reporting on your performance, be sure to continually adapt your strategy based on the results you are seeing.

For more social media insight, check back with the IOU Financial blog. Happy posting!

3 Steps to Plan for Successfully Expanding Your Business

Expansion is an exciting prospect in the life of any business. Normally, it denotes that your business is doing well and will benefit from growing bigger. It’s also a challenging prospect, in that it can interrupt your normal operations and require additional resources, such as a business loan. Expansions are risky, and there are always obstacles in the way. What do you have to do to maximize the chances of success?

We’ll cover three steps to plan for a successful expansion: know your numbers, prepare a plan, and secure financing. While these steps don’t ensure success, failure to take them is likely to cost your business money, limit growth potential and even risk its survival.

Know Your Numbers

Before plans are even started, make sure these changes will really boost your business growth.  Determine whether your business needs the expansion based upon your cash flow: sales volume, your costs, and the difference between the two (your margins).

You might find that you’re not really growing and therefore expansion is not a good idea. If you find yourself in this position, work on removing obstacles to your growth before moving forward. These obstacles could include:

  • Not meeting your sales targets: Do you have the right marketing strategy and sales team? Do you offer the right product or service mix?
  • Not containing costs: Do you have a handle on your business expenses and keep them under control? Are you racking up bad debts due to poor collections?
  • Spread too thin: Are you working 100 hours a week and making bad decisions because you’re not getting enough sleep?
  • Not exploiting opportunities: Could you grow your sales and profits by buying more inventory, adding personnel/equipment or expanding your operations?
  • Not managing your cash properly: Do you sometimes run low on cash and have to postpone disbursements or purchases? Is your working capital too puny to optimize your revenues?

Prepare a Plan

You will never be able to anticipate 100 percent of what you’ll need for growth and expansion, but creating a complete business plan can reduce your unknowns. The plan should specify:

  • A roadmap to execute the expansion, including acquisition of new equipment, fixtures and other assets
  • Estimated one-time costs and new fixed costs, including financing costs
  • Anticipated changes to sales and margins
  • Amount of downtime expected
  • Timeline and strategy for recruiting additional staff
  • Anticipation of things that could go wrong and how much will be held in reserves

Make sure your business plan is detailed, complete, and written down.

Secure Financing

Once you know your numbers and have a plan, you are ready to seek financing. Most small businesses are not able to finance the expansion of their location out of pocket without stretching their funds too thin and need a loan.  You might turn to a bank, but banks reject many loan applications simply because of credit scores, and the slow, tedious application process involves a lot of paperwork.

To save yourself a lot of time and hassle, you might consider a trusted alternative commercial lender. There are a variety of options online that can do microloans, cash advances, or small business loans targeted for specific purposes like equipment leasing or working capital loans. Alternative lenders may be able to weigh other factors beyond credit score, like the overall health of your business, and provide quick turnarounds, some even as little as 24 hours.

 

If you decide to go with an alternative lender, make sure to research and vet them thoroughly, and educate yourself about their rates and their repayment terms. The last thing you want to happen is to disrupt your cash flow.

If you follow these steps, you will be well on your way to planning for a successful expansion! You can contact IOU Financial if you have questions about these steps and how to make financing your expansion a reality.