One of the hottest business buzzwords during the coronavirus pandemic has been “pivot” — the concept of businesses reinventing and shifting strategies. Turning this term into action has become a necessity for many as the sociological and financial fallout from COVID-19 has hit the entire world economy hard.
By the numbers, small businesses across the US have indeed embraced the pivot: 92% reported changing at least one aspect of their business since the onset of COVID-19, according to data from a recent survey that was released online last week.
The survey, conducted by software recommendation platform GetApp, also found that many businesses pivoted in “multiple ways.” Only 8% of the 577 small business leaders surveyed didn’t report altering their business model at all.
For 58% of businesses, pivoting has included incorporating “a new online delivery channel.” Other common tweaks mentioned in the survey include adding a new virtual service (40%), offline delivery channel (36%), or product (31%).
COVID-19 Necessitated Quick Pivots
GetApp specifically highlighted Asahi Imports, a small Japanese grocery store and delicatessen in Austin, Texas that quickly incorporated online shopping and curbside pickup to meet customer needs.
“With the pandemic, we had to act fast,” Asahi Imports owner Sally Matsumae said. “We had to scramble to get some sort of system that shoppers could use to tell us what items they wanted without having to step into the store.”
The survey also found that companies that have pivoted were three times more likely to report increased revenue. However, there are still challenges facing pivoting businesses. For instance, 22% reported that their staff lack the necessary skills for new approaches while 16% noted a scarcity of cash.
Despite any challenges, a whopping 96% of businesses plan to keep at least some of their changes, a finding that Matsumae agrees with.
“I think curbside shopping and home delivery are here to stay,” she said. “Weâve always wanted to do it and COVID just sped the process along.”
According to the survey, 43% plan to keep all changes, potentially indicating that pivots have proved successful for many small businesses. 81% of respondents were also bullish that Q3 revenue will beat Q2.
“Ultimately, what matters most is getting your business online — how you do it is less important,” Zach Capers, a senior content analyst at GetApp, wrote in the survey’s report. He later added: “Small businesses will need to continue innovating until customer behaviors stabilize.”
GetApp’s findings parallel other reports, such as those in The New York Times — in May, the Gray Lady covered several companies that utilized pivots in an effort to survive COVID-19. Elsewhere, The Washington Post reported over the weekend how small wineries are turning to virtual tools to thrive amidst the pandemic.
The ubiquity of the pivot has also seen the rise of tools aiming to guide businesses making much-needed shifts. In this vein, Merchant Maverick recently covered a new webseries dedicated to helping businesses find new ways of building revenue.
How Your Business Can Pivot
In its report of the survey, GetApp highlighted five areas where businesses can pivot:
Online delivery channels. Turning to online marketplaces or taking orders via the web can provide brick-and-mortar businesses with a boost.
Virtual services. Crafting a virtual version of a business’ existing services may potentially reach a wider audience, such as those who live further away.
Offline delivery channels. Adding curbside pickup or home delivery provides customers with more convenience (and more safety during COVID-19).
Designing new products. A new product can make up for lost revenue from existing streams.
Targeting new customers. If a business loses revenue from one subset of customers, refocusing on a different group could make up some lost ground — such as commercial suppliers selling directly to consumers.
For more tips on how your business can handle COVID-19, check out Merchant Maverick’s guide to outbreaks and pandemics.
H/T Small Business Trends
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The post Survey: 92% Of Small Business Have Pivoted Due To COVID-19 appeared first on Merchant Maverick.
Creative, crafty people everywhere have found a home on Etsy, the online marketplace for unique handcrafted items. Since its origin in 2005, Etsy has grown to become a community of 2.5 million active sellers and an impressive 46.35 million buyers. In short, Etsy is a handcrafted powerhouse.
Well, now there’s a new player in town, and it’s not just a powerhouse. It’s a genuine eCommerce behemoth. (Or at least, it’s a part of a behemoth.) Amazon Handmade is a microstore within the Amazon.com framework. It shares some commonalities with Etsy â and some key differences.
Screenshot of Amazon Homemade page, captured 7/28/2020
Is Amazon Handmade right for you?
Amazon Handmade is a sales platform within the larger Amazon marketplace. It was carved out for a special type of product: handmade items, as the name suggests.
Amazon Handmade has a distinct advantage: access to Amazon’s enormous customer base. There are 112 million members of Amazon Prime alone. The company’s loyalty program is known for its free two-day shipping on many items. Prime membership represents about 82% of American households, and when you list items on Amazon Handmade, you have access to that existing customer base. They can search Handmade as another category on Amazon, much like appliances or books.
Screenshot of Amazon’s search menu on the home page, captured 7/28/2020
Who Can Sell On Amazon Handmade?
Unlike a vendor selling on the main Amazon platform, if you want to become an Amazon Handmade vendor you must apply and be approved before you can set up shop. For your application to be approved, you must demonstrate that you meet certain conditions:
Items must be created, altered, or assembled entirely by hand, i.e., not from a kit.
Items must be handmade by you; by an employee, if you have 20 or fewer employees; or by a member of your business if your business has fewer than 100 people.
Hand tools and light machinery are allowed in a home studio or workspace, while mass-production using assembly lines or automation technology is not allowed.
It’s okay to add your own designs to pre-made items, such as fabric or porcelain.
Upcycling and repurposing are allowed.
Dropshipping and reselling are off-limits.
Some of those requirements deserve a little more explanation. Amazon Handmade defines as independent makers as those who work alone or with fewer than 20 friends, family members, or employees. The following collaborative groups are singled out and approved for selling on Amazon Handmade.
Cooperatives: A group of makers working toward common economic, social, and cultural needs
Nonprofits & Non-Government Organizations: Groups dedicated to furthering a social cause or a shared point of view
Social Enterprise: Organizations with a goal of empowering and supporting collectives of makers creating one-of-a-kind, handmade products.
Furthermore, only certain types of handmade items are welcome on Amazon Handmade. If you want to be an Amazon Handmade artisan vendor, you can sell products from the following categories.
Accessories
Artwork
Baby items
Beauty and personal care
Clothing
Shoes
Handbags
Home items
Outdoor and home care
Jewelry and watches
Kitchen and dining
Pet supplies
Sporting goods
Stationery
Party supplies
Toys and games
Note that no digital or downloadable products are allowed. Electronics and food and grocery items are notable exceptions also.
Amazon Handmade Fees & Pricing
Remember that huge customer base Amazon gives Handmade vendors access to? That access comes with a price. Expect to pay a “referral fee” on each sale you make via Amazon Handmade. Amazon will deduct 15% of each sale or $1 per sale, whichever is larger.
Amazon does not charge any other fees associated with Handmade sales. Amazon’s Handmade vendors currently are exempt from the normal $39.99 monthly professional selling fee.
Screenshot of Amazon webpage, captured 7/29/2020
The Pros Of Selling On Amazon Handmade
Intrigued by the thought of gaining access to Amazon’s enormous customer base? Looking for a new marketplace for your handcrafted items? Amazon Handmade is an attractive eCommerce platform, with many good qualities. Here are some of the best reasons to give Amazon Handmade a try.
No Hidden Fees
Exposure To A Wide Audience
Only Handmade Items Allowed
Artisan Profile
Access To Prime Shipping
On the surface, those are pretty enticing reasons for giving Amazon Handmade a try. Let’s look at each more in-depth.
No Hidden Fees
With Amazon Handmade, what you see is what you get when it comes to fees. Amazon charges what they call a referral fee that totals 15% of your sales â including shipping and gift wrap charges. That may be a higher rate than you’d pay on a site like Etsy, but it’s a known factor you can consider as you weigh your options and consider your own prices. Amazon Handmade does not charge listing fees for items. Handmade items also do not require a UPC code, so that’s another thing you won’t have to bother with.
Exposure To A Wide Audience
It’s hard to think of any other single eCommerce site that is visited by and accessible to a larger audience than Amazon. Be aware, however, that the best way for customers to find you is for them to search in the Handmade category. If you’re offering handmade soap, your volume of sales will likely place you well below common household names on a typical search. Using keywords, like the scents or oils you add, can boost you, but the fact remains that unless customers specify handmade, you’ll be competing in search results with far bigger players. The good news is that Amazon Handmade listings don’t expire, and you don’t pay a listing fee. So you can allow more time for items to sell.
Only Handmade Items Allowed
Amazon Handmade is strict about allowing only handcrafted items to be listed. Compare that to Etsy’s backdoor policy of allowing third-party vendors for intermediary tasks, and you can see that Amazon offers artisans a more level playing field for selling their wares. When you’re going up solely against other creators, you’ll be better able to compete in important areas like price and speed and volume of sales, things that can impact your visibility on the site.
Artisan Profile
Once you’re approved to sell on Amazon Handmade, you’ll have a chance to set up your artisan profile. It’s essentially your home page or your storefront. You’ll receive an automatically generated URL based on how you enter your store name, so you’ll get a shareable link that is basically amazon.com/handmade/yourbusinessname. In your profile, you can share a tagline about your products or a mission statement, share how you create the items you’re selling, what inspires you, where you get your raw materials, highlight custom orders â anything that’s important to you and that will help set you apart from your competitor. You can also list your social media accounts.
The Cons Of Selling On Amazon Handmade
Like any good thing, there are some downsides to selling on Amazon Handmade. Overall, you may decide that joining is the right move for you. First, consider these points.
It’s expensive
Not all handmade items are allowed
Amazon can dictate pricing
Customers expect fast delivery
It’s hard to market your brand
Here’s what you need to know about the possible reasons for giving Amazon Handmade a pass:
It’s Expensive
Amazon does charge a monthly fee for a Professional Seller account. However, at this time, that fee is waived for Handmade vendors. Like Etsy, Amazon Handmade makes its money through fees attached to transactions. Unlike Etsy though, Amazon Handmade does not charge a listing fee (20 cents per listing on Etsy) or payment processing fees (on Etsy, that equals 3% plus 25 cents). You will pay a minimum of 15% of the transaction on Amazon Handmade, or a maximum of 15% of the total.
Be aware that Amazon will hold the funds until your orders ship. After that, you can expect to wait up two weeks for payment to be transferred to your bank account, and that transfer process could take as long as 3 to 5 days.
Not All Handmade Items Are Allowed
It’s especially important to understand the limitations Amazon Handmade places on vendors regarding what can and cannot be sold in the marketplace. Right now, you may want to sell only items that make the list, which is great. As you grow and learn more about selling online, you might wish to expand your offerings. Amazon Handmade may change the list of acceptable items, but for now, you should proceed as if restrictions on categories and on the creation process are here to stay. Factor those limitations into your business plan.
Amazon Can Dictate Pricing
Amazon.com is known for three things: the ability to order practically anything, to get it quickly, and to pay relatively little. How do you feel about having each of those applied to handcrafted products? Some vendors have reported explicit pressure from Amazon to lower their prices; we were not able to confirm that, but it’s something to be aware of. The bigger threat, however, is probably built-in to the Amazon model. Remember, people visit Amazon to buy low-priced merchandise. Sure, they’re willing to pay for what they want. But handmade items will always cost more than mass-produced merchandise, and you need to be aware of what products you’ll be going up against.
Customers Expect Fast Delivery
What were the three things Amazon shoppers want again? Variety, low price, and speedy delivery. With the prevalence of Amazon Prime, the majority of Amazon’s shoppers now expect free two-day delivery on most items they purchase. That expectation can be hard to meet if you create custom items, for example, or make products to order, rather than holding stock on hand. Although you will have the option of setting your own timeline for shipping, and you can explain to customers why you set that timeline, you likely will be competing with vendors who are selling mass-produced items similar (at least on the surface) to what you’re offering. Given the choice, how many customers will choose quality over speedy delivery?
Also: How will you respond if your Handmade store becomes a little too successful? If an item draws a lot of positive interest, are you prepared to ramp up production to meet demand?
Hard To Market Your Brand
Amazon asks vendors to abide by a list of selling policies and a code of conduct that can be restrictive. Some of those requirements could limit your ability to market yourself and build your brand. For example, you are not allowed to contact your customers outside of buyer-seller messaging system. All messages to customers must be related only to fulfilling the order and customer service matters. Marketing messages are completely forbidden.
Furthermore, any customer information you receive, such as address and telephone number, may be used only in the process of fulfilling the order and you’re required to delete it after the sale is completed. And you may not provide prompts or links that encourage your customers to visit any external websites, including your own. Amazon goes so far as to forbid Handmade sellers from including any promotional or marketing information in shipments if that material includes links to non-Amazon websites or logos that contain links to other websites. If you want to include a business card in your shipments, you must update your card to show your Amazon URL, to drive customers to your Handmade store.
Violations of these policies could lead to your removal from the platform or even prevent Amazon from forwarding payments to you.
How To Sell On Amazon Handmade
Having weighed the pros and cons of selling on Amazon Handmade, you may be ready to give it a try. Once you understand the potential downsides, remember that it’s free to join. You’ll pay only when you make a sale. So the risk of joining is relatively low, and you may decide you have very little to lose from doing so. Here’s how to get started:
Step 1: Complete An Amazon Handmade Application
Remember, Amazon screens participants in its Handmade marketplace. So if you want to sell there, you will need to apply online. It’s a relatively simple application, with five parts.
Input some basic information such as your name, email, and what type of Maker you are (solo, collaborative, etc.).
Categorize your work as handcrafted, hand-altered, customized, or purchased. As you probably already know, Amazon Handmade does not allow the reselling of premade items. You’ll be asked about your design process and what percentage of production is done by you and/or your employees.
Provide a step-by-step description of your creation process.
Show your creations. Images are required.
Choose your category from a list of 12 options. Remember, if your items don’t fit in one of those categories, you are not able to list them on Amazon Handmade.
Amazon does not offer any official information about how long you can expect to wait for your application to be approved. Anecdotal reports collected on various online forums suggest you could be waiting anywhere from one to four weeks. So if the items you want to sell have any seasonal urgency, or if you want to be up and selling before the holiday season, don’t delay in submitting your application.
Once you’re approved as an Amazon Handmade seller, it’s time to take the next step toward online sales.
Step 2: Create Your Artisan Profile
Before you can list any items for sale, you will need to complete your Artisan Profile. This is your chance to tell your own unique story and inform potential customers why they should buy from you. Describe your Handmade listings in detail, including the materials you use to create them and what makes them special. Explain what inspired you to create these items. List (but don’t link to) your social media accounts. Add some photos, too, of yourself and your products. Don’t worry; you can always come back later and edit this information.
When you’re done setting up your Artisan Profile, Amazon will assign you a unique URL that you can use to drive traffic to your Handmade storefront.
Step 3: Create Your Store
Amazon offers support for new vendors as they set up their Handmade stores, including a thorough 38-page guide, dedicated support, and online help. Start by exploring Seller Central. That’s where you’ll track inventory, add new products, find information about orders and returns, and more. It’s also where you’ll find advertising functions, reports, shipping settings, and customer metrics, among other important functions. There’s also a seven-part Handmade 101 email series that covers some basic important items.
Step 4: Add Your Items
From Seller Central, you will be able to list your first products. Click on Inventory and choose Add a Product. From there, you’ll be guided through a series of steps that includes choosing the right categories to list your product, so it reaches the right buyers. Include a short product title describes the product so it appears in searches. You don’t need to add specifications or options yet. But you will need to include price and production time. You will have up to 30 days to ship from the time of order. But remember, Amazon shoppers have come to expect speedy shipping. So if there’s a reason your shipping takes longer than they hope for, explain why.
You will have the chance to add images, too. Amazon’s rules for images require that you show your products without pros, distractions, or watermarks. You can include alternate images that show more detail, the item’s scale, or what kinds of customization you can offer. There’s also a box that lets you tell customers how your product was made. Be sure to use that to highlight what makes your items special.
You’ll be guided to choose keywords that will make your listings show up in customer searches, too. After you go through all the prompts Seller Central offers, you will be ready to publish your listing. Don’t worry, you can come back and make changes any time. Listing multiple items is made easier by a copy feature that lets you duplicate a listing, transferring most of the product information from a completed listing. You’ll have to add new images for each listing, though.
Step 5: Optimize Your Listings
Amazon offers an online style guide that’s full of helpful information you can use to fine-tune your listings. There’s a whole section on creating effective product images, for example, followed by specific recommendations for several categories of listings allowed on Amazon Handmade. Amazon has experience using visual imagery to draw customers in, and from general tips on how to make it easy to zoom in on your images or how many pixels images should be, to specific advice on showing your jewelry in the best light or what to include in alternate images, it’s advice you can use to make listings that move products.
Step 6: Set Up Your Shipping Policy
Seller Central is also the place you’ll go to set up your store’s shipping policy. As you create your site, Amazon sets up a default shipping cost for your store. You can choose to set up your shipping charges by weight or by a price banded model. You cannot set different shipping rates for each item.
Amazon assigns expected shipping dates based on the production time you enter in Seller Central when you create a listing. If you put down a production time of eight days, that falls within a preset range of six to 10 days. (Other ranges include one to two days and 23-30 days. There is no way to alter these ranges.) You have the full 10 days to ship that product before Amazon marks it as late. So be certain that you enter accurate production time when you list products. Remember that while you can always update product information, including shipping time, you won’t want to do it after a customer places an order and receives an estimated ship date.
Step 7: Add Other Amazon Services
Once your Handmade store is up and running, there are two Amazon services that could make running your store easier.
Amazon Fulfillment
Amazon offers a service, Fulfillment By Amazon (or FBA), that lets you hand off the chore of storing your products and shipping customers their orders. Vendors who use FBA allow Amazon to store their products and ship them from Amazon warehouses. From there, Amazon handles all the elements of shipping, customer service, and returns. That means customers’ orders for your items can be shipped faster, and you’re able to continue crafting those handmade items to sell, instead of pulling and packing orders.
When you sign up for FBA, your products become eligible for Prime, which can make them more attractive to Amazon shoppers. FBA comes at a price, of course. You’ll pay a fee to Amazon for storing and shipping your products. What you’ll pay will depend on what you’re selling, its size, and how much it weighs. Learn more on Amazon’s FBA page. In general, smaller, lighter items tend to incur lower fees.
One word of caution. When you use FBA, you commit to having enough stock in the Amazon warehouse to fulfill orders as they come in. Think about the time it takes you to create your products, then factor in the time it will take to ship them to the Amazon warehouse and have them processed there. It can be a successful business strategy for many. Just make to allow enough time to continuously create adequate stock of all the products you list with FBA.
Seller-Fulfilled Prime
When you sign up for Seller-Fulfilled Prime (SFP), you agree to deliver products to Amazon Prime customers directly from your own stock. That means you are committing to two-day delivery at no additional charge to customers. Remember that you can factor in shipping charges when you set prices for the items you list on your Handmade store.
To participate in SFP, you must ship almost all of your product via Amazon’s Buy Shipping Services and pass a trial period to prove that you can ship 99% of your orders on time with a cancellation rate of 0.5% or less.
Step 8: Connect With Your Accounting Software
Once you’ve got your Amazon Handmade store up and running, don’t forget to connect your online accounting software to keep things running smoothly. Some programs, like QuickBooks Online, make it easy to integrate directly with Amazon. If the accounting software you’re using doesn’t integrate with Amazon, you’ll still need to import your sales to stay on top of your accounting.
If you’re not already using an accounting solution, or if you’re looking for a better option, set your Handmade store up for success by choosing one now. When you start using the right online accounting software, you’ll be able to focus on the part of your business that only you can do best: making great handmade products to sell.
Amazon Handmade VS Etsy
Amazon Handmade and Etsy have a lot in common. So how can you decide which is right for you? Examine the differences between the two platforms.
Pricing
Amazon Handmade offers a simple fee structure, taking either $1 per transaction or 15% of each sale (including shipping and customization fees), whichever is greater. Etsy, on the other hand, offers a complicated fee structure and two subscription options. If you have been selling with Etsy, you should be able to calculate which platform will cost you more. If you haven’t yet joined Etsy, you can find information at the site’s fees here. One important point that’s worth repeating: Amazon Handmade does not charge listing fees, and listings never expire. That means you may be able to give products the time they need to find their buyers.
Audience
Both Amazon Handmade and Etsy have wide audiences and great reach. However, again, there are key differences between those audiences. Etsy is a community of 2.5 million active sellers and 46.36 million buyers who visit Etsy specifically in search of handcrafted items to buy. By contrast, Amazon had over 2.5 billion visits in the month of May, 2020, according to Statista. To say that’s a lot of potential customers would be an understatement. However, those shoppers aren’t necessarily in search of handcrafted items. Their goals are low prices and speedy delivery. You certainly can compete on Amazon, if you’re willing to commit to those two things. Does your production process allow that? Remember that Amazon allows you 30 days from order placement to delivery.
Visibility
Etsy is almost synonymous with handmade, so it might seem like the natural choice. Yet Amazon has far greater reach overall. To make your store stand out on Amazon, you will need to commit to doing the hard work of earning that visibility. That means driving traffic to your store through online marketing and social media campaigns. You’ll need to choose the right items to list at the right price and tinker with your listing titles until you find the right keywords. You should also encourage customers to leave feedback and reviews after they purchase from your store.
The Bottom Line: Is Amazon Handmade Right For You?
Amazon Handmade won’t be the best choice for every vendor. However, it makes sense for anyone who has an established production procedure that is reliable and speedy. If that sounds like you, and if you’re ready to jump into the biggest online marketplace in the world, you should have all the information you need to make an informed choice about Amazon Handmade. If you meet all the criteria listed and can pass the application process, you won’t pay Amazon anything until you make a sale.
If you’re still weighing your options, make sure you have the information you need to make the right choice. After learning about Amazon, get to know more about Etsy next. The good news is, you can start an account with Etsy at a cost of $0 and give it a try, too. The results you see after a trial period will help you decide which platform will work best for you.
The post What Is Amazon Handmade & Should You Sell Your Handcrafted Goods On It? appeared first on Merchant Maverick.
Finding the right business funding can be difficult for even the most established business. Those challenges multiply when you have a startup business that lacks revenue, business credit history, or collateral. For many startups, simply going to the neighborhood bank to get funding isn’t realistic, leaving many startups without funding or turning to lenders with high interest rates, low borrowing amounts, and short repayment terms.
Why get caught in a cycle of debt when you don’t have to? Whether you own a startup or you’re ready to get started but a lack of funding is holding you back, you do have other options. In this post, we’re going to take an in-depth look at one of these options: venture debt.
Is venture debt something you’ve been considering? Or maybe it’s a completely new concept. Either way, we’re going to break down what venture debt means, how it works, and help you decide whether or not it’s the right option for funding your startup.
What Is Venture Debt?
Type the phrase “venture debt” into your search bar, and you’ll be inundated with definitions that leave you scratching your head. Instead of using technical terms, we’re going to break everything down throughout this post so it’s easier to understand.
Venture debt is a type of debt financing. This means that borrowed funds are repaid over a period of time set by the lender. In addition to paying back borrowed funds, the business also pays interest. While this may sound similar to traditional business loans, there are some differences that we will describe in more detail a little later.
Venture debt is best suited for startup businesses or growing companies that have already raised capital through fundraising rounds. It is obtained through venture debt lenders which include banks, private equity firms, and other investors and groups.
When & Why Businesses Use Venture Debt
As mentioned in the previous section, venture debt is primarily used by startups and early-stage businesses that have already raised at least some capital through one or multiple rounds of funding. Some lenders even take this a step further by only lending to businesses that are backed by a well-known investor. In other words, even if you raise $100,000 through GoFundMe or Kickstarter from your friends, family, and followers, this isn’t sufficient for some lenders.
However, if your company is backed by a known investor and other requirements are met, you may qualify for this type of funding. Now, why would you choose venture debt over another type of funding, such as a business loan? As a startup or early-stage business, qualifying for traditional funding is tough, if not impossible for some businesses. Banks and other lenders assess risk before handing over money, and new businesses haven’t yet established a good track record of success. This translates to rejected loan applications or loan offers with sky-high interest rates, short terms, low borrowing limits, and extra fees that significantly raise the cost of borrowing.
On the other hand, startups may consider equity financing — that is, the business gives up company shares in exchange for capital. There are pros and cons to this strategy. While it does offer startup businesses access to capital without high interest rates and fees, it does take away partial ownership — which means giving up some control of the business and full profit potential further down the road. Venture debt is a suitable alternative that many startups have taken advantage of.
How Venture Debt Works
Let’s take a more specific look at how venture debt works.
Reasons For Using Venture Debt
Capital from venture debt can be used in a number of ways. It can be used to fund a project or an asset needed to accelerate growth and help the business become successful. Some specific ways venture debt can be used include:
Funding long-term projects
Making a large purchase, such as equipment or inventory
Extending the time between funding rounds
Making an investment in an opportunity that will help the business grow
Repayment Terms
The interest rate and repayment terms vary from lender to lender, but you can generally expect to repay your debt over a period of two to four years with interest set anywhere from the prime rate plus 0% to 9%.
Depending on the terms you agree to with a lender, borrowed funds may be repaid in a number of ways, such as a period of interest-only payments followed by larger monthly payments or a balloon payment at the end of the repayment term.
Collateral
While many types of funding require specific collateral — physical property that can be seized if the funds aren’t repaid as agreed — this is only sometimes true for venture debt. If the funds are being used to purchase a piece of equipment, for example, the item being purchased could serve as collateral for the loan.
However, if funds are being used for a project, such as a big marketing campaign, venture debt doesn’t require collateral in the traditional sense. This is where stock warrants come into play.
Stock Warrants
Venture debt allows a business to get the capital it needs for growth without diluting ownership. There is, however, an added incentive built into venture debt for lenders taking on high-risk loans in the form of stock warrants.
Stock warrants are given by any company that trades on an exchange. Stock warrants give the investor the right to purchase stock within the company at a set price. The opportunity to purchase stock at this price does have a deadline specified between the lender and the borrower. Stock warrants are a further incentive for lenders to take on the risk of working with startups and developing businesses.
Default
Most borrowers don’t intend to borrow money without repaying it, but unfortunately, sometimes the inevitable happens: a business isn’t making a profit and is unable to afford paying off its debts. If this happens, what should you expect from your lender?
Venture debt is also known as senior debt. This means that your lender takes first position over other lenders or investors in terms of liens. Now, if a piece of equipment was purchased with the capital you received, it can be seized and sold if it was used as collateral.
But what if no specific collateral was attached to your debt? It’s likely that your terms included a blanket lien, which allows the lender to legally seize and sell business assets in order to pay off the debt. In many cases, this doesn’t just include your physical assets — it may also include your intellectual property.
This is why it’s recommended that businesses that already have financial backing and are starting on solid ground use venture debt as a source of capital. As with any other type of business funding, make sure that you fully understand the terms set forth by the lender before signing anything.
Venture Debt VS Business Loans
So, how is venture debt different from your everyday business loan? There are a handful of similarities between venture debt and business loans, but there are also a few significant differences between the two types of funding.
First, let’s look at the similarities between the two.
Debt Financing: Venture debt and business loans are both types of debt financing. In other words, funds are repaid over a period of time without giving up shares of the business.
Lender Options: Both types of funding can be obtained from a bank or from a non-bank lender.
Access To Capital: One of the most obvious similarities is that both forms of funding give businesses access to capital to continue operations, grow, and to improve the odds for success.
Now, let’s compare the differences between these two types of financing.
Requirements:Â To receive a business loan, banks and other lenders look at factors including personal credit history, business credit history, time in business, and annual revenue. In some cases, collateral may be required. Venture debt lenders, on the other hand, look at factors such as the amount of money raised, investors, the product/service being offered, and even the business’s team.
Term Length: Most venture debt lenders require debt to be repaid over a period of 2 to 4 years, although this may vary slightly. Depending on the type of business loan you apply to receive, repayment terms could be 10 years, 20 years, or even longer.
Usage Of Funds: Venture debt is most often used for a specific project or asset that is used to grow the business. Business loans — in most cases — are more flexible in terms of how they’re used. Business loans can be used as working capital, to hire employees, or even to pay off existing debt.
Borrowing Limits: How borrowing limits are determined is also a difference between venture debt and business loans. Business loans take into consideration things like personal credit history and debt-to-income ratio. Venture debt lenders usually base your borrowing limit on a percentage of the capital earned in your most recent round of fundraising.
Reporting Requirements: Once you’re approved for a small business loan, the loan is simply repaid as agreed. You typically don’t have to provide more documentation to your lender unless you’re seeking additional funds. With venture debt, however, you may be required to report regularly to your lender through documentation such as monthly income statements, balance sheets, and tax returns.
Is Venture Debt Right For You?
With a grasp of what venture debt means and how it works, you might still be wondering if it’s the right financial option for your business. Before taking the plunge into venture debt, consider these factors:
Fundraising: Have you already raised venture capital funds through one or more rounds of funding? Venture debt is best suited for startups and other businesses that have already raised capital and will be able to pay off the debt. Some lenders may even require backing by a known investor or group of investors.
Understand Risk Of Default: Venture debt is best for businesses that are growing and need more funding to hit their next milestones. Businesses that aren’t in this position are at higher risk of default, which means that the business could be liquidated or seized by the lender.
Know Your Terms: Getting capital through venture debt has terms similar to a short- or medium-term loan. Generally, you’ll have 12 to 24 months to repay the funds. If you’re looking for a funding with longer terms, consider other options — which we’ll go into more in the next section.
Have A Purpose For Your Funds: Looking for working capital or don’t have any specific plans for the funds you receive? Keep looking at other financing options. Venture debt should be taken on for a specific purpose, such as making a large purchase (like equipment), funding a project, hitting a specific milestone, or growing the business without further diluting shares.
Learn About Other Types Of Financing For Startups & Entrepreneurs
Does venture debt not seem like the right fit or you’re still on the fence? Don’t worry — this type of funding certainly isn’t best for every business. The great news, though, is that you do have other options. While startups and new entrepreneurs may find it a bit challenging to find funding, it’s not impossible, especially if you’re willing to get a little creative. Unsure of where to start? Check out The 20 Best Ways To Finance A Business Startup to find out how you can get your business off the ground — or take it to the next level. Good luck!
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Long gone are the days when DIY payroll meant sitting huddled in a spreadsheet hellscape with only an abacus to guide you through the proper withholdings.
Okay, that’s a slight exaggeration, but in the Roaring Twenty-Twenties, the options for DIY payroll are no longer archaic and mind-numbing, and many small business owners are switching over to cloud-based payroll software. This modern update to payroll systems has made a once tedious task a bit less troublesome and a bit more, dare I say, fun. (My employer Merchant Maverick uses the payroll company Gusto to manage our payroll and every month they tell me how many bananas my paycheck is worth. See? Fun.)
With the right software, DIY can sometimes be as simple as uploading information into the cloud and clicking a button. Even so, small business owners should take the time to understand the various components of payroll. Think of it this way: If an employee comes to you with a question about their paycheck, you should be able to help and explain any payroll documents in a teachable manner.
If payroll is new to you, that’s okay! We’ve got you covered. Use our guide to brush-up on the terms you might encounter (and should be familiar with), while processing payroll as a small business owner:
ACA
The Affordable Care Act (ACA) was signed into law in March 2010 and includes health coverage mandates for business owners. Research whether your small business needs to provide health coverage and what your state requirements look like.
ACH
The Automated Clearing House (ACH) is an electronic funds transfer system.
Compensation
Compensation is the pay (money) made to employees as salary or wages.
Deductions
Payroll deductions are payments withheld from an employee’s paycheck each pay period. These can be voluntary amounts that the employee chooses (like retirement contributions) or involuntary deductions (like child support/garnishments; health insurance premiums). Some deductions can be made pre-tax or post-tax.
Direct Deposit
This is when funds/money is transferred electronically into a checking or savings account.
Employees
An employee is a person who receives a salary or wage for a job. However, for the purposes of payroll, taxes, and the government, an employee is a person you employ, over whose time and work you have control. It sounds reminiscent of archaic work-systems, but control is defined as:
Work/Behavior Control: Do you assign this person a schedule? Do you manage their workload?
Financial Control: Do you pay a consistent salary? Do you contribute to a retirement fund? Is this person granted reimbursement for tools and supplies?
If workers are not employees, they might be independent contractors.
See: Independent Contractors
Exempt
Exempt means “exempt from overtime” and is a reference to the type of work someone performs for your business. Exempt employees typically include managerial, professional, and executive positions.
See: Nonexempt
FICA
The acronym FICA stands for: Federal Insurance Contributions Act. This is a mandatory federal payroll deduction in the form of taxes that you, as an employer, send to the IRS. The FICA tax rates are 6.2% for Social Security tax and a 1.45% Medicare tax.
FUTA
The Federal Unemployment Tax Act (FUTA) covers the costs of unemployment insurance and state-run job programs. These taxes are based on employees’ gross earnings — that means they are not withheld from their wages. Instead, these are a financial obligation that employers cover.
Garnishment
This refers to a court order from a judge which allows an employee’s wages to be seized and paid to a creditor to settle a debt.
Gross Pay
This is the total amount of money paid to an employee. Gross pay is reported to the IRS and the employee pays income taxes on that amount. For salaried employees, gross pay is a stated annual amount. For hourly employees, gross pay is their hourly rate multiplied by hours worked.
See: Net pay
Hourly
Hourly employees are paid by the hour; their hourly rate is how much they are paid per hour.
See: Salary
Income Tax
Income tax is a tax that varies based on income or profits (taxable income) and is generally decided upon by a pre-determined tax rate. Taxation may vary by type of taxpayer. This type of tax is withheld from employees’ paychecks.
See: FICA
Independent Contractors
An independent contractor is a person who is hired via contract to do work for your business. Contractors are not employees.
See: Employees, 1099
Imputed Income
This is any non-monetary compensation given to employees in the form of fringe benefits. Employers must recognize imputed income in employees’ paychecks as it is taxable income. Imputed pay is subject to Medicare and Social Security taxes but not to federal income tax.
Net Pay
This is the amount of take-home pay an employee receives after deductions and withholdings.
See: Gross pay
Nonexempt
A nonexempt employee is not exempt from overtime provisions and is entitled to overtime pay.
See: Exempt
Off-cycle Payroll
An off-cycle payroll is run during a time when payroll isn’t usually offered. Off-cycle payroll may be used to handle holiday or bonus pay, termination pay, fixing an error, or any other unusual situation.
Overtime
Overtime is the number of additional hours an employee works. Unless an employee is exempt, employees must receive overtime pay if they work more than 4o hours in the workweek.
Payroll
A payroll is a list of a business’s employees and the amount of money paid as wages and salaries.
Paystub
A paystub, sometimes referred to as a payslip, is a document that comes with or is attached to a paycheck. It is a record of gross earnings, net earnings, deductions, and withholdings. Some states have laws requiring an employer to provide a paystub; check your state’s local guidelines. You can also check out our article Payroll 101: What Is A Paystub for a more detailed look at what a paystub includes.
Pay Period
A pay period is a recurring schedule that determines when you pay your employees for their time worked. The most common pay period frequencies are weekly, bi-weekly, semi-monthly, and monthly. Read our article Choosing The Right Pay Schedule For Your Business for a more detailed breakdown of pay periods.
Payroll Processing
Payroll processing refers to the process of managing a business’s payroll. Steps include gathering employee timecard information; managing benefits, deductions, and taxes; distributing and recording pay.
Quarterly Federal Tax Returns
Form 941 is a company’s quarterly federal tax returns and the form is used to report income taxes, social security tax, or Medicare tax withheld from an employee’s paycheck. The form is also used quarterly to pay the employer’s portion of social security or Medicare. These are estimated payments made to the IRS for the business year and you are required to make these payments if:
You expect to owe at least $1000 in federal taxes
You expect federal withholding/refundable credits to be less than:
90-100% of the tax to be shown on your 2020 federal tax return
Dates for payments during a typical tax year fall on April 15, June 15, September 15, January 15.
See: Withholdings
Reimbursements
Expense reimbursement occurs when you pay an employee back for payments/purchases made for the company with their own money. Small businesses should employ a reimbursement policy. Reimbursement via payroll should not be reported as taxable income.
See: Taxable income
Salary
This is your employee’s fixed income expressed as an annual amount.
Social Security
Social Security started in the 1930s as government assistance for retirees, veterans, disabled persons, workers, or their families. Today’s workers are paying for current social security recipients and these contributions are mandatory. Paying social security is part of an employee’s FICA taxes.
See: FICA
Taxable Income
The list of types of taxable income can be long! In general, taxable income includes wages, salaries, bonuses, commissions, and tips. It can also include fees, interest and dividends, assignment of income, or profit on a sale. The IRS Publication 525 lists full types of taxable and nontaxable income.
Workweek
A workweek is the number of hours or days an employee is scheduled to work during a seven-day period. The Department of Labor and the Federal Government have this technical definition of a workweek for the purposes of overtime and tax purposes:
An employee’s workweek is a fixed and regularly recurring period of 168 hours â seven consecutive 24-hour periods. It need not coincide with the calendar week, but may begin on any day and at any hour of the day. Different workweeks may be established for different employees or groups of employees. Averaging of hours over two or more weeks is not permitted.
Withholdings
Withholdings are the federal, state, and local taxes taken from an employee’s paycheck and delivered to their appropriate agencies by an employer. Withholdings reduce an employee’s pay but also decrease taxes owed at the end of the year. There are a few things that determine an employee’s withholdings, including the employee’s income, marital status, number of dependents, and number of jobs. The number and type of withholdings for an employee are determined by the information listed on an employee’s W4.
See: W4
W2
A W2 is a standard tax form called the “Wage and Statement” document that shows wages and taxes withheld during a calendar year. This document is prepared by the employer for the employee and must be sent to employees by Jan. 31 every year. Employers also send copies of W2s to the IRS.
W4
The W4, also called an Employee’s Withholding Allowance Certificate, is an IRS form that an employee uses to show their tax situation (exemptions and marital status, etc.). This form tells the employer the amount of taxes to withhold from a paycheck. A W-4 is based on allowances; the more allowances, the less money an employer withholds.
See: Withholding
1099
A 1099 is an information return for independent contractors. Payers use this form, also referenced as a Miscellaneous Income form, to report payments to a person who is not an employee.
Learn More About Payroll
Paying your employees is not an optional part of running a small business, and you need to find a payroll system and a method of running payroll that adds quality to your business, not chaos. You will want this not only for yourself but also for your employees. After the first step — knowing the ins and outs of payroll in general — the next step is to have a concrete understanding of what payroll systems work best for you and your business.
Research and understand what you need, know your business, and take the leap into organizing your systems with seamless payroll. The IRS and your employees will thank you. Want to know more? Merchant Maverick has put together a handy Small Business Payroll Guide to assist small business owners through decisions related to payroll and payroll systems. No abacuses needed.
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Intuit is a well-known name in the world of business finance. Now the financial titan is getting in on the small business banking game with QuickBooks Cash.
The Mountain View, Calif.-headquartered company announced the new product — which acts as a checking account for businesses — in a press release on Wednesday.
To snag the focus of financial decision-makers, Intuit has bundled QuickBooks Cash with a high-yield interest rate: Customers will receive a 1.00% annual percentage yield (APY) on all balances — a competitive rate compared to most accounts on the market today.
Intuit is touting QuickBooks Cash for its lack of common banking fees such as account opening, maintenance, and overdraft fees. Account holders will also be free of the need to maintain a minimum balance. Note that QuickBooks Cash does require a QuickBooks Online account, which costs money (the minimum tier is $25 per month).
This new offering is meant to work in sync with Intuit’s existing QuickBooks products, such as payroll, payments, and accounting services.
“Small businesses face unique challenges in the management of their finances — too often, they have to track and manage their money inflows and outflows through multiple solutions, which can lead to increased fees and wasted time,” QuickBooks Capital and Payments senior vice president Rania Succar said in a statement. “Combining QuickBooks Cash with the powerful insights and financial management platform powered by QuickBooks, we are building a tool that accelerates the growth of small businesses.”
QuickBooks Cash accounts are FDIC-insured via GreenDot Bank for up to the standard $250,000.
Business banking seems to be the soup du jour of financial firms as of late. Just last week, online lender Kabbage announced its own checking account for businesses, Kabbage Checking. And like QuickBooks Cash, Kabbage Checking features a high APY meant to entice business owners (it’s also insured through GreenDot Bank).
QuickBooks Cash Leans Heavily On Integrations
Outside of the above-mentioned benefits, QuickBooks Cash features these additional perks:
Ability to see funds within 30 minutes when they’re processed via QuickBooks Payments.
A machine learning-powered tool that aims to predict a business’ cash flow needs 30 and 90 days into the future.
Ability to schedule vendor payments and automatically reconcile made payments within QuickBooks.
A QuickBooks Visa Business Debit Card that can be used with no fee at over 19,000 Allpoint ATM locations.
Access to QuickBooks Envelopes, a tool that allows businesses to create “savings buckets” for goal and expense management.
With these perks in mind, QuickBooks Cash seems to be aimed primarily at businesses already within the QuickBooks fold, with the hope of luring new companies into the QuickBooks ecosystem. The practicality of having all financial needs serviced by a single company remains to be seen, but Intuit is certainly attempting to strengthen its position in the financial sector of small businesses.
Interested businesses are able to apply for a QuickBooks Cash account today, but they first must sign up for QuickBooks Online before moving forward with the Cash application process.
Other High APY Bank Accounts For Businesses
Intuit claims that QuickBooks Cash’s APY beats the national average banking account by 25 times. Based on the latest FDIC national average of 0.04% for interest checking accounts, this claim is indeed true. However, there are still a few formidable foes that stack up pound for pound against Intuit’s freshly minted offering.
The most notable challenger is the newly announced Kabbage Checking, which just nudges out QuickBooks Cash with its 1.10% APY. Kabbage Checking also lacks any sort of fees, while QuickBooks Cash does require a paid QuickBooks Online account.
There’s also Axos Bank, which has a 0.50% APY business account, and Internet First Bank, which offers a 0.65% APY one. Local credit unions may also deal out high APYs, such as the 1.00% APY business account on offer through the Lafayette Federal Credit Union.
All told, QuickBooks Cash looks to be a solid option for businesses wanting a high-yield bank account. However, it will take time to see if this new product lives up to its lofty potential.
Do you have a story idea, tip, or press release for the Merchant Maverick news team? Shoot us an email: [email protected]
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There’s a new kid on the block in the world of small business checking accounts: Kabbage Checking.
As any new product should, this checking service — announced last week by online lender Kabbage — has a few tricks up its sleeve to entice business owners.
To start, Kabbage Checking boasts a 1.10% annual percentage yield (APY) that will be paid out monthly to each customer account. While APYs do fluctuate based on the market, Kabbage’s offering is among the highest available to small businesses at the time of writing.
Kabbage Checking also features no opening, maintenance, or monthly fees. On top of this, account holders won’t have to worry about minimum or daily balance requirements.
“We believe in the businesses too often left out, overlooked and underestimated,” Kabbage president Kathryn Petralia said in a statement. “Kabbage Checking is a new banking service built to give those small businesses an upper hand to earn more, save more and grow their business faster without sacrificing anything they expect from a bank.”
Atlanta-based Kabbage will jointly run the service alongside its partner Green Dot Bank, which will provide account holders with FDIC insurance for up to $250,000.
Kabbage Checking Requires Waitlist Sign-Up
Those interested in moving their small business’ funds over to Kabbage Checking will first need to sign up to join the waitlist. Do note there is an application process once off the waitlist, although Kabbage hasn’t made any approval requirements known.
Beyond the core perks mentioned above, other benefits bundled within Kabbage Checking include:
Depositing cash across a network of 90,000 retailers and service centers throughout the US.
Withdrawing cash from ATMs at 19,000 locations nationwide for free.
Creating up to five “Wallets” for savings track or cash flow management.
Paying vendors and bills electronically.
Being issued a Kabbage Debit Mastercard to use at any merchants who accept Mastercard.
Kabbage further promises that its checking account will integrate with its other products in a “seamless” fashion. For example, Kabbage Funding customers will be protected from overdrafts. It also hinted that wire transfers and mobile remote deposits will “launch later this year.”
The fintech is a fairly well-regarded loan provider for small businesses. Merchant Maverick gave Kabbage four stars in our review of its loan service, noting that the company requires no minimum credit score, lacks extra fees, and provides a fast-and-easy application process.
Kabbage has also been fairly active processing Paycheck Protection Program (PPP) applications. By the end of June, Kabbage had processed over 200,000 approved PPP loans with a focus on smaller businesses — its approved loans averaged $28,100, less than a third the size of the PPP’s national average.
Related: How Fintechs Fared: Many Small Businesses Got Much-Needed PPP Funding Via Online Lenders
Other Checking Account Options For Small Business
Kabbage Checking may be the newest player on the scene, but it’s far from the only checking account available to small businesses.
For instance, many traditional banks, such as Chase or Bank of America, offer business-focused solutions for customers. However, these checking accounts often don’t feature high APYs — meaning business owners won’t be able to fully make their money to work for them.
High APY accounts for small businesses also do exist. Examples here include Axos Bank, which has a 0.50% APY business account, and Internet First Bank, which offers a 0.65% APY one. Local credit unions can also dish out high APYs, such as with the 1.00% APY business account by Lafayette Federal Credit Union.
It’s also worth noting that accounting giant Intuit QuickBooks just announced its own business bank account with 1.00% APY. But among all the options Merchant Maverick surveyed, Kabbage’s 1.10% APY still came out on top at the time of writing.
Of course, because Kabbage Checking is an untested option, it’s possible that issues not usually seen at more well-established institutions may arise at some point down the line.
H/T Reuters
Do you have a story idea, tip, or press release for the Merchant Maverick news team? Shoot us an email: [email protected]
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$1 million is now available for US-based small businesses thanks to a grant program announced today by financial firm The Hartford and Main Street America, a nonprofit focused on revitalizing older and historic commercial districts.
The HartBeat of Main Street Grant Program, as the program has been dubbed, will sponsor grants ranging from $5,000 to $15,000 in size. Brick-and-mortar small businesses with fewer than 20 employees and located within commercial districts are eligible to apply.
Applications are open now through August 23, or after the program has received 500 applicants. Additional funding rounds may be announced later this summer.
The $1 million in funding has been donated by The Hartford.
“The incredible resilience and innovation our small business customers have shown as theyâve adapted to a new normal has been inspiring,” The Hartford’s head of small commercial and personal lines Stephanie Bush said in a statement. “We are committed to providing them with support as they continue to navigate these challenging times.”
The Hartford and Main Street America have also geared this grant program towards helping underserved communities — they’ve pledged that 50% of funds will go towards diverse-owned businesses. This includes ownership by minorities, women, veterans, disabled people, and those identifying as LGBTQ.
Related: Women-led Businesses More Impacted By COVID-19, Survey Says
The HartBeat Aims To Aid COVID-19 Recovery
Like many financial aid programs launched recently, the economic struggles stemming from COVID-19 inspired the HartBeat program.
“COVID-19 has had a devastating impact on small, locally-owned businesses and they need our support like never before,” said Patrice Frey, the president and CEO of Main Street America’s National Main Street Center. “We are thrilled to partner with The Hartford to alleviate some of the financial burden small businesses are experiencing and support the resilience and recovery of older and historic main streets and commercial districts.”
With its focus on COVID-19 recovery, the HartBeat does have a set of eligible grant expenses for awardees. These requirements include things such as physical improvements to meet COVID-19 safety regulations, equipment for public safety, fees associated with launching eCommerce sales, and business plan modifications. The grants may also be used for rent, payroll, and other operating expenses.
The program’s application notes that final awards will be given out based on “a case by case basis” as well as listing a set of criteria for eligible applicants. To be eligible for the HartBeat’s grants, applicants are required to:
Run their business within the same state that it does business
Own a US brick-and-mortar location within an older or historic main street, downtown, or commercial district
Have been in operation since at least January 1, 2019
Employ fewer than 20 employees
Be an owner of the business
Be over 18 years of age
Note that applicants don’t need to be customers of The Hartford to be eligible for funding, nor is an applicant’s relationship to The Hartford considered.
This is far from the first grant venture from Main Street America. In June, the nonprofit awarded $10,000 each to 10 different businesses as part of its Future of Shopping Small Grant Program, which was run jointly with American Express. Earlier in the year, Main Street America doled out $10,000 apiece to eight different small business programs focused on helping local businesses survive COVID-19.
Other Small Business Grants
Beyond the HartBeat program, small businesses have several other avenues to pursue for grant funding.
To get up to speed on the world of small business grants, check out Merchant Maverick’s primer on the topic. Some may also find our article covering COVID-19 relief grants helpful, too.
Women who own a small business may want to take a peek at Merchant Maverick’s guide to the best business grants for women. We’ve also written about grants for minority-owned businesses as well.
Do you have a story idea, tip, or press release for the Merchant Maverick news team? Shoot us an email: [email protected]
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Doing your own payroll is like skinning a cat â it may seem daunting, but there are many ways to do it. You just have to choose the one that works best for you. Read on to explore the pros and cons of doing your own payroll.
The Pros & Cons Of Manual Payroll
Some small business owners choose to do their own payroll manually. It saves money but it is not necessarily the best option for everyone.
Pros Of DIY Payroll
It’s Cheaper: When you outsource payroll, you incur an extra cost. That cost will depend on the kind of business you are running and the number of people on your payroll, but when you are running a small business, every penny counts. If you just canât justify the expense of outsourcing Payroll, you can do it yourself using free resources available.
You Stay In Control: Small business owners often fear losing control of their business. A third-party payroll provider may not do things the way you want them done. Doing it yourself allows you to maintain total control of your business operations.
You Know What’s Going On: Doing it yourself provides a good opportunity to understand everything about your payroll process and payroll taxes.
Cons Of DIY Payroll
It Takes Dedication: Successful DIY payroll depends directly on the effort of an individual. If you canât take care of it for some reason that month, it wonât be taken care of.
There’s A Significant Time Commitment: Doing your own payroll means sacrificing your own time. Time is the only resource that is even scarcer than money in the small business landscape, and there is an automatic cost to doing payroll yourself.
Lots Of Room For Error: You might get it wrong or incur too much stress. If you are not a naturally detail-oriented person, doing your own payroll might cause more stress than its worth — and put you in a position of liability when you get things wrong.
At the end of the day, it is a question of whether you have more money than time or more time than money. What is the opportunity cost? Is there another option that can ultimately give you better results?
How to Do Your Own Payroll Manually
There are several things you must keep in mind if you’re going to take the manual payroll route. Nothing about payroll is simple or low-stakes, so it’s crucial to have your ducks in a row.
1) Prepare The Proper Tax Documents
The 1-9 form is a requisite for verifying the identity of your employees as well as their employment availability. Every new hire must fill out this form during the onboarding process.
Your employee fills in the first part and you fill in the second part. New employees must furnish you with a document of identity, which could be their Passport, Green Card, Birth Certificate, Social Security Card, or Alien Registration Card.
Employees should fill out their own W-4s to document withholding tax (tax that the employer withholds from their salaries and pays to the government directly).
2) Have Your EIN Number Handy
An EIN is your Federal Employer Identification Number. This number is provided to you by the IRS. If you are a new business or company, you’ll need to request one from the IRS.
3) Gather Employee Earnings Information
Depending on your type of business and how it is run, you will need lots of information about your employees and their earnings. All of the following contribute to the overall labor burden of each employee:
Gross Pay: First, you must calculate their Gross Pay, which is what they earn before any money is deducted. For salaried employees, Gross Pay is the yearly salary. For employees who earn an hourly wage, gross pay can be found by multiplying their hourly wage by the number of hours worked. Generally, contractors and freelancers tend to be on an hourly wage.
Net Pay: Net Pay is what your employees earn after all deductions, including taxes and copays.
Overtime: This is money that employees earn for going beyond regular working hours. For example, a typical full-time employee gets overtime when they work more than 40 hours.
Bonuses: Employees get bonuses based on certain performance goals. A bonus has nothing to do with working hours or salary. It is a one-time reward for good performance. Bonus money is taxable.
Tips: Some employees, typically in the service industry, earn money from tips. Tips are rewards for good service and they typically come from customers or clients. You need a Payroll system to track tips because they too are taxed.
Commissions: Some employees earn on commission: a percentage of money from each sale they make. The IRS taxes the income of commission-only employees like any other supplemental income.
Paid Time-Off: Paid time-off is not necessarily synonymous with vacation days; it is used any time an employee is still earning although they have taken time off for medical leave, family leave, personal days, or paid vacation time. Your payroll system should reflect any adjustments to a paycheck depending on the time-off policies. You should also consider offering other leave options besides sick leave and vacation leave. Have a plan for maternity leave, paternity leave, and family leave, for example. Your employees should know as much as possible about your time-off policies, including whether they will be earning a regular rate for their paid time-off or not. They should also know what happens to unutilized time-off when the year ends. Note that the laws on paid leave are not the same in every state. You have to look up what the rules say in your own state.
Benefits: Benefits are extra incentives above and beyond salaries and wages. These benefits may include workersâ compensation, life insurance, dental, medical insurance, Family Medical Leave Act laws, unemployment taxes, and time off to exercise civic responsibilities such as voting, serving in the military, or jury duty.
Retirement: Retirement plans are some of the incentives that promote employee retention, like a 401K.
4) Choose Your Payroll Schedule
Businesses pay their employees weekly, bi-weekly, semi-monthly, or monthly. Each payroll schedule has its own benefits and drawbacks and you have to choose the right one for you.
Your choice of payroll schedule might be influenced by the industry you are in or the state in which you are operating.
5) Track Time
For employees who earn an hourly age or a salary, you need to track the hours they have worked. A payroll system should have the capacity to track employee working time.
6) Calculate Gross Pay
Gross Pay is the total amount of money that each employee earns before deductions. This means before things like taxes are deducted from the Pay. A simple tool like Excel can be used to calculate gross pay by multiplying the hours worked, including overtime, by the pay rate/hour.
Once you have the employee’s gross pay, you can calculate the deductions on each employee’s pay as well as their allowances.
8) Calculate Net Pay
To calculate net pay, subtract all the deductions from the employee’s gross pay.
9) Pay Your Employees
Pay your employees via direct deposits, checks, or any other method that works for both you and your employees.
10) Keep Strong Payroll Records
Putting together your payroll records at the end of the year can be a nightmare if you have not been documenting them faithfully. Update records throughout the year on a regular basis to avoid this nightmare.
Learn more about end of year payroll.
11) Don’t Forget To File & Pay Payroll Taxes
Creating a payroll system requires the right tax documents from employees. Thankfully, todayâs digital way of doing business reduces the amount of paperwork required.
Here are some of the tax forms you’ll need:
W-2: The W-2 form details information about all wages for the year and the taxes withheld.
W-4: Your employees will fill a W-4 form detailing the amount of tax that they expect will be withheld from their salaries. These withholding allowances will help you run the Payroll correctly.
1099: The 1099 is for freelancers and contractors to track their income. No taxes are withheld.
Schedule C: This is a profit/loss report for Sole Proprietors and Independent Contractors to file with the IRS. It is a profit-loss or income statement for calculating self-employment tax.
I-9: The 1-9 form verifies the identity of your employees as well as their employment availability. Employees should fill it as soon as they start working for you. The 1-9 form is filled by both the employee and the employer. You need the employeesâ formal identification papers.
940: Declare your payroll annually in a 940. This form details how much all your employees have earned and how much went into unemployment taxes.
941: File a 941 form annually. It has information about what you have paid your employees during the year and how much you withheld for social security taxes, income taxes, and Medicare. File the form and remit the money you withheld to the IRS.
944: Small businesses that withhold less than $1,000 in payroll taxes in a year will need to file a 944 form with the IRS.
Learn more about payroll taxes.
The Pros & Cons Of Using Payroll Software
There is a middle ground between outsourcing payroll entirely and doing it yourself manually. This option entails using payroll software. Once you feed a payroll software app with all the relevant information, all you have to do is to hit the âpayâ button and the whole process is taken care of for you.
There are some obvious advantages and disadvantages to using payroll software.
Pros:
Maintain Control: Since you are not hiring a consultant, you are still retaining control over the details of your payroll. You or your in-house employee will be creating and viewing the reports as well as paying the employees and taking care of taxes.
Cheaper: Paying for payroll software is much cheaper than hiring a consultant or a company to do your payroll.
Quicker: Payroll software will do the job faster than you or anyone else would have done it.
Increased Security: Your financial information is much more secure because you have control over it. You can access your information anytime you want it. The payroll software safely stores the information.
Cons:
It Takes Longer: On the other hand, using a payroll solution will take longer â at least initially â when you are still learning how to use the software properly. A mistake on your part could cost you hours to fix. Of course, once you have mastered it, the process gets infinitely faster.
Potential For Error: When you are doing your taxes yourself, mistakes might cost you hefty penalties with the IRS. Outsourcing payroll means someone else takes that risk.
Monthly Costs: Although payroll software is cheaper in the long run, there are some upfront costs that can be relatively high depending on the range of services. You also have to budget for annual fees.
Time Investment: When you first begin with a payroll software program, you have to invest plenty of man-hours in learning how the software works.
How to Do Your Own Payroll Using Payroll Software
If you’re looking for a fairly seamless and automated payroll process, you should probably invest in a payroll app. Payroll software not only handles the administration of pay, but also the processes of onboarding employees, as well as filing payroll taxes both quarterly and annually.
When you use payroll software, you get a payroll guarantee, which means that any penalties caused by tax mistakes will be on the software provider, and not on you.
1) Choose the Right Payroll Software
Analyze the unique needs of your business before settling on a payroll software app. Each payroll program has its own range of features. A full-service payroll app takes care of payroll, filing taxes, or even HR functions like keeping track of employee benefits and tracking time.
Consider the size of your company when choosing the right payroll software for you. Some products are tailor-made for microenterprises while others are more suited to mid-sized companies.
Look into payroll software designed for your specific industry. A payroll app made for your industry will serve you better than one that isnât. Hospitality companies, for example, have their own unique needs that may be different from those of companies in a different niche, like education, or manufacturing.
Some payroll software products are designed to be customizable to your business requirements. Consider one of these as long as you have the ability to use them with relative ease.
Choose software that is compatible with your level of accounting knowledge. Some are specifically designed for non-accountants and they are therefore easier to learn. Others are more complex and present a steeper learning curve.
Purchase software that is compatible with the tools you already have. For example, you might want to use one that is compatible with QuickBooks or Square, if that is what you are already using.
Find something that fits within your budget. If the whole point of working with a payroll program is to save money, then you definitely want something that is priced reasonably for you.
2) Add Company & Employee Information
As an employer, you require accurate and current information on each employee to process payroll accurately. For each employee, you’ll need the name in full, spelled correctly, as well as their Social Security Number, their jurisdictions (both lived-in and worked-in), and their correct address.
For your company, you’ll need information about tax IDs, and any additional tax information required.
You’ll also need to enter any employment forms, like the EIN, W-4, and the 1-9, into the software.
3) Track Time
A full-service payroll system takes on payroll calculations, deductions, check printing, tax support and tax filing, time tracking, and paid time off.
If you are not dealing with full-service payroll software, you may have to do without time tracking, among other features. Simplified payroll services are cheaper and have fewer features.
Decent payroll software should take care of regular time tracking, as well as PTO tracking, together with other features like paying contractors and employees, paying vendors, garnishing wages, online processing, filing taxes, paying vendors, and W-2 preparation and distribution.
4) Process Payroll
Processing your payroll involves a series of actions. You must determine your employeesâ wages and salaries, choose a pay schedule, calculate their taxes, withhold payroll taxes from their paychecks, deliver paychecks to the employees with the correct net pay after withholding the right amounts of money, remit taxes to the government, and provide employees with their W-2 or 1099 paperwork.
You may have a combination of employees and contractors on your payroll:
Employees are individuals over whose workload, paycheck, and working relationship you have control.
Contractors are individuals who are working with you for a specific period of time, according to a contract you have agreed upon. Contract employees are supposed to withhold their own tax. It is not your responsibility to withhold it. Your work is done as soon as you have paid them.
5) Don’t Forget To File & Pay Payroll Taxes
All the money that you withhold from the earnings of your employees for the purpose of remitting tax to the government falls under the umbrella of payroll taxes.
You pay taxes to federal governments and the states. The money you withhold as payroll tax is a percentage of your employeeâs gross earnings. You have the responsibility to manage these taxes from employee salaries and wages. If you have contractors on 1099, they will manage their own payroll taxes.
Other Options for Processing Payroll
You may also consider outsourcing your payroll to an accountant or an accountancy firm to run it for you. Accountants have extensive experience and training and they will do a much better job in less time.
Accountants can help you to drastically reduce the amount of time you spend on the payroll, but you still have to provide the accountant with the right documentation â like your tracked time â so that they have what they need to do their job.
An accountant may be the best option for that entrepreneur who has no time at all to run their own payroll. All you have to do is give them your time cards and employee information. They handle the rest.
The problem with hiring an accountant is that it is the most expensive option. If you decide to go that route, try to find an accountant who has experience working with similar businesses to yours.
Choosing The Right Payroll Processing Option For Your Business
There are three ways to go when it comes to payroll. The first is to do it yourself manually. The second is to do it yourself but use a payroll software solution. The third way is to hire an accountant or an accountancy firm to do it for you.
Doing payroll manually demands the greatest time investment. It also exposes the entrepreneur to the risk of making costly errors. Go with manual payroll if you donât want to spend any money on payroll, you have some understanding of taxation and accounting (or you are naturally meticulous and good with numbers), and you have the time to spare. Manual DIY payroll works best when you have a smaller number of employees. The larger your team and the more complex your payroll needs, the harder it is to do.
Using payroll software still require some time investment from you, but it most likely wonât take as much time as the first method. If you donât have any accounting or taxation skills, you need to choose a simple app — one that is designed for amateurs. If you are not familiar with taxation and payroll in general, the learning curve will not be as steep since many of the processes are automated.
When you are dealing with a more complicated business payroll, you might want to consider option three: hiring an accountant. An accounting consultant will handle everything, including running payroll, monthly remittances, and paystub requests.
One of the best things about outsourcing is that the other party assumes responsibility for any errors. This means that you donât have to be afraid of making a mistake.
Whichever option you go with, make sure you feel comfortable. Payroll is an enormous responsibility. Choose wisely!
The post How To Do Your Own Payroll In 11 Easy Steps appeared first on Merchant Maverick.
Let’s imagine a scenario. Your business needs capital now. You’ve applied for a loan with your bank, but the lender tells you that it could be weeks before you get your funds. You like the low rates and favorable terms of the loan, but you don’t want to play the waiting game. Anything can happen in the time it takes for your loan to be disbursed, and you could find yourself in a cash crunch that jeopardizes business operations.
On the other hand, you could go to an alternative lender and receive funding with a much shorter turnaround â even as quickly as the next day. The downside, though, is that a high-interest rate, additional fees, and shorter repayment terms mean that your loan will be more expensive â which could also negatively impact your business.
Fortunately, you aren’t stuck with these two choices. There is a way to get the funding you need now while waiting for your long-term loan. That option is called a commercial bridge loan.
If you need a way to cover gaps in cash flow while waiting for your loan disbursement, keep reading because a bridge loan may be exactly what you’re looking for.
What Is A Commercial Bridge Loan & What Are They Used For?
A commercial bridge loan is a type of short-term loan that businesses use as they seek a more long-term funding option. This loan bridges the gap in cash flow between the time a business applies for funding to the time that funds are disbursed.
Commercial bridge loans are used for a number of purposes. Most commonly, these loans are used to secure commercial real estate quickly. If a business owner finds a great deal on an office building, securing a mortgage or other real estate loan is time-consuming, and they could miss out on this opportunity. With bridge funding, the business owner could secure short-term funding quickly, purchase the property, and have time to secure a low-cost, long-term loan.
Bridge loans can also be used to fund the cost of renovations, either for your own commercial real estate or for investment properties. Other large purchases, such as equipment, can also be purchased with bridge loans. Another way that bridge loans are used is when acquiring another business.
The most important thing to remember is that a bridge loan is a temporary funding solution. Loan terms are often quite short, and interest rates can be high, so you want to pay this type of loan off as soon as possible by securing low-interest, long-term financing elsewhere.
How Commercial Bridge Loans Work
A commercial bridge loan works similar to other business loans. The business owner applies with a lender, provides information and documentation required to close the loan, and receives funding quickly â sometimes in just a matter of days.
The lender will consider several factors before approving an application, which we’ll discuss in more detail in a later section. For now, though, one thing that the lender will look at is the loan-to-cost (LTC). The LTC is the maximum percentage of the total cost that the lender will give to a borrower. For most lenders, the LTC is 70% to 80%.
Let’s look at an example. You want to purchase a property that is priced at $100,000. The lender is willing to offer a bridge loan of 80% LTC. This means that the lender will provide you with a loan of $80,000, while you will be required to come up with the remaining $20,000.
The lender will set the rates and terms for your bridge loan (more on that later). Once your loan is approved, funds will be disbursed so that you can make your purchase. If you bought the property from the example above, you would make payments as agreed until you secure a mortgage or other long-term funding that covers the principal, interest, and any fees required by the lender.
Another thing to note is that the property being purchased with loan funds is typically the collateral that secures the loan. That means if you default on your agreement to repay the lender, the lender has the right to seize and sell the property to recoup its losses.
Typical Bridge Loan Terms
Bridge loans are temporary, short-term solutions to cash flow problems. Most bridge loans have repayment terms of one year or less. Some lenders may provide bridge loans with longer terms, but these generally will not exceed two years. Many bridge loans will need to be repaid in just a matter of months, giving you enough time to secure more permanent financing.
Typical Bridge Loan Rates
As with any type of business funding, terms vary by lender. However, you should go into bridge loans knowing that the rates are higher than your average loan. Expect to pay at least double the prime rate or roughly 8% to 11%. Since terms for bridge loans are so short, lenders use high rates to make money off their investments.
The interest isn’t all that you have to think about, either. Most bridge loans have numerous fees that must be paid. These include:
Origination fees
Escrow fees
Appraisal fees
Title fees
A prepayment fee may also be applied if you pay your loan off early, so make sure to ask your lender about this fee and any other applicable fees that may increase your cost of borrowing.
What You Need To Qualify For A Bridge Loan
The requirements for obtaining a bridge loan varies from lender to lender. However, these loans may not have requirements that are as strict as traditional bank loans, which is why so many businesses use them as short-term solutions until a more favorable loan can be obtained. In exchange, though, the cost of borrowing is much higher than other financial products. You must also be able to secure long-term financing before your loan is due, or you risk losing your collateral â typically, the property purchased with loan funds.
Most lenders will look for the following when determining whether to approve a loan application:
Affordability: Lenders will consider various factors, including your debt-to-income ratio (DTI) and your debt coverage service ratio (DCSR), to determine if your cash flow is sufficient to cover current obligations plus any costs associated with your new loan.
Equity: A bridge loan will only provide around 70% to 80% of the cost of your purchase. You will need to have the remaining 20% to 30% available to complete your purchase.
Property Being Purchased: Lenders will look at what you are using your loan funds for. If you’re purchasing commercial real estate, for example, the lender may consider factors, such as the location of the property, its condition, and existing liens.
Credit History: If you have a low credit score, this doesn’t necessarily disqualify you from receiving a bridge loan. However, lenders may look at your past credit history to determine if derogatory marks â bankruptcies, foreclosures, and liens, for example â make you a risky borrower.
Is A Commercial Bridge Loan Right For Your Business?
A commercial bridge loan isn’t the right choice for every business. How do you determine if your business will benefit from a bridge loan? There are a few things to consider.
First, think about why you need funds. If you want a long-term solution for cash flow issues, a commercial bridge loan isn’t a good fit. However, if you need funds for one of these reasons, consider speaking with a lender:
Close A Deal Quickly: When the real estate market is hot, you have to strike quickly, or you’ll get left out in the cold. Lining up a mortgage or long-term loan can take weeks or even longer, and by that time, you may have lost out to another buyer. If you want to purchase a commercial property fast, you can get the funds you need with a commercial bridge loan, which buys you enough time to secure another source of funding.
Work On Your Credit: Is your credit preventing you from getting a mortgage or a bank loan? If so, making a purchase using a bridge loan may be a wise choice. If you need to make a purchase now but also need to work on your credit (i.e., paying off debt or disputing erroneous items on your credit reports), bridge loans provide you with the capital you need until you’re able to clean up your credit and obtain another loan.
Acquire A Business: If you plan to purchase another business, time is of the essence. Instead of waiting on funding, a bridge loan can help you push the deal forward quickly.
Renovate Your Property: If you want to improve your business to draw in new customers, a bridge loan can help you get the ball rolling on renovations sooner rather than later.
Where To Find Lenders That Offer Bridge Loans
Does a bridge loan seem like a good fit for your business? If so, the next step is to find your lender. Where do you get started? Try these options.
Banks: Many traditional banks offer commercial bridge loans. Start by speaking with any institutions that you currently have working relationships with. Even if your bank offers bridge loans, make sure to check out other options in your area to find the best terms and lowest rates.
Credit Unions: Credit unions that offer commercial products and services may provide bridge loans. Start with your credit union, or search for ones in your area to find the institution that best fits your needs.
Hard Money Lenders: Hard money lenders are private investors that may offer short-term bridge loans. The good thing about hard money lenders is that they often put the value of the property over factors such as credit history. The downside is that they may have higher rates than other lenders. Make sure to compare your options and only work with reputable hard money lenders.
Alternative Lenders: Some online lenders specialize in bridge loans and other short-term funding. These loans typically have quick turnaround times, and you never even have to leave your office to get the money you need.
Learn About Other Types Of Financing For Small Businesses
If a bridge loan isn’t quite the right fit for your financial situation, take heart â there are numerous other options available to help you score the capital you need. Check out our great resources, starting with the 12 Different Types Of Small Business Loans You Should Know. From affordable SBA loans to flexible lines of credit, there’s something for everyone. Then, shop your options by checking out our small business loan reviews. Once you’ve narrowed down your choices, make sure that you fully understand the loans, terms, and costs of borrowing so that you can take your business to the next level without drowning in a sea of debt. Good luck!
The post Commercial Bridge Loans: What They Are, How They Work, & When You Need One appeared first on Merchant Maverick.
For Ashley Miller, owner of Portland-based Ruby’s Cleaning Company, business is in her blood.
A product of small business owners who built up a successful franchise operation, Miller always understood that opening a business was part of her future; she knew the hours and hard work involved, she knew the mental acuity and life-balance requirements, and she knew she had the drive and connections to make it happen.
“I watched my parents manage their small business for over 25 years, and that totally gave me the confidence to take this step. When I imagined it, however, I always thought we would open our own bar,” Miller said.
The pandemic had other plans.
A Clean Slate
Back in March 2020, both a few short months and a lifetime ago, Miller was juggling two jobs just to hold the fort with her partner Henry and their son. A Portland State University graduate with degrees in Applied Linguistics and Cross-Cultural Communications, Miller was a substitute elementary teacher by day and the head bartender at The Ram — a popular local restaurant and brewery chain — by night. She’d go from juggling second-graders to slinging drinks, and while she loved both jobs and their energies, Miller was already dreaming about a change when change was thrust upon her.
“The pandemic took everything. Restaurants, closed. Schools, closed. I was definitely scared. And so for me, it was a real catalyst for forced change,” Miller said. Not only were both her jobs on hold, Miller’s 8-year-old was now home distance learning.
“I realized that COVID was going to impact my employment indefinitely, and I needed a long-term plan. That plan had to include how I’m going to work and still care for my own child.”
Then the news hit that schools might not resume in the fall — and the Ram closed its Clackamas location amid the economic fallout of the pandemic. With her two employment options no longer viable, Miller got to work.
The idea to start a cleaning company happened over socially-distanced beers with a friend. “She said we should clean houses, and I ran with it,” Miller laughed.
From there, Ruby’s Cleaning Service was quickly born.
“I decided I would take this on; take on the risk and the responsibility of starting a business. It’s already stressful to build something new, and without knowing what the future looks like, I couldn’t risk making mistakes and having that impact someone else’s life right now. Right now the business is just me, and if I need extra bodies I will hire independent contractors. Having employees is a goal for the future.”
Moving-In To The Right Niche
Miller has many goals for the future but in the meantime, she is figuring out her business and throwing herself fully into its long-term success.
“I have watched my parents and friends in their small businesses, and I come into this with an understanding that being a small business owner is about having the control to do what you love and to walk away from it, too. Maybe you end up not liking the day-to-day, but I get to work that all out myself. I get to call it — how I spend my day, who I work with,” she said.
She also loves how starting the business has provided much-needed mental exercise. Her brain is working overtime as it balances the nuts of bolts of owning a business with the reality of being that business’s lone employee.
What Miller loved about the service industry was both its brisk pace and its potential for connection to others: tending bar at a popular brewery and teaching little kids required all her mental dexterity and physical stamina. Owning Ruby’s Cleaning Service is the same. “It’s totally fulfilling to put my mind and body to work,” Miller said.
Ruby’s specializes in deep cleaning for real-estate move-ins/outs (offering everything from a full deep clean of an entire property to a pre-photography “spiff clean” needed before a listing goes live. While she is working with a client, Miller has a million other business-related items on her plate, and she still has to remember to check her phone to capitalize on potential opportunities for new clients. Until she has a consistent schedule with regulars, every phone call is a potential lead.
“Already a few real estate agents have called me in a blind panic because they need to get a place sparkling clean before pictures. When you’re building your client list, you don’t say no. I am the ‘yes’ woman right now. Can you do that? Yes. Can you be here? Yes. Right now? Yes!” Miller said. “When I first started, my prices were in the gutter. Then I got in there and it was such physically demanding work that I realized, no, there’s a reason to charge my worth.”
She admits that starting a cleaning service in a pandemic might raise eyebrows as fewer people are inviting strangers into their homes. She thought about that, too.
Miller will offer residential cleaning services if someone is in a great need, but wants to focus her energy and attention on her own branding — she knows she wants to become a favorite and go-to for real estate agencies and property management teams. Getting on vendor lists is key, and after she has built a reputation, she wants her company’s name to be synonymous with big jobs: luxury homes with expanded square-footage, commercial buildings, and specialized move-in/move-outs.
Ashley Miller’s best piece of advice for people thinking about jumping into the small business world is to find their niche.
“Carve out your niche. This is the key,” she said. “If you’re opening a restaurant, what makes you different? What type of atmosphere is special to your business, your place? It’s key for marketing to know how to market yourself directly to people looking for your services, and having a specific understanding of what makes your business unique.” For Miller, that niche involves skipping over residential cleaning services. She charges $200 per 1000 square feet and brings her own cleaning supplies. (But she’s happy to upgrade to other cleaning brands for a price, and has learned to ask if clients have their own preferred supplies, which are two industry tips for small ways to affect the bottom line).
Learning The Ropes
Miller has also been speaking with industry veterans.
“I reached out to a woman who owns a successful commercial cleaning business. She was unbelievably helpful in mentioning ideas or issues that hadn’t even crossed my mind,” Miller said. Many established small business owners love to take newbies under their wings to share years of learning and hard work.
One thing Miller learned is to always solicit feedback from clients. “I don’t take it personally or take it to heart. It’s better to ask and know you are meeting client expectations than to guess or assume,” she said. Her ultimate goal is to do great work and get asked to come back, and people like to come back to businesses where they feel valued and heard.
Right now, in these early stages, Miller says it feels like she has all the gears turning and working, but they don’t know how to work together yet. “I’m waiting for when all the gears run seamlessly, together.” She’s spending ample time on the nuts and bolts — things that she hopes will become easier as time passes.
“My time is going to the specific aspects of my business that need the most attention right now. I’m researching about accountants and taxes; do I have enough insurance? What is being bonded and do I need that, too?” Miller said.
Miller was even encouraged to ditch an accountant who was charging above the industry standard to run QuickBooks; she resolved to simply learn QuickBooks herself. “I know I need help, but I’m learning. I’ll run into a lot of verbiage, and I’m juggling what I can do myself and what I need someone else to help with. But at the moment, every penny in my company is valuable.”
Always Check The Oven First
As a DIY-er, Miller is ready. If she can learn to manage it herself, she wants to. She knows that at the heart of small business owners is a sense of adventure and a strong motivation to succeed. With her client list growing, Miller is ready to do what it takes to build this business during a time when starting a business might seem risky. Two months in, however, Miller has reasons to be optimistic: She’s not a small business newbie and she already has repeat clients.
For now, Miller is here for the long-haul, learning what she needs to become the leader of her own business niche. The best things she’s learned so far about the cleaning business? You can know everything you need to know about a house by its oven.
“At first, I didn’t know how to budget my time. Now I’ve got it. I’ll go check out the oven first — you can tell a lot about a house by how gross their oven is,” Miller laughed. But no matter how gross it starts, Ashley Miller and Ruby’s Cleaning Service will leave it shiny and new.
Do you have a story idea, tip, or small business spotlight idea for the Merchant Maverick news team? Shoot us an email: [email protected].
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