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How Important is Personal Credit When Looking for Business Financing?

August 9, 2022

By: Matthew Gillman, SMB Compass Founder

You’ve probably heard time and time again that lenders will look at your personal credit profile before approving your business loan application. That is because your credit reflects how diligent you are in paying off your debts. It also gives lenders an idea of how risky it would be to lend you money.

This article will demonstrate why personal credit is essential when looking to get business financing. It will also provide practical tips on building up your personal credit score to prepare you for future loan applications.

What is personal credit?

Personal credit is the creditworthiness of an individual based on their credit history. It is a three-digit summary of your payment history, which shows whether you’re paying your bills on time and in full. It tells creditors like banks, credit unions, and alternative lenders whether you’re a risky borrower or you repay loans on time.

Your personal credit is a record of all your transactions, from the payments you make on your credit cards to your mortgage loans and auto loans.

What measures your personal credit?

Two popular credit score brands determine your credit rating: Fair Isaac Corporation (FICO) and VantageScore. FICO is the oldest credit scoring company that’s already trusted by millions of Americans, while VantageScore–which was established in 2003–is a joint venture between Experian, Equifax, and TransUnion.

These two companies offer the same credit scoring models: FICO and VantageScore use a scoring range between 300 and 850. For this discussion, let’s look at how FICO scores are determined.

There are five elements involved in your FICO score which are your payment history (35%), total debts (30%), length of credit history (15%), credit mix (10%), and new credit (10%).

    1. Overall payment history

      Your payment history is the record you’ve established by making on-time payments–or missing them–over a certain period. It provides an overview of your payment behaviors, whether you’ve missed any bills or debt payments in the past.

    2. Total debts incurred throughout your payment history

      Total debts are all the individual loans you acquired over a certain period, such as auto loans, mortgages, or credit cards. The higher your total debts, the lower your FICO score will be.

      By reducing your total debts, you can improve your FICO score and make yourself a more attractive candidate for loans in the future.

    3. Length of credit history

      Most small business owners don’t get approval on their loan applications because they lack sufficient credit history. The length of your credit history tells if you have been using credit responsibly throughout the years. The longer your credit history is, the more experienced and credible you become at paying off debts.

      Simply put, if you have a long history of using credit responsibly, it will help improve your score. On the other hand, if you have a short credit history, it could lower your score.

      To determine the average length of your credit history, simply divide the ages of your oldest and newest accounts by the total number of accounts you have.

    4. Credit mix

      Credit mix refers to the different types of credit you have on your credit report. Having various types of credit can improve your FICO score because it shows lenders that you can handle different types of debt responsibly. If you’re looking to improve your FICO score, one thing you can do is to diversify your credit.

    5. Number of new credit

      The number of new credit refers to the number of new loans you’ve been applying for at a certain period. Lenders usually check if you’ve been shopping around to get as many credit accounts as possible.

What is a good personal credit rating?

Having a solid personal credit history can help you get approved for a loan and get better terms, such as a lower interest rate. If you have bad personal credit, you may still be able to get a loan, but you will likely have to pay a higher interest rate. But how do you know if your current credit rating is good?

We mentioned earlier that credit scores range between 300 and 850. Your credit score must be 580 or higher to have a good personal credit rating. The higher your credit rating is, the higher your chances of securing a loan with lower interest rates and better terms.

Why do lenders need to know your personal credit rating?

First and foremost, lenders look at your personal credit profile if you don’t have an existing business credit. With that absence, lenders need to look at any proof of your payment behavior through your personal credit to get an idea of how risky it would be to lend you money. Small business owners usually don’t have enough time to build up a good business credit unless they have been running the business for years. To give you an idea, a business credit score is anywhere between 0 and 100; lenders will require you to have at least a rating of 75 to qualify for loans.

If you have a low personal credit score, it could mean that you will not be approved for a loan or that you will have to pay a high-interest rate. Also, having a low credit score could indicate that you’re more likely to default on your new loan, which isn’t good for the lender.

Also, personal credit reports show lenders that you have held strong relationships with different types of creditors in the past. For example,if you are applying to get a business credit card, lenders will trace your credit history and see how you’ve managed your personal credit cards. They want to know how consistent you are in paying your debts and what your credit utilization is.

Lenders are also required to review your credit score when applying for new credit. This helps them determine whether you’re eligible for the new credit and, if so, what terms they’ll offer you.

That said, it’s essential to build up your credit rating before applying for small business financing. Make sure you check your credit report at least once a year to know where you stand. Don’t worry; requesting your credit report won’t affect your credit score.

How to build personal credit

There are a few things you can do to improve your credit score. Below is a quick list of things you need to check.

    • Start paying your bills on time, even ahead of schedule.
    • Keep your balances low.
    • Keep your credit utilization below 30%.
    • Avoid opening new credit cards, especially when you still have existing debts.
    • Try not to close old credit because it will affect your credit history.
    • Consolidate your debts if you can.
    • Dispute errors in your credit report, such as misspelled names or wrong addresses.

Lastly, it helps to work with finance experts and lenders who can help you increase your chances of getting approved for a loan. With some effort, you can improve your credit score and get the lenders on your side.

Matthew-Gillman
About the Author: Matthew Gillman is a business financing expert with more than a decade of experience in commercial lending. He is the founder and CEO of SMB Compass, a specialty finance company providing education and financing options for business owners.

5 challenges today’s entrepreneurs face — and how to overcome them

August 2, 2022

By Myranda Mondry

2021 broke a record year for entrepreneurship with five million new businesses started. This year more than 17 million Americans said they wanted to open a new business, according to data from QuickBooks. 

These new business owners have unique challenges to face in the wake of the pandemic. Like inflation, which a recent QuickBooks survey found that almost all business owners (99%) are concerned about. Respondents also ranked supply chain, cash flow challenges, low funding, and skills shortages among the top threats facing small businesses this year.

There’s no magic spell to solve these challenges in one fell swoop, but small steps can make a big difference in overcoming them. 

1. Rising costs and inflation

More than half of small business owners say inflation is the top threat to their business this year. Nearly every survey respondent said they’re concerned about the rising costs of goods and labor, and more than half say they’re very concerned. 

To combat inflation, many small business owners have been forced to dip into business or personal savings accounts, or turn to credit cards and small business loans to cover rising costs. But these are only temporary solutions. As costs continue to rise, temporary funding will only get you so far. 

To lessen the impact of inflation without draining your savings account or racking up more debt, consider this:

    • Review your expenses. Identify where you can cut costs, like products and services that aren’t essential to your business or utilities you aren’t currently using. 
    • Review supplier contracts. Your supplier may be willing to negotiate a better deal, especially if you’re willing to pre-order or order in bulk.
    • Streamline your invoicing. Send invoices right away and consistently follow up on past due invoices to keep cash flow on schedule.
    • Rethink your pricing strategy. The rising costs of goods and labor may have thrown your profit margins out of whack. Sometimes raising your prices is the only way to combat inflation. 

2. Supply chain struggles

In its most basic form, your supply chain begins with raw materials and ends with finished products in the hands of your end customers. Optimizing your supply chain can help you save money, streamline inventory, and improve customer satisfaction. But the events of 2020 taught us that an optimized supply chain simply isn’t enough—it also has to be resilient. 

Your supply chain needs to be resilient enough to withstand demand surges, shipping difficulties, and global volatility. Today, 33% of business owners say supply chain problems are a top threat to their business. You can strengthen your supply chain by:

    • Implementing buffers. Keep a buffer stock of inventory to protect against supplier delays or demand surges. Build in a time buffer to reduce later delivery. And implement a capacity buffer to leverage underutilized space, like warehouses.
    • Diversifying your network. Diversify your manufacturing and sourcing network to combat supply chain disruptions. In the event of unforeseen circumstances, you’ll have a back-up plan.
    • Practicing demand forecasting. Use hard data to predict demand so you can gauge your needs ahead of time. Your predictions might not always be accurate, but it’s better to be safe than sorry. 

3. Cash flow challenges

More than two-thirds of small businesses say they struggle with cash flow problems—a challenge that has only been exacerbated by rising costs and inflation. When more cash is flowing out than coming in, you can’t pay your employees, suppliers, or other debts. You may have to dip into personal savings to compensate, or you might miss out on exciting investment opportunities due to your lack of cash. 

Negative cash flow can lead to a number of serious issues for your business. When cash flow slows to a trickle, there are a few things you can do to bounce back to cash flow positive

    • Build a cash flow forecast. A cash flow forecast or projection predicts the amount of money entering and leaving your small business. Keeping a close eye on your cash flow forecast helps you better understand where your money is going and prevent cash flow problems before they arise. One study found that using software to track cash flow can result in a 50% reduction in loan interest paid.
    • Reduce expenses. Discontinue non-essential services, cancel or reduce premium services, and reduce operating costs while you work on bouncing back.
    • Get paid faster. Faster payments keep cash coming into your business. Ask for partial payments upfront, incentivize early payments, and make sure you’re accepting multiple payment methods—making it incredibly easy for customers to pay. 

4. Low funding 

One in five small business owners say low funding is the biggest threat to their business this year. If you’re struggling with inflation or cash flow, there’s only so much you can do before you just need funding. Sometimes, a small business loan is the only way to get back on top. 

Applying for a small business loan is easy—but being approved for small business funding is easier said than done. Improve your chances of getting approved for a loan by:

    • Reducing your debt-to-income ratio. This means paying off old balances, increasing existing credit limits, and paying bills more frequently. Your credit utilization ratio should be between 15% and 30%.
    • Improving your business credit score. Find your business credit score through a reputable credit agency. Improve your score by always paying bills on time and opening credit accounts with suppliers when possible.
    • Boosting your sales. Lenders like to see that your business is already generating revenue. Boost your sales as much as possible before applying for a loan to increase your chances of approval. 

Small business grants are another good funding option for small businesses, but they can be much harder to obtain. The application process is much more rigorous than applying for a small business loan. But if you think your business may be eligible for a grant, it’s well worth your time to apply. If all else fails, crowdfunding is a modern solution to funding woes, or turning to friends and family for financial support.

5. Skills shortages and employee retention

One in four small business owners says hiring new employees is a top priority for 2022, but finding skilled workers is a top threat. Nearly half of small business owners (49%) say hiring is getting harder. But keeping skilled workers is just as tricky, 40% say employee retention is a challenge. 

To solve these problems, many small businesses are raising employee pay for new and established workers. They’re beefing up employee benefits and offering year-end bonuses to sweeten the pot. These tactics go a long way towards recruiting and retaining talented employees. But there are a few more things you can do to increase employee retention and make your business more attractive to job seekers. 

    • Focus on diversity, equity, and inclusion (DEI). More than three in four employees say a diverse workforce is an important factor when evaluating job offers, according to data from Glassdoor. Nearly a third say they wouldn’t consider working for a company with a lack of diversity. Commit to DEI by being transparent about the gaps in your business, gathering feedback from employees, and clearly communicate your plan to improve.
    • Offer remote or hybrid work options. Nearly half of small business owners report that they have remote workers in the aftermath of the pandemic—and those workers plan to continue working remotely. Research from Owl Labs found that half of employees said they would not return to jobs that don’t offer remote work. Employees crave the flexibility and autonomy that remote and hybrid work offers.
    • Invest in employee development. A LinkedIn Learning report found that 94% of employees would stay at a company longer if it invested in their career. Investing in employee training and development shows your workers you value their contributions and care about their success. 

Challenge accepted

Whether you face these challenges or not, every business, new and established, can benefit from saving money, improving business processes, and cultivating a strong team. Small tweaks to your existing processes can make a big difference to the success of your business this year and beyond.

By Myranda Mondry

2021 broke a record year for entrepreneurship with five million new businesses started. This year more than 17 million Americans said they wanted to open a new business, according to data from QuickBooks. 

These new business owners have unique challenges to face in the wake of the pandemic. Like inflation, which a recent QuickBooks survey found that almost all business owners (99%) are concerned about. Respondents also ranked supply chain, cash flow challenges, low funding, and skills shortages among the top threats facing small businesses this year. 

There’s no magic spell to solve these challenges in one fell swoop, but small steps can make a big difference in overcoming them. 

1. Rising costs and inflation

More than half of small business owners say inflation is the top threat to their business this year. Nearly every survey respondent said they’re concerned about the rising costs of goods and labor, and more than half say they’re very concerned. 

To combat inflation, many small business owners have been forced to dip into business or personal savings accounts, or turn to credit cards and small business loans to cover rising costs. But these are only temporary solutions. As costs continue to rise, temporary funding will only get you so far. 

To lessen the impact of inflation without draining your savings account or racking up more debt, consider this:

    • Review your expenses. Identify where you can cut costs, like products and services that aren’t essential to your business or utilities you aren’t currently using. 
    • Review supplier contracts. Your supplier may be willing to negotiate a better deal, especially if you’re willing to pre-order or order in bulk.
    • Streamline your invoicing. Send invoices right away and consistently follow up on past due invoices to keep cash flow on schedule.
    • Rethink your pricing strategy. The rising costs of goods and labor may have thrown your profit margins out of whack. Sometimes raising your prices is the only way to combat inflation. 

2. Supply chain struggles

In its most basic form, your supply chain begins with raw materials and ends with finished products in the hands of your end customers. Optimizing your supply chain can help you save money, streamline inventory, and improve customer satisfaction. But the events of 2020 taught us that an optimized supply chain simply isn’t enough—it also has to be resilient. 

Your supply chain needs to be resilient enough to withstand demand surges, shipping difficulties, and global volatility. Today, 33% of business owners say supply chain problems are a top threat to their business. You can strengthen your supply chain by:

    • Implementing buffers. Keep a buffer stock of inventory to protect against supplier delays or demand surges. Build in a time buffer to reduce later delivery. And implement a capacity buffer to leverage underutilized space, like warehouses.
    • Diversifying your network. Diversify your manufacturing and sourcing network to combat supply chain disruptions. In the event of unforeseen circumstances, you’ll have a back-up plan.
    • Practicing demand forecasting. Use hard data to predict demand so you can gauge your needs ahead of time. Your predictions might not always be accurate, but it’s better to be safe than sorry. 

3. Cash flow challenges

More than two-thirds of small businesses say they struggle with cash flow problems—a challenge that has only been exacerbated by rising costs and inflation. When more cash is flowing out than coming in, you can’t pay your employees, suppliers, or other debts. You may have to dip into personal savings to compensate, or you might miss out on exciting investment opportunities due to your lack of cash. 

Negative cash flow can lead to a number of serious issues for your business. When cash flow slows to a trickle, there are a few things you can do to bounce back to cash flow positive

    • Build a cash flow forecast. A cash flow forecast or projection predicts the amount of money entering and leaving your small business. Keeping a close eye on your cash flow forecast helps you better understand where your money is going and prevent cash flow problems before they arise. One study found that using software to track cash flow can result in a 50% reduction in loan interest paid.
    • Reduce expenses. Discontinue non-essential services, cancel or reduce premium services, and reduce operating costs while you work on bouncing back.
    • Get paid faster. Faster payments keep cash coming into your business. Ask for partial payments upfront, incentivize early payments, and make sure you’re accepting multiple payment methods—making it incredibly easy for customers to pay. 

4. Low funding 

One in five small business owners say low funding is the biggest threat to their business this year. If you’re struggling with inflation or cash flow, there’s only so much you can do before you just need funding. Sometimes, a small business loan is the only way to get back on top. 

Applying for a small business loan is easy—but being approved for small business funding is easier said than done. Improve your chances of getting approved for a loan by:

    • Reducing your debt-to-income ratio. This means paying off old balances, increasing existing credit limits, and paying bills more frequently. Your credit utilization ratio should be between 15% and 30%.
    • Improving your business credit score. Find your business credit score through a reputable credit agency. Improve your score by always paying bills on time and opening credit accounts with suppliers when possible.
    • Boosting your sales. Lenders like to see that your business is already generating revenue. Boost your sales as much as possible before applying for a loan to increase your chances of approval. 

Small business grants are another good funding option for small businesses, but they can be much harder to obtain. The application process is much more rigorous than applying for a small business loan. But if you think your business may be eligible for a grant, it’s well worth your time to apply. If all else fails, crowdfunding is a modern solution to funding woes, or turning to friends and family for financial support.

5. Skills shortages and employee retention

One in four small business owners says hiring new employees is a top priority for 2022, but finding skilled workers is a top threat. Nearly half of small business owners (49%) say hiring is getting harder. But keeping skilled workers is just as tricky, 40% say employee retention is a challenge. 

To solve these problems, many small businesses are raising employee pay for new and established workers. They’re beefing up employee benefits and offering year-end bonuses to sweeten the pot. These tactics go a long way towards recruiting and retaining talented employees. But there are a few more things you can do to increase employee retention and make your business more attractive to job seekers. 

    • Focus on diversity, equity, and inclusion (DEI). More than three in four employees say a diverse workforce is an important factor when evaluating job offers, according to data from Glassdoor. Nearly a third say they wouldn’t consider working for a company with a lack of diversity. Commit to DEI by being transparent about the gaps in your business, gathering feedback from employees, and clearly communicate your plan to improve.
    • Offer remote or hybrid work options. Nearly half of small business owners report that they have remote workers in the aftermath of the pandemic—and those workers plan to continue working remotely. Research from Owl Labs found that half of employees said they would not return to jobs that don’t offer remote work. Employees crave the flexibility and autonomy that remote and hybrid work offers.
    • Invest in employee development. A LinkedIn Learning report found that 94% of employees would stay at a company longer if it invested in their career. Investing in employee training and development shows your workers you value their contributions and care about their success. 

Challenge accepted

Whether you face these challenges or not, every business, new and established, can benefit from saving money, improving business processes, and cultivating a strong team. Small tweaks to your existing processes can make a big difference to the success of your business this year and beyond.

Myranda-Mondry
About the Author: Myranda Mondry is a content creator and researcher at Intuit. She graduated with an english and journalism degree from Boise State University, and currently resides in Boise, Idaho. She’s passionate about dogs, music, and helping small businesses succeed.

Questions to Ask Yourself Before Taking On Business Debt

July 12, 2022

By: Matthew Gillman, SMB Compass Founder

Deciding to take on business debt is a difficult and necessary decision that most business owners face at some point. If you’re thinking of applying for business financing, you’re not alone. In fact, in the last 12 months, 45% of small business owners have applied for a business loan.

And, currently many business owners are considering financing options to simply deal with rising costs and inflation. According to the latest Small Business Index report, more than seven out of ten small entrepreneurs said that the rising cost of goods and services due to inflation had taken a toll on their operations within the past 12 months. The new survey revealed that about 50% of small companies have dealt with inflation by getting business financing.

Regardless of what form of debt you take on, it’s important to remember that the biggest point of debt is that you eventually have to pay with interest over a certain period. For many small businesses, taking on debt can actually benefit the business in the long run, and when used for the right reasons, access to financing can serve as a breather for many entrepreneurs who are struggling to keep their business afloat. 

    1. Is getting a loan the only option?

      When your business is new, you might think that applying for a small business loan from traditional banks or credit unions is the only way to get capital. The truth is, there are a myriad of options for you to get financing.

      To fund your business, you may also do crowdfunding on websites such as Kickstarter, GoFundMe, Patreon, and Indiegogo—all these sites can help you raise funds from supporters.

      On top of crowdfunding, you may also ask for capital from friends or family, or seek out investors. This can be done in a few ways: through venture capitalists, angel investors, or private equity firms.

    2. What will the capital be used for?

      One of the most important questions you should ask yourself is what you’re going to use the money for. Most new small business owners make the mistake of getting the maximum loan amount they can get from lenders without considering why they need it in the first place.

      Before even talking to a lender, make sure you know why you need more capital: do you need to pay your employees? Is it getting more difficult to make ends meet? Do you need to purchase new equipment for your business?

      Knowing the purpose for taking out a loan allows you to find the best financing option. For example, if you only need to access capital from time to time, a business line of credit might be a better option for you than a term loan.

    3. Can I make the monthly payments?

      Since small business loans are like any type of financing, you need to know if you have the means to repay it with interest monthly. Check whether you have any outstanding balances or if you can squeeze in the repayments in your cash flow.

      Also, make sure you’re not compromising your business’ emergency fund to pay for your monthly terms. At the end of the day, you still want to have enough financial cushion for tough situations.

    4. Which type of financing best suits my needs?

      Aside from small business loans from traditional creditors, you may also access funding from alternative lenders. Alternative small business loan lenders typically offer more flexible payment terms and are not too strict regarding your qualifications. You may even have access to funds in as fast as 24 hours.

      Some alternative loan solutions you may apply for are a line of credit, quick cash loans, invoice factoring, and equipment loans.

    5. Can I provide collateral?

      Since alternative lenders give small business owners more opportunities to access capital without rigorous application, they will need to reduce their risks. Seeking collateral from borrowers is one way for lenders to reduce their risk of lending you money.

      Collateral is important for small business loans because it gives the lender a way to recoup their losses if the borrower defaults on the loan. Collateral also provides the lender with peace of mind knowing that they have some security in case of default. Lenders will typically require collateral for business loans over a certain amount, so it is important to be aware of this when applying for financing.

    6. Are my credit ratings strong enough?

      Lenders will always refer to your personal and business credit reports when seeking capital. Your personal credit score is a three-digit summary of your creditworthiness, which gives lenders an overview of your behavior regarding money.

      The same goes with a business credit score: a business credit score is a number between 0 and 100 that demonstrates your ability to pay for business expenses on time.

      Generally, a good personal score should be at least 680; a good business credit score is 70 and above. Having a strong enough personal and business credit allows you to have more access to capital at better terms and rates.

Talk to experts about your options

As you do your research, it’s important to consider speaking with lenders and financial experts. They know what financing solutions are ideal for your business and your qualifications. That way, you can avoid paying for steep funds for getting the wrong type of loan or getting financing at the wrong time.

Matthew-Gillman
About the Author: Matthew Gillman is a business financing expert with more than a decade of experience in commercial lending. He is the founder and CEO of SMB Compass, a specialty finance company providing education and financing options for business owners.

What small businesses need to know about combating inflation

July 5, 2022 1 Comment

By Myranda Mondry

Inflation is the biggest threat facing U.S. small businesses in 2022, according to recent QuickBooks data. 99% of survey respondents say they’re concerned about the rising costs of goods and labor, and more than half say they’re very concerned.

With inflation comes additional cash flow challenges for small businesses. More than two-thirds of respondents say they’ve encountered cash flow problems this year, and 23% say it’s a major problem for their business. They identified rising costs as the number one cause of these challenges.

To combat inflation, many small businesses have been forced to dip into business savings accounts (if they’re lucky enough to have cash in reserve) or turn to credit cards, loans, or even their personal bank accounts to keep their business afloat. Nearly 40% of small business owners say they’ve dipped into their personal savings for their business this year.

Others have reacted by raising prices to compensate for rising supply chain costs and labor costs, passing the brunt of inflation on to their customers. But this tactic could drive consumers away—and it might not be enough to combat inflation.

There’s no easy answer to the inflation riddle. Small businesses with tight margins are stuck between a rock and a hard place. Raise prices, risk losing customers. Dip into savings, risk running dry. But there are a few things small businesses can do to lessen the impact of inflation without making major cuts or changes.

1. Review your expenses

Now is a great time to review your business expenses and identify where you can cut costs. Using expense tracking software allows you to see all your business expenses in one place, making it easy to identify non-essential spending.

Look for products and services that aren’t being used or aren’t essential to your business. (Note that costs related to employee wellbeing and customer satisfaction should always land in your “essential” category). From there, identify your “must-haves” and “nice-to-haves.” Can you live without a nice-to-have product or service until cash is flowing more freely? Consider pausing it.

If you’re still paying for office or retail space, but have started operating remotely or online, consider downsizing or subletting your space to save costs. Move to a more affordable location, or let the space go if it’s no longer benefiting your business or your team. Businesses that operate from a physical location can look for ways to improve energy efficiency and save money on utilities. Those nickels and dimes add up.


2. Renegotiate supplier contracts

If it’s been a while since you’ve read your supplier contracts or negotiated with your vendors and suppliers, there’s no time like the present. Some suppliers may be willing to offer discounts for pre-ordering, paying early, or ordering in bulk. If you notice the price of supply increasing each time you place an order, you might consider pre-ordering or ordering in bulk to stock up on supply and order less often. If your supplier simply won’t budge on the cost, there’s no harm in shopping around.


3. Get paid faster

More than half of small business owners say late payments are the driving force behind their cash flow problems, and a quarter say it takes more than 30 days to get paid, according to QuickBooks data.

With inflation knocking on your door, you don’t have the time or the funding to deal with late payments. Get paid faster and improve your cash flow by including clear payment terms on your invoices, requesting upfront payments or deposits, making it extremely easy for customers to pay their bills, and following up on past due invoices immediately. Use invoicing software to create and send professional invoices that get paid faster.


4. Focus on employee retention

The recent labor shortage has made it difficult for small business owners to find qualified candidates, but 40% say keeping skilled workers has been just as hard, according to QuickBooks data.

When employees leave, they take with them their skills, training, and experience—leaving you with recruiting, hiring, and onboarding costs. Not to mention an empty slot on the schedule that needs to be filled.

Many business owners are offering raises and bonuses to existing employees to sweeten the pot and keep employees on the payroll. It might seem counterproductive to raise salaries while you’re trying to cut costs, but the price of keeping employees happy is often cheaper than the cost of finding new workers.

Remember, inflation impacts employees too. While you’re battling the rising costs of supplies, they’re battling a rising cost of living. Along with higher pay, things like paid time off, flexible work schedules, and mentorship opportunities are low-cost ways to keep employees engaged.


5. Get funding

A small business loan can help you fuel your bottom line without dipping into your business cash reserves or personal savings. But a business loan should be an investment for your business, not a band-aid solution to cover unpaid bills or unexpected expenses—this only digs you deeper in debt.

Use a small business loan to buy inventory in bulk, invest in more efficient operations, or ramp up your marketing efforts to attract new customers. Look for high ROI opportunities to invest your capital back into your business. 


6. Rethink your pricing strategy

Sometimes you just need to raise your prices. If your profit margins are dipping lower and lower by the day, raising your prices might be necessary. But there’s a right way to do it.

Start small. Raising prices en masse can be jolting for customers, driving them away from your business. Make small, strategic pricing changes that will have the biggest impact on your business but the lowest on your customers. It’s a good idea to start with top selling or unique products to increase profit margins right away and gauge customer reactions.


Small steps, big impact

According to recent small business data and research, inflation isn’t going away anytime soon. Small businesses will be stuck in this seemingly uphill battle for the foreseeable future—which can feel pretty daunting. But cutting costs, collecting on past due invoices, and improving your profit margins can go a long way towards combating inflation. These changes may feel small, but they’re steps you can take right now to lessen the impact of inflation and protect your bottom line… without compromising your personal financial (or mental) health.

It’s always a good idea to consult a business accountant or advisor before making drastic changes. Get free business consulting at your local Small Business Development Center.

Myranda-Mondry
About the Author: Myranda Mondry is a content creator and researcher at Intuit. She graduated with an english and journalism degree from Boise State University, and currently resides in Boise, Idaho. She’s passionate about dogs, music, and helping small businesses succeed.

How to Do Business in Your Own Backyard With no Money

June 28, 2022

By: Sharita Humphrey

Starting a business can seem rather scary at first. You’ve got to think about how to get your resources, review whether your budget would be enough, or – whether a certain business would be profitable.

This is why, in order to live a simpler life, many people delay starting their dream business because of the challenges it may involve.

The good news is… there are ways to start a business in a simpler sense. You may start a business from the comfort of your own home and save a lot of headaches. It might not be the dream business you had in mind, but all big businesses started small.

Know the pros and cons

If you’re on the fence about starting a home-based business, here are some benefits and downsides to think about.

Pros:
    • A reduction in overhead costs (office space, transportation, warehouse rentals, etc.)
    • Time saved by not having to commute
    • Work-life balance that is flexible

You can also benefit from tax deductions when operating from a home-based business. Although some organizations have now returned to working in offices, many small business owners have found the virtual shift to be efficient and cost-effective, resulting in many making it a permanent change.

The following is a list of the most typical tax deductions claimed by home-based business operators.

You can save up:

    • Business office insurance
    • Cleaning services or cleaning materials that are typically arranged by contract in offices
    • Mortgage insurance and accompanying interest
    • Utility expenses that cover electricity, internet, heat, and phone bills
    • Maintenance and fixtures fees
Cons:
    • Difficulty in keeping your professional and personal lives separate
    • Possibility of government-regulating actions for home-based companies
    • Facing the challenges of isolation if you’re more of an extrovert
    • Possibility of working long hours
    • Reduction of social connections due to working alone at home excessively

As you can see, not everyone is suited for starting or purchasing a home-based business. Before you take on this endeavor, you must weigh up all of the pros and cons.
Remember that having a strong financial foundation prior to starting your own business can make the process smoother.

List down your ideas

The first step in starting a backyard business is to come up with a project idea. You might wish to start a business out of one of your passions, or you might want to try something new.

What do you usually do? What are you good at? What are your hobbies? You can start assessing yourself and list down these things. You can ask for support and brainstorm ideas on how to monetize these hobbies and passions that you had.

When you have the plan laid out, you can start eliminating ideas or concepts that aren’t going to sell.

The concept is crucial, but don’t be afraid to come up with a few alternatives in case things go wrong. When it comes to starting a business, a little trial-and-error is OK.

Market your idea

The wonderful thing about beginning a business in today’s culture is that you don’t need a large marketing expenditure. Thankfully, you can utilize social media to promote your business and get it off the ground right in your own backyard.

Additionally, you can make use of social media management software to schedule updates on your accounts. These apps would make your business life much easier to manage and some of them are free to use, such as;

    • Later
    • Tweetdeck
    • Canva
    • Buffer
    • Hootsuite
    • Planable

As a bonus, you can concentrate on other tasks while your social media accounts are taken care of.

Think about expansion

Although your initial goal may have been to create a backyard business, you may find that your business grows to the point where you can no longer operate it from your backyard. Don’t be scared as this only indicates that your company is becoming more successful.

It is now even easier when businesses started to gain ground online. So expanding and reaching out to the world is actually doable and possible.

Don’t be scared to extend your business by purchasing an additional building for your backyard or renting out a nearby office. This is your company, so keep an eye on it and be proud of it. Just having started it in the first place is already a success in its own right.

Takeaway

There’s no reason why you shouldn’t start a backyard business of your own. You’re already halfway there if you have some spare cash and a good idea. Making money without ever leaving the house is now conceivable (and reasonably easy) in today’s increasingly connected world. The rapid expansion of remote work is proof that high-quality performance and significant commercial results can be accomplished without the need for pricey real estate.

Working from home and being your own boss is no longer a pipe dream— it can become your reality.

sharita
About the Author: Sharita M. Humphrey is an award-winning finance expert, money mentor and Certified Financial Education Instructor. Once broke and homeless, Sharita completely transformed her life and is now a successful entrepreneur and one of the most in-demand money coaches for individuals and business owners. In 2020, Sharita was named National Financial Educator of the Year.