Category Archives: business

6 Ways to Make Your Ecommerce Startup Stand Out

6 Ways to Make Your Ecommerce Startup Stand Out
Barebones shopping cart sites and apps just don’t quite cut it anymore.

The growth of the ecommerce industry remains strong. In the U.S., the industry grew by 15.6 percent to $394.86 billion last year, with ecommerce comprising 42 percent of all retail growth. Consumers have also now shifted to mobile. Mobile ecommerce poses another set of challenges to success which leaves online merchants little choice but to continue adapting. Merchants must be able to leverage the new developments in ecommerce technologies in order to secure an advantage.

Ecommerce startups may find themselves in quite an interesting position. On one hand, they can readily implement cutting edge or mobile-first strategies since they don’t have any legacy issues to deal with. On the other, they also need to enhance their infrastructure with these new technologies. Barebones shopping cart sites and apps just don’t quite cut it anymore.

Here are six ways startups can make their stores stand out.
1. Marketing automation

Even with a good catalog of products, ecommerce startups can’t just expect customers to just turn up and buy. Successful ecommerce efforts are always aided by strong marketing efforts. Ecommerce marketing helps to attract and convert customers, upsell and cross-sell, and generate repeat sales.

Due to the volume of customers companies have to reach, doing marketing tasks such as sending newsletters and following up on abandoned carts can be a tedious process. Marketing automation can be used to streamline these tasks. Automation services can be configured to send out customized offers or newsletters via email or as push notifications on mobile. These can even be sent out at an optimal time based on a user’s past behavior so that messages land at the top of their inboxes. Moreover, effective timing can lead to increased email response times. Reminders can also be triggered if customers leave items in the online shopping carts.

2. Advanced analytics

Gone are the days when analytics meant simply tracking a website’s daily visits and how long each visit lasted. For ecommerce, advanced analytics offers means to accurately track each customer’s journey. Trackers can now determine traffic sources and gather data on each click made in the store. These data can be compiled and analyzed in order to generate insights on customer behavior and product and site performance.

Analytics tools can be configured to sync data from multiple sources and trigger actions such as notifications. These can even be integrated with automated marketing services as part of rule-based campaigns. Analytics could also be used to track internal team’s performance to see how quickly orders get fulfilled. Timely decisions and changes can then be made while being guided by solid evidence. Customers, especially loyal ones, could tell if improvements are being done to enhance their experience.
3. Personalization

Customers love being flattered and one way to do this is by offering a personalized experience. Among the simple ways of implementing personalization are automatically changing language and currency settings based on geolocation data and launching push notifications reminding customers of the items they browsed.

Customer data can be utilized to further improve their experience. Developments in machine learning are ushering in hyper-personalization in ecommerce. We are already seeing glimpses of this when store apps would display a targeted selection of products based on recently viewed items. Thirty-five percent of Amazon’s sales come from such recommendations. The combination of analytics and machine learning enables targeted messages and actions based on a customer’s historical information. Soon, machine learning may even be able to anticipate and predict purchases based on buying histories, trends and seasons.
4. Chatbots

Chatbots are an exciting development in ecommerce. Dubbed conversational commerce, messaging apps are now being used to enable ecommerce. One example is Uber’s integration with Facebook Messenger which allowed users to book rides within the chat window. Voice activated home devices like the Amazon Echo can be used to check user’s Capital One account balances and even order pizza from Domino’s.

Future developments would enable users to browse and compare products and even directly place orders within the chat app. Facebook is heavily investing in its Messenger developer platform to enable more partnerships and integrations. Subway has recently unveiled its Messenger bot to enable sandwich orders, and Wells Fargo looks to follow Capital One in allowing customers to access account information through Messenger. Startups could do well investigating how they can make an early splash in using chatbots for ecommerce.
5. Customer support 2.0

Among the pitfalls of doing business online is poor customer service. Digital channels do take away much of the human element of doing business so it is important to put up systems that would allow merchants to connect with customers. Customer support often came in the form of chat widgets and email and messaging systems which allow customers to interact with live agents.

The problem with this is that it can sometimes take a while, especially if the support team is encountering a large volume of transactions. However, being too pushy by bombarding users with messages can turn them off. One way to supercharge customer support is by carefully engineering the points at which these messages come up. Platforms like Giosg can be set to enable live chat to pop up just as a customer abandons the cart. This allows a live agent to address any concerns buyers may have in order to close the sale.
6. Fraud protection

A growing concern among merchants is fraud. Fraudsters often target ecommerce services to “launder” money by using stolen credit card details to purchase both physical and digital goods. Due to the chargeback system, real owners of the credit card gain a level of protection. Unfortunately, it’s the merchant that has to deal with the loss.

Implementing fraud protection has been gaining traction. But, for some, verifying orders has been a manual process. There are times where legitimate transactions get flagged or denied. While this could be simply a prudent move on the part of the merchant, these can ultimately result in lost customers. Availing of fraud protection services can help automate this process, and using their advanced algorithms, filter out fraudulent purchases while ensuring real purchases get fulfilled.
Providing superior customer experience

Everything considered, what this all boils down to is providing superior customer experience. Ecommerce startups should understand that the industry has become more competitive. These new technologies could be a difference maker but only if used strategically. There’s little point in packing all these features if they aren’t configured to work towards making the whole experience unique, smooth and hassle-free for customers.

5 Rules for Staying Ahead in the Ecommerce Race

5 Rules for Staying Ahead in the Ecommerce Race
Starting with a winning formula from inception goes a long way in guaranteeing long-term sustainability.

While the news has been filled with stories of brick-and-mortar struggles lately, ecommerce has been thriving. Just last year ecommerce sales rose 15.1 percent, according to a report released by the U.S. Commerce Department, encompassing 8.1 percent of total retail transactions. Indeed, optimistic hopes for online buying from the late 90s are 2017’s reality.

And in turn, after a number of relatively dormant years, there has been a flurry of ecommerce M&A activity. This has included some of the largest ecommerce exits in history such as “unicorns” Dollar Shave Club and Chewy.com. Yet, conversely, the last couple of months have also seen unfortunate results, with Nasty Gal, One Kings Lane, Modcloth, Gilt and others shuttering or selling for less than the capital raised through their VCs.

Ecommerce is by nature transactional and thus built to succeed. The question is, why do some well-funded companies manage to thrive and others fall apart? Of course, all strokes can’t be painted with the same brush, and there are many operational and marketing oriented reasons that lead to a company’s success or failure. However, starting with a winning formula from inception goes a long way in guaranteeing long-term sustainability.

So, what are best practices for building a successful ecommerce company in 2017 and beyond? Here are some simple rules:
Vertically integrated models work.

Vertically integrated ecommerce companies own the entire customer lifecycle, from coordinating manufacturing to final delivery. Since the inception of Warby Parker in 2011, vertically integrated ecommerce companies have thrived, and with due cause. By virtue of being both the manufacturer and retailer, they can provide greater value and service to customers while maintaining reasonable margins. They also don’t have to engage in price wars on Amazon, which inevitably bring down profits and don’t allow for differentiation.

Pursue large, inefficient markets.

Everyone needs a mattress. Similarly, lots of people need glasses. Pursuing large markets has been to the benefit of online disruptors out of the gate. But, Warby worked not only because it went after a large market, but that it also went after one that was inefficient and over-priced. Its better service and branding helped, but the market itself was ripe for disruption.
Subscriptions make sense.

Dollar Shave Club sold to Unilever for $1 billion. Why do subscription companies do well? The reason is simple: They can handle a higher user acquisition cost vs competitors. Take subscription vs. non-subscription players for lower cost items. If you’re selling a $9 razor one time only, you probably aren’t justifying the price you paid for Facebook ads to acquire that customer. If you’re Dollar Shave Club and that person pays you $9 and sticks around for three years, the customer is actually paying you $324 over time. Guess who wins out in the long run?

The largest ecommerce exit ever, Chewy.com, in some ways operates as a subscription model in disguise. Pets need to be fed daily and Chewy, by making it simple and easy to buy again, got lots of its consumers to return to Chewy.com the next time they needed a fill-up.

Complexity is difficult.

Complex businesses with lots of specialized SKUs can be difficult to turn into effective businesses. For example, there have been a few fashion and apparel wins during the last few years, but lately apparel exits haven’t been the toast of the town. Even the vertically integrated apparel trailblazer, Bonobos, sold for much less than its investors were hoping. Why? Because apparel is inherently complicated. There is seasonality, inventory and converting one-time shoppers into loyal consumers can be difficult in a world of styles and trends. It can happen, but it requires an experienced team, a great product portfolio and strong technology. Retention and data driven etailer Stitch Fix has thrived by getting customers to purchase more than once; others not as much. If generating loyal shoppers doesn’t work out, well, you have the makings of some of the less successful ecommerce transactions we’ve seen lately.
Differentiated products sustain.

Inherently smart businesses should have more efficient marketing over time. The bad news is that even if greater efficiency happens in isolation, as a space gets more competitive, pricing for user acquisition usually goes up and conversion rates go down. The good news is that there is a way to get past this issue: Provide a differentiated product from your competitors.

In the online mattress category, we’ve seen over 60 companies enter the category during the last three years. It’s become expensive to enter the space and market effectively online. For example, the price of Google in-market spending has risen by four times in the last four years. At Saatva, we’ve been able to continually be one of the top players because we provide a unique luxury product and differentiated service. We custom install a non-compressible product in-home; our competitors arrive via UPS rolled into a box. It’s this type of core distinction that allows us to convert a greater percentage of buyers, even as marketing costs get more expensive.
Here’s the bottom line.

It’s an amazing time to be an ecommerce company, and the good news is that there seems to be a system behind success. Less successful companies don’t pursue the right markets, aren’t able to provide a distinct value proposition or have customers that become less loyal over time. Good companies can come from anywhere, yet certain ones have the odds stacked in their favor. With a strong business model, the skill to operate relatively simple businesses and provide differentiated value in a space with increased competition and marketing costs, an ecommerce company can be built to thrive and stay ahead in this competitive race.

Can the ‘Freemium’ Model Work For You? Here’s How to Know.

Can the ‘Freemium’ Model Work For You? Here’s How to Know.
Offering ‘freemium’ products can be a smart way to acquire customers and build a lucrative business, but it’s not the right move for every company.

When growing your business, it’s important to figure out what model fits best for your business. Today, one popular strategy is the freemium model. Here’s how to know if it’s right for your business.

Q: I’m building an app, and I want to try a freemium model. Is this a successful strategy, or am I setting myself up for failure? — Fabian, Sydney, Australia

Fabian, you’re facing one of the biggest headaches of the digital age. Turn back the clock 30 years, and the idea of giving away your product for free was almost unheard of. Today it’s a staple business model, used in some form by everyone from Dropbox to The New York Times to Match.com.

So first, let’s define the options. The paid model is simple. If a customer wants to use your product or service, they must buy. The freemium model has several variations. You can offer free trials for a period of time, or offer an entire product or service for free while selling add-ons or upgrades.

Generally speaking, freemium works in two scenarios. Number one: if it’s combined with the launch of your company, because being “new” will bring some intrigue, and a free introductory version reduces barriers to entry. Number two: if your product or service is established and so loved by users that they’ll pay for something before losing access to it. Take The New York Times, for example. When the publisher first introduced its digital pay wall, people were unhappy. But they wanted to read stories online. So they paid.

But deciding between paid and free models isn’t just about what’s appealing. It’s about big-picture strategy. Think about your budget. If you can’t afford to spend on marketing, a free offering can help acquire customers. Think about your competition. Is your product vastly better? If it’s not, it doesn’t matter what you’re offering for free — people would rather pay for something that works. And if your product is experiential, will customers feel like they can’t live without it once they’ve tried it?

If your answers still point you toward freemium, here’s how to build an infrastructure to support the model:
1. Be prepared to tweak.

If people are not signing up in waves, your offering isn’t strong enough. But if your offer is so good that there’s no need to pay to upgrade, the lights won’t stay on very long. This is a delicate balance that requires a lot of user testing and a willingness and ability to pivot.
2. Know your value.

Years ago, LinkedIn had a problem: Customers didn’t see why paying for its premium service would make their experience better. So LinkedIn added the ability to email and communicate with non-contacts, a clear value proposition that customers understood (and responded to). Dating sites hit upon a similar idea. Their free platforms work like window-­shopping, but you can’t step into the store unless you pay. (Want to see who messaged you? Enter your credit card here.) Just because you assign a value to a product doesn’t mean the customer agrees with that value. Again, pay attention and pivot where needed.

3. Don’t be lulled by early adopters.

The first people who try and pay for your service are probably not representative of long-term customers. Early adopters convert at higher percentages, so plan for an eventual dip in conversion as time goes on. And watch how you’re generating leads. You need power users who’ll act as salespeople, so if new leads are the result of other customers singing your praises, you likely have a winner.

No business model is foolproof, of course. But if freemium is right for you, you’ll need to constantly innovate, iterate and evolve — and then, hopefully, gain the traction you need to stand out in a crowded market full of other free products.

How Our Brains Trick Us Into Choosing Instant Gratification Over Long-term Goals

How Our Brains Trick Us Into Choosing Instant Gratification Over Long-term Goals
Distractions and emotions can lead us away from where we want to go.

Humans are clever creatures.

We thought up outer space travel, penicillin and the Internet. With every century, the technology we use gets more and more sophisticated. And yet, we still make irrational decisions each day.

We choose to stay in an unhappy situation rather than pursue something else. We keep putting off a project until the night before the deadline. We do things knowing that they’ll likely lead to regret down the road — so why do we do them?
We’re not as in control as we think.

We like to think that we are logical and rational about our decisions. If a problem comes up, we think through each step carefully and find a way to resolve it. That may be true some of the time, but more often than not, a lot of times we act first, then think later. As a result, we perform an action and then find a way to logically make sense of what we did in what is known as the attitude follows behavior principle.

A group of participants in a study were asked to hold a pencil between their teeth as they watched cartoons, which forced them to a smile. Another group of participants were asked to hold the pencil between their lips without touching the teeth, causing them to frown as they watched cartoons. As a result, the participants forced to smile perceived the cartoons as funnier than those forced to frown.

In real life, the attitude-behavior principle leads to bigger implications. Even if we genuinely want to do something, external circumstances or our emotions get the best of us, causing us to rationalize poor decisions. For instance, you might:

Not apply to grad school for fear of rejection and say, “I didn’t really want to go there anyway.”
Not get time off from work to travel, then reason that there’s no need to visit anywhere else.
Not pursue business leads that could grow your revenues, then tell yourself that you’re comfortable where you are.

In all of these instances, we do things to feel better in the short-term without considering the long-term consequences. We may live to regret our choices down the road, but since we’re doing fine right now, so there’s little incentive to change.

It seems silly now to see the rationale behind poor choices. It’s as if we have different personalities waging a war inside of us, pulling us in different directions. In a sense, that’s exactly what’s happening.
The three brain networks.

Humans have three separate components of the brain that act very differently from one another. Over a long period of time, a newer layer developed over the older component to form the modern human brain.

The first layer, known as the basal ganglia or “reptilian brain,” is the oldest of the three. It focuses on survival, such as nourishment, reproduction and threat avoidance. While that’s all good, this part of our brain is averse to changes and can be stubborn to the suggestions of other parts of the brain.

The limbic brain emerged next, and it focuses on our emotional responses to situations. The limbic brain causes us to make snap judgments based on past experiences and memories. While these emotions and reactions can protect us, they can also be unfair judges.

Finally, the neocortex is the newest part of the brain. It focuses on complex skills such as rational thinking, creativity and languages. We have the neocortex to thank largely for civilization’s advancements.

These three layers communicate with each other and influence our thoughts and decisions. Unfortunately, the older, powerful parts of our brain can work against what’s best for us.
How your brain makes decisions.

As soon as a situation pops up, the three parts of our brain try to resolve the issue in different ways. For instance, let’s say you walk into a room and see a molten lava cake oozing with chocolate sauce. You start to salivate (just writing this makes me hungry). Your reptilian brain sees food, while your limbic brain imagines how delicious it would be to bite into the cake.

On the other hand, your rational neocortex sees the calorie-dense cake and says, “Hold on a second. I’m supposed to be watching my weight. And besides, I’m heading over to Jane’s place tonight, where there will be tons of food and dessert.”

Back before modern civilization was around, eating the cake (or whatever food was around) was a wise decision, since you never knew when the next meal would be. Today though, eating everything you see leads to weight and health problems.

Related: 5 Ways to Train Your Brain and Boost Your Self-Esteem

So which part of our brain wins in the end? It depends on the scenario. Research from Princeton University concludes that impulsive choices happen when the emotional part of our brains triumphs over the logical one.

When people get really close to obtaining a reward, their emotional brain takes over. So if a chocolate cake is staring right at you, things will get dicey.

“Our emotional brain has a hard time imagining the future, even though our logical brain clearly sees the future consequences of our current actions,” says Laibson at Harvard University. “Our emotional brain wants to max out the credit card, order dessert and smoke a cigarette. Our logical brain knows we should save for retirement, go for a jog and quit smoking.”

When we see, touch, or smell something that we really want, the temptation is too great to resist. We act impulsively because the dopamine in our brains gets all fired up. When our brain has calmed down afterward, though, we end up regretting our actions.
Make peace in times of war.

With all these temptations, it seems like you and I are doomed to eat whatever we want, shy away from opportunities, and spend lavishly outside our budget. What hope is there if our brains are working against us?

Don’t despair just yet. There’s good news.

For one, we get wiser as we grow up. Our cortex helps us delay gratification in favor of long-term rewards. As children, this part of the brain isn’t quite developed, which is why kids have a harder time resisting the marshmallow than adults do. When we go through our teenage and adult years, our cortex develops and matures, which can then communicate better with the other parts of our brain.

While that’s an improvement, we still easily get seduced by the bag of Doritos nearby. So here are some methods that I’ve used to help my brain do what’s best for me in the long run.
1. Manage your environment.

I’ve noticed that cravings happen most often when I see an object. My brain then thinks, “I want that!” Since I’ve placed healthier snacks and food nearby, I don’t need to expend energy trying to resist temptation.

Managing your surroundings also works when you want to achieve an important goal. Since I made writing a regular habit, I talk to like-minded people and have resources at hand to help me with this skill. Doing so makes it easier to keep going.
2. Tend to basic needs.

If possible, find ways to work with your reptilian and limbic brains, not against them. Even if the older parts of your brain don’t always work in your best interest, it doesn’t mean they’re evil. The best way to tend to their needs is to maintain your energy levels.

Feeling tired? Take a nap or get more rest. Is your stomach grumbling? Eat balanced meals throughout the day. Cranky from stress? Go and play. When your energy levels aren’t being taken care of, your mood drops and your reasoning skills worsen.
3. Tie emotion to your goals.

Our emotions can easily overpower any logic deduction skills we have. So if you really want to start creating a habit, then associate it with an emotion. For instance, if you forget to floss your teeth, put a sign up reminding yourself that cavities are painful.

On the other hand, if you find it hard to work on a project, find ways to make it exciting. I like to use the Page-turner Technique to make it easier to get back into where I left off. You can also picture how your life will benefit from completing a task.
4. Just do it.

When we feel nervous or scared of doing something, we often try to talk ourselves into becoming more confident. While this method helps boost up our self-esteem, there comes a point when you just have to jump. After all, we’re naturally inclined to stay in the same situation.

In my case, I felt nervous about sending cold emails to reach out to strangers. I tried to reason to my fears about why it wouldn’t be so bad. But eventually, I just had to go ahead and do it. Now, I don’t mind sending cold emails and actually see it as a fun process.

Our decisions are often driven by factors outside of logic and reasoning. Distractions and emotions can lead us away from where we want to go. But if you can find ways to get parts of the brain to cooperate and behave according to your goals, then you’re well on your way to tipping the scales back in your favor.

4 Effective Business Models That Built Billion-Dollar Companies

4 Effective Business Models That Built Billion-Dollar Companies
From software that’s free to virtual goods that cost real money, all the new models have their uses.

It takes more than a mere initial idea to build a successful business. To start with, you’ll need a roadmap of where you’re headed and how to get there. Since businesses thrive on profit, one of the crucial questions you must ask yourself at the outset is how to grow your user base to build revenue. Both of these issues are covered under the umbrella term “business model.”

While a lot of business models exist, four of them are worth studying in the context of today’s marketplace.
1. The on-demand model.

This model has been receiving a lot of attention because more and more startups are adopting it. As its name implies, the on-demand model pitches its tent on the real-time provision of goods and services. That is, all you’re required to do as a consumer is to place an order for a good or service, using your gadget, and await its delivery. Dead simple.

But why is this model even a thing? Many people argue that its increasing popularity is tied to the fact that it fits right into the hectic lifestyle that we are all now used to: a life where, thanks to technology, we expect instant gratification. In fact, technology is considered to be its single major propeller, as technology serves as a fillip to its core pre-conditions, which include cost-effectiveness and speed.

Better for you, the on-demand model is not just convenient to consumers but also to businesses. It’s especially suitable for platform businesses that utilize already established infrastructure to solve a problem.

Uber, for example, doesn’t own a car. Without its present model whereby independent drivers sign up for the service and are then added to a database of Uber drivers, Uber would need to purchase its own cars while also trying to build and maintain its core product. This would be costly and ultimately lead to scaling issues. Think about what it would cost to not only purchase vehicles but also to maintain them, while running about 3000 micro services that make up its product — all this while also trying to grow on a global scale. Painfully difficult, if you ask me.

Semil Shah explained a common usage of the on-demand model: “Every week, a new service seems to launch that aggregates and organizes freelance labor (those with excess time) to help those who have money but not time.” In other words, these services aren’t grooming their own freelancers but are simply attracting both employers and freelancers to mutual ground. There, employers get to select and outsource jobs to desired freelancers, on demand. No hassles. That’s the beauty of it.
2. The freemium model.

The freemium model is mostly adopted by tech products when they group features into basic and advanced products. The purpose of this model is to promote the basic features for free, where anyone and everyone would be able to use them, but grant only premium users access to the advanced ones. Becoming a premium user usually comes in the form of an account upgrade, as seen in the case of LinkedIn.

A venture capitalist, Fred Wilson, aptly described the models as: “Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc. then offer premium-priced, value-added services or an enhanced version of your service to your customer base.”

Dropbox, Evernote and MailChimp are a few of the many companies that have been able to successfully leverage this model.

What makes freemium interesting is nothing other than psychology. Allowing users to access high-quality features for free will most likely lead to the rapid acquisition of mindshare. Soon, some of the users who find the product indispensable will pay for more advanced features. Moreover, people naturally attribute low-quality to free things and will consider an upgrade as the best way to improve quality.

Using freemium, it’s usual to expect to convert only a fraction of your users. In his book, Free, Chris Anderson explains that this model works on a 5 percent rule – that is, 5 percent of paying customers support the remaining 95 percent of free users. Some companies however record better conversions. MailChimp, for example, reported a 150 percent boost in paying customers and 650 percent increase in profit, within a year of adopting this model. In LinkedIn’s case, a little less than 20 percent of users pay for premium services but the company earned nearly $1 billion revenue in 2017.

Freemium also thrives due to the network effect. Phil Libin, CEO of Evernote, characterized it: “The easiest way to get one million people paying is to get one billion people using.”
3. Shopping annuity.

The so-called shopping annuity is a not-so-talked-about business model, but one that’s presently gaining some ground. The idea behind this model is simply to enable customers to earn from their own current spending. Consumers actually earn money when purchasing everyday items, such as paper towels, toilet paper, toothpaste, razors and so on. It can be a very compelling model that fits well into the ecommerce space.

A good example of a business that’s pioneering the shopping annuity is Market America, through its ecommerce site, shop.com. Founder and CEO of Market America and shop.com, JR Ridinger, is seeing significant success with this business model in nine countries, including the U.S. In a recent interview, Ridinger said, “The shopping annuity — converting everyday spending into earning — is the foundation of our business model and is like rocket fuel for our UnFranchise business, overall. Let’s face it, Uber is essentially the largest taxi service in the world, and they don’t own a single taxi/car. We look at the retail landscape in a similar way, and realize there’s an equally powerful opportunity for us as a global ecommerce powerhouse. People don’t just shop for luxury items, they shop for the things they use everyday. By making those purchases the cornerstone of a shopping annuity, we feel this concept will revolutionize the retail industry as well as our economy. It took 25 years for the technology to catch up to our original vision of interconnected shoppers who wield their collective buying power and convert spending into earning.”

The shopping annuity business model might just revolutionize the way ecommerce works. You might want to look into it.
4. The virtual goods model.

If you’ve ever played a game or used an app in which you were required to make in-app purchases for an intangible product, then you’ve experienced the virtual goods model. This model creates revenue by giving users the sense that they are gaining real value from purchasing a virtual good.

For example, since many people enjoy Candy Crush, its developers leveraged this to monetize the game by enabling users to buy stuff that would get players up and running quickly after losing a stage. The same thing goes for action games where buying weapons and abilities makes the experience way more fun.

If you’re going to create a widely appealing app or game, then this model is one that you’ll want to consider, as people will want to purchase virtual goods that make their experience with a fascinating product more fun.

The Complete, 12-Step Guide to Starting a Business

The Complete, 12-Step Guide to Starting a Business
Everything you need to know about how to start a business.

There are no limits on who can become a great entrepreneur. You don’t necessarily need a college degree, a bunch of money in the bank or even business experience to start something that could become the next major success. However, what you do need is a strong plan and the drive to see it through.

If you’re on Entrepreneur, odds are you already have the drive, but, you might not know how to start building your empire.

That why we are here.

Check out this step-by-step guide to help turn your big idea into a successful business.

1. Evaluate yourself.

Why do you want to start a business? Use this question to guide what kind of business you want to start. If you want extra money, maybe you should start a side hustle. If you want more freedom, maybe it’s time to leave your 9-to-5 job and start something new.

Once you have the reason, start asking yourself even more questions to help you figure out the type of business you should start, and if you have what it takes.

What skills do you have?
Where does your passion lie?
Where is your area of expertise?
How much can you afford to spend, knowing that most businesses fail?
How much capital do you need?
What sort of lifestyle do you want to live?
Are you even ready to be an entrepreneur?

Be brutally honest with your answers.

2. Think of a business idea.

Do you already have a killer business idea? If so, congratulations, you can proceed to the next section. If not, there are a ton of ways to start brainstorming for a good idea. An article on Entrepreneur, “8 Ways to Come Up With a Business Idea,” helps people break down potential business ideas. Here are a few pointers from the article:

Ask yourself what’s next. What technology or advancement is coming soon, and how will that change the business landscape as we know it? Can you get ahead of the curve?
Fix something that bugs you. People would rather have less of a bad thing than more of a good thing. If your business can fix a problem for your customers, they’ll thank you for it.
Apply your skills to an entirely new field. Many businesses and industries do things one way because that’s the way they’ve always been done. In those cases, a fresh set of eyes from a new perspective can make all the difference.
Use the better, cheaper, faster approach. Do you have a business idea that isn’t completely new? If so, think about the current offerings and focus on how you can create something better, cheaper or faster.

Also, go out and meet people and ask them questions, seek advice from other entrepreneurs, research ideas online or use whatever method makes the most sense to you.

And, if you’ve exhausted all your options and you’re still stuck, here are 55 great business options you can start.

3. Do market research.

Is anyone else already doing what you want to start doing? If not, is there a good reason why?

Start researching your potential rivals or partners within the market by using this guide. It breaks down the objectives you need to complete with your research and the methods you can use to do just that. For example, you can conduct interviews by telephone or face to face. You can also offer surveys or questionnaires that ask questions like “What factors do you consider when purchasing this product or service?” and “What areas would you suggest for improvement?”

Just as importantly, it explains three of the most common mistakes people make when starting their market research, which are:

Using only secondary research.
Using only online resources.
Surveying only the people you know.

4. Get feedback.

Let people interact with your product or service and see what their take is on it. A fresh set of eyes can help point out a problem you might have missed. Plus, these people will become your first brand advocates, especially if you listen to their input and they like the product.

One of the easiest ways to utilize feedback is to focus on “The Lean Startup” approach (read more about it here), but it involves three basic pillars: prototyping, experimenting and pivoting. By pushing out a product, getting feedback and then adapting before you push out the next product, you can constantly improve and make sure you stay relevant.

Just realize that some of that advice, solicited or not, will be good. Some of it won’t be. That’s why you should have a plan on how to receive feedback.

Here are six steps for handling feedback:

Stop! Your brain will probably be in an excited state when receiving feedback, and it might start racing to bad conclusions. Slow down and take the time to consider carefully what you’ve just heard.
Start by saying ‘thank you.’ People who give you negative feedback won’t expect you to thank them for it, but doing so will probably make them respect you and encourage them to continue be honest in the future.
Look for the grain of truth. If someone doesn’t like one idea, it doesn’t mean they hate everything you’ve just said. Remember that these people are trying to help, and they might just be pointing out a smaller problem or solution that you should look into further.
Seek out the patterns. If you keep hearing the same comments, then it’s time to start sitting up and taking notice.
Listen with curiosity. Be willing to enter a conversation where the customer is in control.
Ask questions. Figure out why someone liked or didn’t like something. How could you make it better? What would be a better solution?

Also, one way to help you get through negative feedback is to create a “wall of love,” where you can post all of the positive messages you’ve received.Not only will this wall of love inspire you, but you can use these messages later when you begin selling your product or service. Positive reviews online and word-of-mouth testimonials can help make a big difference.

5. Make it official.

Get all of the legal aspects out of the way early. That way, you don’t have to worry about someone taking your big idea, screwing you over in a partnership or suing you for something you never saw coming. A quick checklist of things to shore up might include:

Business structure (LLC, corporation or a partnership, to name a few.)
Business name
Register your business
Federal tax ID
State tax ID
Permits (more on permits here)
License
Necessary bank account
Trademarks, copyrights or patents

While some things you can do on your own, it’s best to consult with a lawyer when starting out, so you can make sure you’ve covered everything that you need.

Here are some questions you can ask when looking for a small-business lawyer.

6. Write your business plan.

A business plan is a written description of how your business will evolve from when it starts to the finish product.

As angel investor and tech-company founder Tim Berry wrote on Entrepreneur, “You can probably cover everything you need to convey in 20 to 30 pages of text plus another 10 pages of appendices for monthly projections, management resumes and other details. If you’ve got a plan that’s more than 40 pages long, you’re probably not summarizing very well.”

Here’s what we suggest should be in your business plan:

Title page. Start with name the name of your business, which is harder than it sounds. This article can help you avoid common mistakes when picking.
Executive summary. This is a high-level summary of what the plan includes, often touching on the company description, the problem the business is solving, the solution and why now. (Here’s what you should include in the summary and how you can make it appeal to investors.)
Business description. What kind of business do you want to start? What does your industry look like? What will it look like in the future?
Market strategies. What is your target market, and how can you best sell to that market?
Competitive analysis. What are the strengths and weakness of your competitors? How will you beat them?
Design and development plan. What is your product or service and how will it develop? Then, create a budget for that product or service.
Operations and management plan. How does the business function on a daily basis?
Finance factors. Where is the money coming from? When? How? What sort of projections should you create and what should you take into consideration?

For each question, you can spend between one to three pages. Keep in mind, the business plan is a living, breathing document and as time goes on and your business matures, you will be updating it.

7. Finance your business.

There are a ton of different ways to get the resources you need to start your business. Angel investor Martin Zwilling, whose business Startup Professionals provides services and products for startups and small businesses, recommends 10 of the most reliable ways to fund your business. Take a look and consider your own resources, circumstances and life state to figure out which one works best for you.

Fund your startup yourself. Bootstrapping your business might take longer, but the good part is that you control your own destiny (and equity).
Pitch your needs to friends and family. It can be hard to separate business from personal relationships, but if you’re considering asking for a loan, here’s a resource you can use to make it as straightforward as possible.
Request a small-business grant. Start by checking out our guide to small-business grants. Then, head over to Grants.gov, which is a searchable, online directory of more than 1,000 federal grant programs. It might be a long process, but it doesn’t cost you any equity.
Start a crowdfunding campaign online. Sometimes power is in numbers, and a bunch of small investments can add up to something major. If you think your business might be a fit for something like Kickstarter or Indiegogo, you should read up on 10 of the best-crowdfunded businesses ever or check out the most popular crowdfunding websites.
Apply to local angel investor groups. Online platforms such as Gust and AngelList and local networking can help you find potential investors who relate to your industry and passion.
Solicit venture capital investors. VCs typically look for big opportunities from proven teams that need a million dollars or more, so you should have some traction before approaching them.
Join a startup incubator or accelerator. These companies are designed to help new or startup businesses get to the next level. Most provide free resources, including office facilities and consulting, along with networking opportunities and pitch events. Some, also provide seed funding as well.
Negotiate an advance from a strategic partner or customer. If someone wants your product or service bad enough to pay for it, there’s a chance they’ll want it bad enough to fund it, too. Variations on this theme include early licensing or white-labeling agreements.
Trade equity or services for startup help. For example, you could support a computer system for office tenants in exchange for free office space. You might not get paid for this, but you won’t have to pay for an office, either, and a penny saved is a penny earned.
Seek a bank loan or line of credit. Here are 10 questions you should ask before applying for a bank loan, including whether you will qualify. If you do meet the requirements, a good place to start for loan opportunities is the Small Business Administration.

8. Develop your product or service.

After all the work you’ve put into starting your business, it’s going to feel awesome to actually see your idea come to life. But keep in mind, it takes a village to create a product. If you want to make an app and you’re not an engineer, you will need to reach out to a technical person. Or if you need to mass-produce an item, you will have to team up with a manufacturer.

Here is a seven-step checklist — including finding a manufacturer and pricing strategies — you can use for your own product development. A major point the article highlights is that when you’re actually crafting the product, you should focus on two things: simplicity and quality. Your best option isn’t necessarily to make the cheapest product, even if it lowers manufacturing cost. Also, you need to make sure the product can grab someone’s attention quickly.

When you are ready to do product development and outsource some of the tasks make sure you:

Retain control of your product and learn constantly. If you leave the development up to someone else or another firm without supervising, you might not get the thing you envisioned.
Implement checks and balances to reduce your risk. If you only hire one freelance engineer, there’s a chance that no one will be able to check their work. If you go the freelance route, use multiple engineers so you don’t have to just take someone at their word.
Hire specialists, not generalists. Get people who are awesome at the exact thing you want, not a jack-of-all-trades type.
Don’t put all your eggs in one basket. Make sure you don’t lose all of your progress if one freelancer leaves or if a contract falls through.
Manage product development to save money. Rates can vary for engineers depending on their specialties, so make sure you’re not paying an overqualified engineer when you could get the same end result for a much lower price.

To help you have peace of mind, start learning as much as you can about the production, so you can improve the process and your hiring decisions as time goes along.

This process will be very different for service-focused entrepreneurs, but no less important. You have several skills that people are willing to pay you for right now, but those skills can be hard to quantify. How can you establish yourself and your abilities? You might consider creating a portfolio of your work — create a website to show your artwork if you’re an artist, writing if you’re a writer or design if you’re a designer.

Also, make sure you have the necessary certificates or educational requirements, so that when someone inquires about your service, you’re ready to jump at a good opportunity.

9. Start building your team.

To scale your business, you are going to need to hand off responsibilities to other people. You need a team.

Whether you need a partner, employee or freelancer, these three tips can help you find a good fit:

State your goals clearly. Make sure everyone understands the vision and their role within that mission at the very start.
Follow hiring protocols. When starting the hiring process you need to take a lot of things into consideration, from screening people to asking the right questions and having the proper forms. Here is a more in-depth guide to help you.
Establish a strong company culture. What makes a great culture? What are some of the building blocks? You can see our list of 10 examples of companies with great cultures, but keep in mind that you don’t need to have Google’s crazy office space to instill a positive atmosphere. That’s because a great culture is more about respecting and empowering employees through multiple channels, including training and mentorship, than it is about decor or ping-pong tables. In fact, office perks can turn out to be more like traps than real benefits.

10. Find a location.

This could mean an office or a store. Your priorities will differ depending on need, but here are 10 basic things to consider:

Style of operation. Make sure your location is consistent with your particular style and image.
Demographics. Start by considering who your customers are. How important is their proximity to your location? If you’re a retail store that relies on the local community, this is vital. For other business models, it might not be.
Foot traffic. If you need people to come into your store, make sure that store is easy to find. Remember: even the best retail areas have dead spots.
Accessibility and parking. Is your building accessible? Don’t give customers a reason to go somewhere else because they don’t know where to park.
Competition. Sometimes having competitors nearby is a good thing. Other times, it’s not. You’ve done the market research, so you know which is best for your business.
Proximity to other businesses and services. This is more than just about foot traffic. Look at how nearby businesses can enrich the quality of your business as a workplace, too.
Image and history of the site. What does this address state about your business? Have other businesses failed there? Does the location reflect the image you want to project?
Ordinances. Depending on your business, these could help or hinder you. For example, if you’re starting a daycare center, ordinances that state no one can build a liquor store nearby might add a level of safety for you. Just make sure you’re not the one trying to build the liquor store.
The building’s infrastructure. Especially if you’re looking at an older building or if you’re starting an online business, make sure the space can support your high-tech needs. If you’re getting serious about a building, you might want to hire an engineer to check out the state of the place to get an objective evaluation.
Rent, utilities and other costs. Rent is the biggest facilities expense, but check out the utilities, as well, and whether they’re included in the lease or not. You don’t want to start out with one price and find out it’s going to be more later.

Once you know what to look for and it’s time to start searching for a place that fits all of your qualifications, these four tips can help.

Think on your own timeframe. Landlords are starting to offer shorter-term office rentals. Don’t get stuck in a long-term lease if it doesn’t make sense for your business.
Play the whole field. There are all sorts of places to use — co-working spaces, office business centers, sublets and more. Keep your options open.
Click around town. You might be able to find the perfect place by using online resources.
Do the deal on your terms. Again, you have options. Don’t get roped into something that makes you uncomfortable.

After you have a location, you can focus on the aesthetic. You can check out a few design ideas here.

11. Start getting some sales.

No matter your product or industry, your business’s future is going to depend on revenue and sales. Steve Jobs knew this — it’s why, when he was starting Apple, he spent day after day calling investors from his garage.

There are a ton of different sales strategies and techniques you can employ, but here are four tenets to live by:

Listen. “When you listen to your clients/customers, you find out what they want and need, and how to make that happen,” says investor and entrepreneur John Rampton.
Ask for a commitment, but don’t be pushy about it. You can’t be too shy to ask for a next step or to close a sale, but you also can’t make customers feel as though you’re forcing them into a sale.
Don’t be afraid of hearing “no.” As former door-to-door salesman (and now co-founder of software business Pipedrive) Timo Rein said, “Most people are too polite. They let you make your pitch even if they have no interest in buying. And that’s a problem of its own. Time is your most important resource.”
Make it a priority. As entrepreneurial wizard Gary Vaynerchuk said, “Actually creating revenue, and running a profitable business, is a good strategy for business. Where are we that people think users or visits or time on site is the proxy to a successful business?”

But how do you actually make those sales? Start by identifying targets who want your product or service. Find early adopters of your business, grow your customer base or put out ads to find people who fit your business. Then, figure out the right sales funnel or strategy that can convert these leads into revenue.

12. Grow your business.

There are a million different ways to grow. You could acquire another business, start targeting a new market, expand your offerings and more. But, no growth plan will matter if you don’t have the two key attributes that all growing companies have in common.

First, they have a plan to market themselves. They use social media effectively through organic, influencer or paid campaigns. They have an email list and know how to use it. They understand exactly who they need to target — either online or off — with their marketing campaigns.

Then, once they have a new customer, they understand how to retain them. You’ve probably heard many people state that the easiest customer to sell to is the one you already have. Your existing customers have already signed up for your email list, added their credit card information to your website and tested what you have to offer. In doing so, they’re starting a relationship with you and your brand. Help them feel as good about that relationship as possible.

Start by utilizing these strategies, which include investing in your customer service and getting personal, but realize your work will never be done. You’ll constantly be competing for these customers in the marketplace, and you can never simply rest on your laurels. Keep researching the market, hiring good people and making a superior product and you’ll be on your way to building the empire you always dreamed about.

Why Exercising Is a Higher Priority Than My Business

Why Exercising Is a Higher Priority Than My Business

There’s a prevalent attitude among entrepreneurs that the business, whatever that business is, comes first. It is the high priority that trumps everything else, including family, friends and especially health.

I’ve seen entrepreneurs sacrifice all these things, sometimes with tragic consequences, to focus on making their businesses successful. I’ve also done it myself, although I’m one of the lucky ones. During the years I made my business my highest priority, my wife stuck by my side, I didn’t cause any permanent damage with friendships (although I certainly didn’t nurture any) and I didn’t die.

It’s not greed that motivates us entrepreneurs. It would be difficult to justify the sacrifices we make if the only reward were money. Dollars become mere points in a sort of game. What it’s really about is building something great, doing something that matters and changing the world. That’s what makes it so easy to brush other things off. But it’s a mistake. I know that now, and that’s why today I care more about exercise than my business. But it’s not easy.

I have a growing business with 14 team members. These men and women rely on me to make sure their paychecks come on time, that benefits are there for them and their families, and that obstacles are removed so they can get their work done. We have approximately 40 clients, who are depending on me to make sure they’re getting the results that will help their businesses grow.

This adds up to a lot of tasks, and a lot of pressure. On any given day there are easily 100 important things I should be doing for my business, 50 of which are also urgent, but there is no way I can get more than 10 things done. And yet each and every week I spend at least 10 hours on focused, physical exercise.

I schedule my workouts during the workday and prioritize exercise over all my work activities. There is some flexibility, but if there is a conflict between a trail run I need to get in, and a meeting with a client, I’ll reschedule the client meeting first. I do this because I and my business can survive the consequences of rescheduling a client meeting, even if it means losing that client. But as soon as I start pushing workouts off, I’ll start missing workouts, and once I start missing workouts, I’m close to stopping workouts altogether.

Exercise must come first, or it’s unlikely to happen at all.

If exercise stops, then my health goes downhill. With the loss of physical health my productivity at work goes down. I become depressed. I lose motivation to do the things that makes my business successful. I’ve learned firsthand that excellence in one area of my life promotes excellence in all other areas of my life. Exercise is the easiest area of my life to control. It’s easy to measure. Either I get it in, or I don’t. When I do, it lifts up all other areas of my life, including my business.

For a long time, I was fooled into thinking that if my business wasn’t the top priority, then that meant I wasn’t doing all I could do to make it successful. This is an understandable way of thinking, but it’s completely wrong.

If my life is made up of 10 priorities, then it’s not as simple as saying that if I move the business from being priority two to priority one, that the business is going to benefit. The trick is to figure out which ordering of priorities provides the maximum overall benefit.

For example, when I exercise, that makes me better in every role I have, whether it’s as a husband, father, friend or entrepreneur. If I were to stop exercising because I felt that being a good business owner was a higher priority, then ironically I would end up a worse business owner than I was when it was a lower priority. Putting exercise first creates a win-win.

As my business grows, I see members of my team falling into the same trap I did. That’s why we’re working to institute health incentives, and why I’m not ashamed to talk about the time I take out of my work day to exercise. I know that if my team members put exercise and health before their jobs, they might work fewer hours, but they’ll feel better about themselves, have more fulfilling lives and they’ll produce better results with the hours they do work.

How to Know When That Business Idea Is Good Enough to Pursue

How to Know When That Business Idea Is Good Enough to Pursue
Is your brilliant idea a gold mine or a guaranteed flop?

Eureka! You’re overcome with a genius (or so you think) business idea while going about your day. But is your idea good enough to actually act on? Knowing when it’s time to start a side gig or, better yet, to leave your job can be challenging.

This article will give you some guidelines to help you better understand if it’s worth acting upon your supposedly game-changing business idea.
Can the business model be patented or protected in some way?

You want a moat. The wider, deeper and more alligator-infested, the better. A moat refers to obstacles potential competitors would have to contend with in order to directly compete with your business.

Examples of a moat are patents, exclusive licenses or unique information that would make it difficult for competitors to copy your business model.

If your business lacks significant moats, that can be OK. There are many examples of consumer packaged goods companies that have found success with little to no moats. The mail-order shaving company Dollar Shave Club is just one example.

If your business lacks a moat, and you don’t have a positive answer for the questions below, then it’s back to the drawing board for you and your business idea.

Would the business idea require you to operate in a heavily regulated industry?

Regulation is great if you’re a consumer; it protects you from being harmed by organizations that you might otherwise have a hard time defending yourself against. But when it comes to running a business, regulation is expensive, and often prohibitively so.

There’s a reason why sectors like health care or government tend to lack innovation. It’s because all of the red tape discourages entrepreneurs from entering a market where regulation eats profits for breakfast.

The easiest way to know if an industry is heavily regulated is to talk to a few folks who are already operating within it. As part of your due diligence, you can also research the local and federal laws that govern the industry in question.

If you find it difficult to surface any laws directly related to the industry you are thinking of entering, then it may be time to rejoice.

Has the idea been done before? If so, how did other businesses fare?

In the venture capital world, there are two ends of a spectrum in which to operate. One is a “blue ocean,” where there isn’t a single competitor in sight. Then, there’s a “red ocean,” a world in which competitors are more plentiful than seaweed.

Ideally, you’d like to operate somewhere in between. Contrary to popular belief, creating an entirely new market can be a bad idea. It often requires market education, which means you’ll need a big marketing budget or some viral component to user adoption.

Look for potential competitors, or for businesses that originally operated in your market before pivoting or going out of business. If you find one or two organizations operating successfully, and a large market cap exists for your product or service, then that’s a good sign.

Would the business idea require large up-front costs?

As has been alluded to already, it’s best to avoid a business idea that will require large up-front costs, all things being equal.

A few caveats before continuing: First, it should be noted that large up-front costs is a relative measure. Most businesses will require meaningful up-front costs to get started. Second, up-front costs aren’t necessarily a bad thing; they can mean that you are able to gain market share faster thanks to early investment. Third, up-front costs aren’t concerning if the risk that the business will fail is relatively low or, at the very least, if you are tolerant of a high-risk business scenario.

That said, you should be able to roughly calculate the up-front costs that will be required to successfully launch your business idea before actually doing so.

Can you use your expertise to give your business a meaningful edge?

Back to the moat discussion — if you have access to some sort of hard-to-find expertise, your business will be in better shape than if you have to learn skills central to the success of the business.

That’s not to say that your new venture should not require you to learn new skills. It simply means that developing a business that plays to your strengths will increase the likelihood that the business will be successful in the long run.

If you think you’ll need to develop a variety of skills essential to the success of the business, consider bringing on a co-founder or a handful of highly skilled early employees.
Improving your odds

Successfully developing a business from idea to IPO (or at least to successful small business) is a part of the American dream. While the vast majority of small businesses will fail in the first 10 years after founding, if you carefully vet your business idea before launching, you will be able to markedly improve your odds.

5 Best and Fast Small-Business Loans (Some of Which You’ve Never Heard of)

5 Best and Fast Small-Business Loans (Some of Which You’ve Never Heard of)

Do you need a small-business loan fast to start or grow your business? Whatever your reasons for borrowing cash fast, not all small-business loans are made equal. Some of them have stringent credit history and documentation requirements, some have high interest rates and some are government-guaranteed, long-term loans that allow for lower rates. There are multiple channels for small-business owners to borrow from, and the choices can get confusing.

To get started, ask yourself how the ongoing borrowing costs and interest payments will impact your bottom line. “Just because capital can be borrowed doesn’t mean that it should be,” S. Michael Sury, lecturer of finance at the University of Texas at Austin, told U.S. News & World Report. To minimize risk and ensure you net a positive return on your investment, you can do an informal small-business loan performance analysis using a calculator on a loan site, such as Fundera, which will forecast how the loan will financially impact your business before you commit to taking out a loan.

Also, find out how much you can actually afford to borrow by calculating your Debt Service Coverage Ratio (DSCR). To figure out your DSCR, you simply divide your net operating income by your total debt service. With some lenders, you can get away with a 1.0 ratio; however, most lenders prefer a DSCR that shows your annual net operating income is higher than your total debt, such as a DSCR of 1.35 and above.

Another tip: Check your personal credit score before starting the application process and look for any errors that need to be corrected. As a sole proprietor, your credit score will be part of the loan process, and the higher your credit score, the better terms and lower interest rates you’ll get on a loan. If you’re already in business, you should check your business credit score through credit reporting agencies that deal with business credit, such as Dun & Bradstreet.

Make sure you have a strong business plan, which will show lenders how profitable your venture is and where you plan to spend the loan. “It’s vitally important for small businesses to have organized, well-thought-out and professionally presented business plans,” Sury said.

The good news is that there are a ton of free informational resources for small-business owners, including Small Business Administration (SBA) district offices and SCORE chapters (a nonprofit providing free business advice and services), the NFIB, Veteran’s Business Outreach Centers and Women’s Business Centers. Ask for help, because you shouldn’t go at it alone.

On that note, if you’re looking for a quick loan, let us guide you toward five of the best and fastest small-business loans (minus the loan shark route).

1. SBA Express Loan

Loan highlights:

Simplified application process

36-hour response time

Flexible use of funds

Can borrow $350,000 maximum

Typical 10-year repayment period

4.5 percent to 6.5 percent interest above prime interest rate

The SBA Express Loan, up to $350,000, is one of two kinds of SBA Express Loans with a swift response (typically within 36 hours) following submittal of your application and is also 50 percent guaranteed by the Small Business Administration, a U.S. government agency serving small businesses. (The other SBA Express Loan that is swift and half guaranteed by the federal government is the SBA Export Express, which we’ll get to.)

Here are the loan’s perks: The SBA Express Loan carries a lighter documentation requirement than a traditional loan, which is why it can be a good fit for a small business or startup that may not have the credit history or collateral to receive a traditional loan. As mentioned, the time it takes for loan approval is much quicker than for a traditional loan, however the actual time it takes to get the funds — it can be as swift as a few days to as long as 90 days. (Traditional loans take, on average, 90 days to fund.)

The interest rate for this loan is capped and cannot exceed a maximum of 4.5 percent to 6.5 percent above the prime interest rate (up to 6.5 percent for loans of $50,000 or less and up to 4.5 percent for more than $50,000). Also, the loan program is flexible, so the money can be used for a broad range of business needs, including the purchase of inventory, supplies, furniture, fixtures, machinery or equipment, a line of credit or commercial real estate. It cannot be used to pay off debts. These loans typically have a 10-year repayment period, but this varies, depending on the loan terms.

Here are some of the requirements for the SBA Express Loan:

The business must be registered and operate for profit.

The business must be able to demonstrate operations within the U.S.

The business must be be in operation for at minimum two years.

It must qualify as a small business.

It must be able to demonstrate a need for financing.

It must be able to demonstrate qualified business purpose for funds.

There can be no delinquent debts to the government.

Also, depending on your lender, some collateral may be required. Lenders are not required to take collateral for loans up to $25,000, but for loans between $25,000 and $350,000, lenders may use their existing collateral policy. Note, for each loan approved and disbursed, the SBA charges lenders a guarantee and servicing fee, so the lender may charge the fee to the borrower after the lender has paid the fee to the SBA and has made the first disbursement of the loan.

You must find an SBA-approved lender to apply for an SBA loan.

2. SBA Export Express Loan

Loan highlights:

Simplified application process

36-hour response time

Funds must be used for a company’s export development

Can borrow $500,000 maximum

Typical 10-year repayment period

4.5 percent to 6.5 percent interest above prime interest rate

Do you run a small export business that needs funds to expand? Or run a small business that needs funds to use toward creating and developing an export business? Then, the SBA Export Express Loan, for up to $500,000, could be for you.

The reason why the SBA created this loan program is because most U.S. banks view loans for exporters as high risk, so small-business exporters who normally would not qualify for a traditional loan may qualify for this one. Also, like the SBA Express Loan, the SBA Export Express Loan is government guaranteed (90 percent for loans of $350,000 or less; 75 percent for loans more than $350,000) with a swift response time (within 36 hours) from the time of application.

The interest rate for this loan is capped and cannot exceed a maximum of 4.5 percent to 6.5 percent above the prime interest rate; however unlike the SBA Express Loan, this program is not flexible. The proceeds for this small-business loan must be used for purposes that will enhance a company’s export development, including participation in a foreign trade show, finance standby letters of credit, translate product literature for use in foreign markets, finance specific export orders, as well as to finance expansions, equipment purchases and inventory or real estate acquisitions.

These loans typically have a 10-year repayment period, but this varies, depending on the loan terms.

Here are some of the requirements:

The business must be registered and operate for profit.

The business must demonstrate that it has been in operation for, at minimum, a 12 full months.

The business must be able to demonstrate that the loan will be used for export activity.

The business must be able to demonstrate operations within the U.S.

It must qualify as a small business.

The owner must be able to demonstrate financing the business through alternative means.

There can be no delinquencies on previous debts to the government.

Some other points to note: Personal collateral may be required for SBA Express Export Loans of more than $25,000, and a guarantee and servicing fee will be charge for each loan approved and disbursed.

A simple way to get started on the loan process is to see if your current lender is an SBA Express Export lender. Or you can contact your local SBA International Trade Finance Specialist to find an export specialist in your state to point you in the right direction. Also, you can reach out to the SBA’s Office of International Trade.

3. Peer-to-Peer (P2P) Loan

Loan highlights:

Simplified application process

Eligibility requirements often less stringent

For individuals, borrowing maximum is typically $35,000; for businesses, $300,000

Repayment period varies from platform to platform (typically fixed at a three-, five- and seven-year repayment period)

Interest on loans varies depending on your credit score or risk grade

Peer-to-peer lending is a rapidly growing landscape, largely because it cuts out the middleman, the financial institution, and the eligibility requirements are less stringent. However, these loans tend to also have higher interest rates and more often than not, are for those individuals who need a loan for less than $35,000 quickly. (In some cases, businesses can borrow up to $300,000.)

The peer-to-peer lending marketplace works through online platforms, which connects borrowers and lenders. Each P2P loan is often divided among several investors, spreading the risk. For instance, somebody who needs to borrow money goes to a P2P company, such as Lending Club, which has been around since 2007 and is well capitalized. At Lending Club, the borrower fills out an application for credit, and once approved, the borrower is assigned to a risk grade, which is a combination of a proprietary scoring model, FICO score and other credit features of the applicant, which then determines the interest rate of the loan.

The Lending Club, like many other P2P operations including Prosper, uses a a notary business model, meaning it acts as an intermediary between borrowers and investors. In terms of fees, the Lending Club charges borrowers an origination fee that ranges from 1 percent to 5 percent, depending on the grade the borrower receives. Other companies’ policies may slightly differ and charge a closing fee based on the borrower’s risk grade, but the borrowing process of having your risk score calculated to some sort of fee being paid toward the P2P lender is more or less the same across lenders.

The upswing of P2P platforms is that the process is relatively easy compared to the process of going to a bank. It’s very streamlined and done entirely online, and the approval rates for P2P platforms are higher than that at commercial banks. Cutting out the bank can also result in a lower interest rate than you’d get for a bank loan. When calculating your risk grade, factors other than your debt-to-income ratio or credit score — such as your educational background — are sometimes factored in, like with Upstart.

Some P2P sites to check out (all with different application requirements):

Lending Club

Prosper

Upstart

Funding Circle

 

4. Microloan

Loan Highlights:

Loans of $50,000 or less to startups and other small businesses

Low interest rates

Loans are often targeted for disadvantaged communities

Average loan term is 40 months

If you’re a small-business owner who needs a low interest, short-term loan, then a microloan may be a good option for you. One of the reasons why microloans are advantageous is because microlenders operate as nonprofit financing — their aim is to offer loans to help disadvantaged communities both domestically and internationally — hence the low-interest rate. Intermediaries can charge up to 7.75 percent for loans of more than $10,000 and up to 8.5 percent for loans less than $10,000.

Some of the more well-known nonprofit microlenders include Kiva, an interest-free online microlender that operates in more than 80 countries, and Excelsior Growth Fund, a microlender that offers online loans of up to $100,000 (which doesn’t seem “micro”) funded in less than five days through its ImpactLoan program.

The SBA has several microloan programs that operate through state-specific nonprofit organizations, including the SBA Community Advantage Program, which offers loans of up to $250,000 in communities with limited access to funding. (Loans are guaranteed up to 85 percent through this program.) The SBA Microloan Program allows borrowers up to $50,000. While the maximum repayment term is 72 months for SBA microloans, the average repayment term is 40 months.

To apply for a microloan, first find an intermediary microlender that serves your state. For instance, LiftFund offers microloans in 13 states to borrowers that meet their specific requirements (e.g. if more than 50 percent of the business’s full-time workforce is low-income or if their employees live in areas designated as low- to moderate-income communities).

In addition to the ones already mentioned, here are some microloan programs to check out:

Pacific Community Ventures

Business Center for New Americans

LiftFund

Main Street Launch

Accion U.S. Network

5. Business Line of Credit

Loan Highlights:

Ranges from $5,000 and $150,000

Quick funding (one to five days) from time of approval

Works like a credit card

Lower interest rate than a credit card

Apply for line of credit with bank or online creditor

Business lines of credit operate like a credit card, and you can repeatedly use your line of credit without reapplying for a new loan each time. Typically, lines of credit range from $5,000 to $150,000, and the obvious advantage is the swift funding time from approval to credit availability, which can be as fast as 36 hours. When you apply, your lender approves you for a maximum borrowing amount, say $100,000, and then you can borrow up to that amount and repay it, as long as you don’t go over your maximum and make the minimum payments. Like with credit cards, you’re also charged a monthly interest on the amount you repay. There are both online lenders for lines of credit as well as traditional bank institutions. While online lenders tend to have less stringent borrower requirements, they also tend to charge higher interest rates and offer lower credit lines.

Here are the perks: The line of credit is flexible in terms of what you can spend it on. You can purchase inventory or equipment, invest in marketing or manage fluctuations from seasonal sales. Also, business lines of credit with lower credit limits are typically unsecured, which means collateral such as real estate or inventory is not required.

Here are the requirements: Not surprisingly, you need to demonstrate a good credit score (500 or higher) and a history of revenue (at least six months showing at minimum $25,000 annually) to apply for a credit line. Larger lines of credit may require collateral, which can be seized by the lender if you fail to make payments. The documentation you’ll need are personal and business tax returns, bank account information and business financial statements (profit-and-loss statements and a balance sheet). For those who don’t meet the credit and revenue requirements of traditional banks, keep in mind that online establishments typically have looser qualifications than banks but charge higher interest rates.

Here are some places to check out for business lines of credit:

Fundbox

StreetShares

OnDeck

Kabbage

The Impact of the Senate and House Tax Bills on the Small-Business Owner

The Impact of the Senate and House Tax Bills on the Small-Business Owner
Plus, 10 things small-business owners should demand from lawmakers in the final bill.

Bluntly, the House tax bill does very little for small-business owners. The Senate bill, however, has a glimmer of hope for us, and hopefully, the objections and concerns of Wisconsin Sen. Ron Johnson (and the other senators working behind the scenes to help protect small-business owners’ interests) will be heard.

Over the past three weeks, I have been extremely vocal about my personal concerns regarding the House bill and what should change in the legislation before it becomes law. In fact, I will go as far to say that the House version hurts small business and the average small-business owner.

In fact, I was shocked to see Treasury Secretary Mnuchin’s comments that this legislation substantially helps small-business owners. Either his definition of “small business” is far from that of mine, yours and the Small Business Administration (SBA), or he can’t do math. Since he is the Treasury Secretary, I’m going to assume we have a definition problem.

But enough rhetoric. Let’s actually break down the bill, and I’ll give you the pros and cons of both the House and Senate Bills in a simple, easy-to-understand format (at least, as easy as humanly possible with over 750 pages of combined legislation material to pour through and decipher).

Moreover, at the end of this article, I’m going to give you the method and resources to contact your elected representative, and preferably your senator, to express your concerns and plead for some relief for the small-business owner as reconciliation between the two bills takes place over the next few weeks.

Now, as we dive into the numbers, it is important to put this bill in perspective regarding the “facts” being thrown around. It may be interesting for you to note that the IRS and SBA have an extremely broad definition of “small business.” Believe it or not, under both of these institutions, a small business could be anywhere from two employees to 500 employees, or sales from $7 million to $35 million.

However, according to the U.S. Census Bureau in 2014, there are two critical facts you and I need to recognize:

According to the definition of “small business” by the SBA and IRS stated above, in 2014 over 97.9 percent of these small businesses had less than 20 employees or no employees at all, and …
Among employer C corporations in 2014, 85 percent had fewer than 20 employees, and 99 percent had fewer than 500 workers.

The point is that, when the GOP leadership stands up in front of the microphone or camera and says that this legislation is going to substantially help small business, or “Main Street,” you shouldn’t be fooled by the smokescreen. There is a very slim cross section of small-business owners this legislation will substantially benefit, and it’s primarily big businesses, not the firms with less than 20 employees.

Moreover, legislation from both the House and Senate delivers a whopping 15 percent permanent and across the board tax cut to large corporations, not the 97.9 percent of small-business owners or 99 percent of C corporations that have no global impact and need a tax cut to be competitive.

The benefits to the pass-through businesses that the GOP leadership loves to boast about are so convoluted, complex and watered down, they’re truly a joke. In fact, if I were IRS Commissioner John Koskinen, I would be thrilled to get this legislation on my desk. The IRS has been trying to find any method to further regulate pass-through compensation for years!

This legislation will give the IRS carte blanche latitude to now further scrutinize officer/owner compensation. In fact, it will have a negative impact on pass-through tax planning, potentially even lessening the whole benefit of a pass-through company. The negative impact this legislation could have on millions of S corporation owners is actually frightening.

Here is what the small-business, pass-through business owner really gets in terms of tax savings:

Provision: Maximum 25 percent tax rate for flow-through entities
House Bill: No savings whatsoever until a business owner makes at least $260,000 Married Filing Jointly (MFJ) or $180,000 (after salary). In order to save just $5,000 in taxes, a business owner needs to make $426,666 MFJ or $346,666 Single (after salary). Is this the impact you need in your business to expand and grow? Bottom line: Not helpful for large majority of small-business owners.
Senate Bill: N/A

Provision: 9 percent tax rate on first $75,000 MFJ or $37,500 Single
House Bill: Save $750 MFJ in 2018/2019 and $375 Single. Save $1,500 MFJ and $750 Single in 2020/2021. The most a taxpayer will save is $2,250 MFJ in 2022. Personal service businesses get to participate in this benefit. However, it phases out completely at $150,000/$75,000 of income, and is this “significant savings” that will affect your business to hire more employees? Bottom line: This deceptively isn’t good for small business when you weigh the meager benefit compared to the increased scrutiny from the IRS on salary levels and pass-thru income.
Senate Bill: N/A

Provision: 17.4 percent deduction against pass-thru income from pass-thru businesses. For personal services such as health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services and brokerage services.
House Bill: N/A
Senate Bill: Phases out entirely at $150,000 MFJ and $75,000 Single filers, and starts phasing out at half-way there. The most a small-business owner will possibly save is $1,044 MFJ/$522 Single, and if you make more than $50,000/$25,000 it’s reduced from there. Bottom line: A minor benefit at best, and if you are in a personal service business making this level of income, it won’t last long.

Provision: 17.4 percent deduction against pass-thru income from pass-thru businesses.
House Bill: N/A
Senate Bill: This is a 17.4 percent deduction from qualified business income/trade or business, not including salary. No phase out, but it is limited to 50 percent of the salary of the business owner, which you want to keep as low as possible anyway. Thus, it will make for some creative planning opportunities. Approximate savings of $11,484 MFJ, assuming a business owner with a $75,000 salary and $200,000 in net income, the deduction would be approximately $35,000 and in a 33 percent tax bracket (under Senate Bill). However, it does not apply to Personal Service Firms. Bottom line: I can’t imagine tax savings being more than $15,000 to $20,000 for a successful business owner and a salary of approximately $96,000.

Provision: Entertainment expense
House Bill: Completely repealed: Not good. Business flourishes with constructive meetings between business owners, vendors, customers and employees.

Provision: Business tax credits: Employer-provided child care, rehabilitation credit, work opportunity tax credit, new markets tax credit, building access for disabled individuals, employee tips and various energy credits.
House Bill: The House bill repeals a long list of business tax credits that help motivate wise investment and business development.

Rather than just complain and not give any constructive recommendations, here are the 10 changes I would propose to the House and Senate:

Change the Senate version of the flow-through business deduction of 17.4 percent to 12.4 percent and allow all trade or businesses to use it, including personal service firms, with no phase out limitations.
Don’t use any provisions of the House bill in regards to flow-through entities.
Do not eliminate the entertainment deduction for business owners (part of the House bill). Audits and tax court guidance have prevented its abuse for years and will continue to do so.
Keep the current provision of selling your personal residence with the two out of five year rule.
Keep the Coverdell IRA (the 529 is a Wall Street strategy and we should encourage saving for education, not discourage it)
Continue to allow for Roth IRA re-characterizations (it’s not being abused, the IRS just hates it and Social Security is tenuous at best — we need Roths!).
Multiple business tax credits are gutted with the House bill. Leave these alone. They make sense for business and encourage wise business expenditures and investments.
Go ahead and double the standard deduction and “simplify” tax returns for millions of Americans that own modest homes, rent and have a W-2 — great … but don’t touch the itemized deductions. Leave them alone for those who want to and can use them. Don’t touch the State and Local Income Tax (SALT) deduction, mortgage interest, charitable and medical itemized deductions.
Yes, I know that these 10 recommendations will cost (at least the eight above). So, what you do is to reduce only the corporate tax rate to 25 percent or 27.5 percent in order to pay for the cuts above. Big corporations don’t need all the breaks in this bill.
Moreover, to help pay for the above cuts for “Main Street” and small-business owners, no one in the top 2 percent of income in the U.S. needs any sort of tax break. Gut those provisions out of the legislation, period.

In summary, I cannot emphasize enough how important this is for you, the small-business owner, to take seriously and contact your elected official. Share your concerns. Demand more. The two senators from your state are probably the best method to hopefully finding some resolution. This is primarily because the Senate has a much slimmer margin for victory and have to carve out a bill during the reconciliation that will pass the Senate.

Go to https://www.usa.gov/elected-officials to find the phone number and email addess to your senator and send a message immediately. This is your government. Demand more for Main Street.