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Street smart savvy moves you’ll use to keep your business alive

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7 Kinds of Business Financing

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Is 2020 your year to launch a business, or is growth and expansion of your existing venture on this year’s must-do list? If so, congratulations and best of luck to you! I’m sure you’ve thought of the most advantageous way to obtain the required financing for your plans and we’ll look at some good options right now.

A study conducted by the National Small Business Association found that 19% of small business owners cite a lack of available capital as the biggest challenge to plans for future growth and 82% of businesses outright fail because of cash flow management issues. In preparation for borrowing, I remind you that financial institutions will evaluate your credit score, so make paying off bills and boosting your savings immediate priorities.

According to the 2018 Small Business Lending Index, big (national) banks approve 25% of loan applications made by small business owners and smaller (community and regional) banks approve nearly 50% of loan applications made by small business owners. So whether it’s your food supply or your money supply, keeping it local is a good thing, am I right? https://www.biz2credit.com/small-business-lending-index/january-2018

Line of credit

A business line of credit functions like a credit card and it’s available to borrowers with either good or less than perfect credit. Borrowers can be approved for a potentially generous amount of funding that can be accessed immediately. The application process to obtain a line of credit is usually quick, and many businesses receive approval in a day or two. Interest rates range from 7% – 25% and repayment terms are usually between six months and one year, (meaning that one cannot run a balance ad infinitum) depending on the business’ revenue and credit score.

Short-term loan

Pursue this type of loan to, for example, bridge cash flow gaps, stock up on inventory that is available at an attractive price, or take advantage of a lucrative business opportunity. Surprisingly, borrowers often don’t need a great credit score to be approved for a short-term loan and that can be an advantage. In fact, the borrower could use the loan to pay off higher-interest debt and improve the credit score. Furthermore, short-term loans tend to involve less paperwork and processing is usually fast, making funds available quickly.

Short-term loans must be repaid in rather a short amount of time, often in just one year, and payments are usually due weekly, not monthly. They also generally come with a relatively high interest rate when compared to other types of loans and loan amounts are usually capped.

Secured loan

Secured business loans require a specific piece of collateral, such as a business vehicle or commercial property, that the lender can claim if the borrower fails to repay the loan. Unsecured loans, on the other hand, are not attached to collateral. Personal loans, student loans and credit cards are common examples of unsecured loans. Unsecured loans have higher interest rates and stringent approval requirements, to ensure that lenders gets their money back. Secured loans are often easier to obtain and may also have a lower interest rate, because the lender has a guaranteed way to recoup money lost to default by selling the borrower’s collateral.

Because of the increased risk an unsecured loan represents to the lender, borrowers may be asked to sign a personal guarantee in order to receive approval. If the borrower defaults on the loan, s/he will then be personally liable for repaying it. While a creditor can’t seize business property under a personal guarantee they can legally claim the borrower’s personal assets, including bank accounts, cars and real estate, until the loan is repaid.

Another common method used by institutions to mitigate the risk associated with secured loans is by reserving the right to file a blanket lien against the borrower’s business assets. Most business loan terms include a blanket lien clause that allows the lender to claim and resell business assets to collect the debt.

Term loan

Term loans, also known as long-term loans, are best for business owners with great credit and who are requesting a big loan. They may not be a good option for those who are launching a new business, however, since lenders usually want to see a track record of success (evidenced by 3- 5 years of business financials) before taking on the risk. 

The term loan application process is lengthy. If the application is accepted, borrowers must pay a principal amount plus interest each month until the debt is paid in full. Term loans are most often used to buy real estate, acquire another business, remodel or renovate a commercial space, or support long-term business expansion.

Equipment loan

Owners of businesses large and small often need to purchase, replace, repair, or upgrade various kinds of equipment to process, manufacture, or produce their products and equipment loans are essential to this process. These loans can be a great option for start-ups as well as established businesses, and they can be used to finance nearly every type of business equipment, including company vehicles. Owners of new businesses can take advantage of an equipment loan because the equipment secures the loan, regardless of the success or failure of the company. Interest rates are often reasonable and will reflect the individual’s or business’ credit rating and financial picture.

Be aware that excellent credit is required for most equipment loans. In general, borrowers will be able to finance 80% of the total purchase price of the equipment. A down payment of about 20% is typically required for most small business equipment loans.

Borrowers with less than stellar credit should investigate the terms of leasing the desired equipment. Leasing typically does not require a down payment and that especially benefits businesses that have little or no available working capital. When a down payment is required, it is typically relatively small compared to what a traditional loan down payment would be.

Purchase order financing

To qualify for purchase order financing, the company must sell finished goods (not raw materials or product components) to B2B or B2G customers with profit margins of at least 15%. Start-ups can qualify for PO financing because approval is based primarily on the creditworthiness of, and borrower history with, those customers and suppliers. The chances of being approved are even greater if customers and suppliers are well-established, reputable companies.

PO financing can present a great opportunity for start-ups that receive lots of orders but don’t have the cash to fulfill them. In these cases, similar to invoice financing, the purchase order secures the loan. Once the business receives a purchase order from a customer, the lender directly pays the supplier to manufacture and deliver the product to the customer. Once delivery is accepted, the customer pays the lender. The lender then deducts their fees from this amount and pays the remainder to the borrower, which can be counted as profits. 

PO financing is a great way to help your business grow without taking on bank debt or selling equity in your company. If sales outpace your incoming cash flow, then purchase order financing might be a good strategy to fulfill big orders.

Invoice financing

Also known as accounts receivable financing or factoring, this loan allows Freelance consultants to survive slow-paying clients. Small and medium- sized businesses will be able to manage the increasingly common practice of “net 90” receivables payment that large companies impose on smaller organizations, in exchange for big orders.

With invoice financing, lenders advance to borrowers the value of accounts receivable, less a fee of perhaps 15%. The borrower will pay a weekly fee while waiting for the customer to pay up. Invoice financing helps businesses improve cash flow, meet the employee payroll, pay vendors and suppliers and reinvest in operations and growth earlier than they could if they had to wait for clients and customers to pay their balances in full.

Thanks for reading,

Kim

Image: Money Lenders (1784) an etching by Thomas Rowland. The aspiring borrower (L) is George, Prince of Wales (George IV 1820 -1830).

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Can You Say No To a VIP?

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Sometimes, the answer is no. Respectfully, I must decline. No, this will not do. Nein. It’s just that I find saying yes is more fun than saying no. In fact, I find “yes” to be a powerful word. “Yes” makes people happy and I enjoy making people happy.  I love to give people the green light and let them do wonderful, fulfilling things that satisfy them, things that help them grow and achieve special goals.

But certain behaviors or ideas one may find unacceptable, unsustainable, untrustworthy, or merely unattainable. We find them upsetting or unsavory or unrealistic. To such words or conduct we may even have an intense visceral reaction that literally makes us pull away, as if to shield our offended sensibilities. It may seem counter-intuitive, but think about it—what we reject defines us because our core values, priorities and boundaries often become evident only when they are challenged. Saying no to requests that compromise one’s values announces and reconfirms those values.

Saying no not only represents the conviction to honor one’s own values, priorities, self-respect, or boundaries, but can also be about conserving and managing one’s energy, time and other resources. To politely refuse certain invitations allows one to direct energy and attention to people and activities that matter most. Saying no is strategic.

Now, let’s be honest—saying “no” to a VIP, especially when the VIP is a paying client, carries risk. Certain powerful people have the ability to make an offer that cannot be refused (at least not without damage). Nevertheless, it’s worthwhile to explore ways to decline that which we dislike, mistrust, or just find inconvenient for some reason. Disappointing someone whom one would much rather please is stressful.  Think of it this way—when you feel it necessary to voice doubts about a strategy or proposal makes your expertise, insights and values known to colleagues and keeps you true to yourself. You may also prevent an ill-conceived idea from gaining support (maybe because others were not inclined to speak out?) and causing an ugly crash and burn somewhere down the line.

Tact and diplomacy will be needed when saying no to a VIP, no doubt about it. Pour oil on potentially rough waters to head off the appearance of insubordination and ensure that disappointment doesn’t escalate to insult. Take care to separate your discomfort with supporting a certain strategy or participating in a proposed project from your feelings about the people involved. Make it strictly business and emphasize that you support the organization, its mission and history. Below are suggestions for how one might diplomatically say no and not burn bridges:

  • Provide facts. Don’t simply say “no.” Express the reasoning behind your decision. Most importantly, communicate the values that influenced your decision. If you don’t provide the context, others will do it for you, and the picture they paint might not be pretty.  Unflattering motives could be assigned to you and your reputation is sure to suffer as a result.  Don’t create a mystery for others to solve. Cite data and share the motivations that led to your position.
  • Acknowledge values trade-offs. Let others know that you respect the priorities  they aim to promote. Decisions are rarely as simple as black and white, right and wrong. They typically involve value trade-offs. To soften your “no” vote and avoid unnecessary offense, remember to compliment the worthy values that may motivate others’ positions.
  • Be tentatively confident. It’s important to take a firm stand, but avoid appearing intransigent or aggressive. You’ll alienate more people than you’ll convince if you make absolutist statements.  Show that you’re a thoughtful person who has arrived at a reasonable conclusion. Opening statements such as, “I’ve researched the matter and learned…” and “I believe…” demonstrate a combination of resolve and humility that avoids provoking unnecessary conflict.
  • Ask for permission to say no. When saying no to a VIP, particularly someone who might misinterpret your refusal as disrespect, it can be helpful to ask permission to say no. This allows you to honor their authority while maintaining your integrity. For example, you could say, “Boss, you’ve asked me to take on a new project. I think it is a bad idea for me to take it on and I’d like to share my reasons. If, however, you don’t want to hear them, I’ll take it on and do my best. What would you like?” In most cases, the boss will feel obligated to hear you out. If the boss refuses to hear your reservations, you might decide to say no to continuing your employment there!

 

Thanks for reading,

Kim

Photograph: L-R Florence Ballard, Diana Ross and Mary Wilson The Supremes sing Stop in the Name of Love in 1965.

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Keep it Going: Sustaining Your Success

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OMG you did it!! The months and years of working hard and working smart, of knowing when to listen to your inner voice and when to listen to a good adviser, the months of living on four hours of sleep and no vacations for what seems like forever and—–your company grossed $1 million over four consecutive quarters! You’ve reached a milestone that defines success.

OK. So now that you’ve reached the mountaintop, you have to figure out how to keep your footing and stay up there.  In fact, because you are focused, ambitious and determined, you’re already thinking about climbing even higher.  But sustaining and growing your success might demand as much work and determination as you invested to attain it. Here are four commonsense choices that can help you hold on to your earnings and continue the positive slope of your company’s future.

Pay taxes

Meet with a business accountant and figure out how much money you should reserve each quarter for tax payments (usually 30% – 40%). You don’t want to wait until the annual tax time and realize that you owe big money to the IRS.  Before you spread money around, pay the quarterly tax bill and set aside enough to ensure that all remaining tax bills in the calendar year can be covered.

Smart celebration

When you hit the revenue milestone that you’ve defined as your “made it” metric, whether the amount is a net or gross figure, you owe it to yourself to celebrate. What’s important, though, is not only how you celebrate but also with whom.

First, don’t overspend.  If you want to take a week-long spa vacation then go for it, because that will dissolve your stress and prepare you for the work you’ll do to build on your new-found success.  Or maybe you’d like to visit a place you’ve always wanted to see, or return to?  A splurge that refreshes and replenishes your energy stores is likewise always worth it.

Where you want to be careful is the amount you spend on consumer goods.  You may need a new car and if you can afford it, then do so, but be careful about splurging on luxuries.  Buying a Saab or Volvo probably makes more sense than buying a BMW or Benz at this point.  Save real luxury purchases for when you’ve raised your net worth to a more substantial level.

Others may want to throw a party.  Caution is advised when developing the guest list.  The sad fact is that there will be certain individuals, including family members, who will feel more envy than happiness upon hearing news of your success.  If a party is a must-do (and why not?), invite only those who supported and believed in you.

Fair-weather friends, frenemies, passive-aggressives, or critical types who claim that they’re just playing “devil’s advocate” or being “objective” are mostly about undermining and sabotaging. They are not your friends, even if they’re family members.  Don’t invite them and don’t let your mother guilt you into including them.  They don’t belong.

Save money

After you’ve paid down or, ideally, paid off any significant debts, business and personal, it’s time to save money.  Start with your retirement fund. Research options available to you in accordance with the business you own and pay the maximum amount allowed by your age and income level.  Investigate opening a Roth retirement account as a place to hold after-tax money if you anticipate having surplus cash.

Once you’ve figured out your retirement fund strategy, focus on other long-term investments. By all means, invest in the equipment, staffing, technology and office or manufacturing space that will support operations (including customer service), generate ROI and advance the business. But what if the building where you lease space comes up for sale? It might be a good move to buy the building, so that you can control your costs more effectively and also collect some rents.  For that, you’ll need money and a good credit score.

You can give yourself a wish-list savings account to build up cash reserves. There are other investments that can be made as well and to learn about your options, ask people you trust to recommend an investment counselor.  If you’ve got even $5000 to invest, investigate certificates of deposit, online banks such as Everbank, index stock funds, or actively managed mutual funds.

Keep doing what it was that made you successful

Now that you have a blueprint for making lots of money, continue to follow the template and don’t slack off! Don’t think that once you reach a certain level of success that things will just cruise along on their own. You must continue to do those things that created the conditions for success.  You can, however, devise methods that help processes become more efficient—that comes from experience. Operational efficiencies make money.  Plan your work to give priority to income-generating activities, such as sales calls and networking, to conserve your energy and bolster your stamina and creativity.

Thanks for reading,

Kim

Image: Emanuel Leutze (1816 – 1868, Germany) Washington Crossing the Delaware (River) December 25- 26, 1776 (1851)

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Shutting Down Toxic People

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Today, I share with you insights about managing toxic people, a vexing class of individuals whom we all encounter from time to time.  The toxic types can infiltrate and poison our workplaces, schools, neighborhoods and volunteer service posts. They are even, I’m sorry to say, to be found in our religious institutions and our families. They are high-maintenance, manipulative and hurtful.

Those of us who are well-meaning and psychologically healthy are in need of polite and effective tactics that will keep the toxic at bay and prevent their calamities from spreading and tainting our experiences and opportunities, if not our lives. The ability to manage your emotions and remain calm under pressure has a direct link to your performance.

For help, I turn to a list of tactics developed by Travis Bradberry, PhD., clinical psychologist and expert on the subject of emotional intelligence.  Bradberry is the co- founder and CEO of Talentsmart, a consulting firm that provides training and coaching in emotional intelligence, a vital “soft skill” that impacts many aspects of relationship -building in our business and personal lives. Bradberry is also co-author (with Jean Greaves) of the best-seller Emotional Intelligence 2.0 (2009).

TalentSmart has conducted research reportedly with more than a million people and found that 90% of top performers are skilled at managing their emotions in times of stress in order to remain calm and in control. The ability to neutralize toxic people is a foundational competency for those who plan to become successful. Top performers have well-honed coping strategies that they employ to keep toxic people at bay.

Set limits

There is a fine line between lending a sympathetic ear to someone who is feeling disappointed or disrespected and feels the need to vent, as s/he seeks a way to cope.  It is quite another thing to be caught in the grip of a chronic malcontent for whom constant complaining seems to be the goal and to even entertain the thought of finding solutions to the problem are quickly dismissed.

Bradberry recommends that we ask the complainer how s/he intends to address the problem.  Be on guard for the malcontent to attempt to pull you into doing the repair work for them.  You may be met with a tirade (or a whine) about how “I thought I could depend on you to help me.” Gently point out that you are not the one who is upset. Sir/Madame Malcontent will be exposed as having no interest in solving any problems and that is your opportunity to politely distance yourself from this individual and refuse to remain a sounding board for ongoing complaints.

Rise above

Toxic people love to push buttons and generate conflict that inflates sometimes insignificant misunderstanding into a whirling tornado.  They are often irrational and thrive on arguments and power struggles; they have no filter and no off button. Whether their impulse is deliberate or unwitting matters little.

Instead, do what you can to remain calm.  Ignore any taunting and refuse to get drawn into debates and show downs, for you are too sane to prevail in such a fight.  Create distance and don’t engage.  If an individual persists in goading you into arguments, (including the arguments of third parties that do not involve you) it may be necessary to threaten and even pursue legal action, such as a restraining order, if you feel that the behavior has crossed the line into harassment (you cannot do this in the workplace, however).  You must stop cold behavior that you find unacceptably stressful or threatening.

Choose your battles

Understand that some battles are not worth the fight, even if you feel that you can win.  Do you want to die on this hill? Some battles are not worth the time and energy. Living well is the best revenge.

Aware of emotions

Bradberry points out that maintaining emotional distance from the toxic types requires emotional awareness.  Instead of allowing yourself to be manipulated emotionally and dragged into some irrational state of mind, calmly remind yourself that the toxic person is deliberately pressing your buttons (or perhaps inadvertently—who cares?) because s/he feels compelled to bully you into joining him/her in a rant, a whine, a shouting match, or some other counterproductive behavior.  Don’t go there.  Walk away, if possible, or change the subject.

Establish boundaries

The toxic are champion boundary busters. One of my mother’s sisters was very good to me but when it came to respecting boundaries, she could see no reason to do so (especially not those of a young person).  Whenever she saw me with food, she begged for a taste.  I would offer to make her a small plate and she would refuse, saying that she didn’t want that much, but only wanted “a taste of mine.”  She knew well that I didn’t like that behavior and I suppose I need to accept that disrespecting me was her goal.  She’s been gone for many decades, but the memory of her hurtful behavior will never leave me.  It poisons my memories of her.

I was a young adult when she died.  If she had lived longer, I would have become better at protecting my boundaries, despite the family pressure to give into her, an elder who had done me a big favor and always gave me nice gifts at birthdays and Christmas. I think I would have called her on it in a more forthright manner and if it meant that I saw a lot less of her, I would have done so and let her know the reason for my absence.

Now if your boss is the toxic person, it would stand to reason that the best thing would be to give him/her exactly what they ask for, on time and within budget.  But the problem is that toxic people love finding fault. They “move the goal posts” so that you can never succeed.  I suggest that whatever the boss wants from you, confirm it in email—all expectations, the budget and the deadline.

Forgive, don’t forget

There is lots of talk about forgiveness and I suppose some of it is useful.  Bradberry recommends it and I’ve come to the place in my life that I will concur, with limits. Forgive but do not forget.  Let the incident go, but do not give the wrongdoer another chance to violate you.  Or, hurt me once shame on you, hurt me twice, shame on me.

Thanks for reading,

Kim

Photograph: Anthony Perkins in Psycho (1960)

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Challenges That Impact the Solopreneur Enterprise

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There are always challenges associated with operating one’s own business venture. Some challenges are formidable while others are merely annoying.  Many are common and probably inevitable.  Anticipation and preparation are the best defenses and can mostly be addressed in your business plan and its subsequent updates.

TIME CONSTRAINTS

Employees can, on occasion, walk into their office, close the door, and choose to be non-productive for most of the day.  Solopreneurs do not have that luxury.  We must meet or exceed the expectations of clients and prospects every time and hit a home run whenever we walk up to the plate.

Solopreneurs are often faced with a lengthy daily to-do list— client work to perform, a meeting to attend, a workshop to develop, a class to teach, an event with probable networking potential to attend.  Furthermore, there are business operations to maintain, such as financial management, marketing, prospecting and customer service. Every item is mandatory.

Over time, fatigue and a sense of being overwhelmed can develop.  Even depression can manifest. The successful Solopreneur must learn to manage and prioritize routine tasks and in fact consider removing some from the plate through outsourcing.  The judicious use of technological tools that save both time and money is smart management, as they help business processes and customer service operate seamlessly.

Click  here  and  here  to assess no-cost and low-cost apps that not only record the time you spend on project work, but also invoice clients and in some instances, accept accounts receivable payments online.

FOUNDER’S SYNDROME

The reality of a single-person shop is that services that generate billable hours cannot be delivered unless the founder is on the job and able to produce them. That means, if you’d like to attend a multi-day skills training session or take a one or two week vacation, be certain to allow adequate time to make key preparations that will help you to discreetly step away from center stage for a few days.

Tasks that you’ve outsourced, e.g. invoicing or bookkeeping, can continue as pre-arranged, but the production and delivery of the services that are the business must be put on hold until you return.  Learn how to prepare your business for your absence (in this case, a vacation) when you click here.

HOW TO GROW

You work alone and that is why you are called Solopreneur.  To promote the expression of your creativity and ingenuity, it will be wise to remove certain routine tasks from your plate, as noted above.  Grow your organization by giving yourself adequate time to concentrate on the money making functions of a business owner: client acquisition and retention, recognizing potential new revenue streams, including niche markets you might enter, effective and timely business strategies to implement, collaborations, beneficial partnerships and networking.

If you elect to continue to perform all administrative tasks as you work to grow and sustain the business, quality control might become an issue.  Spreading oneself too thin is inadvisable and may result in sub par work, diminished customer service, poor decision-making and fatigue. It is far more preferable to spend the money on outsourced help so that you can maintain or enhance the expectations of your brand.

In closing, I reiterate that when you write a business plan, you will be encouraged to acknowledge and prepare in advance for most of the business challenges mentioned.  The initial marketing plan, financial plan and business model will keep you from falling prey to client list, money management and growth challenges.

Thanks for reading,

Kim

Image: Mosaic depicting the Amazon queen Melanippe, courtesy of the Haleplibahce Museum in Urfa, Turkey.

 

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Common Challenges That Impact Solopreneur Ventures

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Starting a business is an impressive achievement that’s guaranteed to make you proud, but the real victory lies in your ability to grow and sustain the venture.  A Solopreneur business owner must be both leader and manager, competencies that seldom co-exist within the same person.

Leadership skills support your ability to formulate a guiding vision for your enterprise, recognize business opportunities, devise strategies, find new customers and develop marketing plans, as well as inspire potential investors, collaborators and employees.

Management skills direct your  focus to administrative functions, as well as business operations, financial management, risk management, quality control and customer service.

While it’s recommended that Solopreneurs cultivate both skill sets, it’s probably inevitable that the average person will favor one competency over the other.  Nevertheless, it is important to hone both leadership and managerial capabilities so that you are better prepared to position the venture to overcome the challenges that visit every business, regardless of industry, annual sales revenue, or number of employees.  Discussed below are two of the five common business challenges that we’ll examine.

CLIENT LIST

How many active clients are on your roster? How many do you bill at least $1000/ month, on average? I completely understand that for a Solopreneur, every client counts and that it’s so comfortable to provide services to just one or two clients who are generous with billable hours.

However, succeeding in business means pushing beyond comfort level and actively discouraging one’s tendency to become complacent. Furthermore, depending on one or two big clients for the lion’s share of annual revenue places the business in a vulnerable position.

What will happen to your billable hours if your contact at that company moves on? There can be no guarantee that the next person will continue to send projects your way.  Be advised that the new person has Solopreneur friends with whom s/he has previously worked and it’s reasonable to believe that it will be game over for someone who’s thought to have ridden the gravy train for a number of years.

Demonstrate your leadership skills and protect your venture as you pursue potential prospects to nurture your sales pipeline.  A diversified active client list is an insurance policy.  Furthermore, growing your list of viable prospects encourages you to operate as a real Solopreneur and not just a sub-contractor for a larger entity.

MONEY MANAGEMENT

Early in the life cycle of a business, the most important money matter is simply to earn enough to pay the bills, for the business and your personal life.  On the next rung, you’ll begin to consider the amount of investment capital needed to finance upgrades that will make you and the company appear more competent and trustworthy to clients, prospects and referring colleagues and friends.

The company website must have a professional look and download quickly.  Printed marketing materials must reinforce the superior quality of your brand and communicate your expertise.  Even the look of your invoice matters.  You’ll also need enough revenue to occasionally attend conferences to upgrade your skills and expand your networking options.

BTW, to promote a predictable cash flow, it is not uncommon for Soloprenuers to take a job, whether it’s an under the radar gig such as  bartending or waitressing, or a more typical opportunity such as teaching, where one’s professional skills are parlayed into an arena other than the usual client work.

Unless you have a background in finance, consulting with a good accountant and/ or bookkeeper is the best way to ensure that your venture has astute financial management.  Meet quarterly with a bookkeeper and semi-annually with the accountant to learn how to take the necessary steps to strengthen your business finances.

I’ll return to discuss more common business challenges.

Merry Christmas and thanks for reading,

Kim

Photograph: Members of the Acorda Capoeira perform on a roof top in Rio de Janeiro (July 2016)

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Negotiate Your Way into Healthy Cash-Flow

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Lovely summer is here, generously rewarding us with warm breezes, long days and abundant sunshine.  Summer gives us many gifts but unfortunately, a generous amount of billable hours may not be one of them.  Two possible solutions to the impasse are to step up your networking activity starting in early spring, to help yourself meet and connect with potential clients who are in hiring mode and to let family, friends and referral sources know that you’re looking for projects.  Don’t be shy!

As a self-employed professional, you are the captain of your ship and it is your responsibility to take all reasonable measures to improve your financial position.  Your survival depends on it.  Smart marketing and prudent financial management are the foundation of a successful enterprise.

The most critical aspect of financial management for Freelance consultants and small business owners is to collect accounts receivable as quickly as possible, so that adequate cash-flow is maintained and accounts payable, employees and subcontractors can be paid on time.  Regarding your accounts receivable, I recommend that you take the following actions to encourage on-time payments:

  1. During the project specs discussion propose a payment schedule, perhaps tied to the timing and achievement of certain project milestones.
  2. Request a down payment of 20% – 35% of the total project fee and unless you’ve previously worked with the client, don’t start the project work until it is in hand.
  3. Invoice according to the agreed-upon payment schedule.

I cannot overstate the importance of these three actions.  Accountants estimate that in a given year, 5% – 10% of professional services providers’ invoices will be uncollectible.  The client is not always entirely at fault.  Freelancers must demonstrate that we intend to get paid and that’s done by being serious about the project payment schedule, requiring a project fee down payment and on-time invoicing.

Another helpful tactic is to make money by saving money.  Examining your accounts payable might help you gain a few dollars each month.  The number one accounts payable tactic is to avoid paying late fees by any means necessary.  Several years ago, many companies recognized that late payment fees are a very lucrative passive revenue stream and so they doubled, or even tripled, their penalties.  Some also shortened the length of their grace period window, when a late fee could be avoided.  Defend yourself from this predatory practice by flagging all accounts payable with their due dates as they arrive and make every effort to pay on time.

Another reason to pay on time is that a good payment record can sometimes be used to negotiate a lower credit card interest rate or request that certain fees might be waived or reduced at your bank.  While you’re on the phone and in the mood to negotiate, call your cell phone company and internet service provider and see what they can do to lower your monthly bill.

Adequate cash-flow is the life blood of every business, required to finance all business operations, including marketing campaigns, technological upgrades, professional development and other activities that support the venture.  No business can function effectively, much less grow and thrive, without healthy cash-flow.  Your diligence and negotiation skills can contribute substantively to its maintenance.

Thanks for reading,

Kim

Image: The Fruit and Vegetable Seller (1631) by Louise Moillon (France, 1610 – 1696) Courtesy of La Musee du Louvre, Paris

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Productivity Hacks To Keep You On Track

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Whether you work at home or in a co-working space, Freelance consultants will not see payment for our work until key milestones are reached or the project is complete.  Pay day will come around as scheduled only when we have the discipline to do our best work and get the job done.  Productivity equals a pay check for the self-employed.  Productivity also means that one is able to devote adequate time to activities that enhance the consulting practice, such as professional development and networking, as well as having time to enjoy a personal life.  Here are a few things you can do to maintain peak performance every day.

Define your work schedule

In general, Freelancers need to be available when clients expect us to be available. Answering client emails within an hour and calls as they come in demonstrates that we’re responsive and trustworthy.  Define the hours that you’ll be on the job and commit to working within that time frame.  Unless you’re on a very time-sensitive project, being “open for business” from approximately 8:00 AM – 6:00 PM Monday through Friday, with the exception of holidays, will seem reasonable to your clients.

Perform one task at a time

Multi-tasking has lost its luster.  Productivity experts now realize that we perform better when we work on one task at a time and give it our full attention.  Attempting to work simultaneously on more than one task can easily result in errors that require do-overs that undermine productivity.

Schedule time for content marketing and social media

Investigate social media aggregators such as Flock,  Buffer and Hootsuite , so that you can manage your blog, newsletter and social media accounts all from one dashboard.  Aggregators allow you to efficiently schedule and focus on this aspect of your consulting practice, whether you check in every day or once a week.  Some of these services offer a free, but limited, option that might meet your needs.

Organize your work space

Followers of Feng Shui understand the importance of maintaining a clean, neat desk and office space, as do devotees of Marie Kondo, author of The Life-Changing Magic of Tidying Up (2011). De-cluttering is good for the soul and good for productivity, too.  For more information, please read my post Feng Shui for your office .

Be proactive

Every day, create a to-do list for the next day.  Rank the list into A-Tasks (high priority), B -Tasks (important, not urgent) and C-Tasks (do them when time allows).  The A-Tasks are what you start with each day.

Do not allow yourself to be controlled by non-business related incoming calls and emails. Put your ringer on silent and keep an eye on caller ID, so you’ll know if you must answer a call and do the same with emails—answer what pertains to business immediately.  You may want to devote the early morning and evening to answering non-urgent calls and emails.

Take breaks

Every 90 minutes to two hours, take a brain break.  On a nice day,  you might take a walk around the block.  If it’s cold or wet, leave your desk, find a comfortable place to put your feet up and meditate for 15 minutes.  Recharging your energy stores is important for promoting concentration, focus and creativity.

Invent deadlines

Decide how much time you should spend on a particular task and make yourself follow the time you allot.  Creating a bit of urgency can be a useful tactic to keep yourself motivated and working.

Eliminate distractions

Close your office door when you are not home alone, or signal that you’re engrossed in work if you’re in an open plan co-working space, to discourage others from dropping in to gossip or otherwise ease their boredom at your expense.  However, make yourself available to your child during your break times or when s/he has an urgent need and be available to take important work-related questions posed by your co-working colleagues.  It is unrealistic to hermetically seal yourself off from your environment, but nevertheless imperative that you have the ability to work undisturbed.

Exercise

Numerous studies conducted over the past 20 years have shown a positive correlation between regular exercise and productivity, in addition to the benefits for one’s physical and psychological health.  Create a physical and psychological foundation that supports your productivity by hitting the gym, going for a run or swim, or participating in the team sport of your choice, at least four times a week, for a minimum of 30 minutes per session.

Review and evaluate your day

At the end of the day, evaluate how well you measured up to the items on your to-do list. Did you accomplish what you set out to do? Identify what helped, or hindered, your performance and make any necessary adjustments.

Thanks for reading,

Kim

Image: The Gleaners (1857) Jean-Francois Millet (1814 – 1875)                                     Courtesy of La Musee D’Orsay, Paris

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Cash-Flow Therapy

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So many businesses in the U.S. are undercapitalized; insufficient cash-flow is a factor in the demise of many ventures that might otherwise succeed.  Cash is king, it is often said, and the wise business owner will do what is necessary to maintain adequate cash-flow in his/her organization.

Make friends with the basic three financial documents and learn to use them as analytical tools.  They exist to enable your success and they will signal you when corrective action must be taken.

Monitor the top line of your company’s Income Statement (sales revenue/ billable hours).  Observe the ebb and flow of the accounts receivable (who owes your business money) and payable (to whom you owe money) on your Balance Sheet.  Make note of the beginning and ending cash balances on your Cash-Flow Statement.  Also on the Cash-Flow Statement, notice the cash sales (representing billable hours payments received as checks, for example) and the operating expenses.

Seasonal variations in billable hours/ sales can potentially exacerbate cash-flow problems if that is an issue in your business (the Christmas to New Year’s slowdown, for example) and pop-up emergency expenses can do the same.  Unfortunately, the outcome for Freelance consultants or other business owners can be a cash deficit, an especially unwelcome state of affairs in a month that involves holiday expenses.

But the primary cause of cash-flow woes is usually a result of persistently insufficient billable hours for services rendered or product sales, perhaps secondary to an anemic client list.

Former Wall Street Journal Assistant Editor Serenity Gibbons points out that if you  struggle to generate enough at the top line, you’re probably facing one of the following challenges:

  • The optimum target clients have not been reached by your marketing campaigns, or the message doesn’t address their priorities or aspirations.
  • The product/ service has limited value to the target clients, or your offerings are overwhelmed by dominant competitors.
  • The product/ service is perceived as too expensive for the value delivered.

It’s time to take control and consider what can be done over the short and long-term to correct the problem.  Do some homework and discover the basic challenges, concerns and goals (as defined by their respective industries) that would motivate your prospective clients and guide their decisions.  Determine why they’re doing business with your competitors and not you.  Moreover, make sure that you are pursuing the best target markets for your products/ services.

A second issue is an administrative one that plagues many Freelancers—-we fail to invoice in a timely and regularly scheduled fashion.  Help your clients to take you seriously and treat you like a “real” business by invoicing when promised. Take measures to improve the odds of getting paid on time and in full.  I’ve lived through this challenge and can report that with a small amount of discipline, it can be overcome.

Third, watch your operating (fixed) and sales related (variable) expenses.  How much are you spending to generate sales revenues/ billable hours? Limit what must get dropped into accounts payable and expand what drops into accounts receivable.

There are usually ways to stem the tide of cash-flow problems, that is, if you take action early enough.  You might start with revisiting your pricing strategy.  Ensure that your pricing reflects the value of your product/ service; that your prices are comparable to what competitors in your area charge for similar services/ products; and that you charge close to the maximum of what clients expect to pay for what you offer. Do some in-depth pricing research, using GSA MOBIS, the federal contract system, as a benchmark.  http://gsa.federalschedules.com/industries/gsa-mobis-consulting-pss-874/

Another useful tactic that serves as a band-aid for cash-flow glitches that are more inconvenient than problematic is your business credit line.  While you’re still able to pay bills on time and have a respectable credit score, investigate obtaining a business credit card through your bank.

Resist the temptation to charge business expenses to your personal credit cards!  Keep business and personal expenses separate and get your arms around the spending in each sector.  Furthermore, a business credit card usually has a much higher credit limit than a personal line and that allows you to more easily make investments in your business and earn cash back and points as you do.

Finally, if inflated business expenses, whether fixed or variable, play a major role in your cash-flow problems, then you will have some decisions to make (re: the selling expenses) and negotiating to do (re: the operating).  If you regularly pay on time expenses for inventory purchases, credit cards, or insurance, for example, get on the phone and ask for lower interest rates or a lower premium.  If variable expenses seem high, reconsider how much you must spend on marketing, advertising, sales and client entertaining.

Thanks for reading,

Kim

Photograph: Baccarat at the Sands Hotel in Las Vegas, NV, with Frank Sinatra (in black tie) as the card dealer (1959)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thanks for reading,

Kim

Photograph: Baccarat at the Sands Hotel in Las Vegas, NV with Frank Sinatra (in bow tie) dealing the cards (1959)

Survival Strategies Leave a comment

Persuading Your Client to Accept Reality

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What does a Freelance consultant do when a client refuses to believe what should be an undeniable fact and instead chooses to believe something that is obviously incorrect? When a client denies or ignores the reality of circumstances in his/her organization—like a strategy that’s not producing the desired outcome or a decision that’s caused a problem to go from bad to worse—can an external consultant (or subordinate employee) tactfully open the boss’ eyes? Maybe.  But before you try, examine the alternate reality in which some of us will occasionally choose to live.

In a four-year study conducted by LeadershipIQ, a company that provides online leadership development seminars, 1,087 board members at 286 organizations that had ousted their CEOs were interviewed.  In 23% of the organizations surveyed, the dismissed CEOs failed to acknowledge, and therefore act upon, adverse business conditions or other obvious threats to the organization and that lapse was the pivotal factor in his/her demise.  In other words, those CEOs chose to deny reality and paid the price.

Business and other leaders, like everyone else, might at times choose to deny or ignore uncomfortable truths, a behavioral trait known as the ostrich effect, where the birds are said to hide their heads in the sand when faced with a threat (untrue, BTW).  There are those people who prefer to see the bright side because they are convinced that positive thinking brings about positive results.  Every once in a while, that is true.

For the resolutely rose-colored glasses crowd, however, you may have noticed that presenting accurate information is often ineffective because their denial is rooted in misplaced emotion.  With this group, facts do not win arguments.

There are a number of paths that might lead to faulty logic that prevents one from seeing and responding to reality.  The phenomenon of confirmation bias demonstrates that we humans have a tendency to seek out and interpret data and other information that is in line with our belief systems.  The sunk cost fallacy essentially means that one has so heavily invested in the truism of a particular decision’s outcome that there will be no backing down now.

In the backfire effect, we elect to dig in our heels when presented with facts that call into question the value of our self-worth, identity, worldview, or group belonging.  In many cases, presenting those facts causes the person to cling even more tightly to his/her incorrect or unsustainable beliefs.

Unfortunately, those who tell the truth to someone who is mired in denial, and most likely engaging in one of the above behavioral patterns, risk triggering an attack by the denier, in the classic shoot the messenger face-saving mechanism.  In this scenario, the realist cannot win because according to behavioral scientists, denial is more about identity than information.

Now to get back to the client we’re trying to persuade to do one thing or another—what can one do when demonstrable facts are not only insufficient, but are also capable of imploding your valuable relationship? Ohio State University behavioral scientist Gleb Tsipursky recommends that we sidestep a potential showdown by asking a few delicately phrased questions that might reveal the emotion behind the denial and idealy, allow the denier to back away from his/her original stance and save face as this occurs.

While it may have already become apparent that you hold another viewpoint on the matter,  your first objective is to portray yourself as trustworthy and not an enemy.  Say what you can to convey to your denier that you share his/her core values and concerns.  Rephrasing what that person has said could be useful, to demonstrate that you understand and (perhaps) agree with what is most meaningful to him/her.

Your second objective is to gently reveal to the denier that his/her position is actually in conflict with his/her core values and/or goals.  This will take a silver tongue, I admit.  You might be able to get the ball rolling by noting that the denier’s position is quite understandable, based on the available information at the time, or as a result of his/her experiences.

If you can follow that up with an example of when and how someone who is known to the denier subsequently changed his/her opinion or practices on a particular matter, so much the better.  You want to make it safe for the denier to make a tectonic shift and show him/her how to do it painlessly.  Revealing that others sometimes do so is validating.

Finally, reconfirm -your denial prone client’s goals and based on what the two of you now agree upon, cobble together a solution that the client can accept.  Since the client will substantively participant in the process, buy-in will be achieved and you will emerge with a signed contract.

Thanks for reading,

Kim

Image: The Denial of St. Peter  Gerard Seghers, circa 1623                                                      Courtesy of the North Carolina Museum of Art