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Your Guide to Building Your Brand through Private Label Financing

This article will provide you with the information you need to fully understand what private label is all about and how you can build your brand using private label financing. Because it is important that you first have a complete understanding of the concept of private labeling prior to the financing aspect of it, this article is comprised of two parts. The first part addresses the definition as well as pros and cons of private label financing, while the second part will discuss how private label financing can benefit your brand.

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Part One:

  • What is Private Label Financing and how does it work?
  • What are the advantages and disadvantages of Private Label Financing?
  • How to select a private label financier that can best meet your needs.

Part Two:

  • How to build your brand through Private Label Financing and affiliated programs
  • Business Finance
  • Online Alternative Lending
  • How are White Label Loans different
  • Private Label Business as Profit Makers

Private Label Financing and How it Works

A Private Label product is one which is manufactured by a single company for later sale and/or distribution under another company’s brand. Private label goods are generally available in industries ranging from food, drinks, clothing, shoes, technology, electronic, home décor, health care items and cosmetics, to name just a few. A Private Label brand which is managed by a retailer for retail sale within a specific chain of retail stores is known as a store brand. As the retailer, you will provide the product manufacturer with the specifications you desire for the product. Those specifications could include not just the products’ ingredients, but the specific packaging.

Private labeling is an ideal option for products that can improve the value of other products. Moreover, if you have little or no experience with retailing, you might want to first consider a private label product. Essentially, through Private Labeling you can still sell products that you would otherwise have had no way of manufacturing, plus it is a great way to expose potential customers to your unique product.

The Private Label Manufacturers Association, has reported that, within the United States, the market share of private label goods has nearly reached 25% of unit sales. More importantly, it was also reported that the sector is expanding even faster than national brands.

You might be surprised to learn that you already use private label goods. If you shop at any of the major global retailers, whether online or B&M, such as Amazon, Wal-Mart, or Target and you have used their “brand name” product, that’s a private label good. In the same vein, say you frequent a store that sells “their brand” of ibuprofen, do you think they are manufacturing it themselves? No, they’re definitely not, given the many major constraints (patents and costs, notwithstanding). What they are doing is obtaining the right to sell that product under their name via a private label (namely, in this instance, the manufacturers of Motrin).

A successful private label brand can enrich a retailer’s sales opportunities. A store brand label can even be customized with a store logo or tag line, and through personalization, customer loyalty can be increased.

Another typical example of private label financing is a private label credit card program. Essentially, that is a store-branded credit card which is issued to a customer for general use at a specific store (or chain of affiliated stores) and it will carry the logo of the store (or affiliated chain). The customer’s use of this private label credit card is similar to a typical revolving credit plan which is managed by a bank or other financial institution, i.e. you make regular payments toward your balance (both principal and interest), with your principal balance being restore with the amount of the principal payment.

Interestingly, a private label credit card program will allow a retailer to offer its customers greater discounts and more favorable payment term (including the possibility of deferred payments though customers should understand that interest will continue to accrue). In addition, customers who hold private label credit cards get the benefit of returning items to any store within the chain, without the need to present receipts.

Private Label Financing Advantages

  • Customer Loyalty: One of the key elements to a business’ long term success is the ability to build and maintain a loyal customer base. Building your brand via private labeling is one smart way that those dual goals can be achieved. Customers generally remain faithful to a brand name they know and trust; often, they will go out of their way to purchase a particular brand. With private label goods, which typically have limited availability, you can not only ensure that customers remain loyal, but that you will have made them feel special, among a select chosen few who are permitted to buy it. Eventually, customer loyalty will increase, as will sales among that loyal customer base.
  • Higher margins: Brands which use private labels often generate higher profits, comparatively. The rationale is that the costs for producing or manufacturing your own products via a private label is typically much lower than buying products that are already manufactured, especially if these are high quality products with a strong background in development and marketing.
  • Wholesale income: With the exclusive rights to sell a product, one other option to enhance your bottom line is to wholesale the product and provide limited access and the rights to specific retailers. In so doing, you can further increase your market share by exposing your brand to new customers.
  • Exclusivity: Private labeling gives you a product niche and allows you to separate yourself from the competition. The exclusive rights to offer your product for sale is clearly one of the biggest advantages with private labeling. Marketing the product will also help to generate higher demand which would result in higher sales, simply because you are now the only source for your product.

Private Label Financing Disadvantages

As with anything, there are also potential disadvantages. Fortunately, provided you already have designed a comprehensive plan, you may be able to mitigate the negative effects of the primary drawbacks. Below are a few of the disadvantages to private label financing:

  • Minimum order requirements: The majority of manufacturers will have a minimum order requirement for a private label good, especially if its needs special customization. Quite often, the requirement for a minimum order may be significantly higher than you need or can afford.
  • Dead inventory: Some retailers will place far more orders than they will need. Perhaps it is because of the aforementioned minimum order requirement, but it could very well be that they either failed to market the product or to gauge the interest of their customer base. As a result, you, as a private label retailer, may be left with a great deal of unsold, aka dead, inventory.
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  • Customer perception: In general, consumers tend to have greater trust in a brand they know well or have frequently used. As a result, they may initially distrust an unknown private label brand. That is why it is critical to actively research and question your customer base for their likes and dislikes, before you make such a large investment in a private label good. To that end, there are a number of online research companies which have a massive membership base comprised of consumers from all walks of life. It would be less expensive for you to engage a research or marketing company to conduct an opinion survey on your behalf, than it would to just arbitrarily place an order for a private label good and hope for the best.

How to Select a Private Label Financier Who Meets Your Needs

Research is also critical before you choose a private label manufacturer. With comprehensive research of your target customers, especially knowing their purchasing habits and patterns (which you can ascertain through a company which conducts consumer surveys, as previously mentioned), you will have a good basis on which to make an informed decision. Trade shows (often offered by the Private Label Manufacturers Association) and other networking events can also help you to “test the waters.” You will also be able to gauge your competition and improve your ideas for a private label product before you offer the specs to a manufacturer. If your ideas for an improved private label product are unique, you may want to get a patent for it, to protect your product from copycats.

Part Two

How to Build Your Brand Through Private Label Financing and Programs

Private label financing is a relatively simple concept; essentially, the vendor will provide direct financing to their customers. For vendors, that is often a win-win proposition. By offering a convenient financing option to their customers, they may be able to close significantly more deals, as well as close them faster. That means an improved bottom line for your business.

A private label financing company can offer its customers a few financing options, and customers should carefully consider the benefits of one over the other. Typically, a business line of credit or a business loan can be obtained directly from a private label financing company; all that is needed is for you to apply and have met the standard loan requirements. There are two key benefits to obtaining private label financing. The vendor can often provide the customer with extended repayment terms in addition to deferring revenue recognition. The latter is especially relevant, as a typical lender might have a requirement that you must show sales of a certain amount over a specific period of time (for example, $100,000 a year over the past five years). On the other hand, a private label financing company will take into consideration your potential future sales of the private label good that they have agreed to finance.

In the event a vendor does not provide direct financing, they are often able to arrange for financing from a third party, typically that would be a financial institution with which they may have an exclusive arrangement. The customer would enter into a loan agreement with the third party financial institution. On the face of it, this might seem a “reasonable” alternative, but you will need to read the fine print carefully. It has been proven that the majority of private label customers often prefer to arrange a contract directly with the vendors as opposed to a third party. There is some concern that the other party might infringe on the use of their license, or have some other unintended involvement in the licensing chain. Also important, many customers perceive third-party financing as a debt; moreover, the financial institution or bank may make excessive demands prior to approval.

Under private label financing, a vendor and/or its channel partners have some flexibility through the contract’s life. Because the vendor can manage both cash and risk, it is critical that program agreements are carefully and appropriately negotiated. To that end, be certain that your agreement contains clear and simple language which allows for the non-recourse assignment of the payments terms.

Business Finance

There are two types of business finance; they are debt finance or equity finance. Generally, with debt financing, funds are borrowed from a lender and interest (and principal) are repaid according to the contract terms. Equity financing is the exchange of capital (cash) for part ownership or shares in a company.

Sources of business finance include:

  • Bank loan: A bank loan is money you have borrowed from a bank, credit union or some other financial institution. That financial institution will only grant or approve the loan if your credit rating warrants it, and provided you are able to prove you have the capacity to repay the loan. The principal amount, together with interest, is paid to the bank on dates specified in the Loan Agreement.

More reading: Your Complete Guide to Business Loans and the Outlook for Interest Rates in 2020

  • Business credit card: A business credit card is one intended for use by a representative (or representatives) of a business rather than for an individual’s personal use. A business credit card is typically available to businesses of all sizes. Though interest rates are typically higher than a regular bank loan, they can help a business to build or improve a credit profile in order to improve credit borrowing terms in the future.
  • Invoice factoring: Invoice factoring is a good way to generate cash quickly, but it does come with risk. Essentially, at a discount, you are selling your control of your accounts receivable (you can sell all of your accounts receivable or just a part of it). Your customers would be required to directly pay their invoice to the factoring company; they will “chase” it, if necessary, if your client is late paying. Once the invoices have been paid, the factoring company will pay you the remaining amount of the accounts receivable invoices (the discount they held back), minus their fee.

Online Alternative Lenders

Alternative lending is a term associated with non-traditional funding options that may be available to individuals and/or businesses. Individuals and business owners who have not been able to get a loan or funding from a traditional bank or financial institution are the prime candidates for an alternative lending option. Typically, alternative lenders tend to be far more flexible with the loan approval process, as well as disbursements and the repayment schedule.

Kabbage

If you prefer convenience and versatility then you should place Kabbage on top of your list. It is actually possible to apply to Kabbage online and get approval within minutes and the funds within the same day. It also has very straight and simple eligibility requirements for its business line of credit: you have to be one year in business with $50K annual revenue to be eligible for a credit up to $100,000.

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They don’t need a minimum credit score and are a fantastic option for entrepreneurs with low personal credit. Kabbage looks into your business’s revenue and cash flow, so business owners with a high revenue model will get easy approval. Kabbage also offers unmatched convenience and you can have the money in your PayPal account, bank account, or a Kabbage card. The ease, convenience, low credit score, and speed of approval also makes Kabbage one of the favorites for the woman entrepreneur.

For Against
  • Fast, automated approval
  • Fast funding
  • Convenient and multiple ways to access funds
  • No personal credit score
  • Assessment of business strength

 

  • High Annual percentage rate

 

OnDeck

OnDeck offers both term loans and business lines of credit. It is good for you if you may be a good fit for your business if you need fast cash. Online or phone applications take a few minutes and get the funds within 24 hours of approval for a term loan and instantly for a line of credit with withdrawals between $1K -$10K. They also require looser qualification and credit scores for approval.

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Unlike typical banks, OnDeck doesn’t requite collaterals and offers discounts for repeat borrowers.  However, you also have to look out as their loans can be expensive with a high APR.  they also have a fixed repayment plan and early repayment also don’t get any benefits. It might not be the best for startups but definitely, a good option if your business has constant sales and you are looking for expansion.

For Against
  • Funds are available within minutes or a day
  • Low minimum personal credit score required
  • Fast application and processing
  • Fixed repayment structure and no saving of interest on early repayment
  • Fixed daily or weekly repayment
  • For term loans need a personal guarantee and business lien

Lendio

Lendio serves as a lending market, where the entrepreneurs and lenders with their offers come on a common platform. You can apply really quickly as it is really just a click away. Your application will be scrutinized and requirements matched with the available loans, lenders, and offers and you can choose the plan best suited for your business. The team at Lendio will guide you with their expertise to complete the loan application and get approved. The typical time to get the funds after approval is 2-4 weeks.

The best part of Lendio is the availability of a huge number of small-business loans and lenders. Also, Lendio can match you with other funding agencies too if you are not happy with their offers. With loans starting as low as $500, longer loan term, and short funding period, they offer the best startup loans overall, especially for small business owners. They also offer some of the best plans for women entrepreneurs or business owners.

For Against
  • One-click application
  • Fast scrutiny and processing of the application
  • A huge number of loans, lenders, and offers
  • Personalized supervision and guidance by experts
  • Steep interest rates in some areas or offers
  • Basic qualifications or paperwork required
  • Inquiry in your credit score

How are White Label Loans Different?

A White Label product is that which is made by one company, yet packaged and sold by another (or others) under different brand names. Essentially, a white label loan is a home-branded loan, similar to the home-branded products you might see at many retailers. In a similar vein, a white label loan can provide a customer with a financial product that is very close in nature to a product you might get from a bank or other financial institution. The benefit of a white label loan is, generally, preferable interest rates and loan terms. A white label loan is not only a quality product, but it is also flexible and cost effective. It will come with features much like those from a regular bank (i.e., access to a debit card, ability to re-draw on a line of credit, and specialized or dedicated customer service). One less obvious benefit is that a white label loan does not generally provide features that you won’t use, but that you would often be charged for by a traditional lender.

Private Label Business as Profit Makers

More and more, private label products have grown in popularity among customers with a goal to cutting costs. Some private label segments tend to be more successful, and thus more profitable, than others. Those private label profit centers include:

Clothing and Accessories: Clothing and accessories are, together, an excellent market segment for private label brands. Customers are passionate about discovering something that makes them stand out from the crowd; often, that involves new, unique clothing and brands. Studies show that trend conscious customers tend to own, on average, almost 100 clothing and fashion items.

Skin Care and Cosmetics: The profit margins on cosmetics are among the highest. Women, and more recently, men have become more and more aware of what goes in and on their body. The trend toward vegetarianism and veganism, and using more natural products is growing by leaps and bounds. Moreover, skincare routines are now beginning at an exceedingly young age, in an effort to slow not just signs of aging but potential damage from the environment. Given the move toward skin care products that are healthier, more natural, there is a paradigm shift in the cosmetic industry. That makes this an excellent opportunity for the establishment of a white label product in this sector.

Hair Care: The potential in this market for private label goods continues to grow. Because hair needs vary by individual, the potential within the segment is huge, with a virtually limitless customer base.

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Packaged Food: Of all the products that can quite easily transfer or convert to a private label good, the one to consider is packaged food. Yet again, it is health conscious consumers who are driving the trend toward organic, gluten-free, vegan, non-GMO, etc. Health foods are one sub-segment that is growing among private labels, as is gifts and sweets, which are especially popular among online shoppers. If you have a coffee shop you can white-label your coffee products and offer your customers their desired flavors under your brand.

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What is of interest is that the above mentioned niches all tend to have a common thread, and that is that they all have a short life-cycle (meaning there is a frequent need for purchase) and all are easily marketed online. Influencer marketing, which many social media platforms excel in, can open up a vast audience. It’s also notable that these private label segments have a low barrier to entry. Moreover, with high profit margins and relatively low costs of production (especially in mass quantity), the potential is exponential.

In Conclusion

Basically, any business owner that deals with manufacturers, distributors and vendors can benefit from private label financing in promoting its own brand. No doubt, now that you’ve read about the great things that private label goods and private label financing can do for your business, you’re ready to move full speed ahead. A cautionary note is appropriate here.

Before you consider using private label financing to help build your brand and become profitable, it is imperative that you conduct an extensive research with respect to the following steps:

 

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Your Complete Guide to Business Loans and the Outlook for Interest Rates in 2020

This guide will provide you with answers to some of the important questions you may be asking regarding small business loans and their corresponding interest rates.

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The ability of small businesses to access affordable financing continues to be one the most pressing policy concerns of the US federal government. That is essentially as a result of the well-documented role that small businesses play in creating jobs and contributing to economic growth, both of which are vital to a sound economy. Naturally, small business owners must be able to obtain efficient financing in order to give their businesses the opportunity to grow during periods of relative economic normalcy. While it is important under normal circumstances, the situation becomes exponentially more critical if a small business is to survive an economic downturn such as the one the US is experiencing as a result of the Covid-19 pandemic.

In the absence of adequate financing, small businesses will not be able to continue their critical contributions to economic growth and employment. In fact, under the current economic conditions, those small businesses will not only fail to contribute to growth, but will have a negative impact as a result of closures and employee layoffs.

Having said that, it is important to understand that the outlook for business loan interest rates are difficult to accurately gauge at any given point in time. That is because lending institutions, both mainstream and alternative lenders, employ different methodologies to compute the interest rate that will be applicable to a particular loan product. As such, it is difficult to provide an average interest rate, though a range will be a better gauge for many potential borrowers.

Fund your business with loans guaranteed by the Small Business Administration (SBA)

Every small business owner knows (or should know) about the Small Business Administration. The SBA works with lenders to provide generally low-cost loans to small businesses which meet their stringent requirements. The SBA is not the lender of record, so it does not lend money directly to the small business owner.

What the SBA does is establishes guidelines (including applicable business loan interest rates) for small business loans made by its partnering lenders. Many of the largest US national banks have partnered with the SBA, but larger regional banks are also supported. The list of approved SBA lenders has grown to include a number of online alternative lenders and micro-lending institutions; a search feature on the SBA website can help you locate a micro-lender within a particular area.

The benefit to the lenders is that the SBA reduces their risk of a loan default while at the same time, it benefits small business owners by making it easier for them to access much-needed capital. Below is a list of just a few of the larger and more well-known US-based banks and lenders that have actively partnered with the SBA and which have the most approved SBA loans.

  • Wells Fargo
  • Huntington Bank
  • JP Morgan Chase
  • TD Bank
  • S. Bank
  • Bank of America

These lenders offer both SBA and non-SBA loans. A small business owner should be aware that the non-SBA small business loans typically have stricter eligibility requirements. For example, they may require that the small business be well established for a specific number of years and have income or revenue which needs to meet a certain threshold. While the SBA’s own loan parameters are stringent, because with a non-SBA loan the lender assumes all the risk, their own guidelines might be that much more difficult to achieve.

While the average small business loan interest rate on an SBA-backed loan will be considerably less than the average interest rate of an alternative lender, a business owner must weigh the pros and cons, all things considered. For example, one important thing that all small business owners should be aware of is the turnaround time for an SBA loan, and even a conventional loan which is not backed by the SBA. The process of getting an SBA loan approval could take as many as 12 weeks, but is generally no fewer than 8 weeks. A conventional loan may also take a few weeks for the process through to funding. If a small business owner’s needs are more urgent than that, an alternative funding source might be an option.

Business Loan Interest Rates Now and Their Outlook

Given the economic situation in the world, in general, and the US, in particular, during the second quarter of 2020, one might wonder where business loan interest rates are now and where they are headed. As of this writing, the Federal Reserve Bank has established its Fed Funds rate at 0.25%. The Fed Funds rate is the rate at which the US central bank lends money to US banks. There is some speculation that the Fed, as it is familiarly known, could move to a negative interest rate environment as many of its global peers are now doing. The thinking is that this could help to encourage economic growth in the US economy which is struggling mightily as a result of the fallout from the Coronavirus.

Let’s take a look at some of the key loan facilities that are available to small business owners from the SBA.

The SBA 7(a) loan program provides US-based eligible small businesses with loans up to $5 million through the SBA’s lending partners. The loan proceeds may be used for a variety of purposes; they include (but are not limited to) working capital purposes, expansion, renovation or even new construction, land or building purchase, purchase of fixtures and/or equipment, etc. A complete list of uses as well as restrictions can be found on the SBA website.

The SBA’s Express Loan program provides small businesses with loans of up to $350,000 for a maximum term of seven years; a line of credit option is also available. The turnaround time for approval or denial is typically  36 hours (though it may now be longer given the current situation). The uses of the loan proceeds are similar to the SBA’s 7(a).

The SBA’s Microloan program provides loans of up to $50,000 (with an average of $14,000) to small businesses through various non-profit lending organizations specifically intended for markets that have typically been underserved by traditional lenders. The use of the loan proceeds may for working capital, machinery and equipment purchases, as well as supplies and fixtures.

Below is a sampling of current SBA loan facilities and the corresponding SBA loan interest rate range and average interest rates. Note that the Paycheck Protection loan and the Economic Injury Disaster Loan are only intended as temporary relief because these loans are meant to assist business owners during the Coronavirus pandemic.
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SBA Loan Type

Interest Rate Range

Average Interest Rate

SBA Pay Check Protection Loan Rates

1.00%

1.00%

SBA Economic Injury Disaster Loan Rates

2.75% to 3.75%

3.25%

SBA 7(a) Loan Rates

7.25% to 9.75%

8.50%

SBA Express Loan Rates

9.50% to 11.50%

10.50%

SBA Microloan Rates

6.5% to 13%

9.75%

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SBA Loans, Typical Loan Terms

The terms of an SBA loan will largely depend on the type of loan facility that is approved.

  • Paycheck Protection Loan up to 2 years
  • Economic Injury Disaster Loan up to 30 years
  • Express Loan up to 7 years
  • Microloan up to 6 years

Applying for a government-backed SBA loan increases the likelihood that the small business owner will be approved for a small business loan with a traditional bank. SBA loans have fairly standard (and often stringent) eligibility requirements and associated fees, and they do place limits on the loan and APR. That makes it somewhat difficult to compare which bank is a better choice, based solely on their SBA offerings. What is more important is to compare potential SBA lenders based on their likelihood of approving your application; the fact is in some cases, your ability to meet SBA requirements is not a guarantee that your loan request will be approved by one particular lender or that you will be offered the small business loan interest rate that you had hoped for.

Conventional Business Loans

Small business owners often require loans for employing additional staff, to purchase property or update facilities, or even just to get the company off of the ground. The most common ways for entrepreneurs to gain access to necessary capital is to approach a bank. That need may leave you wondering about your options. What are the different types of loans? And what are the typical terms for small business loans? Will a guaranty be required?

The requirements for a traditional or conventional business loan are often very stringent. It is in your best interests to be well prepared before you submit an application for a small business loan. The typical terms for a small business loan will vary broadly; they generally will be specific to your needs but will also incorporate the requirements of the lender (or type of lender) you ultimately choose. For example, you may have limitations on the amount or use of the proceeds, and the type of loan may be limited, as well as the repayment schedule. Some lenders may require collateral while others will not, and some will ask for a guaranty while others may not need it.

Regardless of the terms, there are some things you should be aware of before you apply for a small business loan. Currently, the average interest rate range for a conventional small business loan is between 4% and 6%. Of course, as mentioned previously, the average interest rate, and rates in general, will vary across lenders and will be dependent upon a variety of factors. That said, traditional banks and lenders will typically offer a lower average interest rate than alternative lenders. Of course, loans which are backed by the Small Business Administration are generally even more competitive when compared to conventional bank loans. If you meet the criteria for an SBA-backed loan, it’s still a good idea to shop around for the best interest rate.
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Type of Loan Product

Interest Rate Range

Major national banks

From 2.55% to 5.14%

Smaller national banks and regional banks

From 2.48% to 5.40%

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Alternative and Online Lenders

Of course, not every small business owner will meet the requirements set out by the Small Business Administration. Unfortunately, even more won’t meet the requirements of a conventional or non-SBA loan, simply because the banks are taking on all of the risk. When that happens, many small business owners will need to look elsewhere to meet their financing needs.

When compared to conventional lenders, online and alternative lenders generally offer business loans at what can be significantly higher interest rates. Their requirements for approval of a business loan are not as strict as that of a conventional or traditional lender. The trade off to the higher interest rate though is that the proceeds of the loan are usually disbursed very quickly, sometimes in as little as a day, because a decision on a small business loan can be made within a couple of hours, in some cases.

Because of the lower eligibility criteria, online lenders are, in general, a better option for a small business owner that might be considered “unbankable” to a traditional lender. An “unbankable” borrower might be a small business owner which has only recently begun operations, i.e., a startup, or one that has low or seasonal revenue. In some cases, the business owner might have a credit score that is below the standard required by a mainstream lender.

In the table which follows, you can see some of the small business loan interest rates that are currently being charged for a small business loan or line of credit by online or alternative lenders. Those APRs range from a low of 6.50% (Guidant Financial’s SBA loan) to a mind-numbing 99.70% (from alternative lender, OnDeck).
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Lender

Annual Percentage Rates (APRs)

American Express (business loan)

6.98% – 19.97%

American Express (merchant financing)

11.50% – 25.90%

BlueVine (invoice financing)

15.00% – 68.00%

BlueVine (line of credit)

15.00% – 78.00%

Credibly

9.99% – 36.00%

Foundation

7.99% – 29.99%

Fundbox (invoice financing)

13.00% – 60.00%

Fundbox (line of credit)

15.00% – 59.00%

Guidant Financial (SBA loan)

6.50%

Kabbage (line of credit)

20.00% – 80.00%

LendingClub

5.99 – 29.99%

OnDeck

9.30% – 99.70%

PayPal Working Capital

15.00% – 30.00%

SmartBiz (SBA loan)

Prime Rate + 1.50% – 2.75%

SnapCap

19.99% – 49.99%

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Main Factors that Determine Small Business Loan Interest Rate 

The Importance of the Credit Score

While a good credit score may be less important for an alternative lender, the fact is the better your personal credit score the more likely you are to get approved for a loan from any lender. Moreover, with a good credit score you may be in a good position to negotiate for a better interest rate, as well as better loan terms. To that end, it is important that you be aware of your credit score before you shop for financing. If your company has been is business long enough, you may also find that your company has a credit history and a corresponding credit score. If your lender says that they will be running a D&B on your company (short for Dun & Bradstreet), that will provide them with a broader picture of your company’s creditworthiness. As a business owner, you should closely monitor both your personal credit and your business’ credit score.

In addition to having a good credit score, many lenders take into account your credit utilization ratio. This gives lenders a better idea of how well your business uses and repays the funds that they have made available to you. The credit utilization ratio gives your potential lender a good indication as to how efficiently and effectively you are using your credit limits.

Your Small Business’ Cash Flow

Cash flow is another metric that lenders use to gauge your credit worthiness. A lender is better able to assess your ability to repay the requested loan from your cash flow, both inputs and outlays. To that end, your accountant or CPA can help you gather all of the relevant documents, which will typically include several years worth of federal income tax and financial statements (if available) and, in some cases, a pro forma statement.

[also-recommended-box title=”” href_title=”Cash flow Strategies for Your Struggling Small Business” rel=”/blog/cash-flow-strategies-for-your-struggling-small-business//” type=”3″] Recommended Reading for You: [/also-recommended-box]

Collateral

Traditional lenders will always prefer to have collateral to secure a loan, and they will often “compensate” you with better terms or interest rates. That’s not to suggest that an unsecured loan isn’t also an option, as many major lenders offer unsecured long-term loans at competitive rates. However, you should be prepared to provide collateral if your lender requires it. Equipment, fixtures, vehicles, real estate and inventory are just a few examples of assets that many business owners can use as collateral. The caveat, of course, is that if you default on the loan, the lender has the legal right to seize and liquidate the asset you staked as security in order to get their money back.

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Loan Terms

Conventional business loan terms can vary widely. The length of time a business owner will have to repay a loan will depend on a number of factors, including the use of the funds, the type of business you operate, and your credit score.

Guaranty, Application and Other Fees

You should be aware that the SBA does charge a guaranty fee for certain loan facilities that they offer. Moreover, most lenders, conventional as well as alternative, may assess a number of fees, many of which require payment prior to the loan disbursement. At a minimum, you may need to pay for an application fee (often non-refundable), documentation fee, processing fees, costs for security filings, title or lien searches, etc.

Conclusion

While in the past many small business owners may have asked which bank would offer the lowest interest rate for their small business loan, that question may now be without merit. By that I mean, that is the right question to ask only if a low interest rate is the primary consideration when you want to borrow funds for your small business. If time is of the essence, however and, given the current distressing economic situation, that may very well be the case, then the lowest interest rate may not be that important. Or what if you are without collateral, which is often a factor of a low interest rate? In that case, a bank loan might not be the answer. Regardless, the issue of the lowest interest rate may be negligible given the experts’ outlook for interest rates. What is most important now is to get your loan approved and funded so that you can keep your small business, and the staff and vendors which support it, in operation.

The table below shows the types of lenders and their average annual interest rates for 2020 (assuming that your small business has a good credit score):
[wpsm_colortable color=”blue”]

Type of Lender

Average Annual Interest Rate

Large National Banks

2.55% – 5.14%

Small National and Regional Banks

3.23% – 5.40%

Foreign Banks (made by U.S. branches)

1.50% – 5.45%

Online or Alternative Lenders

5.49% – 66.57%

[/wpsm_colortable] If you noted the available charts for the average interest rate, it should become clear that a small business owner can find a more competitive small business loan interest rate from an SBA-backed loan. The problem, of course, is that not every small business owner will meet all of the SBA requirements. Moreover, in the dire current economic predicament that we all find ourselves in, time is of the essence. If you don’t have the luxury of waiting for a conventional loan, an alternative lender will likely be your best choice. Having said that, your average interest rate will more likely be higher from an alternative lender; it’s the trade off for a quicker turnaround, after all.

Other common loans include a line of credit, which gives the borrower access to a certain amount of funds at any given time and invoice factoring, in which invoices are sold for a lump sum of cash to improve cash flow and reduce debt. Regardless where your funding comes from, whether it is a conventional lender or a non-traditional one, the small business loan rate that you are ultimately offered will be dependent on several factors, as previously enumerated. The question you need to ask yourself, as a small business owner in the midst of an economic crisis, is can you and your small business afford to wait much longer?

FAQ

1. What Is an Interest Rate?

Every loan is composed out of 2 elements – the principle figure and rate of interest. The interest rate is the amount a lender charges for lending the money and is expressed as a percentage of the principle. The interest rate is typically for a one year term, and is known as Annual Percentage Rate (APR). A loan that is considered low risk by the lender will have a lower interest rate.

2. How Lenders Determine Your Small Business Interest Rate?

Before you apply to the lender, put together a professional business plan concerning why you need the small business loan. Here are a few of the determining factors that go into determining your small business interest rate:

  • Type of loan/funding
  • Time in business
  • Your credit score
  • Payment history
  • Term of the loan
  • Collateral

3. What is a Good Interest Rate For a Small Business Loan?

Small business loan interest rate will depend on your credit history, credit score, and overall creditworthiness. Good interest rate varies from one small business to another, thus what may consider good for one small business might not be good for another business.

 

 

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5 Important Business Phone Features You Should Know About

Have you ever really considered how important a phone system is for your business? Unfortunately, most people take their phone system for granted and don’t view it as a vital business component. You may ask why phone systems play such an essential role in the running of any business. The answer is very simple: It enables you to stay in touch with your customers and employees, both internally or externally. By dismissing its importance, business owners fail to see that a phone system can do one of two things—it can become an obstacle to development or increase a company’s efficiency. It is up to you to decide which it will be.

Cloud-based systems offer several interesting features that improve collaboration and productivity. Using the right business phone system will help you conduct business easier. You can even add a sophisticated phone system which will enable you to work from home. Depending on the size of your business, these systems can be customized to fit your needs. With so many competing features and products on the market, it is easy to be confused. Because your business phone system is a critical tool which facilitates multi-line communication, it is important that you select the best system for your business, one with exactly the features you need at a price which meets your budget.

However, before you decide on a new phone system for your company, you first need to clearly assess your needs, both short and long-term. You should first understand your current and future staffing needs. You should also consider how your business phone system requirements might change over time to ensure you get a system that will scale with your needs.

Next, you might want to consider how your location could affect your decision. Is your business in a single location or more than one? Will the mobile phone carrier you choose have a large enough network of cell towers so there is no lapse in service for any of your employees, regardless of location?

Another consideration will be how simple or complex a system are you looking for? Of course, that will depend on the features that you deem essential to the success of your business.

The good news is that technology is constantly advancing which can make a very big difference. For example, if you choose a VoIP system, you can get superior phone quality and powerful features at a fraction of the cost of an old-fashioned phone system. Of course, there is more than just VoIP, so read on to learn about the give most important business phone features on the market today.

Ability to Conference Call

One of the more essential features of a business phone system is the ability to make conference calls. A teleconference is the use of telecommunication devices to hold virtual meetings with two or more participants simultaneously in different locations. This is more sophisticated than a two-way simple phone connection. It is extremely convenient because you are able to discuss important business issues with your employees and customers without meeting in person at a specific location. Also, you don’t need to speak with every employee separately, which makes this feature extremely useful in resolving existing problems or making important decisions. It can also be a great way to brainstorm new ideas.

Some of the inherent benefits of teleconferencing include a cost-effective solution, larger audience, flexibility, enhanced productivity, reduced travel time, and increased productivity. Before you buy a business phone system, ensure that the teleconferencing features offer the following:

  • Online control panel. This will allow you see how many participants are on the call.
  • Guest speaker access. You and a guest speaker should be able to be on the line while the rest of the participants are muted.
  • Ability to record. You should be able to record the calls and retain a history of the recording.

Of course, you will also want to be certain that the sound quality of the speaker on the phone and microphone are audible for you and your participants.

All in all, you shouldn’t need to pay for basic conference call capability, but you can buy premium features which may be worth the added cost. For example, a feature which ensures the security of your conversation (with the use of PIN codes), Q&A facilitation, automatic audio recording, sub-conferencing, or services which provide participants with transcriptions.

Whether you choose a basic or premium version, it’s clear that the ability to make conference call is absolutely a necessary feature.

Forward Calls with “Find Me, Follow Me” System

The “find me, follow me” feature enables all incoming calls to be automatically forwarded to another phone. With this feature, you can forward or re-route your calls according to a special set of rules that you have created. For instance, you can set the sequence so that a call is forwarded to your first designated number (say, your office), then the next (your co-worker) and so on. Interestingly, some sophisticated forwarding features use a “hunt group” approach that forwards all incoming call to a sequence of numbers until the incoming call is answered, or it goes to a final number for the caller to leave a voice mail.

This feature is especially relevant for businesses which are sales-oriented, especially since employees may get a significant number of calls on a daily basis and aren’t always able to answer them. In a situation like this, it is important to satisfy clients, current and potential, thus finding a capable mobile phone system is paramount.

For small businesses, forwarding and routing your phone calls is a great way to create the appearance of a larger company, though in reality you may have only a few on-staff workers or even some who work remotely.

Local and International Connections

Fortunately, the days when the phone companies differentiated between local and long distance (or international) calls are a thing of the past. Statistics show that fewer and fewer businesses utilize a landline, simply because of the availability of VoIP. VoIP is encrypted as Voice over Internet Protocol or IP telephony. Essentially, it is a system which uses the same broadband connection as your business does to access the Internet.

The main advantage of VoIP is that you are able to send and receive SMS (short message service), faxes, voice messaging, and calls, over Wi-Fi or else using mobile data. The installation, as well as monthly service fees, are generally very inexpensive.

While there are special purpose VoIP phones, they are often not necessary as you can use VoIP on any Internet-accessible device, including a smartphone, telephone, laptop, personal computer, etc.

Phone numbers from anywhere in the world

Some businesses may want to offer potential customers who live outside of their immediate selling area a local-based number from their “home” country. The hope is that this will instill a sense of trust in a new customer who may feel that is is too costly for them to call overseas, especially if the duration could be lengthy. With a local number, there is no opportunity lost for the business, as the customer will likely be more willing to call and hold the line until a representative can answer. There are certain telephony solutions which allow you to choose the phone number of the region or even the country you want. Having that option could potentially increase sales while providing you a stronger connection with your international customers.

Automatic dialer

One problem most salespeople face is manually dialing the phone numbers of a customer each time they want to contact them. The solution to this problem is the “Automatic Dialer.” This is a tool that automatically dials the uploaded numbers and routes the connected calls to the right person or department.

One of the best tools the automatic dialer is used for is to generate business leads. Your company can use it for “cold calling” to generate good leads. It also helps you increase sales because it integrates with the customer relationship management (CRM) system you may already have. With that, your staff will have all of the customer’s information readily at hand to facilitate the execution of the sales process.

Of course, one could argue that manual dialing is not necessarily a major problem. However, in a busy call center, or if there is a quota to be met, manual dialing can and does consume quite a lot of time for your staff, especially when they encounter a busy signal and must continually redial until the call is finally answered. With an automatic dialer, your staff can be more productive as they wait to speak to a potential lead. With the help of such telephony system as an automatic dialer, you can both speed up and simplify the call initiation process.

The mechanism of the work of any automatic dialer is quite simple. After uploading your contacts list, it makes the phone call and only the phone call. If the call isn’t answered, or the line is still busy, the automatic dialer dials the next number from your list and so on.

One of the main advantages of an auto dialer feature is that your data is kept current. Some phone numbers may have been changed or listed incorrectly, and in order not to waste your time dealing with it, you can benefit from using an automatic dialer. You will be able to see which numbers were “good” and which are no longer relevant.

Such a feature of a phone system is especially useful for call centers, affording your business a number of benefits, which include reduced idle time, better operational efficiency, superior lead conversion ratio, and constant monitoring and reporting.

Conclusion

In comparison with a traditional phone system, a cloud-based phone system can give you numerous benefits. Beyond saving money, a good system will improve productivity, provide your workers with the opportunity to work remotely and at multiple locations, and enhance your business image, among others.

To run a modern and efficient business, you certainly need modern technology. In this ever-exciting new era, there are a number of powerful tools being designed specifically with your business needs in mind. In this article, we discussed a number of important business phone features you should be familiar with before buying a business phone system. With a little knowledge, you will be able to make a good decision as to the best phone system for your company.

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How to Open a Successful Hair Salon

Starting a hairdressing salon business can be very challenging. As the owner, your main responsibility is establishing the structure of the salon. You may choose to manage it or cut hair. Managing the business require you to be the wearer of many hats: you may need to be an entrepreneur, a receptionist, an accountant, a hairdresser, a cashier and maybe even a cleaner.

A hair salon business can be started with relatively moderate capital which, of course, will depend largely on the type, quality, clientele base and choice of salon design. If you want to open a hair salon in your home (usually small operation), then all the expenses and preparations are spent on buying equipment and redecorating the room (you will also need to check the licensing requirements for this as it is illegal in some areas). A professional hair salon business is another matter entirely.

Most people who seek success in the beauty industry will find that success greatly depends on your ability to offer a consistently good customer satisfaction experience. A successful hair salon business is supposed to offer good services, use quality hair products, maintain a hygienic environment and provide an enjoyable experience at an affordable price.

The beauty industry business is very promising and profitable, but one should be aware that it is also a very competitive industry. Almost every neighborhood, big or small, will have at least one hair salon; the more populated the neighborhood or city, the more likely you will be competing with several salons in a relatively small radius.

If you hope to establish a successful hair salon, it’s important to have a good plan in place beforehand. Here are few things to consider:

Market/Niche Analysis:

You can undertake the task yourself or hire specialized experts who can draw up a marketing niche plan which is marketing to focus on a specific targeted customers. Finding your niche will not be not easy. First, you must think about what you are good at, what your clients say they like best about your services, and what you enjoy doing for your clients.

Popular and promising areas of niche activity are hair salons which cater exclusively to children, or individuals who want salon services jointly with pet grooming capability, or which offer ultra-exotic services for wealthy clients.

Business Plan:

No business becomes successful by accident; what it generally takes is a good business plan. A business plan acts as a road map that will guide you to success. It is highly recommended that you revisit your business plan regularly, even daily would not be too much. It would also be beneficial to find a mentor in the business that can help you if you have questions. The key elements in your road map should be how to figure out what exactly your business will be, how to troubleshoot problems and how to achieve your dreams.

Because this is a fundamental and important stage in planning, think carefully and honestly about your own ability to craft a business plan. Are you confident enough in your skills or will you be better off getting support from professional business consultants?

Potential Profitability:

Is it profitable to open a hairdresser? It can be. The level of income will depend on your efforts from the onset to organize work and recruit staff that will help you grow the business. With a steady stream of customers you can expect a return on your investment in as little as two years. Remember, you will get out what you put into it; if you invest in expensive equipment, you should be prepared to charge higher prices. Conversely, with a more modest investment you would charge appropriately for services rendered.

It’s also worth bearing in mind that, during periods of economic hardship, beauty salons of medium and low price categories tend to survive. The number of elite style studios is consistently reduced relative to the economy. Success in this business depends primarily on the volume of customers you get, not only during the peak period (weekends and after work) but also when it is slow.

Legal Requirements:

Make sure that you acquire the appropriate business license and other required certifications and documentation (which will vary by state) before you open your doors for business. In the US, in most states, a beauty salon owner can register as a sole proprietorship or as a Limited Liability Company (LLC). While a sole proprietor is the easiest option, it may not be the best. There may be tax implications which would be better suited for an LLC type of ownership. It would be well worth the effort to research this aspect or to speak with an accountant or tax attorney.

Correct documentation and availability of necessary permits from public services will help to eliminate claims from the supervisory authorities. While a license to be a hairdresser is an absolute necessity in nearly every jurisdiction, other staff members, such as nail technicians and cosmetologists, may also need to have a license from an appropriate supervisory board, as well as certification from an accredited trade or beauty school. A hair salon must also satisfy all the requirements of the jurisdiction’s health and sanitation department, as well as be in compliance with fire safety regulations.

Premises:

It may not be easy to find a suitable and affordable place for rent for your hair salon; often the rental expense consumes a significant cost of operations. The goal here is to have a salon space that adequately meets your needs without being too cramped and over-crowded as a too small location is often a turn-off for clients. On the other hand, too big a location when you don’t have the staff and equipment to fill it simply looks unfinished.

At a minimum, the space in your salon needs to be able to accommodate a waiting area and a reception desk, work stations for your stylists (and, if your budget allows, consider separate spaces or work areas to separate the genders; while not a necessity, one survey suggested women prefer a separate space and are more likely to opt for additional services, as a result), a sink and drying area. You will also need a backroom for your beauty supplies and fixtures (washer, dryer, hot water heater, etc.), and a washroom for both staff and clients. If your budget allows, a break room for your staff would be a great morale booster, and an office to handle administrative tasks would make them considerably easier.

Location and Competition:

The main difference between success and failure is location. You should select one with high visibility and good traffic, that is close to where your target clients live and shop. Do not open your salon near your competition. Almost every neighborhood, big or small, will have at least one hair salon; the more populated the neighborhood or city, the more likely you will be competing with several salons in a relatively small radius.

Competition in the beauty care industry, while promising and potentially quite profitable, is also very fierce for the same reasons. As much as possible, gather information about your competitors in the neighborhood and be sure that you can distinguish your services from them. Don’t hesitate to check out your competition, personally; get a feel for what you may be up against by getting your hair styled at your competition. If that is not a possibility, make sure you scrutinize online reviews of your competition to find out what your potential clients like or don’t like about them. Gauge the quality and pricing structure of the beauty salons in your desired location. What type of services do they offer, who is their market, how many employees do they have, how attractive and welcoming is their salon? Your task, really, your responsibility, is to collect as much background information about your rivals as possible.

While the aforementioned considerations do need to be addressed, the pieces of the puzzle which will be the deciding factor between the ultimate success and failure of your hair salon are these:

  • Personnel
  • Desired Clientele
  • Services Offered
  • Equipment
  • Pricing

These five go hand-in-hand. The bottom line is this; if not in sync, they can make or break you.

Personnel

Personnel costs are the biggest recurring expenses in this business. How many employees you need will depend on the type of services you want to offer. Interestingly, some salon owners claim they do not hire talent because they can teach the new employees the required skills, though the love of the job and a nurturing disposition are not traits that can be taught. While you will always want to hire a person who is good at what they do, you do need to bear in mind that an employee who does not have “people skills” will not be an asset to your salon.

While the basics in the salon business are a given, i.e. sinks, chairs, mirrors, scissors and clippers, etc., your biggest investment will be in your staff and, especially, your “master.” A master stylist is someone who has attended a reputable beauty school, who has trained extensively under the best in the business, who has years of solid experience and has built a good reputation (and, subsequently, a good fan base), and who is well versed in all aspects of the craft.

Very few customers are willing to let an untested stylist have carte-blanche with their appearance but having a master stylist on board, whose attention to detail is beyond compare, is quite a different story (thus, worth every penny of your investment). If a customer is pleased with the outcome, she will continue to return to your salon for an appointment with your master stylist, often regardless of the cost.

Though there are no hard and fast rules, the following should be considered a guide to your potential staffing needs:

  • Small-sized salon: Male or female stylist, occasionally a nail technician. Sometimes there is an administrator. Total of 3-4 people;
  • Medium-sized salon: Up to four hair stylists, perhaps one individual who handles the shampooing and conditioning, one or two nail technicians, administrator, cleaning personnel, cosmetologist. Total may be more than 10 people.
  • High-end salon: In general, there are often an equal number of staff as the medium-sized salon, but they will also have a master stylist and/or master colorist, plus more than one person to handle shampooing, as well as one or two nail technicians and cosmetologists (who may or may not be required to be licensed). Last but not least they may have a person who handles the clean-up work during and after business hours.

If you plan to open a small beauty salon, and provided you yourself are a master stylist, you can save on the salaries of hired workers by doing double duty as not only the master but the salon administrator (or the receptionist, clerk and cleaner). If the owner of the business is a master with a brand, this will only add prestige to the salon.

Services Offered

You need to decide on the type and quality of the services you would like to offer in your salon. Below are some of the services offered in typical hair salons of varying price tiers:

For an economy class salon:

  • Simple men’s and women’s haircut
  • Model haircut
  • Coloring
  • Waving, perming or straightening
  • Styling or blow outs
  • Manicure and/or pedicure
  • Waxing and/or shaving
  • Sale of mid-range hair care items

For a mid-level salon, in addition to the above:

  • Lamination
  • Coloring and balayage
  • Biowave
  • Trendy haircuts
  • Braiding or weave
  • Art sculpture, nail painting, application of tips
  • Pedicure
  • Cosmetologist services that do not require the qualification of a doctor-dermatologist
  • Sale of high-quality hair care cosmetics

For a prestigious studio, in addition to the above services:

  • Image creation
  • Stylist services
  • Copyrighted haircuts or the ability to realize any version of your favorite hairstyle
  • High-quality expensive visage
  • Spa treatments for hair
  • Sale of quality styling products, masks, shampoos, balms of famous brands

Fixtures and Equipment

The type and quality of fixtures and equipment you buy for the salon will depend on the level of services you intend to provide which will itself depend on the type of clientele you seek. You will need very expensive equipment if your target clientele is wealthy individuals, or if you intend to offer upscale services.

At a minimum, any salon will need the following furniture, fixtures, equipment and consumables:

  • Large wall mirror(s)
  • At least two stylist chairs
  • Shelves and cabinets for tools and consumables
  • A sink (or two) with attached client chair
  • Hair drying station(s)
  • Hot water heater, washer and dryer for towels and aprons, etc.

Also, dependent upon the various services you plan to offer:

  • For hair services: Hairbrushes, combs, scissors, hair dryers, crimpers, straighteners, hair clippers, towels, smocks, hair apparatus sanitizers, etc.
  • For nail services (manicure and nail artistry): Nail clippers, nail files, nail dryers (air and gel) and assortment of nail polishes and nail care products for nail treatment.
  • For nail services (pedicures): Besides the above for manicures, you will also need a special purpose foot bath and chair combo for your customer, as well as a stool and movable equipment storage unit for your employee.
  • For cosmetology services and/or waxing: Special purpose chair or lounge, table, assorted makeups and facial treatments, wax warmers, linens, etc.

Of course, customers who are awaiting their turn with the stylist or other specialist will need to be made to feel comfortable. You will need chairs, tables, reading materials, a television (optional, but at minimum, a decent sound system), and a beverage station for coffee, tea, water and other non-alcoholic drinks. The goal is to keep your potential customer from getting frustrated with the wait and leaving.

Pricing

During your marketing research, you must be able to identify your client base, the level of services they may need or want, and at what price. Incorrect assessment of this may lead to business failure. As far as clients are concerned, the higher the price level, the more and better quality of services expected. There are essentially three levels of service and pricing tiers to consider:

  • Economy Class/Inexpensive: Your target clients would likely be senior citizens, children with their parents, public sector employees, high school or college students, and men and women who want to simply get in, be served, and get out quickly. Your clients will expect you to offer basic services such as haircuts for men and women, styling, coloring, perm, straightening, blow outs and, occasionally, waxing services. The shop may be located in a residential area or in a shopping or strip mall. It generally has a single modest room and inexpensive equipment. Most income generated is from rapid turnover of these basic services.
  • Middle-Class/Average Price: Your target clientele would be middle-class or high-middle class men and women, entrepreneurs, professional workers such as office managers, teachers, bankers, as well as some well-to-do youth. Clients in this tier would expect the aforementioned basic services and more, including nail styling, biowave, and lamination, etc. The shop will have more modern equipment and a well-furnished interior and exterior. Prices are higher than the economy class salon.
  • Elite Class/Expensive: Your target customers are wealthier individuals with money to spare, those who simply like to be pampered, those who enjoy the relaxation of the salon experience, and even those who are rushed for time but willing to pay extra to get in and out. Elite class clients would generally expect to find a high-end salon in an upscale or trendy neighborhood. Clients will expect to receive excellent personalized services, all of which are performed by well-trained professionals. The shops are well-designed, and equipped with top-of-the line furniture, fixtures and equipment. Some salons may offer private rooms. In general, pricing in this tier is very expensive in keeping with the level of service.

Some Useful Tips

To attract new customers consider offering discounts, special promotions, or bonuses—customers love getting something for “free.” And don’t neglect return customers who will feel jilted if they are not properly appreciated. To that end, advertise locally, or use social media (Facebook, Instagram, Twitter, etc.) to your benefit. It is very important that you create an online presence and maintain your page well—yes, it is more work for you but it will be work which pays off with increased foot traffic.

Your mantra should be, a happy customer is a repeat customer. That means that you need to scour the online reviews (Yelp, for example) for your salon and thank those clients who have left you a favorable review and address the issues which are less than complimentary.

Conclusion

Opening a beauty salon is not always easy. Besides the ability to wield scissors and a blow dryer, you must have a love for the job and a willingness to want to create beauty. Ask any successful salon owner and they will tell you it is next to impossible to create a profitable business that you don’t love. As the saying goes: Love what you do and you won’t work a day in your life.

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Eight LMS Applications for Training Employees

Only about two decades ago, few people knew about Learning Management Systems (LMS) – even today, some would be hard-pressed to define it. Back when the Internet was still gaining traction and access was limited, LMS struggled to gain relevance. Since the introduction of the first LMS tools in the 1990s, the industry has witnessed tremendous growth, with 2021 projections for the industry estimated at about $15 billion. Thus, the importance of LMS tools cannot be overemphasized.

Companies and academic institutions have seized the many opportunities offered by LMS to train employees and students. Thirty-odd years ago, no one would have believed that integrating learning with technology would come to be this easy and cost-effective. Clearly, LMS has come a long way and the future will certainly bear witness to even more positive changes.

Is LMS necessary?

Certainly, as a business owner, you need an easy and effective way to onboard new employees. Replacing an employee is never easy; the replacement process is not only time consuming but can also be expensive. If you find yourself in such a situation, investing in LMS tools may be the best way to go.

LMS tools will quickly help your new employees understand your company’s policies and acclimate to company procedures at their own pace, without the need for physical training sessions. Studies show that the quality and effectiveness of a company’s training program has a positive impact on how quickly employees, especially new hires, get assimilated in the work environment. The business world is ever evolving; there are myriad innovations and concepts that require new skills, thus the proper learning tools and techniques will help ensure your employees remain up to date.

Your business or company will certainly not be immune to change; as such, your strategies and policies will need to adapt, and the onus will be on you to ensure that your employees understand those changes. Learning Management Systems tool comes in handy here. With a good LMS, you will be able to create in-house training with relevant course material for your employees. You will also be able to monitor their progress with its assessment features, and award certificates to those employees who have completed a specific program.

What exactly is an LMS?

LMS is an online tool that allows HR managers to offer virtual training to a group of people. While LMS has applications in the educational sector, for the purpose of this article we will address its relevance as it relates to the business environment. With LMS software, a business owner or manager would be able to upload course material, host assessments, and compile the employee’s data without requiring a physical classroom.

What makes a good LMS?

Using an LMS may sound like a good idea, but as there are hundreds of LMS software on the market choosing one at random would not be wise. Three things that should be considered before making a choice are costs, technical features (user-friendly) and availability of customer support.

Key features of a good Learning Management System

  • Course creation features should not be too technical.
  • Ability to create specific courses for specific employees.
  • Ready availability of customer service support.
  • Basic features and functions should be easy to undertake; they include:
    • Adding employees
    • Inviting employee(s) to a session
    • Creating worker or staff assessments
    • Adding tutorial videos and/or images
    • Pulling videos from online sources for use in a course
    • Analysis and grading of employee tasks
    • Creating a certificate of completion

Factors to Consider When Choosing a LMS

There are a number of factors to consider before you decide on a particular LMS:

  • Cloud-based deployment LMS or open source license LMS.
  • Cost and budget constraints.
  • Compatibility with the technical capabilities of your employees..

If you believe LMS software can help you better train your employees, let’s look at some worthwhile LMS offerings to narrow down your options.

TalentLMS

Compatibility: Web, iOS, and Android

TalentLMS is one of the more flexible and affordable LMS hosting courses. What is unique about it is that it it allows for either user-generated course creation or you can take advantage of the many pre-built courses. Currently, TalentLMS offers more than 400 pre-built courses, covering a variety of topics.

The pre-built course materials come with descriptive videos and images. They can also be edited to suit your needs; you can add or remove courses, information, tests, and assignments. Building your own course content is also relatively easy. You have the ability to easily upload written contents, videos, images, and audio files. You can also add contents directly from YouTube, Flickr, Wikipedia, or Prezi simply by copying and pasting the URL.

Features

  • Access to 400+ pre-built courses
  • Ability to self-create courses
  • Simple, easy-to-use interface

Cost

TalentLMS is among the most affordable providers, given their flexible terms. Course material can be purchased separately or bundled, which provides access to numerous courses. Subscription packages start at $39 monthly. TalentLMS also offers a free starter package though the options are extremely limited.

Coassemble

Compatibility: Web

This learning management software is designed to concentrate more on allowing you to build your own visually appealing coursework. Building a visual course might sound technical, but Coassemble has features that will make it seamless. They offer a fair number of content templates that will guide you, even if you are a novice. Getting started is very easy; use the template of your choice by filling it with your desired contents. After preparing the course content, share the URL with other participants and the session can begin.

Features

  • It has numerous full-fledged quiz templates from which to choose.
  • It has a practical question format.
  • The software allows slideshows and tutorial images.

Cost

The membership plan starts at$149 a month.

Teamie

Compatibility: Web, Android, iOS

LMS is a learning platform, not too far removed from traditional education, so most educational techniques can also be applied on LMS. Teamie is a software that utilizes this learning strategy by creating an ecosystem where your employees can come together and learn in a socialized environment, through the creation of virtual classrooms, each with its own lessons and assessments.

Features

  • Newfeed feature wherein the instructor can pass along information, either in a general information format, or specific, course-related material.
  • Availability of story features will facilitate social communication among employees. This story feature enables your employees to share their opinions about topics discussed. Images, videos and audio files can be shared on the story and, unlike most LMS software which allows only instructors to share files, Teamie allows every participant to get involved.
  • Comments can be hidden from other users, which is useful for the Q&A section.

Cost

Unspecified

GoToTraining

Compatibility: Web, Windows, Mac, Linux, Android, iOS

This is an excellent online training software which is part of a program series from LogMeIn. It is easy to use and accessible, whether you choose to access it from your work computer or in the comfort of your home with your mobile phone. All you need to do is to download the software on the device. With this LMS, you will also have access to LogMeIn Rescue, GoToAccess and GoToMeeting.

To conduct a training session, you will have to log into the back-end and post the data required for the course. You’ll also be able to share videos, images, and audio files from your content library. Using GoToTraining is straightforward; once you have prepared the session, you can share the URL with other participants and, at the end of each session, you’ll have access to information like attendance and assignment scores.

Features

  • Ability to send pre- and post-session emails.
  • Ability to conduct assessments and hold polls.
  • Makes reviewing a feature with your employees easy.

Cost

For the starter package, the cost is $109 monthly; premium packages attract a higher, variable cost depending on the package.

eFront

Compatibility: Web

This LMS tool doesn’t just teach your employees random skills. Rather, it identifies those employees who lack a particular skill and designs the means for them to acquire it. This is a very useful feature for enhancing employees’ skills very quickly, ensuring only those skills which are necessary are taught.

Using eFront is very easy; all you have to do is to use the skill-gap feature, create a new test, and list all the skills that should be tested.

Features

  • eFront allows you to select users to test
  • It also allows you to assign deadlines

Cost

The cost starts at $750 for the business plan.

AdaptiveU

Compatibility: Web

If you are looking for an LMS platform which is not too technical or complicated, then this might be it. With AdaptiveU, you will be able to set up a training portal with ease and the LMS platform makes it easy for users to create their profiles, which carries their description as well as the courses they’ve completed. With each AdaptiveU lesson you will be able to create interactive sessions with your employees, as well as a Q & A session, and get direct feedback from either. AdaptiveU’s tools are simple, and numerous features are available, such as access to an online forum which can aid in communication among the participants.

Features

  • Customization of your URL.
  • Displays your logo, as well as your banner and images.
  • Ability to communicate directly with your employees through email.

Cost

AdaptiveU has some worthwhile free features, and paid subscriptions for premium offerings begin at $99 a month.

Lessonly

Compatibility: Web

Practice has proven to be a very effective means of learning. This LMS will help you to gauge whether your employees can apply what they have learned from their training. When a practice session has been selected, you will be able to assign different employees different tasks. You will be able to monitor their activities using Webcam recordings, written responses, emails, and chats.

Features

  • User reviews suggested it is well suited for customer service employees.
  • Lessonly offers a practice feature to assess employee progress.

Cost

Available from the provider upon request.

Litmos LMS

Compatibility: Web, Android, iOS

What distinguishes one LMS from another are the tools, features, costs and customer service support that it offers. One mistake some LMS software providers make is that courses are taught based on the instructor’s assumption that every employee will start out at the same level, i.e. generally with no knowledge. But, what if the employee already has that particular skill set or if the entire course is not required? Litmos LMS allows you to arrange courses into categories and allocate them to your employees, based on your employees’ particular needs.

Features

  • A learning path that can host up to 50 courses.
  • Litmos allows you to grade your employees within the learning path with a certificate awarded upon class completion.
  • Can accommodate up to 150 users.

Cost

$4 per user per month

Conclusion

Not all LMS tools can provide exactly what you want at a cost that meets your budget. Fortunately, with a little research and comparison of the foregoing LMS software providers, you should be able to find a provider that will fit the bill.

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Accounting Software: Cloud-Based or Locally Installed

Think back to how much time, effort, and money you invested just to get your business off the ground. You implemented what you thought was just the right strategy, you jumped over every hurdle and obstacle that was put before you, you thought you did everything right. Now, imagine that, despite your herculean efforts, your business is on the verge of collapse—already. Believe it or not, Your business may be floundering simply because you chose accounting software that did not mesh with your business. The question is, did you buy a cloud-based or a locally-installed accounting software?

It’s hard to believe that a decision as seemingly inconsequential as your software choice could have such a large impact, but there it is. What this suggests is that making the proper choice, or at least having a clear sense of what to do, is a critical preparatory exercise whereby the failure to make the right decision could turn a very promising investment into a complete loss.

That leads us back to the subject at hand; how do you decide between cloud-based accounting software or locally installed accounting software for your business? The answer is not an easy one, but once you have considered the variables you should have clarity. Let’s look at each one separately, as well as the applicable benefits and disadvantages.

What is Cloud-Based Accounting Software?

A database which is backed-up to a cloud is one stored over the internet. Thus, cloud-based accounting software is a vendor-provided database for processing, maintaining and recovering a company’s financial data and records. Servers are remotely hosted and operate as a SaaS (Software as a Service).

Pros and Cons

To be cloud-based means to be remotely accessible to all authorized individuals. This can be of great value to companies with several employees in its accounting department who may be based at different locations.

Web-based software permits the end user to make custom changes and even operate third party applications, all with the same accounting interface. This can be a huge advantage for businesses that run on applications but which also need its accounting process to be simultaneously functional. Cloud-based accounting also offers unlimited storage space and you can expand your subscription as your business needs increases.

The major disadvantage of cloud-based accounting is that, being connected to the web, it’s quite accessible to anybody who is tech savvy enough to find a backdoor to your database or scale your vendor’s firewall. That, of course, puts your sensitive and confidential data and information at great risk. If you use military-grade encryption, however, your data will be protected once again.

Another disadvantage is the possible limitation of bandwidth; bandwidth simply refers to the amount of data that can be carried across your servers over a specific period of time. Cloud-based accounting software often has a bandwidth limit, just as other cloud-based operations might have. The issue arises when the user(s) exceeds the bandwidth permitted for the company, then extra charges are assessed even as the processing capacity of the servers is reduced.

What Is a Locally Installed Accounting Software?

Locally installed accounting software utilizes your computer’s own server to process, store and recover data related to accounting.

Pros and Cons

A local database is relatively safe since your servers are not connected to the Internet. As such, only authorized personnel, i.e. the software vendor and its users, are allowed access to the accounting information. A third party with potentially harmful intent would not be able to access a local server, thus your data is safe from all forms of cyberattacks.

With local-based accounting software, you would also enjoy the benefit of a single upfront payment that covers the period for which you were granted access, In some cases, this upfront cost may be considerably higher than the amount you would be charged for its cloud-based counterpart.

The data processing could be considerably faster, even despite the myriad of add-ons that typically come with local-based accounting software, since you won’t be dependent on your internet connection.

The major drawback to local-based software, however, is its utter lack of mobility, and difficulty in data sharing. Of course, that is because the software is installed on a single computer with limited access. While a workaround might be to purchase additional copies, that can very easily become cost-prohibitive.

Which Is the Better Choice?

It’s a fact that cloud computing has already crept in to nearly every facet of business, including accounting. However, we cannot dismiss the relevance of local servers yet, because they offer advantages that are far and away too important to be overlooked. Nonetheless, some specific business types, industries or sectors have found one type of accounting preferential to the other; let’s take a moment to sort through some of those.

Business Types That Could Benefit from Cloud Computing

1. Taxi Services, Food Trucks and Other Mobile Business

Any business whose operations requires you to move your entire operating unit from one location to another would find cloud-based accounting software most helpful. Naturally, that is because there is no local server on which to install the software. While you could install it on a laptop or iPad you’d be missing the inherent benefits of cloud-based software. For example, a taxi service (such as Uber) would need to run a mileage app alongside an accounting app, thus integrating both applications would likely be the best course of action.

2. Businesses That Runs Multiple Outlets

If you are operating a business with several stores or outlets in different locations, a cloud-based accounting software would be a better choice. That is because you would require the integration and collation of data from all of the operating units, say for cost and/or profit comparison or merely for research purposes. Unfortunately, a locally installed app cannot achieve this; at best, you would get with a computer-installed application that would only work for units that are in the same vicinity, where one computer installation would serve as a hub and the others as the spokes.

3. Small Business Startups

Most small business entrepreneurs pay more attention to how to start their businesses, and little or none to future expansion, which can lead to a questionable future. For instance, do you, as a small business owner, want to eventually move from a shared working space to a more permanent space? Or would you rather have an office in various locations across the country? Understandably, not every small business owner has the ability to look that far ahead into their future, so the better software option is one that allows for rapid change, as and when needed.

User-recommended cloud-based vendors

1. Sage

Sage is cloud-based invoicing and accounting software which is designed especially for small businesses. Its core features are accounting, tax compliance and expense management. Sage offers a free trial month, after which the subscription plan fee for the basic package is $10 a month, with automatic renewal on a designated credit card.

2. Xero

Xero is designed to provide the user with an accounting app that is easy to access and navigate. It provides for the effective management of your accounts, including POS, eCommerce and more. Invoicing, purchase ordering, inventory management, and bank reconciliation are all available with Xero. Xero also offers a reliable multi-app integration as well as a mobile version. There is a 30-day free trial period for any of the three paid subscription plans (starter, standard and premium). All three plans are discounted for the first six months of use.

3. FreshBooks

Founded in 2003 and based in Canada, FreshBooks is a cloud-based billing, invoicing and time tracking software best suited for small businesses. It is an accounting solution designed to make financial management very easy. It integrates seamlessly with some of the more well-known applications (though some users have complained that the third-party integrations are far too limited). Its features are offered for a monthly fee after a 30-day free trial period. Prospective buyers should be aware that of the three pricing schemes, only the two most expensive offer double-entry accounting which could be cost prohibitive for some small businesses. Some users have complained that the mobile version has a poor screen adaptation.

4. Quickbooks

Quickbooks can’t be overlooked as it is one of the oldest and still capably functional software applications designed especially for small businesses. One of its key features is its ability to simplify most complex accounting processes. It automatically integrates business profiles to a single dashboard application. It has several custom-designed cloud-based and non-cloud based software such as the Quickbook Self-employed, QuickBook Online and the Classic QuickBook. The only complaint from users is the lack of reliable customer service support.

5. FreeAgent

Free-Agent is a feature-rich accounting software application designed to help small businesses to effectively manage financial tasks and processes. As you might have surmised from the name, this software is great for freelancers. It’s equipped with the facility to regularly resend automated invoices to your late-paying clients. It also helps tracks your expenses with an ordinary photograph of your receipt and it categorizes these expenses appropriately in preparation for tax deductions. It monitors your project and also manages your bank feeds, as long as it is linked to your online bank account. It has a 30-day free trial period which is followed by a $10 monthly fee.

Business Types That Could Benefit from Locally Installed Accounting Software

As beneficial as cloud-based computing software may appear, security, control and availability are the main concerns of most users who have to rely on cloud-based services for their businesses. While it may seem old fashioned for some users to actually install accounting software on a local server, it is still beneficial and, indeed, in some cases, mandatory, for one, very valid reason: the program database is not connected to the Internet. This means no one, other than the authorized user, can access the program. This is very important to large multi-national companies and government institutions that handle or maintain highly sensitive and/or classified data which must not be exposed to unauthorized third parties.

1. Organizations Dealing With Sensitive Information

It is the government’s responsibility to ensure its citizens’ trust through transparency. Unfortunately, some hackers are ready to dedicate their time and effort to prove that nothing is ever really safe on the internet. Exposure of data by hackers poses a threat in myriad ways; besides the release of sensitive, confidential or simply embarrassing private data, through hacking they can disrupt financial markets, sow discord and distrust in government entities, or create a wide-spread panic. These risks could be mitigated by the use of a local server as opposed to cloud-based.

2. Large, Well-Established Companies

Most experts would agree that cloud-based accounting is a great option for most businesses, including startups. However, many well-established businesses and entities hesitate to engage in it, primarily because of their need for secrecy. Many of the world’s largest multi-nationals have achieved their success via some sort of patented formula, trade secret or production technique, the guarding of which is of particular importance.

Notable Local-Installed Accounting App Vendors.

Most vendors who provide locally-installed accounting software will also provide cloud-based accounting solution services. Some of the more highly recommended providers of locally-installed accounting software include QuickBooks, Xero, and Wave.

Final Verdict

Being able to calculate profits, losses and ROI are crucial to the survival of any business, and in this age, that has been made substantially easier through accounting software. There is no way to be certain a choice is the most appropriate for your business, except, of course, your purchase and use of it. What will be ideal is the one which meets your particular needs. User reviews suggest that the most important attributes of any accounting software include reliable accounting and invoicing, reasonable pricing, works with international entities, and that it has a straightforward interface that is user friendly. Deciding whether that software should be cloud-based or locally installed may be a personal preference, but it can also be mandated by the type of activity or business. With these considerations, you now have the tools you need to make a sound decision.

Please leave a comment or question in the section provided below.

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SIP Trunking: What You Need to Know

SIP Trunking, or Session-Initiated Protocol, is a cost-effective, straightforward and speedy way to run your phone-based business service using the internet. This technology has helped to revolutionize businesses but not every entrepreneur is familiar with how SIP trunking works.

What is SIP Trunking

SIP Trunking is a Voice over Internet Protocol (VoIP) and streaming media service, based on the Session Initiation Protocol (SIP) which allows Internet Telephony Service Providers (ITSP) to deliver telephone services to customers who are equipped with SIP-based facilities. This enables organizations or businesses to place phone calls via the PSTN or Public Switched Telephone Network. For SIP trunking to operate, you will need either an IP-enabled private branch exchange (PBX), a VoIP vendor, or an Internet connection, paired with an effective gateway that supports this type of IP-based communications.

SIP Trunking doesn’t involve the use of a physical trunk. Instead, it utilizes less cumbersome protocols delivered through a SIP provider, which enables your company or organization to use and enjoy Internet-based telephone services.

SIP Trunking: Is It Right For Your Company?

SIP Trunking is a well-established communication gateway that is also cost-efficient, flexible, and reliable. SIP providers, however, are unique in their own ways.

Organizations or companies that use SIP trunking often need to consider the up-front equipment investment. While SIP trunking is easy to use and manage, finding professionals who are skilled enough to conduct implementation and regular maintenance might be somewhat difficult.

Regardless, SIP trunking is ideal for many companies, particularly those that are ready to enjoy the advantages of Internet-based communication. You may benefit from using SIP trunking if:

  1. Your company always seems to struggle with confusing and/or surprisingly high monthly bills.
  2. If you find traditional telephone lines unreliable.
  3. You often spend more money than you expected for phone calls.
  4. You need to have both on-site and remote phone lines for your employees.

SIP Trunking: What are the Benefits?

One of the most popular things about SIP trunking is its cost-effectiveness. But there is more than just the low price to the list of advantages; here are a few of the most common benefits of SIP trunking:

1. Big Savings

Traditional phone services often have different charges for local calls, long distance calls, and international calls. SIP trunking, on the other hand, allows you to have the same kind of access with a simpler pricing scheme. Generally, SIP trunking is paid at a per-user rate.

Instead of the monthly phone bill surprise from your traditional phone company, SIP providers let you enjoy a predictable, lower monthly cost. By some estimates, the average company can save up to 50% a month by using SIP compared to traditional phone connections, especially for those organizations that do bulk long distance and international calls.

2. Immediate Return on Investment

Companies which use SIP are more likely to reach their target Return on Investment (ROI) sooner, because this technology has a lower upfront investment. Because SIP trunking does not require a capital investment, companies will see a cost savings from their first monthly bill.

3. Fast Growing

Using SIP trunking gives your company even greater potential for growth and the ability to reach several geographic locations. SIP trunking uses a single network which combines voice and data thus remote workers are easily connected. SIP trunking also allows for mobility and flexibility, hence a greater chance of opening new markets and locations, and employing workers remotely without any major phone-related problem.

4. Integrated Communications

Another advantage of using SIP trunking is that it can act as a UCaaS gateway. This means you will be offered several communication tools, like fiber-optic Internet connection, video conferencing, group messaging and more. This gives your company the benefits of using an IP-based business and communications suite that will enhance worker productivity and efficiency.

5. Mobility

With SIP trunking, you can easily connect to your workers’ mobile devices through a user-friendly and flexible VoIP app. This application is safe and secure and allows your remote workers to stay connected with your company’s on-premise communication systems. This technology also keeps your remote workers mobile and fully reachable anytime through one dedicated communication systems.

6. Network Consolidation

Many companies still pay for standard telephone service as well as data service. SIP trunking allows your company to have both voice and data in one network, which essentially considers voice calls as a data transmission, similar to emails and messages.

While this technology may demand an increase in bandwidth allowance on your company’s data connection, it will help your business save more money over the long term. At the same time, it will increase reliability, particularly if you are using a fiber-optic connection.

7. No Need for Physical infrastructure

Using traditional phone services usually requires the building or expansion of a company’s infrastructure, which can be a challenging, as well as costly, undertaking. Installing new phone lines from your local telecommunications company may require you to wait for a long period. Moreover, other than the office phones, your remote employees will also need another set of company-provided mobile phones in order to communicate with each other. These phones, obviously, are an additional investment.

SIP trunking, conversely, allows you to add phone lines easier. It is as simple as connecting your handsets or mobile phones to your data connection. Remote workers can be included in your company’s communication network using a dedicated phone number and an extension number, as well.

8. Less Costly Hardware

This type of communication technology does not require your organization to use additional hardware installations, which can be quite costly. Because adding phone lines through SIP trunking only requires the purchase of additional handsets, the upfront investment is greatly minimized.

9. SIP is More Reliable

Bad weather can often take a toll on traditional telephone connections, whether due to a downed phone line, damage to a telephone pole or problems with the phone company’s transmission substations. With SIP, those worries are moot, thus there will be fewer service failures and improved reliability.

10. Easy to Manage

Unlike traditional telephone connections, SIP trunking, as well as VoIP phones, provides user-friendly portals for easier on-site management. It also allows for easy call routing adjustments, extension change, and on-demand phone lines add-ons.

Things to Expect From a SIP Trunking Provider

At a minimum, here is what you should expect from your SIP trunking service:

1. Easy-to-Use Interface

A good platform should provide you with a powerful, but user-friendly control panel that makes managing your account simple and easy. The control panel or interface is where you manage contacts, calls, billing, and other services. You may also obtain call data records from the control panel.

Make sure that the program does not have confusing controls and data, which can make the service difficult to manage overall. Test out a provider first so that you can better gauge the control panel capability and ease of operation.

2. Outbound Dialer

While some SIP trunking service providers do not offer automatic outbound dialing, there are some higher end providers that will allow you to have telemarketing traffic. This can be very crucial to your growing business. You may not think that you need this feature at first, but choosing a SIP trunking service that offers this option could save you time and money in the future.

3. Real-time Data

It is an advantage for a business to have access to real-time call data when needed. When looking for a SIP trunking provider, make sure that you can have call data records in real-time; this will allow you to understand your calls and traffic, and see which communication medium works and which does not.

Check out providers that can offer the most recent records and make sure you can easily export this data in a comma-separated values (CSV) file or spreadsheet format to make analysis fast and easy.

4. Flexible Internet Service

If the SIP trunking provider requires you to use their data connectivity or Internet services, it may lessen your flexibility of service and can even lead to poor service connections. It is better if you can choose your own internet connection, allowing you to get service with a much larger bandwidth to better operate your business.

5. Fraud Protection

Choose a SIP trunking service that comes with protection from call fraud, especially international fraud. Ask if the SIP provider has real-time protection that catches and stops call fraud and if they are able to alert you in the event of suspicious activity. Knowing that your company and assets are protected will give you peace of mind and more time to think about the business instead of worrying about fraudulent schemes.

6. Simple Pricing

Pick a SIP trunking provider with a simple and transparent price plan. A no-contract plan is preferable and highly recommended to ensure any changes or cancellation is hassle-free. A provider with a low monthly fee and no hidden charges should be at the top of your list, too.

7. Multiple PBX Routing

A SIP trunking service that offers a secondary PBX call routing option could also be highly beneficial to your business. If the SIP provider also offers call forwarding, jump at it. These are two of the more important and useful features that you won’t want to miss.

Top SIP Trunking Vendors

Here are some of the most popular SIP trunking providers:

8×8 X Series

This VoIP phone system is packed with features, such as video calling, video conferencing, shared meetings, to name a few. The 8×8 X Series product line is mainly focused on small to medium sized businesses. Unlike its earlier iteration, this version now has an updated user interface, plus new desktop and mobile applications and other fresh ideas on communications.

Monthly plans for the 8×8 X Series starts at $28 per user; that rate may increase depending on the type of plan chosen.

Vonage

One of the most well-known VoIP providers, Vonage’s appeal is its ability to use mobile apps that conveniently turn your phones into a virtual extension. Plans start at $9.99 per month, a low price on top of excellent quality.

Setting up Vonage is very simple and, in addition to the basic plan, it also offers a number of competitively-priced business plans. The basic plan gives you unlimited minutes to any number in the United States (including Puerto Rico), Canada, and Mexico. When you purchase a plan, you will also receive an adapter, which allows you to use your existing number, and at the same time enjoy the phone service, even if the PC is not running.

RingCentral

RingCentral is another popular cloud-based communications provider. In terms of high revenue and number of subscribers, the company is hailed as one of the top UCaaS. Its basic plan, called the Essentials Plan, starts at $19.99 per month for each user. It is great for small to medium businesses as it offers a hosted PBX or Private Branch Exchange system, together with various important features. While the basic plan might be comparatively higher than its competitors, RingCentral claims that its many features make it a better choice, nonetheless. It should be noted that most of RingCentral’s more useful features are add-ons for an additional cost.

Businesses can take advantage of the RingCentral add-ons, including the RingCentral Office application and RingCentral Meetings, which is a shared meeting and standalone conferencing app. Earlier this year, ringCentral introduced its latest user interface, which is noticeably cleaner and more intuitive.

Phone.com

Phone.com is a cloud-based VoIP that is especially designed to provide phone services to small businesses. Most of their clients are companies with fewer than 20 employees. Starting at $9.99 a month, the platform offers a wide array of phones, simple management features and a call center. Phone.com is ideal for those business owners who are looking for VoIP functionality, cost-efficiency, and user-friendliness in one package.

Phone.com, as with most VoIP providers, is a plug and play phone service. They sell different conference and desk phones, all shipped pre-configured.

Grasshopper

Similar to other SIP trunking providers, Grasshopper’s set up is also easy. There are various service levels that you can choose from and you are also allowed to use up to five toll-free or local numbers. Vanity toll-free numbers are also available for a fee.

The Bottom Line

SIP trunking can allow your phone-based business to grow and flourish. A number of reputable providers are available, irrespective of your budget or the size of your company. A price which won’t break the bank plus a user-friendly interface that enhances your employees’ productivity (which translates to an improved profit margin) should be your paramount goals.

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5 Questions You Must Ask Your Credit Card Processor

Businesses, even start-ups, in order to be successful, will likely have little choice but to accept customer payments through debit or credit cards. This means you would need to hire a third-party credit card processing company in order to manage the transactions that take place between you and the credit card providers.

Businesses typically accept MasterCard and Visa cards, as well as Discover and American Express, since they are the major players in the debit and credit card networks. However, you, as the business owner, can’t work with these card giants directly. These companies outsource their services, such as sales and customer support, to credit card processors. These processors are commonly known as aggregators or merchant account providers. While some business owners find the aggregators to be confusing rather than helpful, they are a crucial part of your credit card payment processing.

How To Choose a Credit Card Processing Company

Choosing the right system for your credit card processing is critical for any business. Credit card processors allow your small business to accept payments through credit and debit cards. However, choosing the processor that is right for your business is the tricky part, and that is why we are here to help.

When looking to secure a credit card processor, you must first thoroughly read the contract; make sure you understand the terms and conditions, as well as the fees that come with their services. Be sure to check out the month-to-month terms, key features, and the interchange pricing.

Almost all types of business need credit card payment acceptance because it is one of the most common and convenient methods of payment. Statistics show that most customers prefer paying this way and if you do not offer this as a payment option, you may lose some of your potential customers. Moreover, getting paid by check generally takes several days for the check to clear the customer’s bank before the funds are made available to you.

Even so, though credit card payments are fast and convenient for your customers, accepting the payments can be costly at your end. This is because the credit card processors charge a small percentage of each and every sale. Moreover, most credit card processors charge a monthly and annual fee, as well.

Different processors use different pricing models. Obviously, when looking for a credit card processor, you want the one which will give you the best deal. You will also have to consider what processing equipment will be used. That begs the question, does the service you intend to choose come with free terminal use or is a free placement program available? And, if not free, is the equipment for lease or is it available for a low price, allowing you to spread the costs? Consider the following before signing your card processor’s contract.

Finding the Best Credit Card Processor For Your Business

Here are some things that you should consider before deciding which credit card processor is perfect for you:

Know which card processor type is ideal for you.

The key to this will depend on how small or large your transactions are likely to be. For instance, if you estimate that your monthly credit card payments will be less than about $3,000, it may be in your best interest to go with payment channels like PayPal or Square, as they do not charge a monthly or annual fee. Instead, they get a percentage of what you receive, meaning you pay only for what they process. On the other hand, if you will be processing $3,000 plus in credit card payments, retaining a full-fledged credit card processor is likely to be more economical and practical.

How are you going to accept credit card payments?

How you plan to accept payments through credit cards depends on whether you are operating a brick and mortar store or online. If you have a physical store, getting a terminal for a checkout station located at the counter is one option, or you can get a mobile card reader as an alternative.

If you plan to accept credit card payments using multiple ways, you may want to consider the services of a single card processor that can provide both methods. It would be easier and less “risky” to obtain the service of a single provider, as some card processors may consider your retention of a second processor a breach of contract.

It is best to call as many processors as possible, at least three companies should be your minimum, to give you more options in terms of pricing quotes. You can usually view rates and fees of mobile credit card processors online, which would allow you to compare the best prices available. Even if the first processor seems as though they are offering you the best deal, you may want to call a few more providers to help make you feel more confident with whichever decision you make.

Ask them to quote you the interchange-plus rates.

When calling the credit card processor for quotes, be sure to request the interchange-plus rates. Interchange-plus plans are typically the cheapest pricing model they can offer you, and industry experts swear by this method. With interchange-plus rates, the rate they will give you is the markup, or the percentage, plus per transaction fee. This fee is added to the published interchange rates that everyone pays. Other pricing models do not allow you to see how much the actual rates the processor is charging you. Knowing what the interchange-plus rate is could help make your negotiations more favorable to you, and will allow you to compare the actual rates more effectively.

Learn about hidden fees.

In many online reviews of credit card processors, users have complained about undisclosed fees. You can avoid this problem by reading all parts of the contract, to ensure you won’t be surprised by any hidden fees. Read the contract carefully to determine whether any additional fees were written into the contract, which the sales representative failed to disclose. Call the sales rep right away and ask how much these fees will cost you and how frequently you will be charged. You could also ask if they would be willing to waive those fees.

Typical credit card processing fees include the batch fee, a monthly fee, PCI compliance fee, gateway and charge-back fees. There may also be various network fees, depending on the card provider. Opaque additional fees such as a membership fee, setup fee, online report fee, quarterly technology fee, audit and access fees and postage and handling are non-standard fees that you should be wary of and which you should avoid.

Ask for a month-to-month contract rather than one which locks you in for a longer term. Most processing contracts with standard terms are not only difficult to exit, they can be expensive, too. Three-year contracts, for instance, only have 30- to 90-day cancellation windows and automatically renew after one to three years. These types of contracts have termination fees with “liquidated damages.”

If you look for a more flexible monthly term it will allow you to move elsewhere without too much difficulty, in the event their processing rates have suddenly gone up or if there is any other problem with their service. With monthly terms, you can easily find a better deal as and when needed. Remember that credit card processors want your business, and they may be more than willing to give you the terms you want if you know to ask for them. Ensure that the contract’s terms are updated to your requests before signing.

Purchase processing equipment.

The basic equipment used for credit card processing is not expensive and buying it in advance can save you from having to pay for a leasing contract and other issues. Choose an EMV-compliant terminal that also has NFC compatibility. This type of processing equipment can accept contactless payments and chip cards. Leasing may start out cheap but you can end up paying several times over the actual cost of the equipment. Furthermore, leasing the equipment won’t pay off the unit and you won’t end up owning it. The leasing contracts are non-cancellable, too, which means you will continue to pay for the unit until the contract is ended, regardless whether or not you continue with the business.

Assess free offers, if there are any.

Some credit card processing companies will offer free equipment or waive some fees as a deal sweetener. However, there are some things you might want to consider before accepting these so-called freebies. For instance, some may require you to accept a certain contract in order to qualify for the deal. You should also check whether or not you will be required to return the “free” equipment once you close your account, or if you will be charged certain fees by not doing so.

5 Questions You Must Ask Your Credit Card Processor

There are important questions that can help you prepare for the retail business. Ask these five questions of your credit card processing company to ensure you are getting the best possible deal:

Question #1. Do you charge for early termination or cancellation of service?

Ideally, you want to look for a processor that does not charge for this. However, if they do charge for early termination or for cancellation, the fees will probably range between $200 and $400. You should avoid processors that demand a termination fee for “liquidated damages,” which means you will be charged for early termination in case you cancel before your contract expires.

Question #2. Are you compatible with my business’ online shopping cart?

Carefully check whether the processor’s proprietary software will effectively work with your online shopping cart. The card processor should use a compatible software that will allow them to become the payment gateway to your shopping cart. A universal software is the best choice for this, as it will work with any type of online shopping payment.

Question #3. Can I opt in for the interchange-plus fee?

If the interchange-plus pricing is not an option, it is better to look for another credit card processor that does offer it. This pricing option allows you to see what the major credit card providers actually charge, plus what you are actually paying the processor. You won’t be able to identify these fees if you choose a tiered payment system.

Without the interchange-plus pricing option, you could be charged up to three different fees for each transaction; these will vary depending on the card type used and how the card payment is processed. Without the interchange plus fee option, the credit card processing company is more likely to charge excessively without you even realizing it.

Question #4. What fees and other costs will you charge me, apart from the per-transaction processing fee?

Some processors may add in monthly or annual fees, as well as compliance fees, regulatory fees, and statement fees, to name a few. Generally, the total cost for these fees should not exceed $200 annually for brick-and-mortar businesses or $300 a year for e-commerce merchants (because of the additional fees associated with maintaining an online shopping cart). Processors also add in interchange and assessment fees, which are the largest expenses you are likely to deal with.

Also, do not agree to lease your terminal since purchasing one outright would only cost about $200 to $350 as a one-time expense. Meanwhile, leasing the terminal can be as expensive as $139 a month, for the duration of your contract.

Question #5. Is your customer support team readily available?

Make sure that, when you need help with terminal malfunctions or some such similar circumstances, you can easily and quickly get help from your credit card processor. Choose a processor that has 24-hour phone support, seven days a week.

A credit card processing company with a reliable payment processing feature is very important, but access to dependable, round-the-clock support that can guide you from setting up the terminal to troubleshooting payment processing failures is an absolute must.

Conclusion

Choosing a reliable and dependable credit card processor can be one of the more difficult challenges to the successful establishment of your business. While credit card payment processing can make payments easier and more convenient for your customers, it can be a stressful undertaking if you don’t select your provider wisely.

Therefore, before deciding on the credit card processor, study the ins and outs of credit card processing first, and then weigh your options. Compare the fees and charges, the features, and the add-ons they may offer to gauge whether or not you need it or if they are worth the extra cost. Your goal should be to find the credit card processor that can give you the service you need at the best possible cost so that you can grow your business.

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What You Should Expect From Time and Attendance Software

HR personnel typically need diverse tools to assist them in order to effectively manage employees, maximize profits and minimize avoidable waste. Time and attendance software is a business application designed to improve the HR department’s efficiency in monitoring and analyzing employee attendance and time records. In addition, the software keeps accurate record of wages and salaries paid to each employee, regardless of the size of the company. Most of this software has replaced the old ways of managing workers’ time and attendance.

With this new technology, management can now accurately track the exact hours each employee spent on the job. The software can generate, maintain, and store payroll data and important tax information. Management can use this information to better plan for projects, evaluate staff expenses, and improve efficiency. While the features and benefits are obvious, some business managers have yet to try out the software, perhaps due to their lack of knowledge about it and/or concerns over the cost of the various packages.

Of course, investing in such a resource does require a cost and benefit analysis, taking into account the business’ finances, its structure, costs, vendor services and regulatory compliance. With this in mind, you should be able to make an informed decision as to whether or not this type of software would benefit your business

Costs

One of the most important factors that any business must take into account before purchasing a technological product is the overall price. As you would expect, prices will vary according to the features of a product, the duration of the warranty, and other various maintenance costs. It is, therefore, very important you be aware that, while some vendors will offer you affordable prices upfront, they may not necessarily make note of “hidden” costs. In other words, understand that the vendor’s upfront price may not be your final price.

A software price will normally be determined by its hosting and number of users. The more users a company has, the less cost per employee it should expect. On the hosting side, premises-based and hosted systems are usually made up of a singular upfront price, while cloud-based system users pay a monthly fee. Most providers’ fees range from $2 to $10 per employee per month. Others will have a basic fee of between $20 to $100 a month, depending on the number of company employees. Companies with over 50 employees can usually negotiate for a better deal and get a customized price structure.

There are many popular names to choose from in time and attendance software, with the list price of the initial installation generally under $700. However, those names which come with the highest recommendations and reviews are typically more costly, starting at $800, plus a monthly fee for each employee.

Regardless of choice, the initial outlay for the software is expected to pay for itself over a year. One analysis suggests that a time and attendance system can save a company more than 2% of employees’ salary. For example, let’s consider a company with more than 20 employees, each earning a gross salary of $20,000; that would amount to a savings of over $8,000 in the first year alone.

While every company’s savings would be different as a result of varying parameters, the analysis suggests that a quality and viable system can pay for itself within a year and save a significant amount of time and money and resources in subsequent years.

Benefits of Time and Attendance Software

Most businesses can expect to see some, if not most, of the following tangible benefits simply from using time and attendance software.

  • Updated Data – The software allows businesses to track, record and monitor data in real-time, thus making it easier for the integration of data with other systems, such as financial and HR management systems. Used together, that goes a long way in the effective management of the company.
  • High Degree of Accuracy – The automation of the time and attendance process minimizes, or in some cases, eliminates human error in accounting, and provides management and regulatory agencies with accurate information regarding the hours worked by each employee. The accuracy of the data translates to a more dependable payroll system.
  • Self Service to Employees – The system not only provides data to the employers but also allow employees to log in and check the number of hours and days they have worked, wages and salaries paid, including overtime and, in some cases, vacation, personal and sick day benefits accrued, as well as their assigned work schedules.
  • Improved Productivity – The software’s ability to collect, monitor, and analyze data makes it easier for management to improve efficiency, productivity and profitability. Without the use of this software it would be very difficult for management to track employees’ productivity and find ways to improve it if, indeed, there are issues to be addressed.
  • Overtime Calculation – Most employees look forward to working overtime because of the extra amount paid per hour. HR staff generally don’t share that same sentiment, as calculating overtime payroll hours is often a challenge, given the varying pay and overtime rates, terms and conditions, etc. Fortunately, automated time and attendance software can do the heavy lifting and accurately calculate employees’ overtime hours and pay.
  • Useful in Ensuring Health and Safety – Federal and state labor laws protect employees by mandating breaks for meals or rest after a certain number of hours have been worked in a day. Essentially, it is unlawful to require that an employee work a full shift without a break. Employers may find this requirement a challenge, but with the software, they can ensure compliance with the various labor laws to ensure the health and safety of their employees.
  • The Software Saves Time – The traditional punch card system took a lot of time to register and process; research has shown that each punch card user will spend 6 to 7 minutes punching in and out of work on any given day. For businesses with a large number of employees, those minutes can add up to a significant loss in productive time. The time and attendance software eliminates this time loss so that workers are able to concentrate on other responsibilities.
  • Expected Rise in Employee Satisfaction – The old error-prone ways of recording payroll hours and pay was a concern to many employees who felt they were underpaid for their time. With the new technology, the workers are confident that they are receiving accurate pay for the hours worked.
  • Ease of Use – Most time and attendance systems were designed to maximize and optimize the user experience. A user-friendly interface is when the user’s goals, tasks and requirements are all met. This means that users can log in and out and access information with ease. Some vendors have mobile apps that can allow users to check in from anywhere in the world, at any time. This has been useful for off-the-desk employees and remote workers who can have their work data recorded at ease.

What to Consider Before Opting For a Software Package

Pricing is an integral part of any business decision. When it comes to buying a software product, however, it is not the only factor in deciding which to buy. Buying a more expensive software, with a long list of extra features, may not necessarily be the appropriate decision. It is important that you choose a software package that employees can adapt to quickly and easily. Following is a summary of package requirements that you might want to consider before choosing time and attendance software.

Legal Compliance – Mandatory labor laws on minimal rest breaks and maximum working hours should be a top consideration for any employer. Compliance of the mandatory laws should influence your decision, thus the software should have features to monitor and record employee data.

Mobile Optimization – Technological advancements have made it possible for the use of mobile systems. Especially if you have remote workers or staff that are often in the field, the software you buy should have mobile capabilities so that employees can record their time and attendance data from different locations or time zones.

Self Service – Not all time and attendance software is designed to provide self service access to your employees. It is advisable to opt for software that provides this feature, as allowing your employees to access their own records has proven to be effective and useful in the long run.

System Integration and Automation – Although the technology is still somewhat in its infancy, some vendors have been able to design software that can make it possible for an organization to integrate their time and attendance controls with other systems such as manufacturing, production and banking environments. This means effective control across these systems and tracking of the workforce productivity, thus ensuring more savings over time.

User Experience – Before making a decision on the best software and provider, you should consider a test drive to ensure that the software is robust, intuitive and user-friendly. Buying a complex software system that takes a significant amount of time to adapt to may not be the best course of action.

Vendor Services – Your first decision is to figure out what it is that you really want out of your time and attendance software. Then, determine which software vendors offer exactly that. Check out the prospective vendor’s stability and credentials, and ask for references and testimonials; you want to know what other end users have to say about the product. Also, find out how often the software is upgraded or new releases are issued; you want a vendor that is always looking to improve the software, and which quickly addresses any problems or bugs with the system. It is also imperative to understand their software customization, scalabilty and hosting conditions. Also read their terms on customization and integration support to ensure that help is readily available in case of an error or compatibility issue. You want to know if the vendor offers software training and support; those which do not are very likely to have inferior customer service support. Lastly, their software maintenance terms and conditions should be favorable and not add an extra burden to the business. Avoid providers with unclear maintenance terms, as they are more likely to carry hidden charges. As the saying goes, the devil is in the details—be aware.

Basic Features of Time and Attendance Software

Clocking Features – This is the most obvious and basic feature of any time and attendance software. It allows an employee to clock in and out of work while keeping their record of time. With some software systems, workers log in or out through time clocks, browser windows and/or a dedicated application while other software may include alternative options such as magnetic cards, fingerprint, and/or facial recognition.

Employee Scheduling – Some advanced systems allow HR departments to design schedules and shifts for their employees. Through the clocking features, the management can organize the workers for individual and group tasks.

Alert and Notification Features – Several software solutions come with email or text alerts. These alerts generally notify an employer if a worker arrives late, works overtime, or leaves early. This feature has been described as resource-saving as it also alerts management about employees who have almost completed their normal working hours and are about to start overtime. This gives managers the chance to make a decision as to whether or not to let the worker proceed into overtime hours or else clock out.

Absence Management – Absences come in different forms; urgency, sickness or, injury. The software feature is designed to control and expose uninformed, unscheduled or excessive absenteeism. Absence management is an important element in assessing employee productivity or the potential abuse by a worker.

Job Trackers – This is a new feature among the advanced time and attendance systems. It allows project managers to assess how long a worker logged in and worked on a specific project. Such a feature can be a bonus for companies that charge clients depending on how long they have worked on a given task; this is common in consulting and legal environments.

Time off Features – Paid time off management is a challenge for many businesses. Newer systems have developed software packages that allow employers to monitor “time off” accruals while simultaneously allowing employees to submit paid time off requests. Through the software, a manager can accept or reject the request and notify the requester on the decision.

Payroll – Today, almost all systems will have the technology to integrate the time and attendance data to the payroll function. This has meant a more faster and accurate calculation and payment of salaries. Retirement and other benefits are also included in the new integrated platform.

Detailed Reporting – The software is designed to provide the user with detailed data on workers’ attendance records, staffing levels, scheduling and performance. This detailed report can presented in the form of tables, graphs and charts. Other software vendors may also provide a financial report and activity map, empowering management with enough data to improve the company’s productivity.

Break Time Tracking – Not all time and attendance software has this feature; however, the latest software versions are being designed to incorporate this feature because companies have identified the need to track and record break time hours during a working day. The software has a feature that allows and records workers who clock in and out multiple times in a day.

Biometric Attendance Registry – The old punch card and register systems have always allowed for human errors or loopholes in the system. While human error may or may not be intentional, loopholes can allow workers to exploit the system; one such loophole is “buddy punching,” an unacceptable and fraudulent behavior in almost all working environments. With biometric fingerprints, this problem has essentially been eradicated. This registry has also been found to be compatible with most HR software. This new feature is another which can save valuable resources, as the probability that a worker can commit fraud in this manner has been eliminated. When an employee leaves the company, the IT department will only need to delete their biometric information from the system. The same would apply in the event of a new employee, where their biometric data is collected and used to monitor their time and attendance records.

Cost Estimators – This feature is important for project managers who want to estimate time and wages figures associated with a particular project. Some advanced systems will be able to to forecast resources needed using historical information to predict project estimates.

Conclusion

If your business only employs a handful of workers, time and attendance software is probably not needed. However, if your staffing needs start out in the double digits or are considerably more, you will likely find this software a tremendous benefit in many, many ways. While the initial cost can be intimidating, statistically a business is able to recoup that cost within a year’s time, though monthly rates or per-employee fees should also be a consideration. Overall, the larger your business and the higher the number of workers, the greater the benefit you will derive from this software. From a time-saving benefit at its most basic, to the elimination of potential fraudulent activities by workers, to long-term cost savings through accurate wages and salaries calculations—not to mention improved efficiency and productivity—it is clear that time and attendance software is a valuable and worthwhile expenditure.

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Services You Should Outsource as a Small Business

Outsourcing is the practice of hiring another individual or company to do certain tasks, provide services or handle operations, which are usually done by the company’s staff and employees. In outsourcing, the third-party provider, or the service provider, is called the outside company. The outside company assigns its workers or systems to do the tasks. These tasks can be done at the hiring company’s facilities or at some remote location that both parties have agreed upon.

These days, companies can outsource several tasks or services, such as IT services, application development, technical support, programming, web design, etc. Companies also often outsource call center and customer services, as well as bookkeeping, accounting, payroll, and human resources, to name just a few. Sometimes, outsourcing is referred to as business process outsourcing or contracting out.

Why Companies Outsource

Companies outsource for any number of reasons. It can be to improve efficiency, acquire speed, or to cut down costs. However, most of the time, companies outsource because they lack the expertise for a certain task or service, or they don’t want to invest in training personnel to do the job. It is also generally cheaper, faster, and not to mention, better, since the third-party service provider is able to focus on the particular task.

Outsourcing vs Off-Shoring

When outsourcing is handled by third-party providers who are overseas, that is known as offshoring. Nearshoring, a term less common, is when a company engages a third-party provider who is near bordering regions.

Outsourcing Ethics

Outsourcing has become, for various industries, “big business,” which has brought up a number of ethical issues. Some critics view outsourcing as a practice that could impact workers in a negative way. Companies that use outsourcing frequently are criticized for making their actual employees feel insecure about their jobs, with many employees concerned that they might lose their jobs to workers who are, often times, much cheaper.

Many US-based companies have been on the receiving end of negative publicity just because they made the decision to outsource. Critics see this practice as a move to cut wages and benefits of the company’s actual employees and, especially when outsourcing to an off-shore provider, as a way to dodge safety, environmental, or financial regulations.

Insourcing vs Outsourcing

Some companies that choose not to outsource often decide to “insource” instead. This practice means that the company will have in-house workers that will handle the specific tasks that would otherwise by handled by outsource contractors. Insourcing may mean that the company would need to hire new employees, generally on a temporary or contractual basis but, if the task is a long-term one, perhaps even as a permanent hire. With insourcing, the company may need to invest in hardware or software, or in new equipment in order to execute the task.

Small Business Outsourcing: What are the Benefits?

Outsourcing is a familiar concept to many businesses, regardless of size. For small companies, outsourcing for payroll processing, product distribution, accounting, and other important functions are done simply because there are not capable of doing the tasks themselves. Big companies, on the other hand, usually use outsourced services as a means to cut costs.

However, not many entrepreneurs understand how outsourcing can really benefit their businesses. Outsourcing can be a real money-saver, but it is not the only reason to outsource. Outsourcing had become very popular in the early 1990s, and the popularity continues to this day. However, some firms have made the unfortunate discovery that too much outsourcing can be a detriment to a business, even more so than not outsourcing at all. Nevertheless, handled appropriately, outsourcing can provide numerous benefits to a business.

Benefits of Outsourcing

Increased efficiency. If, as a company, each and every job or task is handled in-house, you could very well end up having higher staffing, marketing, research, development and distribution expenses. These expenses will, of course, be passed on to your customers. Your company will gain a competitive advantage by using a third-party company’s economies of scale and cost structure.

Keep capital costs under control. While this may not be the only reason to outsource, cost-cutting is one of the major factors. When you outsource, fixed costs are converted into capital costs, which means you can use the money elsewhere. Outsourcing also keeps you from spending too much in the early stages of operation and allows you to use the capital for revenue-producing activities, which will eventually attract investors.

Lower labor costs. For companies, it is very expensive, as well as time-consuming, to hire and train staff, particularly for only a short-term project or task. You could decide to hire temporary employees, but don’t be surprised if, because of their lack of experience and training, they do not meet the company’s expectations. Outsourcing a task allows you to focus on more important things.

Faster project turnaround. A specialized outsourcing makes starting a project quicker and easier compared to handling the same project in-house. Hiring staff might take weeks or even months, and then you will need to train the employees you hired while, at the same time, provide the needed support for each task.

Focus entirely on your business. We all know that businesses do not have access to unlimited resources. Moreover, a manager’s time may also be limited. With outsourcing, you are able to shift your complete attention to the things that will serve your customers and improve the business from its core, without having to worry about other less important things.

Minimize risk. Investing in business inherently comes with a certain level of risk. Many entrepreneurs experience sudden changes in the market, government regulations, competition, technologies, and financial conditions, to the detriment of their bottom line. Third-party service providers are less likely to experience these anomalies because they are more adept in assuming and managing these risks, given that you are hiring the “expert” in the field.

5 Things Every Small Business Should Always Outsource

Being able to run a small business is an empowering experience. And while it is not a small task, having an idea and converting it into a successful business will certainly make you feel confident and content. But, one of the most common mistakes entrepreneurs tend to make is to become over-confident of his or her own abilities. In many instances, they believe that they, and they alone, should handle all business-related matters. It may be great to be in control, but that may not necessarily be the best way forward. In order to be more effective and efficient, you have to learn to delegate tasks to the individuals or companies that can do them expertly.

While outsourcing was once associated with job displacement, it has become a more acceptable practice. Moreover, it has become empowering for companies and individuals alike. With outsourcing, businesses are capable of using the highest quality service available.

Small businesses are still not fully utilizing all of the benefits of outsourcing. Some believe that it is too costly, while some fail to see the advantages. Contractors and freelancers can make your life easier and, if you have some tasks that you simply cannot do, it would be prudent to hire help.

Here are the five most common services that small businesses should outsource:

1. Bookkeeping, Accounting and Payroll

For any business, bookkeeping, accounting and payroll are among the most tedious, time-consuming and complicated tasks for someone without a strong finance-related background. Bookkeeping, and to an even higher degree, accounting, involves keeping track of the payable accounts, filing taxes, filling out timesheets, paying invoices, as well as many other responsibilities. Doing these tasks yourself can not only take away your time and focus on other important business aspects but, done improperly, can be more costly than necessary.

You can break free from this tedious job by outsourcing bookkeeping, accounting and payroll services. You will no doubt find that there are quite a few specialty firms that you can outsource which will, in the long run, be more efficient and less costly. Especially during tax season, you will be surprised how much better it is to have an expert at your beck and call. If you are not adept in dealing with your business books, it is best to have someone to do it for you. It will be easier and you will also have a peace of mind knowing that your finances are handled by experienced hands.

Outsourcing your payroll duties is also highly recommended, especially given the various tax laws, regulations and other requirements—at all levels of government—that you will have to have current knowledge of. Payroll is not as simple as adding up your workers’ hours and paying out your employees. It is much more complicated and can even cost you thousands of dollars in penalties with but a single mistake.

2. Content Curation and Social Media Marketing

Any small business owner should know that, while marketing is crucial, it can be very tricky. Developing the right strategy and ways to ensure that you get the best content possible to your target audience can be too much to handle, especially if you are also managing the business. A poor marketing strategy could easily result in higher costs with very little in the way of positive, quantifiable results.

Fortunately, you can also hire someone to handle marketing for you. Several marketing agencies offer specialized marketing, like Facebook advertising or Google ad placement, which are very effective. Getting help from a third-party service provider can be a great help in disseminating your message, thus increasing market potential. Plus, in the long run, it can be a real money saver.

3. Customer Service

The marketplace is very competitive, and having a solid customer service team is critical, particularly for startups and small businesses. A good customer experience is very crucial at this point and you have to make sure your customers find it pleasant and productive if they do business with you. However, maintaining good customer service can be quite expensive, especially as customers typical expect to see 24/7 service. Needing round-the-clock operations for your company’s customer service is not very cost-effective as you will also need to establish your own call center in order to operate, and this is an almost impossible undertaking for many small businesses.

Many large companies hire third-party contractors to provide their customer service, but this outsourced service is not exclusive to them; even small companies can avail themselves of this service and benefit from it. There are lots of professional firms that provide customer service and you can easily find one that will meet your budget and requirements.

4. Administrative Assistants and Receptionists

Having a good administrative assistant to run your office tasks is crucial in keeping your business running smoothly. However, for small businesses, it also means an additional expense. Thankfully, there are ways to cut costs without cutting down on the quality of service.

For mundane office tasks, you can outsource a competitive virtual assistant through a number of freelancing sites. You can have the virtual assistant manage your schedule, handle administrative tasks such as checking and responding to email, completing forms, creating documents, or other repetitive tasks.

Because your virtual assistant is hired on a contract basis, you are not obligated to offer them typical employee benefits, thus, saving you money. You can even hire contractors at a per hour rate, so you only pay for hours actually worked. Of course, if you want to keep your more-than-capable virtual assistant happy and engaged, you could always throw in a few sweeteners.

5. Consultancy or Expert Advice

While you may be the owner of your business, it doesn’t mean that you know everything about it. Once your business starts to grow, you may start looking for expert advice that will take your small enterprise to the next level. This is advisable, but not feasible most of the time, since this can be quite cost prohibitive. Full-time CEOs and CFOs generally earn high salaries; small businesses simply cannot afford them. Nevertheless, you can hire one as your company’s consultant. They bring with them much-needed knowledge of the successful running of a business and can help raise the profitability of your own company.

You could consider hiring a consultant for just a few months to gauge whether his efforts will have a positive impact on your business. All in all, hiring a consultant is a great way of getting the expertise you need without using up all your resources.

Conclusion

Outsourcing is a great way to get all the services you need in an efficient and low cost way. You don’t need to be a big company in order to use some help from an outside source, as even small companies can benefit from this fast-growing practice. If you are strategic with your outsourcing, it can even support your core functions. Soon, you will realize that outsourcing is actually a major factor in making your business a successful one.