Category: Finance & Capital

“Convince yourself that your startup is worth investing in, and then when you explain this to investors they’ll believe you.” Paul Graham

If you are not backed by an elite accelerator, raising money for your company can be difficult. In fact, at present there is tremendous competition in the market and that makes it more arduous for entrepreneurs to get their start-ups off the ground.

According to a recent research conducted by Shikhar Ghosh, a senior lecturer at Harvard Business School, venture-backed start-ups fail in strikingly high numbers. About three-quarters of venture-backed firms in the U.S. don’t return investors’ capital.

You don’t want to be one of them, which is why it is essential to know the right methods of acquiring funding. Without adequate funding, a business cannot launch and sustain itself. Hence, fundraising is the key to the success of your startup. When done correctly, it can lead to lucrative partnerships with angel investors and venture capitalists.

Here are a few tips that can greatly help you with the process of fundraising.

1. Go Step-By-Step

You want to target the right mode of investment for your company. For this, it is essential to pursue the right method of fund raising.

Accepting cash in the form of VC (venture capital) funding may not be the right choice for every newbie entrepreneur. According to Kauffman Foundation, only 16% of the total fastest-growing private companies in the United States, identified in the annual Inc 500 list between 1997 and 2007 had taken VC money. However, several of today’s recognizable tech giants have partnered with VCs.

Crowd funding is also a brilliant fund raising option. But, it is not the best option for long-term funding. You can consider opting for angel investing too. Regardless of the fund raising method you choose, make sure to evaluate your specific circumstances and decide accordingly.

After the evaluation, ensure to approach funding in phases. Here’s what you should know about a startup’s funding rounds:

• Seeking out seed money: This phase involves receiving a small amount of money from the investor in order to give the start up the momentum it needs to produce the initial product. A portion of this investment should also be directed towards marketing efforts in order to create buzz about the product.
• Series A: This phase involves the entrepreneur working out the nuts and bolts of moving the startup’s product into the marketplace. The funding is at a larger scale than the seed round (usually between $3-7 M) and is offered in exchange for a portion of the startup by the investors. Expenses at this phase should include operations, branding, growth, optimization, marketing, staffing, promoting the product, and hiring social media/community managers to attract users.
• Series B: By the time the start-up has reached series B, it should have a product and a business model, and will need enough capital to bring the product to a broader market. The funding in this phase witnesses a significant incline, from $7M to about $50M. Moreover, in this phase, start-ups should continue balancing business development duties with user acquisition.
• Series C: In series C funding, the start-up should move the work it’s been doing in series B towards international markets and/or focus on diversifying its product for multiple platforms.

2. Brilliant Pitch Is Essential

When it comes to preparing a fund raising pitch, there is no one-size-fits-all. However, by keeping certain essential aspects in mind, you will have an edge over others.

Here are a few tips that can help you with your pitch:

• Know your strengths and play to them.
• When it comes to pitches, telling a great story is important. In fact, according to Oren Jacob, co-founder of ToyTalk, storytelling is a crucial part of making a pitch memorable and resonant.
• Your pitch should include the objective and the goals of your company, the problem you intend to solve through your service/product, the kind of technology involved, and the reasons your potential customers will like your product/service.

3. Focus on Networking

Networking is one of the most prominent aspects of fund raising. It plays a critical role in business development. Being in the nascent stage, speaking with investors and developing relationships can prove beneficial. Here’s what you should do for networking and finding investors for your start up:

• Get your company on AngelList.
• Email potential investors on a regular basis in order keep track of their responses.
• Reach out to current investors to see if they can help you make new connections.

Embrace the power of networking. However, don’t make this your top priority. In the initial stages, customer demand and data should be your primary guide.

Financial Management

More often than not, capital financing is considered as the Holy Grail for a start-up. However, there’s more to start-up finance than fund raising. Also, good fund raising starts with good financial management.

Keep the following in mind for maintaining the financial health of your start-up:

• Ensure steady finances and ready small business loan liquidity available at all times for your startup.
• If you need same day business funding check out Quick Loans Direct
  Link.
• Have your company’s financial information at your fingertips. This will enable you to make informed decisions in terms of budgeting, expenses, hiring, and investments.
• Have a solid understanding of the cash flow of your business.
• Build realistic growth projections for your company as that will help you with budgeting as well as in attracting investments for your company. Also, for successful investments you need to understand its various aspects beforehand. Regardless of what you choose to invest in – a mutual fund, a rental property, or gold, you should be clear about how and which sector you want to invest in to get the best return. For instance, if you’re planning to exchange cash for gold, make sure that you are familiar with market prices, gold futures and trends.
• Use financial management software to manage your start-up’s finances effectively.
• Consider having a financial mentor by your side as he/she can help you navigate the seemingly complicated financial landscape and stay on top.

Conclusion

Raising funds for a start-up can never be easy, which is why several first-time entrepreneurs fret over fund raising. But remember, acquiring funding for your start-ups is a means and not an end in itself. Don’t let this process consume you. At the end of the day, your business is all about your customers and not your investors. Also, financial management plays an equally important role in a business, especially in the risk-driven world of entrepreneurship. Failure to manage it can lead to financial disasters. The above-mentioned tips can help you handle your finances effectively and ensure that your fund raising experience is a smooth-sailing one.

Perhaps one of the most common invoice payment terms is Net 30—a term that means your client has 30 days to pay their invoices.

It is used by businesses of all sizes around the world—small, medium, large, enterprise, and even freelancers.

However ubiquitous it may be, it doesn’t mean that it’s a perfect fit for all business types. In fact, for many smaller businesses and freelancers, it can be downright damaging to your business.

In order to use Net 30 correctly, you have to be aware of the pitfalls and learn to navigate around them.

That’s why today we’ll discuss the ups and many downs of Net 30 for small businesses and how you can adapt to protect yourself against its worst parts.

What is Net 30?

As mentioned above, in Net 30, the ‘30’ refers to the amount of days that the client has to pay the invoice.  It is the most common amount of days for Net, although others are quite possible, including Net 21, Net 60 and even Net 90.

Larger businesses are more able to use larger Net terms, as Net 90 is definitely not recommended for smaller businesses.

Technically, Net 30 is a form of short-term credit that the seller is extending to the buyer (customer). This is because, while the goods or services have already been delivered, there is a 30-day, interest-free period that the seller allows for the customer.

Net 30 is a global standard as well. In fact, many countries like the UK have made it a legal obligation for customers to pay their suppliers within 30 days unless both parties have agreed to other terms.

What are the advantages of Net 30?

There are strong advantages to Net 30, and they are beneficial to both the supplier and the customer.

For you, the supplier, Net 30 allows you to appear more attractive to your customers (and potential customers).

Net 30 provides an incentive for your clients to buy from you because of the delayed payment (short-term credit extension). By allowing your clients to pay later, you are allowing them to hold onto their cash for longer.

For business clients especially, this means that they can decrease their cash outflows and thereby achieve greater cash flow. And, of course, with better cash flow, they are more capable of meeting their regular financial obligations, besides many other accounting-related aspects.

What are the disadvantages of Net 30?

Determining the disadvantages of Net 30 means we have to decide first of all what (or whom) Net 30 is most beneficial for.

If you are selling something to a customer, and you won’t get paid for at least 30 days, how will you be able to pay your bills, buy food, etc.?

For medium- and large-sized businesses, the answer is easy: with payments from their other clients. Those types of businesses have multiple clients and therefore multiple sources of revenue.

That means that they can afford to wait for one invoice to be paid, because either other invoices will be paid in the meantime or invoice payment period is substantial enough for them to be able to wait.

However, the story is not so great for smaller businesses.  Small businesses tend to have much fewer clients, and many very small or new small businesses have only one or two main clients.

This means that the 30-day period can be quite difficult for them to bear, and the expenses will be racking up in such a way that once they do get paid, the money will dissappear quickly.

Even more, some clients are not sure when the 30 days actually start. Should the invoice be paid 30 days from the invoice issue date,  the date it was received, or the date the goods/services were provided? Or can the 30 days start from when the client receives payment from his client?

Beyond that, smaller businesses also don’t have the time and resources to go after late payers. Therefore, clients tend to take advantage of them by taking extended credit extensions. Meaning: instead of Net 30, they will continually delay payment until it comes to Net 60, Net 90, or even net 120.

And because your business is so small, you have limited options. You can allow this client’s credit to be extended.

Alternatively, you can take your client to small claims court or cut your losses and move on—neither of which is particularly good for your business.

How to use an adapted Net 30

While the disadvantages probably outweight the advantages for most small businesses, there are certain things you can do to get the benefits and cut the disadvantages.

1. Decide on when the 30 days begin

This is the first and most important thing to do. Inform your client (or put it in the payment policies) that the invoice is to be paid 30 days from the date the invoice was issued—not received.

That means that if you ship the invoice along with goods, and it takes a week, the client will only have 23 days left to pay the invoice.

2. Use different Net terms

Instead of using Net 30, why not cut it down to net 21 (3 weeks)? This isn’t a particularly heavy burden for your clients, and it will allow you to be paid 9 days earlier.

You can even go as low as Net 15 or even Net 10—although, remember, the lower you go, the less incentive the client has to use your services at all. Net 15 or Net 21 are good starting points.

3. Add late charges

This should already be part of your invoice payment terms. Nonetheless, you need to make sure that you don’t continue giving interest-free credit to your client.

Add a late charge (for example, 5% of the invoice total) on a weekly or monthly basis for unpaid invoices beginning on day 31. This is a great incentive for getting your invoices paid on time.

4. Give Net 30 only to trusted clients

Lastly, you can decide to delay your Net 30 credit extension until you are sure your clients can make regular, timely payments.

For example, you can start your client off with a Net 15, and after 3 or 5 regular, on-time payments,, you can upgrade the client to Net 30. That way, you’ll be sure not to be burned by unstable clients.

With these four easy tipes, you can use Net 30 to your advantage. It’s a standard for a reason, but it shouldn’t be used the same for corporations as for small businesses.

With these adjustments, you’ll see your invoices getting paid faster and your business growing more steadily.

Many small business owners don’t realize this, but personal credit and business credit are actually two entirely different entities. That being said, in many cases they end up getting mixed due to the fact that many small business owners do not have a clear enough distinction between their personal and business finances.

“What is Personal Credit?”

Essentially personal credit is tied to your Social Security number and is meant to track your creditworthiness based on your personal finances. As such any personal loans, credit cards, and other forms of debt will come under its purview.

Many small business owners take out personal loans to fund their businesses and raise capital, and some also tap into home equity or use personal credit cards for business expenses. As a result the delineation between the personal and business credit is often blurred.

“What is Business Credit?”

In contrast to personal credit, business credit is tied to your Employee Identification Number (EIN) or Tax ID number. Some small business owners may not even have an EIN however, as sole-proprietorships do not require it. However in the absence of one it won’t be possible to establish business credit.

Assuming business credit is established however, it will be scored based on the business debt, how it pays off bills, and any lines of credit that have been extended. Because it deals with a limited range of variables, your personal finances are less likely to affect your business credit and more often than not it works the other way around.

“What Do Small Business Loans Look At?”

Unlike big corporations, small businesses unfortunately rarely have the luxury of relying solely on their business credit. That is due to a variety of factors, but mostly it comes down to the fact that most small businesses do not have a well-established business credit.

As a result of that, more often than not lenders will look to a small business owner’s personal credit score to determine whether or not they are eligible for a loan. In some cases that can compound things further especially if the business has incurred debt in the form of personal loans which is affecting your personal credit rating.

What Needs to Be Done to Secure Small Business Loans

Based on everything you now know, it should be clear that the first thing that you should do is start to establish business credit. The first step to do so is to get an EIN – which is simple enough really. Also it would help to register with business credit bureaus such as Experian and Equifax.

After that you should look to separate your personal and business finances by getting a separate business checking account, using a business credit card (compare credit cards online first), and making sure your personal finances don’t overlap. Once you do you can start to compare small business loans and see which offer the most favorable terms, as any payments to loans will help build your business credit further.

In business, one of the basic principles is that you buy low and sell high – which is why importing goods can be a very lucrative venture. All one needs to do is find a supplier that offers very low prices on consumer items, and you can then sell these items in the US with a nice profit margin.

Although there are potential problems such as obtaining commercial customs clearances, a professional customs broker can always take care of it for you.

What you don’t want to do, however, is to attempt to deal with customs yourself. To avoid risking your goods and minimize complications, you should always choose to get a licensed broker to represent you instead. Hiring professional customs brokers offer several advantages:

1. It saves you the trouble of doing it yourself. If you’re running a small business, then you have lots of tasks to attend to, and it may seem that there’s not enough time during the day to deal with all of your responsibilities. So, why should you add to your responsibilities, when you could get a pro to do it for you instead? You can then devote your time to the day-to-day running of your business.
2. It’s faster. Things go a lot faster through customs when you have a broker to represent you, and you can waste a lot of time if you attempt to do it yourself. It’s highly possible that you’ll be tripped up by precise rules, finding yourself with errors that delay the whole process.

Dealing with customs is anything but simple, and it takes a lot of time even just to get a ‘basic’ overview of the entire process. The US Customs and Border Patrol offers this “overview” of the process in the form of a PDF file that spans 211 pages!  Merely reading this report will waste a lot of your time, and it can equally be very difficult to interpret.

Customs brokers, on the other hand, are experienced in these matters, with a wealth of background knowledge to help ensure that you comply with all regulations. That speeds up the entire process considerably.

3. You avoid penalties. When you’re dealing with customs, mistakes can be costly and you may find yourself having to pay penalties for any errors made. There may also be some taxes and fees forced upon you that you could have avoided if you had the necessary knowledge, imposing a significant extra cost to you as a business owner.

The brokers all possess this necessary knowledge, so mistakes and unnecessary fees can be avoided. This is one reason why getting a customs broker is actually a cost-effective measure, even though you have to pay for their services. You’re much more likely to pay a lot more without them.

4. You get accurate records. At the end of the process, you’ll be sent the necessary paperwork for your record keeping so that you have the proper documentation for the importation. What’s more, customs brokers normally keep copies of all transactions for at least 5 years after the date of entry, meaning that they’ll act as a reliable backup for any queries that you might come across during your running of the business.

The next time you need commercial customs clearances for your consumer items, do yourself (and your business) a favor, and carefully consider hiring an online customs broker. With the skills and means required to facilitate a trouble-free importation process, their expertise is at your service to ensure a smooth, successful experience with Customs.

It is very frustrating when one completes a project or item delivery in a timely manner and then must spend twice as much effort in collecting the payment they are due. For small business owners and entrepreneurs, this can be especially trying because they are often responsible for all aspects of the business. They not only have to find new clients; they also must complete all the work and then act as their own accounts receivable department. The following three tips will make the entire process easier.

Impeccable Invoices

The first step in creating an effective accounts receivable process is in providing clients with easy to understand invoices. Payments are often not made simply because the client’s accounts payable department doesn’t know exactly what they are paying for or they aren’t sure where payments should be sent.

An invoice template like this one here, is one way to ensure all of the pertinent information is easy to find and that it is always included. Details such as the business phone number, mailing address, and email all give the client to find the answers to any questions they may have. Payment method should also be clearly outlined, whether that is a check by mail or a payment via PayPal.

It is also important to be as detailed as possible in the invoicing process. Be sure to list exactly what each charge was for if items or services were being sold. For invoices detailing total hours worked it is best to show the total number of hours worked each day as well as the tasks completed if applicable. Clients want to know exactly what they are paying for in order to avoid overpaying and also to make expenses easier to itemize at tax time.

Clear Expectations

Before agreeing to work with a new client, it is imperative they are aware of the terms of service. If there are clear policies in place about the amount of time a client has to pay, it can make it much easier to collect payment in a timely manner. This is often easier to do by using an electronic system that will easily make a record of all information.

For example, standard business practices once allowed companies 30 days from the time of invoice to send payment due to the delay caused by sending things through the postal service. When invoices are received electronically there is no reason to expect to wait a month for payment. However, if it has not been clearly explained that payment is expected upon receipt or within a specific time frame many people will push that invoice to the bottom of their pile of expenses.

One way to encourage timely payment is to include a clause that outlines late charges and how they will be applied. When people know there will be a consequence for not paying on time, they are less likely to put off making their payment.

Fast Follow-Up

With a system in place to alert clients of exactly what their charges are for and when payment is expected, it is easy to determine when it would be appropriate to follow-up for payment. Some studies have indicated that the longer invoices go unpaid, the less likely it is they will ever be paid whether partially or in full.

When one is sure that the client is aware of the due date, the best time to follow-up with them is the day after the payment was due. That way they can be reminded about the payment before the previously explained penalty is applied to their account.

A steady flow of cash into a business is essential for maintenance and growth. The work completed was not donated and deserves compensation. When great invoices, clear expectations, and a quick follow-up protocol fail to encourage clients to pay their invoices in a timely manner, it may be necessary to explore punitive measures.