Category Archives: Finance

4 Ways to Contain HR Costs Without Impacting the Employee Experience

Let’s face it: The cost of creating positive employee experiences quickly builds up and is often overwhelming — especially for small businesses.

For Matt Bentley, CEO of CanIRank, an SEO-ranking software company in San Francisco, finding that balance was crucial to employee retention. So, he implemented an employee-recognition system to improve company culture and allow team members to recognize co-workers’ achievements.

“We use Bonusly, a peer-to-peer bonus platform,” Bentley told me via email. “Employees give each other bonus points, then use their points to cash in on rewards or gifts at the end of each month. It’s fun and keeps morale high.”

Bonusly has also helped the company reduce the turnover rates of new hires, Bentley said. “In fact, we haven’t lost a single new staff member. Even though it costs the company more up-front, it helps to lower our HR expenses in the long run,” Bentley said.

With one cost-effective tool, in other words, Bentley has enhanced his company’s e employee experience and made a work environment where employees want to stay.

Engaging employees with a recognition system is just one way to provide a positive employee experience while containing HR costs. Here are four other ideas for keep your employee experience positive without breaking the bank:

1. Go paperless.

While businesses have gone digital in most aspects of daily operations, they may find it difficult to ditch that trusty pen and paper entirely. But, by critically analyzing the cost of current printing and paperwork, employers will find an opportunity to save.

That’s exactly what David Reid, CEO and co-founder of EaseCentral, a benefits and HR solution company in San Francisco, did by focusing on digitalization. “By digitalizing the experience and using updated technology, we see savings across the board,” Reid told me. “Technology can certainly help augment administrative tasks for HR reps, decreasing costs and increasing overall efficiency.”

After integrating payroll into its employee-facing technology, EaseCentral saved both time and money by centralizing HR and benefits functionalities. This allowed the company to focus even more energy on employee engagement.

Tip: Use an HR platform, like EaseCentral or Zuman, which provides a centralized digital place to keep HR, benefits and payroll. With options like these, employers can eliminate paperwork and outdated processes, using cost-containing options.

2. Employee wellness

Many employers worry about the added expense of employee-wellness programs. But Mark Kushinsky, CEO of MaidPro, a house-cleaning and maid service in Boston, encourages employers to look at their greater team and company benefits.

“At first glance, I can see how one might not see how [wellness programs are] a necessity. However, not only does our wellness program encourage a healthy lifestyle, it also lends itself to a better work-life balance,” Kushinsky shared with me.

MaidPro’s employees are excited about their opportunity to immediately and consistently reap the rewards of the company’s wellness program, Kushinsky said. “On the corporate side, having happy and healthy employees has reduced our costs for employee recruitment, while also increasing our retention,” the CEO explained. “The wellness program costs less than having to recruit, hire and train new employees regularly.”

For example, when one of MaidPro’s employees started having serious back problems, she didn’t take time off for doctors and physical therapy. Instead, she went to a customized class at MaidPro’s headquarters.

“Not only did she have the support she needed from us, but also she was able to continue working during her recovery, which relieved stress for her and for us,” Kushinsky said.

Tip: Employee-wellness benefits come in all shapes and sizes. Before making a move, ask employees what they’re lacking or need in daily wellness measures. As employers implement benefits to help improve their teams’ health, everyone will begin to see employee experience and cost saving improvements.

3. Learning and development

Learning and development is a crucial element in creating engaged employees and positive experiences. Unfortunately, the costs of seminars, webinars and one-on-one trainings quickly add up.

Joyce Wilson-Sanford from Portland, Maine, a retired EVP of strategic organizational development at The Delhaize Group, a global food retailer, said she focused on making her small staff into experts. “I used people who stayed in their primary role to become expert trainers on various topics. Because I only asked for 20 percent of their time for the entire year, primary work didn’t suffer,” Wilson-Sanford said.

By keeping people in their primary roles, Wilson-Sanford’s program cut costs on learning and development and gave new hires an opportunity to dive deeper into the employee experience with superiors.

Explained Wilson-Sanford: “I also created self-managed learning groups.” Setting goals for each person and monitoring progress within these groups resulted in improved engagement in their primary roles, she said.

Tip: Find employees who are not only pros at what they do, but excel in bonding with co-workers. As new hires learn the ropes from an experienced co-worker, they’ll gain a better grasp of the company’s culture.

4. Benefits

The cost of benefits and perks can be too much for small companies. However, when the right benefits that are affordable and effective are chosen, they help attract and retain employees, lowering recruiting costs.

Kevin Busque, co-founder of TaskRabbit, and current CEO and co-founder of Guideline, a 401(k) company in Burlingame, Calif., said he believes benefits are most effective when HR gets younger employees involved.

“If we are spending the money to provide those benefits, we want employees to maximize the value from them,” Busque told me via email. “In the process of starting Guideline, I’ve learned one way to reduce costs without hurting your employee experience is to be super strategic with the benefits you offer and the partners you choose to work with.”

Tip: After establishing a budget that fits your company’s budget, create a survey to give employees a voice in benefit choices. Without increasing HR costs, leaders can enhance the employee experience by including them in the process.

Additionally, no matter what benefits are offered, it’s crucial to educate employees on what is available. Provide interactive seminars to ensure everyone is involved and understands how the benefit helps them.

Original Article:www.entrepreneur.com

4 Money Habits That Separate Building Wealth From Just Making a Living

When it comes to getting rich, many of us assume it means getting an upscale job with a hefty paycheck. We daydream about how we’ll drive a cool car or treat ourselves to fancy dinners out. After all, the more money you earn, the wealthier you are, and then you can do whatever you want, right?

There are a handful of small but powerful things wealthy people do that set them apart from those who are struggling financially. Start cultivating these habits and you’ll get a sense of what real financial success and independence feel like, as well as what it’s like to make a difference.

1. Create multiple streams of income.

It’s difficult to become financially independent on one income. If you lose your job you’ll be frantically looking for work while dipping heavily into savings to stay afloat — or, worse yet, you’ll be going into debt to pay your bills.

Wealthy people focus on cultivating multiple streams of income so they’ll always have something to fall back on during lean times. During boom times, your income will balloon to pad your savings and fund your investments.

You can build passive income, such as from rental properties, stock dividends or interest from a high-yield bank account. A side hustle is a great way to boost your income while developing a passion or a hobby.

A side hustle could be a business you start on the side, freelancing in an area of expertise or marketing your skills. Can you teach yoga? Design websites? You can work a part-time job during off hours, or even rent out a room in your home.

The best kind of side hustle is something you enjoy doing, and it’s even better if you can create synergy between your different income threads, so they feed into your overarching goals and dreams. If you’re able to tap into an area you are passionate about, you’ll be determined to persist until you’re successful.

2. Learn to live on less than you make.

Living beneath your means is the key to creating and maintaining wealth, not to mention avoiding debt. Millionaires know spending less than you earn creates opportunity; you can invest that money, save it or donate it to a cause or charity you care about. Ideally, you can do all three.

Jim Rohn, entrepreneur, author and motivational speaker, uses the 70/30 rule as a blueprint for how much to spend, save, invest and donate. For most people, the difficulty is learning to live on 70 percent of their income after taxes, including spending for all necessities and luxuries. The remaining 30 percent is then broken into 10 percent allocations for investments, savings and charity.

Living on less than you make requires you to get your spending under control and come up with a budget that you stick to. You’ll need to learn to be more frugal and to really make your money stretch. It may mean that you drive a used economy car, eat at home more often or ditch extravagant purchases.

It definitely means that you should stop comparing yourself to others. According to Rohn, “Poor people spend their money and save what’s left. Rich people save their money and spend what’s left.”

When you spend, think about whether this something you really need, or something you just really want.

3. Make your money work for you.

The wealthy invest in themselves. They know the key to making their money work for them consistently over the long haul is creating an investment plan to create wealth. The plan should include regular payments into a mutual fund, a trading account and retirement accounts.

Accruing wealth also requires making capital investments. This is the money you’ll invest in creating an enterprise, such as developing a business, manufacturing a product, marketing and selling your services or investing in other ventures.

This will require you to take calculated risks while taking into account your long-term financial security. Walking this line require financial savvy. Educate yourself on financial matters. Understand the ins and outs of your investment plan and make adjustments as needed.

In addition to your investment plan, you should be tucking away at least 10 percent of your paycheck into “rainy day” savings. It’s easiest if you have it automatically deducted from your paycheck. This money is for unexpected expenses and to get you through tough times.

Savings protect your investments. It will keep you from going into debt or needing to pull money from your investments, which in turn could cripple your multiple income sources.

4. Give back.

It may seem counterintuitive to give generously of your time and money, but this is also an important investment. Giving to others and being of service to those who need it most helps you connect with your community and be a part of something bigger than yourself: the greater good.

This is about growing wealth not just in your bank accounts, but in your whole community, which benefits everyone. When you volunteer your time or make donations to causes or issues that your care deeply about, it gives you a sense of joy and purpose.

The idea is to not just be a go-getter, but a go-giver — someone who is focused on others more than themselves. Yes, it’s important to stay focused on your goals and be passionate about your dreams. But finding a way to also add value to the lives of other people will benefit you in the long run as well.

Truly wealthy people, the ones who impact society and change our world views, understand that the more you give, the more those good feelings and vibes come back to you.

Original Article:www.entrepreneur.com

The Do’s and Don’ts of Private Equity for Entrepreneurs

Here’s a hard-earned lesson for entrepreneurs who might take funding at any cost just to achieve their dream: The most critical factor in identifying a private equity partner is how well you align with the PE firm. That sounds simple enough, but it’s not.

To break it down in terms every entrepreneur can use, here are some of the important “do’s and don’ts” for a successful PE partnership — all designed to ensure maximum alignment.

The best practices for a successful PE partnership boil down to making sure you’re not an outlier in the PE firm’s portfolio. Here are four actionable ways to achieve that:

1. Make sure you fit the PE firm’s funding and investment strategy.

Your deal size should be in the same range as other companies in the portfolio and your investment timeframe should be typical to theirs. The PE firm’s investment timeline is driven by the agreements it has with its investors and each PE firm has a different time horizon. For example, large institutional investors generally require shorter timeframes and family office investors often take a longer view. Partner with a firm that has investors who will stick with you for your optimal investment cycle. The PE partner in one of my previous companies forced a sale just as we were beginning to realize the benefits of scale that would have accelerated our growth. The sale met their investment needs, but we felt shortchanged.

2. Target firms that have interest and experience in your industry.

“Interest is more important because you can help frame the PE firm’s passion and they’ll dedicate the resources to understand your business and help it grow,” says Deb Schwarz, CEO of LAC Group, a Los Angeles-based provider of library and knowledge management services. Having industry experience facilitates due diligence because they know the nuance of your space.

3. Understand the PE firm’s decision-making process.

Be very practical and ask for stories about how decisions are made. Interview the CEOs of past and present portfolio companies to verify what you’re being told. An early PE funder asked me for three references, including one negative — so I asked the same of them. All’s fair in PE funding.

“It’s very important to follow through on these references,” adds Schwarz. “The people we called were founders or CEOs of companies recently acquired by the PE firm we were considering an investment from; the calls were enlightening and reassured us we were making a smart choice.”

4. Find out how the partner responsible for your investment gets paid.

The key question: “Do you make money if I make money?” Ideally, you want a PE partner who has personal skin in the game so your wealth generation goals are aligned.

The “don’ts” of PE funding are about navigating the process without naiveté. Here are four traps to avoid:

1. Don’t go “exclusive” too soon.

Remember, the PE firms need you, too. They have investor money to grow and are looking for proven leaders with solid business models. Understand as much as you can about the details of the paperwork before you sign an exclusive arrangement that takes you out of negotiations with other firms. With every deal, the devil is in the details, and you won’t see that until you review the transaction agreements.

2. Don’t be afraid of “thorough” money — and beware fast money.

“Don’t be afraid of someone being thorough with you,” says Eli Boufis, managing director of Driehaus Private Equity, LLC. “Things don’t always work out as planned and the PE firm that does its homework is better equipped to navigate, rather than berate, its way through the storm.” (Note: DPE is an investor in my current company, Energy Distribution Partners.)

3. Don’t cheap out on your advisors.

In particular, hire an experienced transaction lawyer. Lawyers can save you time and anxiety because they know what’s standard in PE deals, meaning they can set realistic expectations for you. They also know when the PE firm is offering something good or rare in a deal — another sign of alignment with the right partner.

4. Don’t be defensive when the PE firm offers operating expertise.

Most entrepreneurs read this as interference, but for me, it’s a valuable advisory resource. With a good PE partner you have access to directors who add to your strategic brain trust, shared services, including human resources, and credible introductions to other investors and better banking relationships.

The two keys to a successful PE relationship are to make sure you fit the firm’s investment profile and knowing how to navigate the funding process. Doing these things right will provide the kind of alignment you need for a partnership — one that can withstand the challenges that inevitably visit every entrepreneurial venture.

Original Article:www.entrepreneur.com

Avoid These Money Mistakes That Could Have You Losing Thousands of Dollars Overnight

Too often, young entrepreneurs make egregious mistakes that end up costing their business thousands of dollars. This is especially true when they’re focused on generating more leads and driving new business, a situation in which many tend to ignore their expenses and end up accruing a scary amount of debt. The average entrepreneur can be a bit cavalier with their financials: it’s easy to rack up thousands in “necessary” expenses without considering whether or not those bills are actually helping grow your business.

When it comes to filing taxes, you should be especially careful with your numbers. Unfortunately, you can lose thousands of dollars overnight when you fail to prepare for tax time.

 If you’re thinking this can’t happen to you, then consider the ways in which you can go wrong with your taxes: you can underpay, which can lead to expensive IRS interest and even penalties, or you can neglect to take all the relevant deductions, meaning you’re paying more in taxes than you really owe.

If you’re looking to avoid such money management mistakes, then read on: this is how you need to handle your finances.

1. Know your five largest expenses by heart.

Start by answering a simple question: what are the top five things you spend the most money on each month? Then, think about how you can either reduce or eliminate superfluous costs.

For example, do you really need the Expert plan of that email marketing service, or can you afford to downgrade to a more basic plan (or get rid of it altogether if you’re not utilizing it)? Or, if you’re renting an office space, consider whether or not you’d be just as efficient working from your home office.

Take a good hard look at your biggest expenses. If you’re being critical (as you should be!), then you’ll find that you’re likely spending more than you need to.

2. Make sure each dollar spent is tied to a dollar earned.

Once you review your five largest expenses, it’s time to strategize. Going forward, you should think of each new expense as a strategic investment. How will each new expense help to grow your business? How will this expense bring in more revenue?

Ultimately, this should be your goal: for every $1 in business expenses you incur, your revenue should simultaneously increase by $1 (or more). If you can train your brain to get into this habit of thinking, then your business expenses will start to pay for themselves.

Susie Moore, life coach and bestselling author of What If It Does Work Out, has this advice for entrepreneurs getting their first business off the ground: “Sell first, build later. Focus on making money before spending money. Get customers and clients to buy into your concept, then you can give them what they actually want.”

We also reached out to best-selling author and private consultant Jeremiah Desmarais, who shared his insights on financial mistakes clients have made before coming to him for help.

What Desmarais found are three common errors new entrepreneurs make when trying to get their business off the ground that comprise what he calls “spray and pray marketing”:

  • Buying an ad in a publication using “branding” so you look like a big company building “awareness” – when what you really want are leads
  • Buying a list of prospects and sending an unsolicited email that goes for the offer without adding value first
  • Hiring expensive marketing consultants for a “strategic plan” that ends up not seeing the light of day because it’s too complex

Instead of “spray and pray,” Desmarais advises his clients on a leaner approach to business development that takes less time and money while resulting in more new deals.

He suggests entrepreneurs who desire more business look into hiring freelance consultants with specific skills in client acquisition, LinkedIn marketing to target key accounts and decision makers, and using cold email sequencing with tools like mailshake and getemail.io.

3. Use tax deductions strategically.

Based on the type of business you’re in, you’ll qualify for certain deductions. For example, a real estate agent can deduct the cost of meals and entertainment for clients, and a salesperson can deduct the cost of fuel or take the standard mileage deduction. In order to take full advantage of the deductions that apply to you, consult your tax preparer at the beginning of the year, so you know what to look for.

Throughout the year, track all of your expenses by keeping your receipts. If you’re more old fashioned, you can use a spreadsheet to do so and print out your business bank account statement monthly. Or, if you consider yourself to be a more modern entrepreneur, then you can download a free mobile finance and accounting app like Hurdlr. The importance of keeping receipts (or digital records, if you’re going the app route) is to justify your deductions in the case that your accountant or the IRS requests evidence.

While this record-keeping may feel tedious, this is an important accounting strategy for entrepreneurs. After all, by maximizing your tax deductions, you thereby lower your taxable income, the number off of which your business taxes are calculated. In doing so, you end up with more money in your pocket at the end of the year.

4. File taxes quarterly, not annually.

If you anticipate owing $1,000 or more in taxes for the year, then the IRS requires that you file your taxes quarterly. Filing taxes quarterly (if you meet this threshold) is beneficial in two ways. For one, you avoid IRS penalties that you could incur from paying late.

And second, paying four times per year helps you to better budget your tax expenses; it’s much easier to spread out your tax payments throughout the year, as opposed to making one huge cash payment in April.

Disclosure: This is brought to you by the Entrepreneur Partner Studio. Our goal is to feature products and services that we think you’ll find interesting and useful. If you purchase them, we may get a small share of the revenue from the sale from our commerce partners. 

Original Article:www.entrepreneur.com

How Social Entrepreneurs Can Land Funding

At one point, nongovernmental organizations and charity groups were the only options for alleviating societal ills, but in today’s increasingly interconnected world, we’re facing more complex issues that require more innovative and sustainable solutions. This has led to the rapid upsurge of social entrepreneurship; now, socially conscious entrepreneurs tackle local and global social challenges while generating profits.

Social entrepreneurship combines social impact and sustainable business growth, taking on social issues using business principles to its advantage. In theory, social entrepreneurship is an amazing concept, but the practical process in progressing from an idea to a sustainable operation has critical challenges, in particular during the startup financing stage.

How social entrepreneurs get initial financing

Typically, a regular startup would turn to the following funding sources: network investments, banking, equity debt, convertible debt, crowdfunding and so on, with a relatively straightforward process for funding channels that are revenue model options. However, social ventures don’t have the same flexibility as regular startup ventures when it comes to leveraging capital.

First, equity or VC financing usually expects an exit strategy that doesn’t automatically exist in social ventures, which usually plan on staying in it for the long haul. Second, investors need to have confidence in your business concept. However, social ventures make assessing risk more difficult, given the unique nature of cultural and business resource issues and investor networks. Third, and most important, investors usually depend on comparable investment activity that helps validate an investment thesis around market opportunity and valuation levels. That doesn’t exist in many social venture markets, where activity is a lot patchier and those markets have yet to demonstrate clear trends in delivering investor returns. All this limits the availability of capital in social ventures.

The global trend for social ventures clearing the financing hurdle

To access capital, social ventures have to do several things, including conducting intensive market research to prove their need for funding and their ability to manage and expand their business. But funding roadblocks might still arise. If that happens, social ventures should look into the following three options: leveraging partnerships, philanthropic organizations and social cause competitions and funds.

Revenue-sharing partnerships involve social entrepreneurs identifying a partner who can bring economic value to both parties. The partner may have intellectual value or property to contribute that adds value to the venture in a unique way. The beauty of this strategy is that it’s a win-win situation for both parties.

Philanthropic money is a large pool of capital social entrepreneurs can tap into. However, the definition of philanthropic money has shifted over the years. Originally it meant simple donations, which are commonly seen today as an unsustainable method of giving. Today’s new wave of philanthropy is called impact investing, a form of investing in which a measurable social or environmental impact is part of the goal, along with a financial benefit.

For entrepreneurs, this source of capital is advantageous because it requires lower than market rate interest or return targets, and for philanthropists, a principal attraction is that the returned capital can be recycled into other charitable activities. The concept of impact investing is still evolving, however, and it will take some time until it can accommodate the growing number of social enterprises.

Finally, as in other industries, startup competitions, accelerators, angel investors and impact funds provide valuable exposure and mentorship, which can lead to capital for social ventures. Good avenues to explore would be business plan competitions, such as the Global Social Venture Competition and the Hult Prize, as well as business incubators and accelerators like Echoing Green, Unreasonable Institute and Endeavor Global. Since most social ventures get their start thanks to committed and passionate donors, the challenge for the social entrepreneur is to identify a sustainable model.

Example: how Pi Slice got funded

Genny Ghanimeh is the founder and CEO of Pi Slice, a web-based social platform for microfinance. Here’s how it works at her company, in her words:

“In practice, what model examples do we have of social venture startups that are securing financing? At Pi Slice, when we went for our first funding rounds, we learned from meeting diverse investors to rely on all funding channels. From the beginning, we had some pre-seed angel money that helped us get started, and allowed us, with MicroWorld (www.microworld.org) from the group Positive Planet (www.positiveplanet.ngo), to build a revenue-sharing partnership model — we’re big fans of partnerships and creating shared value.

“We also participated in different entrepreneurship competitions, as much as time and timing allowed us to — the exercise of preparing for a competition, being mentored and presenting the case to the jury is very beneficial to reassess the model, whether one gets funded or not. We still needed money, so we approached philanthropy capital while still pitching the project, focusing on financial and operational metrics. At the end of the day, social investors or philanthropists, like any investors, need to know that you can be sustainable and scalable, and that you won’t require any other emergency rounds of financing.

“Finally, we also engaged with VCs and set future milestones to pitch them at a time when they would be interested to come in — this is a very useful exercise to set standards and milestone achievements in foreseeing the growth of the venture. Our experience has taught us to knock on all doors and try all funding models, because each model has its own added value and can prove to be crucial for a new trend to be successful.”

Original Article:www.entrepreneur.com

How to Make Money in Real Estate, Even If You’re Not in the Real Estate Business

When I founded a financial services company 24 years ago, I was focused on my core business — hiring the right people, navigating arcane regulations and recruiting clients.

As my business grew, so did my rent. I asked myself why I was paying someone else when I could just buy it myself. That’s how I got into real estate. In fact, it’s how many entrepreneurs get into real estate. It starts with their own balance sheet and gradually grows into a lucrative side practice — sometimes more financially rewarding than the initial business they launched.

Moving forward, I decided to buy my own offices. Throughout the years, I have bought and sold more than 50 properties, from commercial office buildings to single family houses. I even purchased a funeral home.

Do you know how much formal real estate training I have? Zero. If you’re a successful business owner in any other industry, you can be successful in real estate, if you’re careful and follow these simple rules.

1. Buy what you know.

If you buy real estate handbooks or take pricey classes, the first lesson they’ll teach you is this: Do your homework and research. As if that isn’t true in any industry.

However, if you’re successful in your industry, you already know a lot. You’ve likely scoured the area — and maybe other regions and states — for the best rates on the most suitable and energy-efficient offices for your needs. You’re keenly aware of what’s a good deal for the square footage you desire and which areas are the most convenient for your employees and your clients. In other words, you’re more qualified to buy a particular type of office building than many real estate professionals.

2. Let go of your ego.

Last month, I sold a funeral home in a low-income area for twice what I paid for it in 1996, while also raking in significant rent in that time. Meanwhile, I have friends who own pricey glass towers visible from the Interstate — because they like to go to parties, brag about the buildings they own, and hear, “Hey, I know that place!”

Few people know the places I’ve bought and sold. Because I don’t care about cache, I don’t pay an “ego markup.” I can negotiate harder and pay less. Then I can market my properties to tenants and owners who are just as savvy about finding a good deal as I am. It turns out there are more dealmakers out there than successful businesses willing to spend extra for a fancy address.

3. Recession-proof your purchases.

Along those lines, I look for the best values because I seek recession-proof properties. A friend of mine just bought a beautiful office building for $252 a square foot. He’s smart and hardworking, and I expect he’ll make money on the deal. Me? I’ll never pay that much for anything.

Real estate is a notorious boom-or-bust business, and like the stock market, it’s nearly impossible to time it perfectly. What I’ve learned is this: Recessions devastate the high-end commercial markets, but it doesn’t put everyone out of business. Those businesses trying to cut back will often ditch their high-priced offices for more modest ones — and I own many of those.

Bottom line: I not only profit as much as my friends with nicer properties, I sleep better at night knowing the things I can’t control won’t badly hurt me.

4. Sell to people just like you.

Buying a valuable property for the best price is only half the transaction. It won’t matter how good the deal is if you can’t turn around and rent it or sell it. Real estate agents and brokers spend a lot of their time trying to locate tenants and buyers, and it’s a percentage game. Many nibbles never actually bite.

You have an advantage, however. You’ve bought property you’ve used yourself, so you’re not only an expert in that kind of space, you can step into the shoes of your customers. You instinctually know how to market your offices. You also have a sharp marketing weapon. Hey, I’m not only a real estate owner, I’m a customer. I understand your needs.

5. Don’t believe your own hype.

Those who succeed in their core businesses and then dabble in real estate can do quite well. They can also overreach. It’s almost a stereotype: “I’ve conquered my industry, so that obviously means I can be a real estate genius, too!”

If you stretch beyond the spaces you know, you can still make money. What did I know about horse ranches before I bought one? Nothing. However, I knew I didn’t know. Tying this back to the beginning, I did my homework.

So, this is my most important piece of advice: Better to end your real estate career simply buying your own offices than believing you’re bulletproof and buying properties that are riskier than you think.

Original Article:www.entrepreneur.com

3 Takeaways for Business Owners in Light of the Federal Interest Rate Hikes

“We don’t like their sound, and guitar music is on the way out” was the reported response of a major record label executive in 1962 to a demo he listened to from some up-and-coming rock and rollers. He was wrong on two counts: Rock and roll has obviously lived on. And the group which he referred to? The Beatles.

That’s a good reminder for today’s business owners: Relying on your “instincts” to determine your growth strategy is risky. Even though some business leaders like Apple’s Steve Jobs and Virgin’s Richard Branson are recognized for their belief in soft factors (Branson even reportedly said, “I rely far more on gut instinct than researching huge amounts of statistics”), small businesses don’t have the luxury of a corporate cushion to protect them from bad instincts.

 Instead, monitoring key predictors, like federal interest-rate hikes, as opposed to relying on instincts, provides a far better road map for the future. According to the latest quarterly Private Capital Access (PCA) Index report from Dun & Bradstreet and our research team at Pepperdine University’s Graziadio School of Business and Management, the December 2016 federal interest rate hike did adversely affect businesses’ operations.

Mid-sized businesses reported both a decline in profitability — down six percentage points from the previous quarter — and an inability to hire new employees due to the higher interest-rate environment. Profitability was down six points in the first quarter of 2017, versus the last quarter of 2016.

Given that additional rate increases are anticipated for this year, small business owners must keep the potential impact of rate hikes in mind as they consider hiring and expanding over the next year. Specifically, here are three operational principles to follow, to maintain stable, profitable operations:

1. Base operational decisions on contracts that are signed, not those that are anticipated.

This year, we witnessed an increase in reports from businessess that the current financing environment is restricting their ability to hire new employees, and an increase in the percentage of small businesses anticipating that they will seek financing in the next six months for “working capital fluctuations,” compared to small businesses in 2016.

That’s almost certainly a result of rate hikes, which can impact the ability of businesses to borrow capital to maintain facilities, hire employees and expand operations.

Rather than obtaining financing to hire new employees until new business is firmly locked down, consider incentivizing employees to put in additional work, or using temporary contract labor. That may bridge the gap and allow you to avoid having to obtain financing.

2. Monitor economic growth to ascertain likely timing for future rate increases.

We found that fewer mid-sized businesses were able to qualify for credit in early 2017, compared to late 2016. It’s likely that slower-than-expected growth in the last few months played a role in that decision, although Fed officials called the slowdown “transitory.” If business owners need to access capital for operations, they should stay abreast of developments not only in financing rates, but also national job gains and unemployment trends.

They should factor that into the likelihood of whether or not future rate increases are on the horizon (the next hike could come as soon as June).

3. Consider alternative forms of financing.

Access to loans may be more challenging as traditional lenders tighten criteria for “risky” loans to small businesses. Be careful with “cash advance” forms of financing such as factoring or merchant cash advance since they are very expensive once all the fees are considered.

Asset-based lending (ABL) can be a good option since these loans are inherently less risky for the lender and therefore will typically have a very competitive interest rate. Companies can borrow against nearly any type of tangible asset, including accounts receivable, inventory, equipment, purchase orders and real estate.

 The old adage that economic recovery starts on Wall Street and ends on Main Street is still true today, and business owners need to adjust their business strategies accordingly. Instincts are terrific, but for small businesses, there is no substitute for careful monitoring of solid economic indicators.
Original Article:www.entrepreneur.com

5 Essentials for Raising Your Growth Round of Financing

As the founder and CEO of the HR platform Namely, Matt Straz has experience raising a growth round of funding. The following is his advice, from his point of view, on the process.

While there are many thousands of people and firms that can provide money to get a startup going, far fewer entities, perhaps just a couple dozen depending on the business, can fund a Series B or C. I raised my Series B round in 2014, and here is what I learned.

Kiss a lot of frogs

Finding the right venture firm requires meeting many of them, since most will pass on the investment no matter how well the company is doing. Whenever I realize there isn’t a fit, I often break up with the firm quickly, sometimes emailing a nice “no thanks” note as I leave their office. This makes company founders feel more in control of a process that is riddled with rejection.

Define growth

Many venture firms claim to be “growth” stage investors, but that term can mean different things to different people. When you get a call from a VC firm, establish upfront whether they have an established minimum revenue or annual “run rate” in order to make an investment. Some investors will want to see a $5 million to $10 million run rate before they invest. Others won’t care and will base their decision on how fast the company is growing and if they like the market.

Be quantitative

Once a company has raised a B round of financing, things become less about the founder and more about the business and its metrics.

For example, if your company is a SaaS (Software as a Service) provider, you should deliver highly detailed reports on things like monthly recurring revenue, annual contract value and customer churn. If your company is a B2C, you should show high levels of user growth and engagement.

Whatever the metrics for your company’s particular industry, have them at the ready when the fundraising process begins.

Show it

At this stage, investors expect significant growth in the months and years immediately following their investment. For example, if your company is a SaaS company, you need to show how it will grow at least three times annually in the years following the investment.

Ultimately, investors want to know how fast your company can get to $100 million in revenue so it can IPO or be acquired. If this is not achievable, then think twice about raising a Series B.

It ain’t over until it’s over

Even if a VC firm is interested in funding your company’s next round, there are things to tend to once you’ve received a term sheet.

Due diligence is typically a formality involving a lot of paperwork being sent back and forth, so have good financial records in place. Also, the public announcement of a U.S. fundraising must happen within 30 days of the closing, as it needs to be filed with the federal government.

Be sure to work with a good PR firm or have a solid relationship with a tech writer to tell your company’s story. Don’t let your hard work be ruined by a poor or muddled fundraising story.

Securing a growth stage investment is rare. Most startups never get to this point. But with the right metrics and approach, it can absolutely happen!

Original Article:www.entrepreneur.com

Why Embezzlement Most Often Occurs at Small Businesses — and How to Prevent It From Happening to You

The latest statistics on fraud should send a big jolt of fear into small business owners. According to a 2016 embezzlement survey by HISCOX, a specialty insurance company, 80 percent of embezzlements occurred at small businesses — defined as those with less than 150 employees — and 30 percent of embezzlements involved a loss of more than $500,000.

One major reason scammers target small businesses is because they often lack checks and balances. Typically, a company starts out with employees who are family and friends, and everyone has access to sensitive client information, inventory and sometimes even the checkbook. You may say, that won’t happen at my company — they all love working here — but it does. In fact, 30 percent of the embezzlements occurred because there were no checks and balances at all.

For any business, employees are your biggest asset yet also the greatest risk. Every night your “assets” walk out the door and go home to everyday financial pressures, drug use, family issues and more. What does this tell us? Employees need clear boundaries. If they know you are looking, they often won’t take a chance of getting caught. If they think there is a chance of getting caught, they won’t jeopardize their job security or cause family embarrassment.

 How do you remove the temptation? Whoever cuts the checks cannot sign them, and the same applies for sending wires. Someone other than the payroll department should hand out checks, as many frauds occur via ghost employees or after employees have left the company. Someone other than the accounting department should open the mail, especially the check statements and correspondence from the IRS or state agencies. Rotate employees from dealing solely with either vendors or clients.

A rogue employee can try to steal cash or equipment, but it may be easier to steal intellectual property, which can also be very damaging. Regardless of the type of theft, as a general rule, a larger business can absorb the cost of fraud better than a smaller company. You should check with your insurance broker to confirm you have fidelity coverage (fraud insurance), so that if you can prove an employee stole from you, you can collect on the policy if you adhere to the guidelines.

Most people have a distorted sense of who is most likely to commit fraud. They may closely watch a new or younger employee, thinking that their immaturity or impulsivity might lead them to steal. In fact, the profile of the typical embezzler is quite different. “He” is more often a “she” (56.3 percent of embezzlers are women), and the average swindler is 49, according to HISCOX. More often than not, it’s the longtime employee, the one that never complains, that stays late and works weekends who bears close watching. The accounting and finance departments bear special attention, as the survey found 40 percent of the embezzlements occurred in those departments.

But, just as an experienced poker players look for “tells,” we advise companies that people intent on committing fraud typically have one or more “red flags” that should cause them to keep close tabs on them. In fact, 78 percent of the embezzlers had at least one of the following red flags:

  • Living beyond one’s means
  • Financial problems
  • Unusually close association with vendors or customers
  • Excessive control issues
  • Wheeler-dealer attitude
  • Recent divorce or family problems

What should you do if you suspect fraud? Assuming you or the life of an employee or your premises is not in imminent danger, call counsel and an investigations firm/forensic accounting firm to assess the situation to include preserving and segregating evidence, whether a computer or documents. Exploratory interviews with management should be undertaken, and then expeditiously map out a strategy to minimize a company-wide morale problem, as well as to make sure news of the fraud does not leak to the media, competitors or even investors. This should be undertaken before taking any action against the “suspect.” Although you have a few options about what to do with the suspected employee, when in doubt consider placing the suspect on paid suspension, subject to an appropriate fact gathering inquiry.

In these situations, always assume the suspect is innocent until the facts prove otherwise, as that may spare you from a potential lawsuit by your employee down the road in the event he or she is innocent, as, often, anonymous allegations against an employee are unfounded. This is a great time to interview the suspect and others, not in an accusatory manner, but from a fact gathering standpoint. You just want to understand what happened and who could have been involved. The suspect may have an alibi, or may dig himself into a hole. Further, you may learn of other accomplices.

What can you do to prevent fraud at your company?

  • Implement a pre-screening program for all new hires, checking LinkedIn and other social media. This should include tiered background screening levels depending upon one’s position.
  • Conduct thorough reference checks. Be sure to speak to current and former supervisors and underlings.
  • Implement appropriate checks and balances, so no one can make a payment or have access to sensitive information without multiple approvals or checks.
  • Create cyber controls, to include having a computer policy, locking up intellectual property and educating employees about opening attachments.                                                                                                                    Original Article:www.entrepreneur.com

The 7 Businesses Venture Capitalists Are Really Interested In

Venture capital (VC) firms are often regarded as the holy grail of startup financiers. But what do venture capitalists want? For entrepreneurs in search of funding, this is the perennial question.

In 2015, the world saw a record high of venture capital investments, with total deals topping $100 billion, according to a report by auditing giant KPMG and data clearinghouse CB Insights. Dominating the investment marketplace were internet companies, which obviously won’t go out of style any time soon; the same goes for tech, mobile, telecom, health care, financial, education and consumer startups.

 So what will be hot next? We asked some leading VCs to put their money where their mouths were, filling us in on the sectors that excite them most — and those likely to score major financing in the months and years ahead.

Virtual reality

When most people think of virtual reality, they think of 3-D gaming or Oculus VR, the maker of headsets that Facebook acquired for $2 billion in 2014. But that’s just the tip of the virtual iceberg, says Ted Leonsis, a founder and partner at Revolution Growth, a Washington, DC-based investment firm.

Leonsis expects the VR market to explode with training products for education, sports, and the military. In 2015, he announced a partnership between VR startup STRIVR and three DC-area pro sports teams he owns: the Capitals, the Wizards and the Mystics. The idea is for these NHL, NBA and WNBA teams to incorporate 3-D training into their game preparation.

Training programs that feature audio and video lessons have about a 50 percent retention rate, Leonsis explains. “But virtual reality takes retention levels to well over 90 percent,” he says.

Brian Wilcove, a partner at Artiman Ventures, an early-stage venture fund in Silicon Valley, seconds this prediction. His firm invested in zSpace, which makes an all-in-one VR solution for the education market — complete with glasses and stylus — that tens of thousands of U.S. students already use. Think high schoolers dissecting 3-D holographic frogs in biology class, or med students watching a virtual open-heart surgery.

As the market evolves, Wilcove says he can imagine a communications app for far-flung business meetings “where you’re all virtually sitting around the table in different locations with one of these headsets on, James Bond–style.”

Cybersecurity

Take corporate and consumer concerns about data integrity, add ongoing developments in mobile and cloud technology and you get a scorching market.

“The sophistication of the bad guys has increased,” says Theresia Gouw, cofounder and managing partner of Aspect Ventures, a San Francisco VC firm. “That, coupled with massive change in technology infrastructure, is creating huge opportunity.”

Consider Exabeam, a big-data security company that’s raised $35 million in financing, including contributions from Aspect Ventures. The company employs user-behavior analytics to detect cyberattacks that rely on stolen credentials. According to Gouw, who’s been investing in security companies for 15 years, “Most of the big hacks that you’ve read about, everything from the Sony hack to the Target hack, are bad guys getting users’ credentials.”

Sean Flynn, managing director of Shasta Ventures, a Silicon Valley VC firm, gets excited about mobile security, especially with so many employees using their own devices at work. In early 2015, Shasta contributed to an $8 million investment round in Skycure, a solution that protects bring-your-own and employer-issued mobile devices in the workplace from internal and external security threats. “We think that most enterprises are quite exposed,” Flynn says. “And we feel like that’s a really big opportunity.”

On-demand platforms

Startups that focus on quality assurance and smooth transactions are the name of the game, says Flynn, whose company invested in Turo, a national peer-to-peer car-rental platform. Turo screens renters, provides various levels of insurance and offers 24/7 roadside assistance.

Maha Ibrahim, general partner at global VC firm Canaan Partners, expects on-demand startups to add more premium, white-glove services in the near future. As an example, she points to onefinestay, an Airbnb for upscale homes that vets listings and offers concierge services. Another example from Canaan’s portfolio: the RealReal, a luxury-brand consignment platform that vets all goods listed on the site, provides high-end photos of them and ships them to buyers.

“It’s a way of capturing more money from that premium user,” says Ibrahim, who expects the trend to proliferate throughout the travel, fashion, and food-delivery sectors.

Consumer health care

Technology companies that make medical treatment more efficient for patients are another good bet. Shasta Ventures has invested in Doctor On Demand, which lets users consult board-certified physicians, psychologists and lactation consultants over video call.

Also hot right now: wellness platforms that doctors, insurers and employers can offer their patients and employees to help them stay healthy or recover from a medical setback.

Sharon Vosmek, CEO of Astia, a San Francisco-based nonprofit dedicated to identifying and promoting women as high-growth entrepreneurs, sees innovations in traditionally underfunded areas, like women’s health and reproductive health, as a growing market. Astia Angels, a global network of angel investors, backs select Astia companies.

“We plan to double down on those companies that actually understand that the female health-care market is a large and expanding market,” Vosmek says. A few examples from the Astia Angels portfolio: nVision Medical, a medical device startup tackling female infertility, and Naya Health, which makes a smart breast pump for nursing mothers.

Services for the underserved

It’s become smart business to develop education, employment and lending workarounds. “People are looking for alternative ways to get the type of education they need in order to get the kind of jobs they want,” says William Crowder of the Comcast Ventures Catalyst Fund, the telecom giant’s $20 million New York-based venture fund for early-stage tech startups led by minority entrepreneurs. As an example, Crowder points to Catalyst Fund portfolio company Quad Learning, which works with community colleges to offer affordable education for students earning a bachelor’s degree.

Dan Levitan, co-founder and general partner of Maveron, a consumer-only VC firm based in Seattle and San Francisco, shares these sentiments. “We think that the whole jobs market and ‘How do you get liberal arts people jobs?’ is a very big idea,” he says. Besides investing in educational startups Koru and General Assembly, Maveron has championed Earnest, an online lender that offers low-interest personal loans and student loan refinancing to fiscally responsible borrowers.

Robotics and drones

Robotic toys and vacuum cleaners may be all the rage, but Shasta Ventures is more enthused about robots for enterprise. “You can build really functional products that make companies much more efficient,” Flynn says. Fetch Robotics, one of Shasta’s portfolio companies, has a suite of robots for warehouses that enables businesses to pack and ship products in a more streamlined way.

Then there are drones. Although they’ve been touted as a solution for delivering items from ecommerce companies, regulatory concerns persist. Other applications are likely to gain ground first. “I think we’ll see a first wave of drone companies targeting image applications, whether that’s taking pictures of houses or surveying land,” says Artiman’s Wilcove. His fund has looked at a couple dozen drone startup deals in the past year. Other possible uses: monitoring bridges, cell towers and dangerous locations.

Original Article:www.entrepreneur.com