What exactly is factoring?
Factoring is the purchase of your accounts receivable (invoices) in order to provide you with the cash flow you need when you need it. Factoring is a widely accepted business practice used by large, mid-sized, and small companies.In most cases, we can have you the cash you need in 48 hours. Once you've established your account, the process takes just 24 hours.
How does Universal Funding's service work?
Here's how it works... You perform a service or deliver a product and you are ready to invoice your client, the amount is $25,000 (it could be as high as $100,000). Fax a copy of the invoice to Universal Funding so we can begin working for you right away, then overnight us the original.
For what types of receivables will Universal Funding pay me cash?
Any type of receivable for which a service has already been rendered or a product has been delivered. There are just a couple of exceptions that your Universal Funding representative will go over with you.
How much cash will you give me for an invoice?
We pay you 70%-90% of the invoice amount right away. When we receive payment for the invoice, we send you the remaining 10%-30% less Universal Funding's service fee.
What will my clients think?
Selling your receivables to Universal Funding only changes the address to which your clients remit payment. Your clients don't need to pay faster, and the name on the check (your business) stays the same.
I have clients all over the U.S. Are there any restrictions?
No. We can work with any business or government agency in the United States.
How does Universal Funding receive payment?
The same way you do. We deliver your invoice and Authorization Letter to your client once services have been rendered or your product has been delivered.
What if my client does not pay?
Universal Funding does not require a personal guaranty of collection. If your client's business goes bankrupt and payment is not remitted, Universal Funding assumes the loss of funds that we advanced to you. If payment is not remitted due to a dispute with you, we will work with you to reclaim funds.
Factoring (selling your receivables) is a common business practice.
From your clients' perspective, your company is probably not the first to utilize this source of cash. They understand that your business is growing and that you need cash to fuel that growth.
Wednesday, May 9, 2007
Monday, April 30, 2007
Invoice Factoring Basics
Can’t afford to wait 30 to 60 days to get paid by your customers?
One of the biggest challenges for small and mid size business owners is waiting 30 to 60 days to get paid on invoices. This can be particularly challenging if the business is in growth mode and adding customers every day. Before you know it, the business has a lot of money tied up in “Accounts Receivable” but little cash in the bank to show for it.
Going to the bank for business financing won’t necessarily help. Why? First, bankers require stringent audited financials and lots of collateral. Second, most banks are retreating from the corporate loan market, making the remaining banks very choosey on who they do business with.
Is there a solution for this problem? Yes. It is called Invoice Factoring.
Invoice Factoring enables you to turn your slow paying invoices (from good customers) into immediate cash. An invoice is a promise to pay from a customer. And an accounts receivable factoring company specializes in purchasing this type of debt.
The factor, purchases your invoices providing you with advance funds immediately. They wait to be paid, while you get to use the immediate funds to grow your business.
Who qualifies for invoice factoring financing?
To qualify for factoring, you must:
- Do business with commercial customers.
- Have a profit - or plan to have one soon.
- Have profit margins (or plan to have them) of 20% or more.
How are invoice factoring rates determined?
The receivable factoring rate or discount is determined by the following factors:
- Monthly volume
- Quality of Account Debtors/Customers Credit
- Other risk parameters
Factoring rates can range from 1.5% to 3% a month depending on all these parameters.
Interested in a factoring quote? Please click here. Prefer to speak to a professional right now? Please call 800-901-2418
Tuesday, April 24, 2007
Accounts Receivable Factoring - An Alternative to Bank Financing: by Kent Harlan
Factoring may not be the world's oldest profession, but not far from it. This financial practice can be traced back to the Roman Empire. Factoring was the dominant form of finance in the American colonies before the Revolution (mainly textile firms). Over the past few decades, consolidation has created two distinct types of funding sources (called factors): large, institutional-owned factors and several small, independent factoring firms.
WHAT IS FACTORING? Factoring is the purchase of a business accounts receivable at a discount. Rather than wait 30, 45, 60 days or longer for the receivable to be paid, the factor purchases the invoice and advances most of the balance up front. The client first completes an application, which includes a list of the receivables to be factored. The funding source then submits a proposal to the client, which includes an estimate of the factor fee. If the client accepts the proposal, the next step is to submit a check for due diligence The factor must research not only the client, but more importantly, the credit standing of the debtors. After due diligence has been performed, the factor advances 70%-80% of the invoice balance to the client. When the customer pays the invoice (which is made directly to the factor), the client receives the remaining balance less the factor's fee.
WHY DO COMPANIES FACTOR? (1) Growth: Consider this situation: You own a profitable, growing manufacturing company that has used up the credit lines the bank has extended you. A customer comes to you with a large order that needs to be filled soon. You must come up with the cash for production or forego the order to a competitor (which might cause you to lose the customer forever). Factoring existing receivables provides the financing for filling the order and increasing company profits.
(2) Survival: In this scenario, the company's cash flow is so tight that they must have the cash now to fund payroll, pay taxes, and meet expenses. They simply can't wait for a customer to pay the bill 45 days down the road. In this situation, factoring often becomes an ongoing relationship
HOW CAN FACTORING INCREASE PROFITS? A leading professional factor offers this illustrative story of a prospective client who owned a solid business with annual sales of $1 million and growing rapidly but in a continuing cash crunch. The business owner was shocked when offered a fairly typical funding arrangement in which the factor proposed to advance 70% of the value of the receivables, no recourse, for a 4 percent discount for the first 30 days. The balance would be paid to the customer upon payment of the bill less the discount. What upset the business owner, who said he was operating in a very competitive market, was the 4 percent discount. "If I raise my prices 4 percent, I'll go out of business", he said heatedly. The factor's response was to assure him that in all likelihood, he wouldn't have to raise his prices at all. He then asked a simple question: "How much business could you do if you had unlimited funds available?" The owner's reply was "I could easily increase sales to $2 million." Here are some facts about the business: The firm made $90,000 on $1 million in sales. If all accounts receivable were factored, the annual cost for the immediately available cash would be $40,000 and administrative overhead would increase by $20,000. However the cash infusion would allow sales to zoom to $2 million. After reviewing the following profit comparison, the business owner realized that he was able to double his profits without incurring any debt without having to dump any more of his own money into expansion of the business, and after paying the factor. The 4 percent factor fee was no longer an issue for him.
PROFIT COMPARISON
Present With Factoring
Annual Sales $1,000,000--$2,000,000
15% Gross profit $150,000--$300,000
Overhead Cost $60,000--$80,000
Factoring Cost * N/A $40,000
Net Profit $ 90,000--$180,000
* Based on the incremental $1,000,000 sales factored
WHAT OTHER BENEFITS ARE THERE TO FACTORING? 1. Elimination of bad debt - a non-recourse factor will assume the risk of bad debt, thus eliminating this expense from your income statement.
2. Professional collections - Not only will a good factor collect receivables in a professional manner, but he will eliminate overhead associated with the collection process.
3. Unlimited capital - Factoring is the only source of financing that grows with your sales. As sales increase, more cash becomes available for you to use, which allows you to constantly meet demand.
4. Take advantage of volume and early payment discounts - With improved cash flow, you will be in a position to take advantage of these discounts which directly effect the bottom line.
5. No debt incurred - Factoring is NOT a loan and therefore, you are not incurring any debt. This keeps your balance sheet looking good, thereby making it easier to obtain other types of financing or to sell the company.
6. Factoring is easy and fast - The application required to establish a factoring relationship is much simpler than other types of financing. No tax returns, financial statements, business plans, or projections are needed.
7. No personal guarantees. The company principals do not have to personally guarantee the repayment of the funding. They usually have to guarantee against fraud or disputes, but not against customers' inability to pay.
8. Invoices are paid faster - Factors generally report payment experiences to Dun & Bradstreet or other credit agencies. A debtor who is aware of this will not want his credit impaired.
9. Credit screening - A factor will provide you with credit information on new customers, thus allowing you to make better credit decisions. Factoring may not be for everyone, but those who are in the role of "banker" for their customers should at least take the time to weigh the benefits of factoring to provide continued growth and stability.
Accounts receivable factoring continues to be a popular financing tool, particularly among the textile industry. Other industry sectors, such as distributors and manufacturers, are beginning to take advantage of this option as well.
by Kent Harlan
WHAT IS FACTORING? Factoring is the purchase of a business accounts receivable at a discount. Rather than wait 30, 45, 60 days or longer for the receivable to be paid, the factor purchases the invoice and advances most of the balance up front. The client first completes an application, which includes a list of the receivables to be factored. The funding source then submits a proposal to the client, which includes an estimate of the factor fee. If the client accepts the proposal, the next step is to submit a check for due diligence The factor must research not only the client, but more importantly, the credit standing of the debtors. After due diligence has been performed, the factor advances 70%-80% of the invoice balance to the client. When the customer pays the invoice (which is made directly to the factor), the client receives the remaining balance less the factor's fee.
WHY DO COMPANIES FACTOR? (1) Growth: Consider this situation: You own a profitable, growing manufacturing company that has used up the credit lines the bank has extended you. A customer comes to you with a large order that needs to be filled soon. You must come up with the cash for production or forego the order to a competitor (which might cause you to lose the customer forever). Factoring existing receivables provides the financing for filling the order and increasing company profits.
(2) Survival: In this scenario, the company's cash flow is so tight that they must have the cash now to fund payroll, pay taxes, and meet expenses. They simply can't wait for a customer to pay the bill 45 days down the road. In this situation, factoring often becomes an ongoing relationship
HOW CAN FACTORING INCREASE PROFITS? A leading professional factor offers this illustrative story of a prospective client who owned a solid business with annual sales of $1 million and growing rapidly but in a continuing cash crunch. The business owner was shocked when offered a fairly typical funding arrangement in which the factor proposed to advance 70% of the value of the receivables, no recourse, for a 4 percent discount for the first 30 days. The balance would be paid to the customer upon payment of the bill less the discount. What upset the business owner, who said he was operating in a very competitive market, was the 4 percent discount. "If I raise my prices 4 percent, I'll go out of business", he said heatedly. The factor's response was to assure him that in all likelihood, he wouldn't have to raise his prices at all. He then asked a simple question: "How much business could you do if you had unlimited funds available?" The owner's reply was "I could easily increase sales to $2 million." Here are some facts about the business: The firm made $90,000 on $1 million in sales. If all accounts receivable were factored, the annual cost for the immediately available cash would be $40,000 and administrative overhead would increase by $20,000. However the cash infusion would allow sales to zoom to $2 million. After reviewing the following profit comparison, the business owner realized that he was able to double his profits without incurring any debt without having to dump any more of his own money into expansion of the business, and after paying the factor. The 4 percent factor fee was no longer an issue for him.
PROFIT COMPARISON
Present With Factoring
Annual Sales $1,000,000--$2,000,000
15% Gross profit $150,000--$300,000
Overhead Cost $60,000--$80,000
Factoring Cost * N/A $40,000
Net Profit $ 90,000--$180,000
* Based on the incremental $1,000,000 sales factored
WHAT OTHER BENEFITS ARE THERE TO FACTORING? 1. Elimination of bad debt - a non-recourse factor will assume the risk of bad debt, thus eliminating this expense from your income statement.
2. Professional collections - Not only will a good factor collect receivables in a professional manner, but he will eliminate overhead associated with the collection process.
3. Unlimited capital - Factoring is the only source of financing that grows with your sales. As sales increase, more cash becomes available for you to use, which allows you to constantly meet demand.
4. Take advantage of volume and early payment discounts - With improved cash flow, you will be in a position to take advantage of these discounts which directly effect the bottom line.
5. No debt incurred - Factoring is NOT a loan and therefore, you are not incurring any debt. This keeps your balance sheet looking good, thereby making it easier to obtain other types of financing or to sell the company.
6. Factoring is easy and fast - The application required to establish a factoring relationship is much simpler than other types of financing. No tax returns, financial statements, business plans, or projections are needed.
7. No personal guarantees. The company principals do not have to personally guarantee the repayment of the funding. They usually have to guarantee against fraud or disputes, but not against customers' inability to pay.
8. Invoices are paid faster - Factors generally report payment experiences to Dun & Bradstreet or other credit agencies. A debtor who is aware of this will not want his credit impaired.
9. Credit screening - A factor will provide you with credit information on new customers, thus allowing you to make better credit decisions. Factoring may not be for everyone, but those who are in the role of "banker" for their customers should at least take the time to weigh the benefits of factoring to provide continued growth and stability.
Accounts receivable factoring continues to be a popular financing tool, particularly among the textile industry. Other industry sectors, such as distributors and manufacturers, are beginning to take advantage of this option as well.
by Kent Harlan
Friday, April 6, 2007
7 Ways to Grow Your Business...
At Universal Funding our goal is to help our clients make it to the next level with the funding many small to mid-sized businesses need for growth. Here is a great article by Julie Monahan on www.entrepreneur.com that may help you find the way to take the next step in your businesses growth. And when you do, let us help you get the funding you need to make it happen!
We hope you enjoy!
Sincerely,
Darcy Gillingham
Director of Internet Marketing
Universal Funding Corporation
www.universalfundingmain.com
All Systems Grow
You don't have to be a rocket scientist to grow your business. Get ready for liftoff with these 7 expansion strategies.
By Julie Monahan January 13, 2006
After the 16-hour workdays, eleventh-hour decision making, empty aspirin bottles and half-eaten sandwiches, your business is finally a success--with the revenue stream to prove it. So how do you stay ahead of the pack? Riding the success of your introduction is not an option--you've got to reach new customers and new markets. "There always has to be a next thing," says Bruce Lynskey, clinical professor of management at Vanderbilt University's Owen Graduate School of Management in Nashville, Tennessee.
The key to your next move is choosing the expansion method that best fits your company's product or service, your strengths and weaknesses as a business owner, and the limitations of cash, credit and existing resources. A business taking on a new growth strategy should be walking on steady legs, not looking for ways to avoid unresolved problems. And while growth is the central tenet of business development, be willing to apply the brakes when the expansion rate is too much to handle.
So what's the best way to develop your company? One or a combination of the seven strategies below should be enough to turn your acorn into an oak.
1. Introduce a New Product
It takes imagination and a bit of luck to hit on a new product idea that doesn't distract buyers or make older products seem obsolete. But, as in the case of Greensboro, North Carolina-based Batanga.com Inc., a product extension can also reinforce connection to a brand and create a niche all its own. An internet radio station, Batanga.comlaunched a companion print magazine called Batanga Latin Music to offer advertisers more ways to reach its young, Hispanic, tech-savvy audience. What began as a one-time marketing piece quickly grew into a separate media property. "We started getting calls from newsstand distributors asking if they could carry the magazine and [from] customers who wanted to subscribe," says Troy McConnell, 42, president and CEO of Batanga.com. In 2004, the magazine accounted for 10 percent of the company's $2.5 million in revenue, and McConnell predicts that number will grow to at least 30 percent in a few years.
While you have to be careful when extending your original product, adding products with little or no connection to your product line can be equally dangerous. Exploiting a trend is tempting, but acquiring new customers is less revenue-savvy than squeezing more from existing customers. "The more you can put through the same sales channel, the more cost-effective it is," says Alan M. Davis, a principal with Revitalization Partners, a Seattle consulting firm specializing in business turnarounds.
Use your existing customer base to vet a new product's potential market value. A survey combined with a free gift can prompt customers to share a wealth of information. Fred Wainwright, executive director and adjunct assistant professor at the Center for Private Equity and Entrepreneurship at Dartmouth University's Tuck School of Business, says, "That preliminary research is essential to getting the pricing right, choosing the right value proposition and developing a product that meets the needs of the market."
2. Introduce an Existing Product to a New Market
Dianne Daniel, president of Handle It LLCin Dublin, Ohio, first marketed GripTwist, an industrial-strength twist tie made of foam-covered wire, to ski shops as a ski and pole binder. It soon became obvious that what could hold unwieldy items like skis together could also hold hoses, tools, ropes and other items--so the company began selling GripTwists to hardware stores. Next, Handle It took the GripTwist into sporting goods stores. Daniel hopes the expansion will boost GripTwist sales to $1 million this year.
New market development can help you reach new customers, but reaching too far can overtax staff, budgets and operational systems. Start small, and check progress as you go, says Ed Chapman, managing partner of VizQuest Ventures LLC, a sales performance and market development firm in Waltham, Massachusetts. "Many companies don't consider market segmentation and target their products too broadly," he says. "Take your solution, sample it among a couple of microsegments, and see which ones stick."
3. License Your Product
Licensing shifts the financial risk from a product's originator to a company willing to take on the burden of marketing and advertising, production and distribution. The shift also includes forfeiting most of the profits, but it may be a fair price to pay for the chance to build a national reputation when cash flow is low.
For Taggies Inc.of Spencer, Massachusetts, the cachet of its licensing partner more than made up for sharing its piece of the pie. In late 2002, Scholastic Inc., the children's publishing behemoth, wanted to license Taggies, a line of blankets and toys with satiny tags attached, for a book collaboration. "The relationship brought us into a market we weren't in before," says Danielle Ayotte, 35, co-founder with Julie Dix, 38.
Ayotte and Dix, whose sales increased from $2 million in 2003 to nearly $3 million in 2004, were lucky to have Scholastic approach them first. Most business owners aren't so fortunate. Before you shop for a licensee, make sure your product is patented--or at least patent pending--and have some research showing sales potential. Then, if you don't already know of a company you'd like to partner with, check out trade shows, online databases and local economic development agencies. A licensing agent can also help you find appropriate companies and broker a deal.
Licensees can be picky, and so should the licensor. Davis of Revitalization Partners recommends choosing a partner who can offer potentially high volumes of distribution. While contracting with a large company might mean a smaller royalty percentage, the potential customer reach will more than make up for it. A good licensing partner should also have an established reputation for quality and service and an aggressive plan to market and advertise your product. For a check on past performance, talk to other licensors contracting with your selected company.
4. Start a Chain
A restaurant, retail or service business that's easily reproduced and can be run from a distance is great for launching a chain. But entrepreneurs must know exactly what makes the original store work and what won't easily transfer to a new site. "You have to ask, 'How much of this success is tied to me, my location or my staff?'" says Chris Wheeler, managing director of Ballenger Cleveland & Issa LLCin Newport Beach, California, a consulting firm specializing in financial and business turnarounds. Defining operating procedures down to the last detail, sharing staff between locations to establish the company's culture in the new location, and developing a training program for new employees all help start things off right.
Launching multiple locations can present some surprises. When Zoots Corp., an eco-friendly dry cleaning chain in Newton, Massachusetts, opened the doors of its third unit, the company launched a marketing campaign to herald the new arrival. "Suddenly, we had three stores doing three times the business of our first two stores," says Todd Krasnow, 47, chair and co-founder. The company, which had about $50 million in sales in 2004, found it difficult to meet its service standards. To avoid similar deluges in the future, Zoots cut back on big promotions, relying instead on word-of-mouth and periodic advertising.
Who wouldn't love the idea of collecting fees and royalties while fellow entrepreneurs expand your business? Once you get past the startup costs--on average, between $125,000 and $150,000 for moderate initial growth of five to 10 franchises per year-franchising is an efficient way to expand brand awareness while pooling the business acumen, financial resources and buying power of multiple owners.
Don't expect a motivated franchisee to make up for existing shortfalls, however. "Make sure there's a market for your product, do your competitive analysis and be sufficiently capitalized," says Andrew Loewinger, an international franchise attorney with law firm Nixon Peabody LLPin Washington, DC. Otherwise, franchisees can be a prickly bunch to deal with. "You might have franchisees who don't want to follow the program, who want to break out on their own or don't want to pay their royalties because they think you're not delivering value," Loewinger says. "It can be a challenge."
Joe Barbat, 29, founder and CEO of Wireless Toyz Ltd., a cellular retailer in Farmington Hills, Michigan, keeps in touch with franchisees through store visits and a company-wide intranet detailing new cellular plans and promotions. These contacts remind franchisees that the company is always there to help, says Barbat. It also helps the company, which brought in over $50 million in revenue last year, maintain sales and service standards.
For more on franchising your business, see the "Franchising Your Business" section of Entrepreneur's Franchise Zone.
6. Join Forces
A merger or acquisition combines the best of two companies, expands your customer base, increases intellectual capital and delivers operational efficiencies. The trick is finding the right partner. "You have to share the same vision of what it is you're trying to build," says Davis.
Such a step is usually the domain of established companies, but acquisitions are how Thought Equity Inc.got off the ground. When Thought Equity's CEO, Kevin Schaff, started his Denver business providing stock footage and production-ready commercials to media companies, he first acquired a nearly bankrupt company selling similar ready-to-use commercials. "We wanted to [increase] the size of our library and provide a critical mass for people when they came to search our libraries," Schaff, 30, says.
The next target, an advertising agency, supplied the expertise of professionals steeped in TV advertising sales. With this "plug and play team," as Schaff calls the agency, Schaff estimates the company got up and running with its first customers 18 months earlier than it could have had it tried to create these resources in-house. Both acquisitions were completed in 2002, the year Thought Equity was founded. Sales in 2004 reached $3 million.
7. Go Global
Growing markets, rising consumer spending, improved business climate--sometimes the only place to find these things is overseas. Doing business internationally can take the form of exporting, licensing, a joint venture or manufacturing, but whatever form you choose, the same basic business rules of assessing customer demand, gaining legal and accounting assistance, protecting intellectual property and obeying regulations apply.
What don't come so easily are the nuances of cultural differences. In some countries, particularly those in Asia, a local partner is virtually a requirement. Your first stop should be your target country's economic development agency, which can help marshal local resources to get you on your way, possibly with a small financial boost.
Melody Brenna, 48, co-founder and CEO of Milestone Architectural Ornamentation Inc.in Amarillo, Texas, emphasizes the importance of the internet in growing an international business. That's how overseas customers first found out about her construction technology firm, which specializes in historic reproductions. Today, Milestone's international business includes exporting product machinery, materials and molds to Thailand, and deals with other countries are in the works. To streamline service, the company creates a project-specific website with regularly updated project news, photos and scheduling information.
Online access also helps businesses overcome the delays of time zone differences. "If there's something I forgot to tell a client," says Brenna, "I throw it on the web and it's there when they get to work in the morning."
Pre-Expansion Checkup
Answer these questions before you make your move.
Do employees have the necessary skills to support your growth strategy? Will you need to hire new staff or provide additional training?
Can existing operations handle a sudden boost in demand? How will you maintain service levels while reaching for new business?
Are current operations, including order management, customer service, record keeping and inventory control, running smoothly and ready to take on more?
Where's the money coming from? Will cash flow from sales be enough to support your expansion, or will you need lender or investor financing?
What will you need the money for? Study historical cash-flow statements as a guideline, then determine cash-flow needs on a weekly, monthly and annual basis to plan your funding strategies.
Are you ready to delegate more tasks and give managers more control?
Does expansion rest on a reliable mix of intuition, solid competitive analysis and customer research?
Do you have a time-defined exit strategy if expansion plans fail?
Source: Office of Women's Business Ownership, SBA
--------------------------------------------------------------------------------
Julie Monahan is a writer in Seattle whose articles on small business and emerging technology have appeared in numerous consumer and trade magazines.
We hope you enjoy!
Sincerely,
Darcy Gillingham
Director of Internet Marketing
Universal Funding Corporation
www.universalfundingmain.com
All Systems Grow
You don't have to be a rocket scientist to grow your business. Get ready for liftoff with these 7 expansion strategies.
By Julie Monahan January 13, 2006
After the 16-hour workdays, eleventh-hour decision making, empty aspirin bottles and half-eaten sandwiches, your business is finally a success--with the revenue stream to prove it. So how do you stay ahead of the pack? Riding the success of your introduction is not an option--you've got to reach new customers and new markets. "There always has to be a next thing," says Bruce Lynskey, clinical professor of management at Vanderbilt University's Owen Graduate School of Management in Nashville, Tennessee.
The key to your next move is choosing the expansion method that best fits your company's product or service, your strengths and weaknesses as a business owner, and the limitations of cash, credit and existing resources. A business taking on a new growth strategy should be walking on steady legs, not looking for ways to avoid unresolved problems. And while growth is the central tenet of business development, be willing to apply the brakes when the expansion rate is too much to handle.
So what's the best way to develop your company? One or a combination of the seven strategies below should be enough to turn your acorn into an oak.
1. Introduce a New Product
It takes imagination and a bit of luck to hit on a new product idea that doesn't distract buyers or make older products seem obsolete. But, as in the case of Greensboro, North Carolina-based Batanga.com Inc., a product extension can also reinforce connection to a brand and create a niche all its own. An internet radio station, Batanga.comlaunched a companion print magazine called Batanga Latin Music to offer advertisers more ways to reach its young, Hispanic, tech-savvy audience. What began as a one-time marketing piece quickly grew into a separate media property. "We started getting calls from newsstand distributors asking if they could carry the magazine and [from] customers who wanted to subscribe," says Troy McConnell, 42, president and CEO of Batanga.com. In 2004, the magazine accounted for 10 percent of the company's $2.5 million in revenue, and McConnell predicts that number will grow to at least 30 percent in a few years.
While you have to be careful when extending your original product, adding products with little or no connection to your product line can be equally dangerous. Exploiting a trend is tempting, but acquiring new customers is less revenue-savvy than squeezing more from existing customers. "The more you can put through the same sales channel, the more cost-effective it is," says Alan M. Davis, a principal with Revitalization Partners, a Seattle consulting firm specializing in business turnarounds.
Use your existing customer base to vet a new product's potential market value. A survey combined with a free gift can prompt customers to share a wealth of information. Fred Wainwright, executive director and adjunct assistant professor at the Center for Private Equity and Entrepreneurship at Dartmouth University's Tuck School of Business, says, "That preliminary research is essential to getting the pricing right, choosing the right value proposition and developing a product that meets the needs of the market."
2. Introduce an Existing Product to a New Market
Dianne Daniel, president of Handle It LLCin Dublin, Ohio, first marketed GripTwist, an industrial-strength twist tie made of foam-covered wire, to ski shops as a ski and pole binder. It soon became obvious that what could hold unwieldy items like skis together could also hold hoses, tools, ropes and other items--so the company began selling GripTwists to hardware stores. Next, Handle It took the GripTwist into sporting goods stores. Daniel hopes the expansion will boost GripTwist sales to $1 million this year.
New market development can help you reach new customers, but reaching too far can overtax staff, budgets and operational systems. Start small, and check progress as you go, says Ed Chapman, managing partner of VizQuest Ventures LLC, a sales performance and market development firm in Waltham, Massachusetts. "Many companies don't consider market segmentation and target their products too broadly," he says. "Take your solution, sample it among a couple of microsegments, and see which ones stick."
3. License Your Product
Licensing shifts the financial risk from a product's originator to a company willing to take on the burden of marketing and advertising, production and distribution. The shift also includes forfeiting most of the profits, but it may be a fair price to pay for the chance to build a national reputation when cash flow is low.
For Taggies Inc.of Spencer, Massachusetts, the cachet of its licensing partner more than made up for sharing its piece of the pie. In late 2002, Scholastic Inc., the children's publishing behemoth, wanted to license Taggies, a line of blankets and toys with satiny tags attached, for a book collaboration. "The relationship brought us into a market we weren't in before," says Danielle Ayotte, 35, co-founder with Julie Dix, 38.
Ayotte and Dix, whose sales increased from $2 million in 2003 to nearly $3 million in 2004, were lucky to have Scholastic approach them first. Most business owners aren't so fortunate. Before you shop for a licensee, make sure your product is patented--or at least patent pending--and have some research showing sales potential. Then, if you don't already know of a company you'd like to partner with, check out trade shows, online databases and local economic development agencies. A licensing agent can also help you find appropriate companies and broker a deal.
Licensees can be picky, and so should the licensor. Davis of Revitalization Partners recommends choosing a partner who can offer potentially high volumes of distribution. While contracting with a large company might mean a smaller royalty percentage, the potential customer reach will more than make up for it. A good licensing partner should also have an established reputation for quality and service and an aggressive plan to market and advertise your product. For a check on past performance, talk to other licensors contracting with your selected company.
4. Start a Chain
A restaurant, retail or service business that's easily reproduced and can be run from a distance is great for launching a chain. But entrepreneurs must know exactly what makes the original store work and what won't easily transfer to a new site. "You have to ask, 'How much of this success is tied to me, my location or my staff?'" says Chris Wheeler, managing director of Ballenger Cleveland & Issa LLCin Newport Beach, California, a consulting firm specializing in financial and business turnarounds. Defining operating procedures down to the last detail, sharing staff between locations to establish the company's culture in the new location, and developing a training program for new employees all help start things off right.
Launching multiple locations can present some surprises. When Zoots Corp., an eco-friendly dry cleaning chain in Newton, Massachusetts, opened the doors of its third unit, the company launched a marketing campaign to herald the new arrival. "Suddenly, we had three stores doing three times the business of our first two stores," says Todd Krasnow, 47, chair and co-founder. The company, which had about $50 million in sales in 2004, found it difficult to meet its service standards. To avoid similar deluges in the future, Zoots cut back on big promotions, relying instead on word-of-mouth and periodic advertising.
Who wouldn't love the idea of collecting fees and royalties while fellow entrepreneurs expand your business? Once you get past the startup costs--on average, between $125,000 and $150,000 for moderate initial growth of five to 10 franchises per year-franchising is an efficient way to expand brand awareness while pooling the business acumen, financial resources and buying power of multiple owners.
Don't expect a motivated franchisee to make up for existing shortfalls, however. "Make sure there's a market for your product, do your competitive analysis and be sufficiently capitalized," says Andrew Loewinger, an international franchise attorney with law firm Nixon Peabody LLPin Washington, DC. Otherwise, franchisees can be a prickly bunch to deal with. "You might have franchisees who don't want to follow the program, who want to break out on their own or don't want to pay their royalties because they think you're not delivering value," Loewinger says. "It can be a challenge."
Joe Barbat, 29, founder and CEO of Wireless Toyz Ltd., a cellular retailer in Farmington Hills, Michigan, keeps in touch with franchisees through store visits and a company-wide intranet detailing new cellular plans and promotions. These contacts remind franchisees that the company is always there to help, says Barbat. It also helps the company, which brought in over $50 million in revenue last year, maintain sales and service standards.
For more on franchising your business, see the "Franchising Your Business" section of Entrepreneur's Franchise Zone.
6. Join Forces
A merger or acquisition combines the best of two companies, expands your customer base, increases intellectual capital and delivers operational efficiencies. The trick is finding the right partner. "You have to share the same vision of what it is you're trying to build," says Davis.
Such a step is usually the domain of established companies, but acquisitions are how Thought Equity Inc.got off the ground. When Thought Equity's CEO, Kevin Schaff, started his Denver business providing stock footage and production-ready commercials to media companies, he first acquired a nearly bankrupt company selling similar ready-to-use commercials. "We wanted to [increase] the size of our library and provide a critical mass for people when they came to search our libraries," Schaff, 30, says.
The next target, an advertising agency, supplied the expertise of professionals steeped in TV advertising sales. With this "plug and play team," as Schaff calls the agency, Schaff estimates the company got up and running with its first customers 18 months earlier than it could have had it tried to create these resources in-house. Both acquisitions were completed in 2002, the year Thought Equity was founded. Sales in 2004 reached $3 million.
7. Go Global
Growing markets, rising consumer spending, improved business climate--sometimes the only place to find these things is overseas. Doing business internationally can take the form of exporting, licensing, a joint venture or manufacturing, but whatever form you choose, the same basic business rules of assessing customer demand, gaining legal and accounting assistance, protecting intellectual property and obeying regulations apply.
What don't come so easily are the nuances of cultural differences. In some countries, particularly those in Asia, a local partner is virtually a requirement. Your first stop should be your target country's economic development agency, which can help marshal local resources to get you on your way, possibly with a small financial boost.
Melody Brenna, 48, co-founder and CEO of Milestone Architectural Ornamentation Inc.in Amarillo, Texas, emphasizes the importance of the internet in growing an international business. That's how overseas customers first found out about her construction technology firm, which specializes in historic reproductions. Today, Milestone's international business includes exporting product machinery, materials and molds to Thailand, and deals with other countries are in the works. To streamline service, the company creates a project-specific website with regularly updated project news, photos and scheduling information.
Online access also helps businesses overcome the delays of time zone differences. "If there's something I forgot to tell a client," says Brenna, "I throw it on the web and it's there when they get to work in the morning."
Pre-Expansion Checkup
Answer these questions before you make your move.
Do employees have the necessary skills to support your growth strategy? Will you need to hire new staff or provide additional training?
Can existing operations handle a sudden boost in demand? How will you maintain service levels while reaching for new business?
Are current operations, including order management, customer service, record keeping and inventory control, running smoothly and ready to take on more?
Where's the money coming from? Will cash flow from sales be enough to support your expansion, or will you need lender or investor financing?
What will you need the money for? Study historical cash-flow statements as a guideline, then determine cash-flow needs on a weekly, monthly and annual basis to plan your funding strategies.
Are you ready to delegate more tasks and give managers more control?
Does expansion rest on a reliable mix of intuition, solid competitive analysis and customer research?
Do you have a time-defined exit strategy if expansion plans fail?
Source: Office of Women's Business Ownership, SBA
--------------------------------------------------------------------------------
Julie Monahan is a writer in Seattle whose articles on small business and emerging technology have appeared in numerous consumer and trade magazines.
Wednesday, March 21, 2007
Invoice Factoring Financing
Are you forced to wait 30 to 60 days to be paid by your commercial clients? Waiting to be paid by your clients can be very challenging, especially if your business is a startup or growing quickly.
The solution is Invoice Factoring:
Invoice factoring can get your invoices paid in as little as 24-hours, providing you with financing to pay employees, suppliers or rent. More importantly, factoring your invoices eliminates the uncertainty of when you’ll be paid, allowing you to confidently manage and grow your business.
How does Invoice Factoring work?
Factoring invoices is very simple and helps you get reliable and stable cash flow. It can easily be integrated to your business and works as follows:
AddMe - Search Engine Optimization
The solution is Invoice Factoring:
Invoice factoring can get your invoices paid in as little as 24-hours, providing you with financing to pay employees, suppliers or rent. More importantly, factoring your invoices eliminates the uncertainty of when you’ll be paid, allowing you to confidently manage and grow your business.
How does Invoice Factoring work?
Factoring invoices is very simple and helps you get reliable and stable cash flow. It can easily be integrated to your business and works as follows:
- You deliver your product/service to your client.
- You send an invoice to your client and send a copy to us (the factoring company)
- We advance you up to 90% (the remaining 10% is used as a reserve)
- You get immediate use of the money to pay suppliers, taxes and employees
- We wait to get paid by your customer
- Once we get paid, we rebate the 10% reserve (less a small fee)
- You may qualify for invoice factoring rates as low as 1.5%. To find out if you qualify,
Invoice Factoring Costs:
Factoring your invoices can be very affordable, with the average monthly discount being between 1.5% and 3.5% per month. There are two major variables that we consider when determining the cost of a factoring transaction. They are the size of the transaction and the credit quality of your clients. If you’d like to get an instant cost estimate, please click here and a Factoring Specialist will contact you as quickly as possible.
If you would like to see if you qualify for any of our programs please click here now and a Factoring Specialist will contact you right away or call 1-800-901-2418 to speak with someone immediately.
AddMe - Search Engine Optimization
Wednesday, March 14, 2007
How Scrap Metal Traders Can Leverage Purchase Order Financing
To be a successful scrap metal dealer you must be able to handle large orders – constantly and consistently. You must be able to pay for the scrap metal costs in advance (and at the best prices) and then wait 30 to 60 days until the transaction is settled to get your investment and profit back. However, few scrap metal traders can handle many large orders at a time while waiting 30 to 60 days to get paid. Therein lies the problem.
Many dealers try to go to the bank hoping to get business financing. However, they soon discover that most banks don’t understand the recycled scrap metal business well and don’t have the right solutions for the industry. Furthermore, getting bank financing is especially hard since banks require that you show three years of profitable business history and have sizeable collateral before making a loan.
Either way, banks loans don’t always work well for scrap metal dealers. In this industry, once you find the best scrap metal prices, you must move quickly to seal the deal. A better solution than bank financing is to use purchase order financing.
Purchase order funding provides you with the necessary funds to execute your confirmed POs. It provides you the financing to pay scrap metal suppliers, enabling you to deliver the goods and close the sale.
Purchase order financing is easy to use and works as follows:
1. The scrap metal dealer / trader secures a purchase order from a customer
2. The purchase order finance company then pays the scrap metal costs from the supplier yard (usually by placing a deposit or using a letter of credit)
3. The yard delivers the scrap metal to the customer according to the order
4. Once the customer pays for the scrap metal, the transaction is settled
Purchase order financing has a number of advantages over conventional bank financing. First, it’s very easy to obtain. The biggest requirement is that your company have purchase orders form commercially credit worthy customers. And second, it can be set up quickly. Most of the times you can get the financing in days (rather than months). And as opposed to bank financing, most startups will qualify.
Many times, po financing can be used in combination with factoring financing. Combining these two products can allow your business to fully optimize its cash flow, enabling it to grow at an even faster rate.
Although not widely used, these financing tools are quickly being adopted by growth minded scrap metal dealerships and traders. Be sure to consider them as options the next time your company needs financing.
By: Marco Terry
Article Directory: http://www.articledashboard.com
Many dealers try to go to the bank hoping to get business financing. However, they soon discover that most banks don’t understand the recycled scrap metal business well and don’t have the right solutions for the industry. Furthermore, getting bank financing is especially hard since banks require that you show three years of profitable business history and have sizeable collateral before making a loan.
Either way, banks loans don’t always work well for scrap metal dealers. In this industry, once you find the best scrap metal prices, you must move quickly to seal the deal. A better solution than bank financing is to use purchase order financing.
Purchase order funding provides you with the necessary funds to execute your confirmed POs. It provides you the financing to pay scrap metal suppliers, enabling you to deliver the goods and close the sale.
Purchase order financing is easy to use and works as follows:
1. The scrap metal dealer / trader secures a purchase order from a customer
2. The purchase order finance company then pays the scrap metal costs from the supplier yard (usually by placing a deposit or using a letter of credit)
3. The yard delivers the scrap metal to the customer according to the order
4. Once the customer pays for the scrap metal, the transaction is settled
Purchase order financing has a number of advantages over conventional bank financing. First, it’s very easy to obtain. The biggest requirement is that your company have purchase orders form commercially credit worthy customers. And second, it can be set up quickly. Most of the times you can get the financing in days (rather than months). And as opposed to bank financing, most startups will qualify.
Many times, po financing can be used in combination with factoring financing. Combining these two products can allow your business to fully optimize its cash flow, enabling it to grow at an even faster rate.
Although not widely used, these financing tools are quickly being adopted by growth minded scrap metal dealerships and traders. Be sure to consider them as options the next time your company needs financing.
By: Marco Terry
Article Directory: http://www.articledashboard.com
Tuesday, March 6, 2007
“Factoring Your Way To Liquidity” By Henry Byers
Dear Friends,
In an effort to keep our articles fresh and informative I will begin posting articles and white papers on factoring from around the web. To start this new series, I found the following article “Factoring Your Way To Liquidity” By Henry Byers online at http://www.articledashboard.com/. It provides a greater overview of all the services and benefits of factoring available. Please note: Universal Funding only specilizes in B2B Factoring.
Thanks for visiting and please let me know if there is anything specific you would like to see on our blog.
Sincerely,
Darcy Gillingham
“Factoring Your Way To Liquidity"
There are various types of factoring available. These factoring can be in any industry viz. account receivable factoring, asset based lending, business loans, construction factoring, credit card receivables factoring, distributors factoring, equipment, hard money loans, invoice factoring, manufacturing, medical factoring, purchase order financing, real estate lending, staffing, systems, technology, trucking, verdict funding, wholesalers, etc.
Various agencies provide all these types of factoring. Usually their turnaround time is 24 hours. They provide exclusive online and paperless factoring solutions to the small and medium sized businesses. These agencies either provide stated rates for factoring of invoices of a particular amount or they offer a free invoice-factoring quote. Thereafter these agencies approach the factoring companies that purchase the creditworthy accounts receivable at a small discount and convert the invoices in to cash.
With the help of these factoring agencies cash is received in mere 24 hours and no debt is created. Since there is no debt created it increases your credit worthiness which can be used to avail a loan. This also represents a healthy balance sheet and strong financial position. These agencies also offer higher advance rates which ultimately results in factoring lesser invoices but generating all the required money.
Moreover the factors handle the collection in professional manner thus reduces the collection costs. They also help in processing of invoices by generating invoices online. This further means increased paperless work. As a result the turnaround time is much shorter than any other means.
Invoice factoring is also known as accounts receivable financing. This practice helps in solving the immediate cash flow problems for small businesses with immediate infusion of money. They also provide a credit facility to small business owners with complete flexibility. This also provides the working capital to the small or medium business owners. This factoring helps in generating working capital without the need of constant renegotiations. Since there is a considerable increase in the working capital it leads to more sales and expansion of business.
A practice of factoring helps small business owners not only to solve their cash problems but also help in increasing sales. Small business owners can also concentrate on their businesses rather than chasing their customers for payments and cash. Factoring practice helps all kinds of small to medium business owners whether they are a small trucking company or any manufacturers. As a result of invoice factoring, it not only reduces accounting costs but also helps business owners and manufacturers in increased productivity.
This practice if factoring the invoices keeps the businessmen from other time consuming jobs like collection, administration, book-keeping, looking up additional capital or warding off creditors. Finally the best part of factoring is that the business ownership remains unchanged as in case of loan, etc. Since there is no loss of business equity, the ownership percentages remain unchanged.
Article Directory: http://www.articledashboard.com
By Henry Byers
Henry Byers, Factoring Financial Services advisor - focusing on Factoring Company and Business Factoring
Subscribe to:
Posts (Atom)