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Business Money Matters by J. Wayne Burritt.

Is S Corporation Election Right for My Business? It Depends on Your Business Structure

Business Organization ConceptThe potential advantages of electing for S Corporation tax treatment are a bit different for LLCs and corporations. Learn the basics of each business structure and how an S Corp election affects each.

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You’ve probably heard that being an S Corporation has some perks. It certainly can for some businesses. Might it be the right option for you? Let’s take a moment to chat about all things S Corp so that you can gain a better understanding of what it is and its potential advantages. 

First, an S Corp isn’t a type of business entity; it’s a special tax election that an eligible limited liability company (LLC) or corporation may choose. In other words, business owners must decide whether their company will form as an LLC or a corporation before they elect for S Corporation tax treatment.

The potential advantages of electing for S Corp tax treatment are a bit different for LLCs and corporations. It’s crucial to consider those differences when deciding whether it’s best to form a company as an LLC or corporation to obtain S Corporation status. It’s also critical you understand the differences between the LLC and corporation business entity types. Aside from the tax implications, there are also legal and administrative factors to consider.

Let’s step through the basics of each business structure and explore how choosing S Corporation election affects each:

Corporation Business Structure 

Overview

A corporation (often called a C Corporation) is a separate legal and tax-paying entity from business owners. It exists and dies independently of its owners. This business structure provides business owners (shareholders) the highest degree of protection against any debt and legal liabilities of the company.

A C Corporation may sell shares of company stock, have an unlimited number of shareholders, and offer its employees a stock option plan. 

Starting and running a Corporation

Incorporating and operating a business as a corporation is more involved and usually more costly than forming an LLC. Several of the legal steps involved include:

  • Selecting a board of directors
  • Drafting corporate bylaws
  • Formally registering the business by filing Articles of Incorporation with the state 
  • Obtaining an Employer Identification Number (EIN) from the IRS
  • Applying for all applicable business licenses and permits
  • Issuing stock certificates
  • Complying with all ongoing legal and tax requirements (such as submitting annual reports, holding board of directors meetings, holding shareholder meetings, keeping detailed meeting minutes, and more)

Default tax treatment of Corporations

A C Corporation’s profits and losses flow through to a corporate tax return. Taxable income (income after allowed business deductions) is taxed at the corporate tax rate. Note that some business income undergoes what many call “double taxation.” Business profits paid as dividends to shareholders are not tax-deductible for the business, so the corporation pays taxes on those dollars, and then the shareholders pay income tax on them, as well. 

S Corporation tax treatment for Corporations

S Corp election may benefit some corporations because it allows them to avoid double taxation. With S Corporation status, the corporation’s profits and losses flow through to shareholders’ personal tax returns; the corporation itself does not pay income tax. So, the corporation’s profits are taxed at the shareholder level (according to their share of ownership) at the applicable individual tax rates. Shareholders that are also employees of the corporation only pay self-employment tax on the wages or salary that the corporation pays them. Dividend income paid to shareholders is not subject to self-employment (Medicare and Social Security taxes). 

Note that corporations that want to maximize their growth potential may find the S Corp option limiting;  S Corps may not have more than 100 shareholders. 

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Limited Liability Company (LLC) Business Structure

Overview

The LLC structure offers liability protection for business owners (members) with less rigid compliance requirements than a C Corporation. An LLC is considered a separate legal entity from its owners, so under most circumstances owners are not personally responsible for the debts of the company. 

Starting and running an LLC

Several tasks involved in forming an LLC include:

  • Filing Articles of Organization with the state 
  • Obtaining an EIN from the IRS
  • Applying for the necessary licenses and permits
  • Complying with ongoing business compliance responsibilities, such as maintaining a registered agent, filing annual reports, keeping business finances separate from owners’ accounts, and more

Default tax treatment of LLCs

Although the LLC protects its members from legal and financial liabilities, it is not considered by the IRS to be a separate tax-paying entity. An LLC is a “pass-through entity,” similar to a partnership or sole proprietorship. Profits and losses flow through to the LLC members’ personal tax returns and get taxed at the applicable individual income tax rates. Not only are the LLC’s profits subject to income tax, but its taxable income is also subject to self-employment taxes. For some LLC owners, that could result in a rather hefty personal tax burden.

S Corporation tax treatment for LLCs

S Corp tax treatment can help LLC members reduce their self-employment tax burden. The individual income tax rate applies to all taxable business income as before, but not all of that income is subject to self-employment taxes. LLC members who are on the company payroll will only pay self-employment taxes on the income they receive as salary or wages. The rest of their income—paid as distributions—is not subject to self-employment taxes.

Keep in mind that the salary that the LLC pays its owners must be fair compensation for the work performed. If an LLC pays its members unreasonably low wages so that members can take the majority of money as distributions, it could raise red flags with the IRS and other tax authorities.

How to Become an S Corporation

IRS eligibility requirements to become an S Corp include:

  • You must have an LLC, partnership, or C Corp already in place
  • Your entity must be domestic
  • Your company must have 100 or fewer shareholders
  • Your shareholders may not be non-resident alien shareholders, partnerships, or corporations
  • Your corporation may only have one class of stock (you are allowed to have voting and non-voting as one class)

A corporation must file Form 2553 (Election by a Small Business Corporation). An LLC must file to be taxed as a corporation first before it can elect S Corporation status. If a new LLC files Form 2553 promptly, the IRS will typically consider that as sufficient notice that the LLC wants corporate tax treatment. If a new LLC waits around to submit Form 2553 or an existing LLC wishes to elect for S Corp status, then the LLC must file Form 8832 (Entity Classification Election) first and then Form 2553.

2020 Deadlines for S Corporation Election

For S Corp tax treatment to be in effect for 2020, existing businesses must meet the IRS deadline of March 16, 2020 to file Form 2553. Missing the deadline means the business will continue to be taxed as a C Corp or LLC for the remainder of the 2020 tax year, with S Corp treatment kicking in on January 1, 2021.

Newly formed LLCs and corporations have two months and 15 days (75 days) from their date of formation to file for S Corporation election for the tax year 2020. Note that business owners can request a six-month extension to file for S Corp status by filing IRS Form 7004 (Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns).

Look and Learn Before You Leap

Often, entrepreneurs will start off as an LLC because of its simplicity and flexibility. Then, as their business grows, they opt to elect S Corp status. ​Rather than converting to a corporation and then electing S status, it is simpler to “check the box” and elect to file an LLC as an S corporation. Business owners may opt to convert back to an LLC at a later date if they choose. 

If business owners discover that S Corp status is not as advantageous as they thought it would be, the company can revoke the status at any time through a majority shareholder vote. The company can set its own revocation date and, if that date happens sometime during the tax year (rather than at the end of the tax year), two separate tax returns must be filed—one as an S Corp and the other as the LLC or C Corp.

Before moving ahead with choosing a business structure or type of tax treatment, take the time to understand the pros and cons of the available options. Your decision will affect you legally and financially, so consider doing more research and talking with licensed legal, tax, and accounting professionals for guidance. 

RELATED: 6 Business-Boosting Benefits of Incorporating Your Company

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Expert Tips to Help Small Businesses Maximize Holiday Retail Sales

Holiday shopping sale sceneBlack Friday, Cyber Monday—any sale, really—should be an opportunity to increase sales. Follow these steps to a successful holiday selling season.

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Black Friday, Cyber Monday—any sale, really—should be an opportunity to increase sales. Whether you started planning for the big holiday sales during the summer or have done nothing yet, you still have time to generate additional revenue if you act now.

Put serious thought into what you are offering before you launch. Poorly designed offers can damage your brand by really annoying your potential buyers.

First, always protect your brand

This is one time when you do not want to be copying what the  corporate stores are doing. USAToday lists tactics to avoid in its recent article “4 Black Friday Facts Retailers Don’t Want You To Know.”

All of these are common in big corporate stores on Black Friday weekend, and are definitely a bad idea if you want your customers to love you:

  1. Doorbuster deals are few and far between.
  2. Discounts are often inflated.
  3. Price-matching may be exempt.
  4. Fine print is everywhere.

Shoppers will eventually catch on to these tricks, probably sooner than later. This close to Black Friday and Cyber Monday, it may be too late to find your own version of a doorbuster to offer. And you probably won’t be doing any 70% discounts.

There are examples, though, of small businesses offering typical discounts and sometimes just regular pricing, but that still benefit from participating in these big sales days. Even if you aren’t interested in that, read on as these retail strategies can be implemented all year long.

Thanksgiving ecommerce spending in perspective

Source: https://www.statista.com/chart/7045/thanksgiving-weekend-e-commerce-roundup/

Be proactive: ask to be added to shipping sites and posts about sales deals

Reach out to parcel-forwarding companies in countries you ship to and ask to be featured on their sites and in their Black Friday and Cyber Monday promotions. They already have a target audience you want to reach.

For example, if you ship to the UK, develop a relationship with MyUKMailbox and ask to be added to their Best UK Black Friday Deals for 2017. Search for “parcel forwarding companies” + the country you’re interested in to find more of them.

Also, watch for location-specific post titles about sales events. Many sites are willing to add you to existing content when it benefits their readers to do so.

Check out this slideshow presentation “7 Best Black Friday Marketing Ideas” from Beeketing.

Expand your client base internationally

80% of small businesses that sell globally saw increased sales in 2016. Businesses located in smaller countries can increase their target audience by expanding to other countries. To keep it simple, use these tips to sell through eBay or Amazon.

Shipping internationally can get complicated quickly. Focus on one country at a time. Or skip the complexity altogether by letting your shoppers know about methods for buying internationally.

For example, there are companies that provide shipping addresses shoppers can use to order from other countries. They enable buyers to shop anywhere that ships to a particular country and have their packages bundled and forwarded to them. Do your due diligence as there are far too many parcel-forwarding services to mention in this post.

Parcel forwarding is primarily used by buyers outside the United States, who are served by far fewer e-commerce stores. Most small online stores based in the U.S. only ship within the country. But more are expanding, so always search their sites first for country information.

Make sure the countries where you ship are featured on your shipping information page. If you only sell in one country, put that on the page. The internet is worldwide and even if they’re not your buyers, it will save everyone time if you make this information obvious and easy to find.

Successfully promote without discounts

Kurt Elster from the Shopify Podcast explains in the video below how to successfully promote during the holidays even without discounts. You don’t have to be using Shopify to benefit from his tips.

Video Thumbnail

[Shopify] Your Money-Making Black Friday Email Marketing Plan

Black Friday, Cyber Monday—any sale, really—should be an opportunity to increase sales. Whether you started planning for the big holiday sales during the summer or have done nothing yet, you still have time to generate additional revenue if you act now. Put serious thought into what you are offering

He focuses on email, which is the first strategy to implement. Even people who usually ignore or delete most email during other times of the year are likely to open email messages when they’re doing holiday shopping.

Remember that during the holidays, both organic and paid traffic can be harder and more expensive to obtain. So start with any method you already have in place to reach existing customers. Get your target products onto a custom page and send that page to your customers via email and social media.

When you send email, suggest customers follow you on social accounts. When you post to social accounts, encourage them to subscribe to get special offers via email. Note that using an email subscription tab on Facebook works better for this than sending people off of Facebook to your site to subscribe.

Find a creative way to get shares and interest and pin it on your Facebook page. Threads asking others to share their own stories can increase interactions. Asking followers to post photos or videos works even better. People are more likely to share what they themselves have contributed, which can help spread your offers.

What to feature by season

Look at your store history for what sold well this time last year and throughout the holiday season. Sort by highest dollar value and then by quantities sold. Those are the products or services to promote, so output them to a list. (Get in the habit of doing this all year long to see impressive sales gains.)

Check your inventory or contact your supplier to verify products you wish to feature are available. You might even ask for a special price for featured items based on the quantity you feel you could sell. Make a business case for increasing sales volume by offering a better discount (if possible).

See the image below about what sells well to impulse buyers:

Statista Black Friday Impulse Buys

Source: https://www.statista.com/chart/6887/black-friday-impulse-buys/

Now that you have products, decide on pricing. Even though deep discounts are heavily advertised, that does not mean only discounted items will sell. Focus first on getting your chosen products in front of people who have bought from you in the past, as they are the most likely to convert.

Bargain cost-per-click (CPC) PPC ads during the week before Thanksgiving

According to Holiday CPC Research by HYFN, “The week leading into Thanksgiving, Black Friday, and Cyber Monday had the second-lowest CPC of any week observed. This could be due to advertisers holding off on ads until a day or two before the actual shopping holidays, leading to a bit of a dead week as advertisers save up their spend for the big days.”

While many small businesses are unable to compete with the high cost per click of ads running on Thanksgiving and after, they might have an opportunity to land some new customers this week if they act now. Be sure to optimize your site to get their email address and encourage them to connect with you on Facebook and elsewhere.

Find free ways to be featured

Everyone and their brother will be publishing Black Friday and Cyber Monday deal pages, emails, and social posts. Research to find any that are highly visible or ranking on search that are especially relevant to what you offer.

Contact publishers of relevant sales and ask to be added to their lists and pages. (Do the same for other holidays and seasonal opportunities.)

Onsite optimizations to increase conversions

There are many ways to increase conversions on your site. Here is a list of tips from this video:

  • Use a promo or hello bar across the top and change the messages regularly.
  • Create gift idea collections under a certain dollar amount—your e-commerce platform may have a smart collection option to automate sorting by price range, items in stock, and best sellers.
  • Source or create gift guide banners to link to your gift idea collections.
  • Add more methods to pay, especially mobile-friendly methods: ApplePay, PayPal, Amazon.
  • Optimize for speed including uninstalling services which may not handle increased traffic and image compression.

RELATED: Do Customers Secretly Hate Your E-Commerce Website?

Being very clear about where you ship and what it costs is critical. In nearly every survey, the #1 complaint by online shoppers is shipping costs. Whenever possible, offer free shipping for a minimum purchase of $50, $75, or whatever number makes sense for you financially. (You can exclude particularly heavy products, but make sure the product page discloses this.)

Putting icons for the payment methods you accept increases sales and is appreciated by buyers who do not use credit cards (or just don’t have theirs handy). You do not want to force a customer to go through the entire checkout process only to find out you don’t accept PayPal or whatever payment form they use.

Statista Thanksgiving weekend e-commerce roundup

Source: https://www.statista.com/chart/7045/thanksgiving-weekend-e-commerce-roundup/

Are you making your buyers mad?

Pay attention to feedback about your discounts and special offers. Creating a sense of urgency is a common method for increasing conversions, but making the window to buy so short that interested customers miss out will not have the desired effect.

You want sales without making your buyers angry enough to voice their complaints online. Frustrate them often enough, and they may even stop buying from you. Think about how offers affect how people feel about your brand.

I find eBay’s special offers extremely frustrating. They message far too often, and by the time I see the offers they have already expired. When you message too often, those messages will be ignored or left for a later that rarely comes.

An online pet store I visit has a large 30% off banner on their home page. But that deal never applies to pet food, which is the reason I visit their site. After spending hours trying to find the perfect dog food, not finding out the discount doesn’t apply until checking out makes a site memorable—in a negative way. Vary your offers to keep shoppers interested.

Be careful your deals don’t torpedo your profits

I recently purchased a shirt on eBay. The seller wisely included a coupon for $10 off my next purchase. This is an excellent method for increasing repeat sales. However, they did not restrict the coupon to only the price of the product and not the shipping, nor did they require a minimum purchase.

What that means to their bottom line is they not only end up giving away products for free, they are also paying for the shipping out of their profits. Maybe that is a strategy that works for them because they want to either engender loyalty, or buyers rarely only spend exactly $10 on their second order.

In my case, when I got a free product with free shipping, it also came with another $10 coupon. Hopefully, you can see where I’m going with this. Their customers could just keep getting free products as long as they keep sending out $10 coupons.

The only way this could make sense is if the clients were so excited about getting totally free products that they decided to place larger orders, once they knew the products would arrive as described in a prompt manner.

Require a minimum purchase to use coupons and other special deals to avoid this issue and increase your average sales. It is more typical to not have coupons apply to shipping costs.

Avoiding legal issues related to deal offers

Remember the fine print mentioned at the beginning? It is there to protect sellers. Sales banners and ads often have limited space, so it is critical that any restrictions and fine print are available where buyers can find them.

Put an asterisk next to the offer and explain the limitations somewhere on the same page, or you risk more than just making your customers mad. They might even sue you. Never make a public offer without including details to protect yourself. Think “while supplies last,” for example.

This advice also applies to oral promises. Make sure you train anyone manning your chat or answering your phones to not promise what you cannot deliver. Contrary to popular belief, “a contract does not have to be in writing in order to be enforceable,” states attorney John Artimez. Also, if you decide to expand globally, make sure you have all your legal bases covered.

RELATED: 10 Steps to Successfully Expand Your Business Overseas

Planning ahead for future holiday seasons

Now that you have some strategies for increasing income from seasonal sales, plan ahead. Build more connections with your customers throughout the year. Get started on your Black Friday/Cyber Monday as early as mid-summer.

Forget Black Friday - Most Holiday Shopping Happens in DECEMBER!

Source: https://www.statista.com/chart/6851/most-holiday-shopping-happens-in-december/

You could even think about lining up a doorbuster product or two of your own for next year. You could work with a drop shipper able to stock large quantities. Another alternative is to obtain an SBA-backed short-term microloan to cover seasonal inventory costs.

Stop procrastinating—take action now to increase income

No matter how busy you are, there is no time to waste. At a minimum, send your email subscribers an offer. Not sure what to send? Read HubSpot’s “What Are Your Email Marketing Plans for the Holidays?

So many businesses see increases of 10, 20, or even 30%+ from every email they send, yet they do not consistently use their mailing lists. If nothing else, do at least this. Better yet, download the guide and checklist for “10 Marketing Must-Dos Before Cyber Monday.”

10 Must Dos Before Cyber Monday Hubspot Checklist

Source: https://offers.hubspot.com/marketing-must-dos-cyber-monday

RELATED: The 12 Days of Christmas Retail

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The 10 Elements of Great Web Content

attracting visitors to websiteGood news: You don’t have to be a professional writer to craft effective content for your business website or blog. But what you write must follow these rules if you want to get eyeballs.

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How do you define great web content? Creating web content that attracts eyeballs can seem like an uphill battle, especially if you’re not a born wordsmith. Good news: You don’t have to be a professional writer to create web content that works. Here are 10 elements of great web content.

1. Goal-oriented

What do you want your content to accomplish? Knowing that is the first step in achieving your goal. For example, you might have content to educate readers about what you sell (and why they need it), content to persuade them to buy, content that’s purely product descriptions, or content that gets them to follow you on social media.

2. Designed for your target customer

Web content is always more effective if it’s written with a specific person in mind. If you have buyer personas for your customers, imagine those as you write. If you don’t, imagine someone you actually know who fits your target customer profile. If your business targets multiple different kinds of customers, that’s OK—just create web content tailored for each of them. For instance, a healthy restaurant might have different content for people following different types of diets.

3. Offers something of value

Good content is useful to the reader. I always tell clients who are trying to think of ideas for web content to start by answering your customers’ and prospects’ most common questions. If you own a dog-walking service, you could create web content such as “How Often Does My Dog Need a Walk?” or “Why Skipping Walks Can Hurt Your Dog’s Health.”

4. Attention-getting

You’ve got to catch people’s eyes before they’ll read your content. Write headlines, subheads, and captions that convey what your online content is about and what value readers will get from it. Will they learn something, laugh, save money, etc.? Incorporate images and design elements that draw the eye.

5. Uses SEO to get more hits

Search engine optimization (SEO) is key to getting people to your website. Incorporate the keywords people use when searching for companies like yours. You can find keywords using the Google Keyword Planner or the Bing Keyword Research Tool. Long-tail keywords (which have three or more words) can be better for a small business since there’s less competition for them.

Place keywords in your body copy, headlines, subheads, meta descriptions, and tags—but don’t go crazy. Stuffing your site with keywords will backfire by hurting your SEO. Read Google’s SEO Starter Guide to learn more.

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6. Easy to read

Who’s got time to wade through long, drawn-out content online? Not me—and not your customers, either. Convey the key points quickly with short paragraphs, plenty of subheads, and bulleted or numbered lists so people can get the gist at a glance.

To maximize your audience, your content should be at or below a sixth-grade reading level. Try using Hemingway Editor—it helps you improve readability and assess your writing’s grade level.

7. Brand-appropriate

A dog-walking website and a law firm will have very different “tones of voice” in their content. Make sure all of the content on your website supports your business brand. Consistency is important to build brand awareness.

8. Action-oriented

All of your online content should include a call to action of some kind. In most cases, this will be something that moves readers closer to buying from you. For instance, your blog post on “How Often Does My Dog Need a Walk?” could end with “Schedule your first dog walk by October 30 and get 20% off your first month.” You can also encourage readers to take more general actions aligned with your business values, such as playing with their dog more often or scheduling regular vet appointments.

9. Supported by your website

Your website can make or break your web content. It’s got to be easy to navigate, attractive to look at, and mobile friendly. Nearly half the time people spend online is on a phone. If prospects are reading your website on a tiny screen, simple text with lots of breaks will help them focus. Mobile-first design ensures your site works on any device. Finally, optimize your site speed—no one’s going to stick around if your site takes forever to load.

10. Amplified

Don’t forget to amplify your web content by sharing it (and your URL) everywhere you can, including on social media, in your email marketing, in your email signature line, and even on print marketing materials. Put share buttons on your content so customers can easily spread the word. Try these tips to get more results from your content marketing efforts.

RELATED: 4 Fundamental Content Marketing Lessons You Can Learn from a Young YouTube Superstar

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10 Key Issues for Fintech Startup Companies

Fintech conceptStartups in the Fintech space face a number of issues and challenges, from regulatory to fundraising and competitive issues. Here are 10 of those key issues and challenges.

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By Richard D. Harroch and Melissa Guzy

Investment in financial technology (“Fintech”) companies is growing dramatically. Global Fintech funding has risen to over $100 billion, fueled by large M&A deals and large rounds of financing. Investment in Fintech companies is expected to continue to grow significantly in the next few years, as such companies offer outsized growth opportunities.

Fintech companies encompass a broad landscape of businesses, generally around financial-oriented services and products. Examples of Fintech related companies or products include:

  • Payment infrastructure, processing and issuance, such as services provided by Square, Ant Financial, Revolut, and Stripe
  • Stock trading apps from Robinhood, TD Ameritrade, and Schwab
  • Alternative lending marketplaces, such as Prosper, LendingClub, and OnDeck
  • Cryptocurrencies and digital cash, a prime example of which is Bitcoin
  • Blockchain technology, such as Ethereum
  • Insurtech, which seeks to modernize and simplify the insurance industry, with companies such as Lemonade, Oscar, and Fabric
  • Money transfer and remittances, including services from TransferWise, PayPal, and Venmo
  • Mortgage lending, such as through LendingHome and Better Mortgage
  • Robo investment advisors, such as Betterment and Wealthfront
  • Neobanks, including Chime, N26, and Monzo
  • Credit reporting, such as Credit Karma
  • Online business loan providers such as Lendio and Kabbage
  • Small business credit cards, payments, and financing, such as through Brex and Fundbox
  • Financial cybersecurity companies seeking to protect institutions from money laundering, chargeback risk. and cybercrimes, such as Forter, EverCompliant, and CrowdStrike.
  • Infrastructure and software to power financial applications, such as from Plaid

See a thorough analysis of companies in the Fintech space in Fintech Insights by FT Partners.

Fintech companies fall into either a business-to-consumer sales model (B2C) or business-to-business model (B2B). Each model has its own challenges, although the B2C sales cycle tends to be much shorter than the B2B sales cycle, as businesses are slower to adopt new technology.

A number of Fintech startups show great promise and are quickly earning rising market valuations. Some of these companies have grown, or will grow, to become valued at billions of dollars. For example, Stripe is valued at over $35 billion and Square is valued at $25 billion.

Startups in the Fintech space face a number of issues and challenges, from regulatory to fundraising and competitive issues. In this article, we will outline 10 of those key issues and challenges.

1. Raising Venture Capital or Strategic Financing

Raising venture capital financing is never easy for Fintech companies. Venture investors will raise a number of key questions in their due diligence process, including:

  • What problem in the financial process is the company’s solution looking to solve?
  • Is there a qualified management team?
  • Is the market opportunity big?
  • What positive early traction has the company achieved? Are there early or pilot customers?
  • Are the founders passionate and determined?
  • Do the founders understand the key financials and metrics of their business?
  • Have the founders been referred to the investor by a trusted colleague? (It’s extremely difficult to get a venture investor interested through cold calling or cold emails.)
  • Is the investor pitch deck professional and interesting? (See item #2 below as to what your investor pitch deck should contain.)
  • What are the potential risks to the business, especially regulatory risk?
  • Why is the company’s product or service great?
  • How will the investment capital be used and what progress will be made? Will it be enough to obtain the next round of financing?
  • Is the expected valuation for the company realistic?
  • Does the company have differentiated technology?
  • What is the company’s intellectual property?
  • Are the company’s financial projections realistic and interesting?

See 15 Key Questions Venture Capitalists Will Ask Before Investing in Your Startup and A Guide to Venture Capital Financings for Startups.

Ideally, Fintech companies will attract the right venture capital investors with Fintech experience and the right strategic investors.

Here are some examples of how experienced Fintech investors can assist Fintech companies:

  • Provide market, product, and competitive intelligence
  • Help to refine the marketing plan and the customer target list
  • Offer introductions to:
    • Potential customers
    • Potential strategic partners, including providers of debt financing
    • Venture capital investors interested in the Fintech space
    • Potential management team members

Strategic Fintech investors can be:

  • Pilot customers
  • Distribution partners
  • Technical and product advisors
  • Strategic partners collaborating on product development
  • Helpful in providing insight into regulatory issues
  • An M&A acquirer of the Fintech company

However, Fintech companies need to avoid granting too many rights (such as rights of first refusal on sale of the company), as this will chill or kill future fund raisings or M&A opportunities. Additionally, tailoring product development to the needs of a strategic investor can turn a startup into a captive development team.

2. Having a Great Investor Pitch Deck

Both venture investors and strategic investors expect to see a concise and interesting summary of the business before they will even consider taking a meeting. Therefore, it’s crucial that a Fintech startup creates a great investor pitch deck that tells a compelling story and shows scalability.

You want your investor pitch deck to cover the following topics, roughly in the order set forth here, and with these titles:

  • Company Overview (A summary overview of the company)
  • Mission/Vision of the Company (What is the mission and vision?)
  • The Team (Who are key team players? What is their relevant background?)
  • The Problem (What big problem are you trying to solve?)
  • The Solution (What is your proposed solution? Why is it better than other solutions or products?)
  • The Market Opportunity (How big is the addressable market?)
  • The Product (Give specifics on the product or service.)
  • The Customers (Who are the target customers? Why will there be a big demand from these customers? How easy is it for a customer to adopt and use?)
  • The Technology (What is the underlying technology? How is it differentiated? Is it defensible and difficult to replicate?)
  • The Competition (Who are the key competitors? How will you be better than the competition?)
  • Traction (Early customers, early adopters, revenues, press, partnerships)
  • Business Model (What is the business and revenue model? Is it scalable? What are the acquisition costs and stickiness?)
  • The Marketing Plan (How do you plan to market? What do you anticipate for customer acquisition costs versus the lifetime value of the customer?)
  • Financials (Projected revenues, key assumptions, and EBITDA)
  • The Ask (How much capital are you are trying to raise? What progress will you make with that capital?)

Here are some helpful pitch deck tips:

  • Tell your story in 15 to 20 slides. (If you can’t tell the story with brevity, you can’t tell it well.)
  • Explain why the market opportunity is or will be large.
  • Describe the talent on your team.
  • Don’t provide excessive financial details. Hit the key indicators and save the rest for follow-up.
  • Don’t try to cover everything in the pitch deck. Your in-person presentation will give you an opportunity to add and highlight key information.
  • Use plain English—too much jargon or acronyms can distract from your story and you will lose credibility.
  • Don’t underestimate or belittle the competition, or dismiss the regulatory risks.
  • Make sure your information and metrics are up-to-date.
  • “Look and feel” matters. Think of it as your investor interface, and consider getting professional help from a graphic designer.
  • Review other pitch decks for ideas on presentation. Do a Google search and you will find hundreds of pitch decks online.
  • Be sure to include the following wording at the bottom left of the pitch deck cover page: “Confidential and Proprietary. Copyright (c) by [Name of Company]. All Rights Reserved.”
  • Send the pitch deck in a PDF format to prospective investors in advance of a meeting. Relying on Google Drive, Dropbox, or some other online service just puts up a barrier to the investor actually reading it.

For additional guidance, as well as sample pitch decks, see How to Create a Great Investor Pitch Deck for Startups Seeking Financing and The 17 Biggest Mistakes Startups Make With Their Investor Pitch Deck.

3. Regulatory Issues for Fintech Companies

If you are in the Fintech space, you should anticipate that dealing with regulation will become a daily norm. There is increasing pressure on Fintech startups, globally, to address and deal with existing or potential regulatory hurdles.

It is important to work with regulators and make sure that you hire a capable team member who is dedicated to understanding the trends, can interface with the appropriate regulatory bodies, and who has a solid understanding of any regulatory impact on your product or the way you market the product. Many countries have “Regulatory Sandboxes,” such as Singapore, Australia and the UK, that can assist and guide Fintech companies.

However, in the United States, Fintech companies must comply with both federal laws and a patchwork of state laws. Although certain federal agencies and state regulators have voiced support for promoting Fintech innovation by simplifying the applicable regulatory regime, in the near term, Fintech companies should expect to engage specialized legal counsel experienced in navigating the morass of laws, regulations, and court decisions that could apply.

As a startup, it’s important to be aware of the regulatory framework. A few key issues to consider include:

  • Are there existing regulations today that regulate the company’s products or services?
  • If there are existing regulations, does the company comply?
  • What licenses will be required?
  • Does it make sense to partner with another company that already has the required licenses?
  • If you are going to partner, what would be the economic split? What is required to partner from each company’s perspective? What is the risk? Is this a long-term approach or an intermediary step?

If the company is dealing with securities, deposits, and/or lending, then legal counsel should be consulted on an appropriate approach before marketing to consumers. 

Privacy and protection of personal information is a huge issue right now, with new laws coming out all over the world. Even large financial institutions are struggling to keep up with new requirements. The following consumer privacy, data security, and financial services-related laws or regulatory schemes are important for Fintech companies:

  • Federal Trade CommissionThe FTC is broadly empowered to bring enforcement actions to protect consumers against unfair or deceptive practices and has developed a sort of “common law” with respect to regulatory expectations. The FTC has taken the position that “deceptive practices” include a company’s failure to comply with its published privacy policy and its failure to implement “reasonable” security measures to protect consumers’ personal information.
  • Consumer Financial Protection Bureau–Also regulates at a federal level certain financial services provided to consumers. The CFPB recently issued new policies intended to promote Fintech innovation, but these policies remain untested, and there is a key unresolved issue regarding whether federal regulations can preempt state laws or regulations governing the same subject matter.
  • European Union GDPR rulesEurope’s data protection laws for companies that may collect or process EU residents’ data. GDPR rules have a global reach as they regulate any international company which collects or processes EU residents’ data.
  • Telephone Consumer Protection ActImposes restrictions on telemarketing.
  • State data breach notification lawsAll 50 U.S. states require customer notification of security breaches involving personal information; moreover, many states are establishing minimal “reasonable” standards to protect consumer data.
  • CAN-SPAM lawsPlaces restrictions on email marketing.
  • Evolving federal and state lawsFor example, the California Consumer Privacy Act of 2018, which imports EU GDPR-style rights for California residents around data ownership, transparency, and control.
  • Gramm-Leach-Bliley ActImposes privacy and security obligations on insurance companies, banks, and other covered financial institutions with respect to customer financial records.
  • New York Department of Financial Services cybersecurity rulesImposes specific security requirements, including technical controls and reporting obligations on licensed entities. The requirements are directed at the security of the systems underlying the financial sector, not simply on data.
  • Anti-Money Laundering lawsFintech companies that handle, remit, or transmit funds may be required to comply with laws designed to prevent money laundering and other illegal activities.
  • International lawsThere are numerous countries around the world developing their own requirements. Some of these laws require that transactions have to be processed and information maintained in the country.

4. Competing With Huge Financial Brands

Today, Fintech companies don’t only compete with the large existing financial powerhouses, such as Goldman Sachs, Citi, or PayPal, but they soon will have to contend with Amazon and other technology companies expanding into financial services. A Fintech startup cannot underestimate the spending power of the incumbents and their willingness to spend when it comes to direct consumer marketing.

A Fintech company needs to differentiate its product and services and ensure defensibility. The target market might be poorly understood or underserved, or consumers are simply dissatisfied with the current offerings. In the infrastructure space, it might be that a new trend is emerging and a new solution bridges a product gap or reduces friction.

As “open banking” expands globally, along with PSD2 (the European Payment Services Directive applicable to the payments industry) and GDPR, new opportunities are emerging for Fintech companies. The introduction of new regulations is leveling the playing field and creating new opportunities for products and services in both the B2C and B2B spaces.

Although large incumbents have been working to address these changes, they are generally slower than the average Fintech company; speed to market is an important competitive advantage, but might not be sustainable over the long term. 

A Fintech B2C company should be able to answer the following:

  • What problem do you solve that the large incumbents are not addressing, and why are they ignoring that market segment or opportunity?
  • Are you trying to change customer behavior? If so, what is your approach and why do you think it is possible?
  • What are customers risking if they adopt your solution versus an incumbent’s product?
  • Can you build trust with your customers?
  • How will incumbents react? And if they do, how long will it take them?
  • Do you have any technology that is defensible with your solution?

For a B2B company, the questions are centered around product differentiation and the problem you can solve for the enterprise. Remember that the product needs to solve a significant problem in order for a large company to bet on a startup versus a larger more established company. The following list highlights the most critical points:

  • Does the product solve a pain point today that is causing the company either significant expense, loss of business, or potential regulatory fines?
  • Is the product robust enough to compete with the incumbents and beat them in a head-to-head match up?
  • Will the incumbents use it as a loss leader, eliminating any potential margin?

5. Cost Effective Marketing to Acquire Customers

Customer acquisition is a significant issue for Fintech startups. To be honest, entire books are written on the topic of customer acquisition, and the methods will vary depending on whether the company has B2C or B2B offerings. But, in brief, key ways Fintech companies can market themselves are:

  • Search engine ads—Pay Google, Bing, Yahoo, Facebook, or other sites to send you traffic (such as through Google Ads). However, such ads are often expensive and not cost-effective, so you need to do testing/pilot programs to see what keywords work and at what price.
  • Company website—Build a great site with lots of high-quality, original content that is search engine optimized as well as optimized for mobile traffic. Continue to add fresh content to the site.
  • Social media marketing—Have a smart social media plan to drive traffic from Facebook, YouTube, Twitter, LinkedIn, Instagram, Pinterest, and other free social media sites.
  • Content marketing—Prepare well-written articles and try to have them posted on other quality sites, such as AllBusiness.com or Medium.com, with links back to your site. Employ content widgets on third-party websites through Taboola or other third-party content discovery platforms.
  • Affiliate programs—Affiliate programs work as a mechanism to pay a finder’s fee to an affiliate who refers a client to a Fintech company. For example, a credit card issuer may pay a $75 fee for each client referred who signs up for the issuer’s credit card.
  • Press releases—Issue press releases announcing major developments in your company: new financing raised, new partnerships, new senior employees hired, and new product announcements.
  • Influencer marketing—Implement a marketing/advertising campaign with the help of influencers who have a large following on LinkedIn, Instagram, Twitter, Facebook, YouTube. and other social media sites.
  • Videos—Produce videos that describe your services in an interesting and professional manner. You can then post these videos on your website, YouTube, and other social media sites.
  • Direct mail—Direct mail can be a valuable channel for Fintech companies to reach potential customers. Targeting information can be combined with credit data, making it easier to identify valuable customers, and the price of direct mail may be more cost effective than search engine advertising.
  • App marketing—If you have a mobile app, you will want to optimize it to rank higher in app store search results. Consider paid promotions in the Apple App Store or Google Play.

Although venture capital financing has been flooding into Fintech startups, marketing is an easy place to waste money. We have been in a period of “growth at all cost,” but this will not be sustainable.

We recommend carefully constructing a marketing strategy before you launch and making sure your tech can support analyzing cohort data on a granular level. Creating a budget for different tests on short cycles will help you to eliminate any strategies that are not working and fine tune marketing programs that are showing success. Keep fine tuning and experimenting, and making sure the data collected shows the right metrics to determine whether the business will thrive at scale.

For B2C companies, there needs to be a virality effect that emerges to reduce the overall acquisition costs and drive scalability. For B2B2C companies, the marketing is more complex. Initially you need to market to another business and convince them that you will increase their revenue, but ultimately sales are driven by the B2C component.

Venture investors will often ask B2C Fintech companies the following questions during due diligence:

  • How are you going to acquire customers?
  • What is the customer acquisition cost?
  • Can you demonstrate what has worked and what has not?
  • How are you striking the balance between ease of use and detecting fraud?
  • Can you demonstrate that the approach is scalable?
  • What is the payback period?
  • What is the long-term value versus the cost of acquisition of a customer?
  • How many times per month will customers use the product/service?
  • What is the churn? How “sticky” is the solution?
  • How do you measure success?

The questions from investors for B2B companies is quite different. Many of the questions are around the initial customers. B2B companies need to think about marketing very differently; acquiring the right initial customers is more important than branding. Being invited to speak at the relevant conferences and reaching the right people at a prospective customer are both important.

6. Getting Early Adopters and Avoiding Slow Sales Cycles

Getting early revenue traction is critical to determining initial product market fit. Early adopters are important for this reason. In B2B, the sales cycle is long, especially for behemothssometimes 24 to 36 months to reach a steady state of recurring revenue. For smaller enterprise customers, the sales cycle can be shortened to six months. We recommend a pipeline that is a mixture so that the product marketing and engineering teams can receive feedback on the product sooner and are able to iterate on product design to meet market requirements.

Getting early adopters in B2C is much easier, especially if a company uses incentives. Companies need to understand their market segments, the sales cycle for the “proof of concept” phase, and the sales cycle for broader commercial rollout. In a company’s early days, it is fine to be opportunistic. but at some point, usually when the company reaches $5 million to $10 million in revenues, an organized sales process needs to be implemented. At this point, an opportunistic approach can become problematic when addressing issues associated with competing sales, engineering, and customer requests.

Too many companies don’t mature organizationally and remain sales opportunistic Taking the time to prepare a detailed market segmentation and to build a sales process and pipeline will pay off long term. Many Fintech CEOs are trying to please their venture capitalists, but implementing a process will lead to more sustainable growth. This is the time to really understand product market fit and to determine what other features and functionality should be added to meet specific client requirements.

The following is a list of questions a Fintech company may be asked by a venture capitalist. Many startups underestimate their sales cycle in both the budgeting and due diligence processes. However, a realistic sales plan can be developed from the answers to these questions:

  • Who is the target audience?
  • What is a realistic sales cycle for this market?
  • Is there a “proof of concept” requirement?
  • How long is the proof of concept?
  • Will you get paid for the proof of concept?
  • What are the metrics that determine a successful proof of concept?
  • Who is the decision maker at the customer’s company?
  • Will the proof of concept lead to revenue? And if so, what can you expect in years one, two, and three?
  • What other features need to be developed to go into full commercialization?
  • With the product you have today, who is the ideal customer and are they interested?
  • What are competing solutions?
  • How much do customers pay for competing solutions?
  • If you win a customer, will they be a good reference for future potential customers?
  • What is a realistic revenue ramp for this customer?
  • Does it require significant internal resources to support this customer?
  • Are you betting your company on the right customers?

7. Cybersecurity and Data Privacy Issues

Data privacy, cybersecurity, and data breach issues are especially important in the Fintech space. Fintech companies often have access to highly confidential information on individuals: Social Security numbers, credit card information, net worth, income, and much more.

Hackers have become increasingly sophisticated at illegally accessing a Fintech company’s data. Their latest stealth methods have made it more difficult for companies to detect and defend themselves from such attacks. Advanced covert surveillance techniques allow attackers to monitor and steal data—often sensitive proprietary information or strategies—over a long period of time without detection.

A delay by a company to discover and report a data breach can result in significant negative publicity, as well as legal exposure, including the risk of substantial fines and potential liabilities due to class action lawsuits and shareholder derivative actions. The FTC and state attorneys general have taken action against companies that failed to immediately report data breaches. A few high-profile companies that have had actions brought against them due to delays in reporting a data breach include Equifax, Uber and Google+.

Investors in Fintech companies may want to review a company’s procedures to protect the data of employees, customers, and business partners, as well as the company’s networks and systems. Questions they may ask include:

  • What is the inherent cybersecurity risk of the company’s business model?
  • Does the company have a written cybersecurity program that establishes administrative, operational, and technical controls to mitigate security risks?
  • Does the company have appropriate policies, including at a minimum, an information security policy, an employee-facing acceptable use policy, and a data classification and handling policy?
  • Does the company conduct regular risk assessments, and vulnerability and penetration testing of its systems?
  • Does the company have dedicated security personnel?
  • Does the company perform an annual risk assessment related to privacy and cybersecurity?
  • Does the company train its employees and contractors on privacy and security best practices?
  • Does the company have a comprehensive incident response plan, and is it tested?
  • Does the company manage vendor risk?
  • Does the company have a business continuity and disaster recovery plan, as well as backup protocols?
  • Does the company protect the physical security of its facilities and assets?
  • Does the company implement “reasonable” technical security controls (or comply with mandatory standards), including for example, anti-virus software, encryption, access controls, network monitoring, authentication, and asset management?
  • Does the company have an insider threat program to detect the potential theft of proprietary information or intellectual property?
  • Does the company require privacy impact assessments when implementing new systems or processes?
  • Has the company suffered past data breaches and what were the consequences?

Investors will also review whether the company is in compliance with applicable laws, as noted in items #3 and #10 in this article.

For a comprehensive discussion of data privacy and cybersecurity issues, see Data Privacy and Cybersecurity Issues in Mergers and Acquisitions: A Due Diligence Checklist to Assess Risk.

8. Intellectual Property and Technology Issues for Fintech Companies

Fintech investors are particularly interested in a company’s software, technology, and underlying intellectual property. The questions the investors will pursue include:

  • How differentiated is the company’s technology?
  • What competitive advantages will there be over existing Fintech offerings?
  • How easy will it be to replicate the company’s offering? How long will it take?
  • How costly will it be to fully build out, maintain, and enhance the offering?
  • What key intellectual property does the company have (patents, patents pending, copyrights, trade secrets, trademarks, domain names)?
  • How was the company’s intellectual property developed?
  • What comfort is there that the company’s intellectual property does not violate the rights of a third party?
  • Is the intellectual property properly owned by the company, and have all employees and consultants assigned the intellectual property over to the company?
  • Would any prior employers of a team member have a potential claim to the company’s intellectual property?
  • If the intellectual property was developed at a university, through government grants, or with open source technology, does the company have the right to use the technology?
  • Where does the company’s intellectual property reside? (This can have important tax consequences.)

See 10 Intellectual Property Strategies for Technology Startups.

9. Business, Revenue, and Expense Model Issues

Investors are particularly sensitive to a number of key business, revenue, and expense model issues inherent in Fintech companies, including:

  • With so many Fintech offerings out there, how can you get noticed and be differentiated?
  • What is the customer acquisition cost?
  • How easy is the onboarding process for new customers?
  • Can the company find a scalable way to acquire users?
  • How will the company detect fraud?
  • If the product or service is adopted, is it difficult for a customer to transition to an alternative?
  • How can churn be mitigated?
  • What is the long-term value of a customer?
  • Can the long-term value of the customer be increased over time while decreasing the cost of acquisition of a customer?
  • How often is the product used by the customer each month?
  • Is the service user-friendly enough?
  • What level of customer support is necessary to ensure customers are satisfied?
  • What ongoing product improvement costs will the company face?
  • Can the company manage a significant growth in users from a technical standpoint with acceptable financial consequences?
  • Is the business capital intensive?
  • Can the company raise sufficient capital to cover the company’s anticipated burn rate? 

When building a company’s financial model, it is important to keep expenses as lean as possible until a revenue trajectory can be established. We suggest building the model from the ground level. On the expense side, start with the core engineering team, add a business development person, and one good “athlete” who can be a multitasker. Don’t go crazy on fixed expenses.

Startups are usually very accurate at projecting their expenses, but it’s far more difficult to project revenues. It can be difficult to judge when to ramp up expenses. For a B2B business, even if you were to execute perfectly, there is a natural revenue ramp that occurs and it is difficult to alter the trajectory. Fintech companies, therefore, should avoid overspending on sales and marketing too early.

Once the burn rate gets too high and revenue does not materialize, it is usually difficult for a company to recover. Early-stage companies should avoid the following expenses:

  • Fancy offices and too much office space
  • Too many parties paid for by the company
  • Having a large sales and marketing team before product/market fit has been established
  • Too many pilots with large financial institutions without predetermined goals/metrics that will lead to full scale implementation
  • A lengthy period of product development before being able to launch a minimally viable product
  • Employee salaries comparable to Amazon, Google, or an investment bank
  • Long-term contractual commitments

Key early expenditures for Fintech companies should include:

  • Engineering talent
  • Product marketing talent
  • A solid business development employee
  • Decent initial office space located in an area where the company can attract top talent
  • Regulatory analysis

10. Legal Issues for Fintech Startups

Investors will look at several questions to ensure a Fintech company’s house is in order from a legal perspective:

  • Has the company been properly organized? (Most investors prefer investing in corporations, not LLCs.)
  • Where is the company incorporated?
  • Is the company paying attention to important contractual issues?
  • Has the company complied with applicable securities laws when issuing stock or options?
  • Has the deal and equity split between co-founders been made clear? What happens if a co-founder leaves the company?
  • Is the company in compliance with employment laws? Does it have appropriate policies in place, such as those prohibiting sexual harassment? Has it obtained all appropriate employment documents from employees?
  • Are all employees and contractors required to sign Confidentiality and Invention Assignment Agreements?
  • Is the company taking appropriate steps to protect itself in its customer contracts (liability limitations, arbitration provision in the event of a dispute, etc.)?
  • Are key tax considerations taken into account?
  • Does the company have an employee manual?
  • Does the name of the company or its service pose any trademark issues, domain name problems, or other issues?
  • Should the company implement an employee equity plan to incentivize employees?
  • Is the company complying with all applicable laws and regulations (see item #3 in this article), and where the laws are unclear, what is the regulatory risk?

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____________________________
*We express our appreciation for the helpful comments on this article from Dora Mao, Senior Counsel at Orrick, Herrington & Sutfcliffe LLP, who is an expert in Fintech, capital market, and lending transactions. We also express appreciation to Jim Hoffmeister, Global Corporate Controller and Chief Accounting Officer at Visa Inc.

Copyright © by Richard D. Harroch. All Rights Reserved.

About the Authors

Richard D. Harroch is a Managing Director and Global Head of M&A at VantagePoint Capital Partners, a large venture capital fund in the San Francisco area. His focus is on internet, digital media, and software companies, and he was the founder of several internet companies. His articles have appeared online in Forbes, Fortune, MSN, Yahoo, FoxBusiness, and AllBusiness.com. Richard is the author of several books on startups and entrepreneurship as well as the co-author of Poker for Dummies and a Wall Street Journal-bestselling book on small business. He is the co-author of the recently published 1,500-page book by Bloomberg, Mergers and Acquisitions of Privately Held Companies: Analysis, Forms and Agreements. He was also a corporate and M&A partner at the law firm of Orrick, Herrington & Sutcliffe, with experience in startups, mergers and acquisitions, and venture capital. He has been involved in over 200 M&A transactions and 250 startup financings. He can be reached through LinkedIn.

Melissa Guzy is the Co-founder and Managing Partner of Arbor Ventures. Prior to founding Arbor Ventures, Melissa was Managing Director and Head of VantagePoint Asia, a $4.5 billion venture capital firm based in Silicon Valley with offices in Beijing, Shanghai and Hong Kong. As a thought leader in the global technology community, with experience across Asia and Silicon Valley, Melissa has been recognized as one of the Top 200 Fintech Influencers in Asia in 2018. Melissa brings with her a unique combination of global experience and perspectives, with deep technological and innovative prowess anchored in an extensive international network. Melissa is a regular speaker on Venture Capital markets, key Fintech trends and the changing global landscape. Melissa serves on the Board of Directors of the HKVCA and the SVCA, and is Co-Chair of the HKVCA Venture Committee. She also served on the Board of Innovation for the Hong Kong Securities and Commodities Commission. Melissa has been recognized as one of the Top 100 Influencers in FinTech, NxtBnk (2016), Always On FinTech Power Player (2015 & 2016), and One of the Most Influential Women in Tech in Asia. She is a Hopkins Fellow and participated in the Women’s Leadership Program at Harvard University. She has been a speaker at Financial Times Top 50 Women in Asia, Money2020, Asian Financial Forum, RISE, and a guest lecturer on the Venture Capital industry at the University of Florida, Hong Kong University, the Chinese University of Hong Kong, and the Hong Kong University of Science and Technology, in addition to being a Contributing Expert at CFTE, the Centre for Finance, Technology and Entrepreneurship.

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The Most Important Personality Trait All Business Leaders Should Have

boss encourages employeeYou might assume that to be a great business leader, you have to be aggressive and attention-seeking. But what if the truth about effective leadership is quite the opposite?

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When most people think of what makes a great business leader, they often say words like “bold,” “strong personality,” “charismatic,” “self-confident,” and “visionary genius.” Business leaders are often in the spotlight, driving their company’s agenda in a very public and visible way.

You might assume that to be a great business leader you have to be aggressive and attention-seeking, to the point of being a bully or egomaniac who will step over other people who get in the way. But what if the truth about what makes a great business leader is more mundane? 

According to research cited by the Wall Street Journal, one of the most important leadership qualities of effective managers is humility. If you want to inspire good teamwork and high individual performance among your employees, it’s best to be a humble leader. 

What does humble leadership mean, and how can you bring a spirit of humility to your business? Consider these bits of “humble advice.” 

Pay attention to your own weaknesses 

Humble leaders tend to have a high level of self-awareness of their own weaknesses and vulnerabilities. They don’t beat themselves up, but they know they’re not always going to be the smartest person in the room, and they don’t expect to be the best at everything. When leaders understand their weaknesses, they are better at delegating, bringing in outside expertise, exploring different perspectives, and avoiding impulsive decisions. 

Ask for advice (and listen)

Humble leaders aren’t afraid to ask for advice, and more importantly, they will listen to the advice. They are eager to hear from diverse stakeholders and voices from all levels of the organization. And they don’t assume that good ideas and smart solutions only come from the executive ranks. 

Delegate to others 

Humble leaders don’t micromanage and they don’t take on more than they can handle. They trust their team to do their jobs, and they are eager to delegate tasks and create new opportunities for others. The most humble leaders tend to exude a sense of calm. Instead of being overwhelmed, they quietly and capably are captaining their ship, even when there are lots of moving parts. But because they’re able to delegate, they can proceed calmly during storms. They have the time and mental space to evaluate high-level strategic options and guard against risks and threats. 

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Share the credit, hoard the blame

Humble leaders are eager to share the credit. They are constantly praising their team and deflecting praise off of themselves and onto their people. Humble leaders are happy to see their employees get promoted or even recruited by other organizations; they consider it a compliment of their own leadership skills when good people rise through the ranks and are happy to create a successful culture that nurtures and develops top talent. 

On the flip side, humble leaders are also eager to take more than their share of the blame when things go wrong or when well-meaning plans don’t work out. They take responsibility for their team, good and bad. 

Put the team first 

In all that they do, humble leaders elevate the interests of the team above their own self-interest and ego. They’re more concerned with building a great culture than winning an award or seeing their name in news headlines. They are happy when their employees are happy. They feel proud when their employees win accolades.

They see the team and the culture that they are building as more important than their own individual success. They believe if you hire, develop, and retain the right people, and surround them with the right support and encouragement, that winning culture will deliver more value for the company than any individual achievement. 

Become a humble leader

Humble leaders succeed because talented people want to keep working for them. There’s an old saying: “People don’t quit jobs, they quit bosses.” If you’re worried about losing talented employees, if you want to know how to have better teamwork and higher productivity, if you want to know what it takes to truly be a great boss…it might be time to take a closer look at your own attitudes and behaviors.

How can you be more humble? If you can learn to make some adjustments in your temperament and management style, and run your business as a quieter, calmer, more supportive place to work, you will likely find that the long-term rewards outweigh the short-term efforts. 

RELATED: 4 Leadership Lessons I Learned From Climbing Mount Kilimanjaro

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Throw a Successful Office Halloween Party

halloween partyA Halloween celebration in the workplace is a great way to give employees an opportunity to defuse tension, take a well-earned break, and have some fun at work with co-workers and customers.

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What are Harry Potter, Darth Vader, Cleopatra, Elvis, and Tinkerbell all doing in the same office? They are enjoying workplace Halloween celebrations, which can scare up business profits and productivity by increasing employee morale.

Businesses spend thousands of dollars every year on ways to make their employees happier and more satisfied with their jobs. For a small expenditure on candy, decorations, and prizes for best costumes, Halloween becomes a human resources bonanza. It gives employees an opportunity to defuse tension, take a well-earned break, and have some fun at work with co-workers and customers.

“The most important part of Halloween celebrations is not the specific events associated with the holiday, but the atmosphere of playfulness it inspires in workplaces,” says Gail Howerton, head of Fun*cilitators, an organizational development firm in Fredericksburg, Va. “The rapport among workers as they don costumes, compete in contests, or play games breaks down barriers and injects more humanity into the workplace. People remember these experiences. It’s a continuation of a feeling you want in the workplace all year long.”

Dressing up for Halloween at work is a rapidly growing trend. According to a recent Human Resource Management Benefits Survey, more than one-third of employers reported they offered in-house Halloween celebrations. Most agreed that the celebrations visibly improved employee morale, which increased performance, productivity, and created a more positive attitude toward work.

“Sometimes it’s the little things that make a difference with employees,” says Jan Stolzenberg, a human resources manager for HARCO Laboratories, a manufacturer of aerospace equipment in Branford, Conn. “A little break in the routine, such as decorating the cafeteria for a holiday, is a nice change,” she says.

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Whether you come up with a theme for your Halloween celebrations (outer space, the Wild West, famous movie stars) or you just go with a general “spooky” vibe, here are some tips that can help put your employees in the mood to participate:

  • Give employees an opportunity to help plan the celebration.
  • Make sure to send out a reminder of when the party will be and what they should prepare beforehand (for example, their costumes).
  • Let partygoers know if they need to bring food and drink or if everything will be provided.
  • Have some basic extra costumes or masks on hand, in case someone shows up in something inappropriate or doesn’t have a costume.
  • Hold the event during office hours so employees don’t feel obligated to stay past their normal workday, which will undo all the morale-boosting your party is supposed to provide in the first place.

Even though it’s considered a time to “break the rules,” make sure people understand that the workplace Halloween party should still be suitable for a business environment. This means steering clear of costumes that might be offensive or too revealing. And keep in mind that some of employees may object to Halloween celebrations for religious reasons, so everyone should be told that participation is voluntary.

RELATED: Plan the Best Employee Party Ever

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5 Ways Solopreneurs and Small Businesses Can Get Funding

handshake over approved loan documentRaising money for a small business can be tough, especially if you’re a solopreneur. Here are five suggestions to get the funding you need.

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Larger businesses often have access to a wide variety of funding options—including investors, shareholders, or previous business reserves—and can usually draw from these sources. This isn’t the case for most solopreneurs and small businesses, which can have a difficult time obtaining needed resources.

No matter how efficiently a company uses its available funds, if there isn’t enough money available, projects will stall. Fortunately, there are a number of less-standard techniques for fundraising that can help smaller teams.

To find out more, we asked members of  YEC Next the following question:

What is a lesser-known way of raising funds when you’re a solopreneur or small business?

1. Offer value in exchange of funds

Offer equity. In other words, make your team members acquire as much value as yourself. This will also allow them to view the company as their own and will make them work harder to reach common goals. —Jose Magana, Yellowberry Hub

2. Get a business credit card

As a solopreneur, you might not have the time required to be approved for the business financing that you desire. Nowadays banks have new application offers. You could get approved for a zero percent introductory interest rate card and use it as a free-money loan. It will give you a period during which you pay no interest on your balance while you fund the initial start of the business. —Jessica Baker, Aligned Signs

3. Sell a related service

If you’re just starting out as a solopreneur or with a small team, you will not always be able to get investors. It’s hard to fundraise an idea. What you can do is offer a service that is related to what your core product will be. If people pay for your service, you can establish positive working relationships for the future for when you eventually roll out your main product. —Kyle Wiggins, Keteka

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4. Look into small business loans

In my experience with fundraising, it’s all about relationships and previous fundraising that you’ve done. It’s a little harder for solopreneurs because most VCs want to see a co-founder who can keep you accountable and push your idea forward. For this reason, I would recommend looking into small business loans or lines of credit, because you also get to keep your shares. —Anna Anisin, Formulatedby

5. Make use of invoice financing

Invoice financing is a great way to raise capital if you’re a solo entrepreneur. This allows you to receive funds which would ordinarily be held up in a client’s account payable by working through a financing company to mediate the exchange. Generally you can get as much as 85% of the total fee from the financing company, and the rest (minus lender fees) when the client finishes the deal. —Bryan Driscoll, Think Big Marketing, LLC

RELATED: The Secret Weapon That Can Help You Get a Better Business Loan

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7 Ways to Be More Responsive to Your Customers

businesswoman running fastWhen it comes to how quickly you need to respond to customers, there’s only one answer: As fast as possible. Here is how you can be more responsive—and boost your customer loyalty, too.

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It’s no secret that consumers and businesses customers are like are becoming more impatient and more demanding. Customers expect businesses to respond to them quickly, if not immediately, and it’s putting pressure on small businesses.

Here’s a closer look at what customers expect from businesses, customer responsiveness trends, and how to be more responsive to customers so you can boost customer loyalty.

Customer expectations are rising

Business owners surveyed by Broadly in The State of the American Small Business 2019 are feeling pressed to deliver rapid service and customer support. The majority (55%) reported feeling like they had an hour or less to respond to a potential customer before the prospect moves on to a competitor.

In fact, they’re right: One-third of consumers in the study expect small businesses to respond to them within an hour to earn their business. And over half of customers (51%) will definitely go elsewhere if a business takes six hours or more to respond.

In a survey by Zingle, the number-one thing customers say would improve the customer experience is, “Faster response times.”

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How small businesses respond to customers

What tools are small business owners using to communicate with customers? According to Broadly:

  • Phone calls: 89%
  • Email: 86%
  • Text messaging: 54%
  • Social media: 49%

Overall, consumers in the survey prefer to communicate with businesses by email (57%), followed by phone (50%), and text (27%). Although consumers ages 18 to 34 also prefer email, fewer of them prefer phone (42%) and more of them prefer text (34%) compared to consumers in general. Clearly, as millennials and Generation Z come to the forefront of society, mobile communications will become more important for small businesses.

But companies often fall short when it comes to customer communication. More than six in 10 companies do not respond to customer service emails, according to a recent study by SuperOffice. A whopping 90% of companies do not acknowledge to the customer that their email has been received. Even if they do respond, 97% of companies never follow up to see if the customer was satisfied with the response.

7 ways to be more responsive to customers

When it comes to how quickly you need to respond to customers and potential customers, there’s only one answer: As fast as possible. How can you be more responsive to customers? Try these tips.

1. Ask your customers what they want. A survey of your existing customers can show you which customer service channels they prefer. For example, do they want the ability to make appointments on your website for your plumbing services? Would they be happy to deal with a chatbot if they got a faster answer? Your customers’ preferences may surprise you.

2. Manage customer expectations. While you should strive to be as responsive as possible on each communication channel, you can also guide customers to the channel that will best serve them. For example, my hairdresser recently told me that a lot of people contact him via Yelp. Since he is frequently busy with clients and not able to check his phone for this type of communication, his website social media accounts alert customers that for a faster response, they should call the salon by phone.

3. Develop procedures. Set benchmarks for how quickly your team needs to respond to customer inquiries or customer service questions, and make sure everyone knows these goals. Benchmarks may vary from channel to channel; customers may expect a faster response on Twitter, for instance, then they would on email.

4. Educate your employees. Make sure your team knows how to answer customer service questions. You can create an online knowledge base with answers to common questions. This also helps ensure that your employees are being consistent in what they tell your customers.

5. Provide self-service options. Something as simple as a frequently asked questions (FAQ) section on your website can answer many of your customers’ questions without the need to contact you directly. A company that sells to business customers could offer regular customers the option to reorder products online instead of having to speak to their sales representative.

6. Use technology. This can be as simple as setting up your Facebook page to send instant replies or using a social media management app to track all your social media channels in one place and get alerts of customer comments or questions. You can also implement customer service software to automate and streamline customer service. Zendesk, Freshdesk and Zoho Desk are among popular apps that can handle tasks such as prioritizing customer calls, answering customer questions via chatbots, and enabling customer self-service.

7. Stay human. While speed is of the essence, rushing too quickly to help a customer can also cause problems. You and your employees must remember to listen to customer complaints and make sure you really hear what customers are saying. No matter how much technology and automation you implement, it’s the human touch that really makes the difference in being truly responsive to your customers.

RELATED: What Is the Power of One Customer?

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How Much Money Can I Get From a Business Loan?

business loanNot all lenders and loan products are the same, and there are a number of factors that will dictate your business loan amount. Learn more about different lending options and how to qualify for the best loan.

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At some point or another, you may want to obtain a business loan for your small business. Business loans are one of the more common methods for entrepreneurs to get financing, and typically give access to more money than you might get from asking friends or family members.

But how much money can you get from a business loan? Can you just walk into a bank and ask for a million bucks? If that sounds crazy, does $500,000 sound more reasonable? 

If you’re not familiar with the world of debt financing, it may not be clear what factors will dictate your business loan amount. As you might imagine, it depends on a number of things, including your needs, your financials, your industry, and more. 

Here’s an overview of how much money your business can typically get from a business loan.

What goes into determining loan amount? 

It’s rare for two loan offers from two lenders to come out to exactly the same number. Different lenders (traditional banks, online lenders, alternative lenders) evaluate a variety of factors, have different algorithms, and may place more emphasis on different aspects of your business history.   

If you’re interested in obtaining the best loan possible and at the best possible rate, then start working now on improving these factors: 

  • Your personal credit score
  • Your business credit score
  • Your business’s monthly cash flow
  • Your time in business (the best way to improve this one, of course, is to continue existing)

In addition to that, when applying for a loan, you may be asked to present some or all of the following documentation and information: 

  • Bank statements
  • Personal and business tax returns
  • Profit and loss statements
  • Balance sheets
  • Your personal income
  • Annual revenue
  • Business plan
  • Industry type
  • Collateral or a personal guarantee

Unsurprisingly, the stronger your business (and personal) financials are, the more likely lenders are to deem you eligible for large loan amounts. Just passing the minimum requirements for some of the factors (such as a 650 personal credit score for bank loans) won’t get you as much money as elite scores. 

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How much can you generally get from a business loan? 

The exact amount of money that a business lender will give you depends on your annual gross sales, as well as your creditworthiness and any existing debt you already have. 

A business that does $100,000 per year in annual sales won’t have the same needs as one that does $10 million in the same time span, and lenders won’t want to lend a large amount of money to someone with a poor credit history—they prefer responsible borrowers. 

Generally, however, the rule of thumb is lenders won’t extend more than 10-30% of a business’s annual revenue in a loan. If you want more money, you’ll have to make more money first. 

How much can you get from each lending option? 

Not all lenders and loan products are the same. Long-term business loans and business lines of credit will typically net you more than short-term loans, equipment or invoice financing, or business credit cards. Here’s a quick rundown of what each lending option can offer your business: 

Bank term loans or SBA loans: $5,000 to $5 million

Banks have the strictest minimum requirements for a small business loan and often won’t want to go through the trouble of underwriting a loan for as little as a few thousand dollars. SBA loans, however, are bank loans partially guaranteed through the Small Business Administration—and these loans can range in size from $5,000 microloans to million-dollar, long-term real estate loans.  

Business line of credit: $10,000 to $1 million

Business LOCs are similar to credit cards, in that you can draw on your line and repay each draw separately, replenishing your total credit pool as you do. Some LOCs give you access to as much as $1 million. 

Short-term loans: $5,000 to $500,000

If you have an immediate funding need or less-than-stellar business financials, you’re probably looking at acquiring a loan from an online lender on a short-term basis. These loans often max out at $500,000. 

Business credit cards: Up to $100,000

You can use a business credit card as you would any other financing option—taking out a certain amount to pay your expenses and repaying that debt on a schedule that works for you, provided you can afford the interest payments. Most business credit cards have a limit of $100,000.  

Equipment or invoice financing: Varies depending on amount needed

If you need a specific piece of equipment, or have been waiting on a customer to pay off an invoice, you can look into equipment or invoice financing, respectively. With these products, the lender gives you the exact amount you need (or close to it) to cover the cost of the equipment or recoup your owed profits. These financing options are self-secured—the equipment or invoice acts as the collateral.  

Typically, you’ll see equipment financing limits of around $250,000 or so, but invoice financing/factoring limits can be for millions of dollars, provided your contract is with a major corporation or brand that is bound to pay off the debt.

How much do you need?

At the end of the day, you should never take out more money than you need with a business loan. Take the time to identify what your capital needs are and then see which option might help you acquire those funds at the most affordable rate.

RELATED: 10 Key Steps to Getting a Small Business Loan

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Top 5 Hiring Trends for Small Businesses

Selecting CandidateStaying up-to-date on emerging workplace trends is crucial for your company to stay competitive. Here’s what to expect in hiring next year.

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By Chad Warner

In no time at all, a new year will be upon us. Many entrepreneurs view the start of a new year as an opportunity to reevaluate company goals and to hire new employees to help their businesses grow. Staying up-to-date on emerging workplace trends is crucial in order for a company to stay competitive. Here’s what to expect hiring wise next year.

Hiring trend #1: New workplace demographics

The country’s largest labor force is now comprised of millennials (individuals born between 1981-1996). This group of employees is well-known for its desire for annual raises and career advancement. Once reputed for their job-hopping tendencies, millennials are now projected to stay in their positions for at least six years. Although this group desires long-term stability, patience is not a key trait—so look out, employers. If millennials are not progressing at their current workplace as desired, they are not afraid to jump to a better career opportunity.

But millennials are not the only generation of worker in 2020 workplaces. With the average employee now working for more years, there are now four generations of workers in the workforce. Each generation features its own diverse background, but individuals must work together in collaborative teams. Their conflicting views, expectations, and priorities can present challenges to employers.

Increased globalization also brings in a new pool of talent and cultural diversity. As a result, internal interactions within companies will need to incorporate a broader set of values that includes cultural differences.

Hiring trend #2: “Work-life balance” is replaced by “work-life integration”

Recently sought-after “work-life balance” is being replaced by “work-life integration,” a new term that recognizes that work and life coexist together. Millennials are seeking this integration which will require employers to get more flexible with work perk offerings and employee benefits. Gone are the days when an employer’s wellness program could be simply an on-site gym. Now, workshops, yoga classes, gamification, and more are being provided in new holistic wellness initiatives.

Employees want to be able to customize their benefits packages to their unique needs—and employers are listening. The creation of cafeteria benefit plans enables employers to allocate money to specifically requested benefits that better suit a particular employee.

Other examples of requested work-life integration include unlimited paid time off, the ability to work remotely, non-scheduled work hours, ongoing performance assessments, and professional development opportunities.

Hiring trend #3: Increased flexibility in work locations and work hours

Gone are the days of traditional work hours involving sitting at a desk. Employers who recognize this shift are asking employees about workplace flexibility. Besides having more content employees, flexible work arrangements can provide cost savings, too. When employees are presented with the opportunity to work remotely, employers may no longer need the expense of large office space rentals.

But just because employees may not be working in a traditional office setting, it doesn’t mean they’re not working. In fact, remote workers are known to be both happier and more productive when they get a say in where they spend the majority of their workday.

Work hours are changing, too. Employees want the ability to incorporate their work into their day—around household and family responsibilities. And as long as the work gets done, many 2020 employers are open to this request.

Integrating a learning management system (LMS) has become increasingly important to help employers coordinate their teams of freelance, full-time and remote workers. With the creation of a fair remote-working policy and the implementation of an LMS, increasing the flexibility of work locations and schedules can be a win-win for both employer and employee.

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Hiring trend #4: More incorporation of technology

Similar to recent years, technology will be well integrated into the 2020 workplace. Besides providing workers with the ability to check on work while they’re away from their desks, it will continue providing companies with the ability to offer remote work.

Social media will also play a large role in our workplaces. With the majority of the workforce being comprised of digital-savvy millennials, it will be difficult for a company with a “No Social Media” policy to attract talent. Instead, social media will play a predominant role in the recruitment process itself. It will be widely used in recruitment methods, throughout workplace cultures, and during online training.

More and more employees will start sharing relevant company content on social media networks including Facebook, Instagram, and Twitter. Traditional forms of employee newsletters will be replaced with news on a company’s internal Facebook site or on Slack, an online, instant messaging system.

With the increased integration of social media in the workplace, setting limits around social media usage has become necessary. With the creation of social media policies, employers can outline rules associated with an employee’s online usage.

Hiring trend #5: Popular recruitment methods

Besides affecting how we work and where we work, technology is also determining how we hire in 2020.
The most popular recruitment method used by HR professionals will be online job boards. For offline recruitment, employers will turn to employee referral programs, job fairs, in-person networking events, recruiting agencies, and print publications.

Most interviews will be conducted one-on-one, with the second most popular interview method being over the phone. The increase in remote workers will mean that phone and video interviews will rise in popularity.

Even though technology will play a huge role in the recruitment process in 2020, a human factor is still required to ensure a candidate is a good fit. Viewed as the most important candidate attribute, cultural fit will be determined through a combination of personality and cultural assessments.

The bottom line

With more work-life integration, an increased use of technology, and flexible work arrangements and schedules, 2020 hiring trends are predicted to be unlike any other. To be successful as an employer, having an openness to change and the ability to work collaboratively with diverse teams will be essential.

RELATED: 13 Key Employment Issues for Startup and Emerging Companies

About the Author

Post by: Chad Warner

Chad Warner is a writer who works with CulverCareers, an award-winning national recruiting agency specializing in sales and marketing. Chad specializes in writing about recruiting and human resources. CulverCareers has spent more than 30 years honing their craft, building their networks, and establishing a reputation as a trusted recruitment agency.

Company: CulverCareers
Website: www.culvercareers.com

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5 Choices That Can Make a Business More Successful

Business decision conceptThe decisions we make about our business may at times seem obvious and easy, but carefully thinking through our options is a necessity for growth and survival.

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In business, there are always choices. Should we do this or should we do that? If we do this, what impact will it have on our bottom line, employees, or customers? If we choose a different approach, what effect will it have on our reputation, branding, or goodwill? If we disrupt the market, will it end up in the long run being positive or negative for our business?

The decisions we make may at times seem obvious and easy, but carefully thinking through our options is a necessity for growth and survival. Consider the following five choices that can change a business:

1. Focus on competitors or customers?

Certainly, every business needs to know its competition. What is their pricing, marketing, distribution, products or services, after-sales assistance, quality, refund policy, etc. Meeting the competition head-to-head, however, is generally not the key to success.

On the other hand, if a business does not have customers, it really does not have a viable business. So, perhaps, the focus should be on customers. Give them what they want in the way of pricing, delivery, customer service, quality, etc. More satisfied customers will mean more business. All of a sudden, it becomes the competition trying to figure out how to beat you and your business rather than you trying to figure out how to beat the competition.

2. Be a follower or leader?

As a business owner, do you prefer to be a follower or leader in your business segment? Whether your business is retail, wholesale, manufacturing, service, technology, or professional, you have a choice: follow what other businesses are doing or be a leader on the forefront of new ideas, new product or service offerings, a different approach to customer service, or a unique value proposition.

Being a follower might be a more conservative route to go, but will it provide the key elements necessary for you to achieve your goals and objectives? Taking the leader approach can certainly involve more risks, but the rewards can also be much greater.

3. Impede or facilitate employee morale?

There is no question that employees are the most valuable asset of any business. Without motivated and dedicated employees, a business is destined to remain mediocre. When owners and managers do not place a high importance on employees, morale is impeded and growth is stymied.

When management understands the important link between employees, customers, and growth, it will facilitate employee morale with good communication, open-door policies, opportunities for growth and advancement, and individual respect. Facilitating employee morale is not accomplished by accident, but through focused and deliberate actions.

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4. Nonexistent or existent company culture?

A company culture is hard to precisely define. It’s an atmosphere that prevails within a business about how employees behave, how they interact with each other in and out of work, and how they deal with outside parties, such as customers and vendors. It is about their beliefs, and can even be how employees dress, hours worked, and office configurations.

When there is no real, cohesive culture within a business, employees do their job and little else. When the workday is over, everyone goes their separate ways. Conversely, a culture can contribute to the success of a business. A culture that embraces the vision of business affects in a positive way how employees work and act.

Although every business will have its own culture, a positive culture is essential for success. When employees feel valued with a sense of belonging and loyalty to a business, company value increases.

5. Deny or empower employees?

When there is no opportunity for growth, employees feel stymied in their current positions, which creates a lackluster business environment. Denying employees the opportunity to do things on their own, to implement new ideas, or to try and fail, creates a monotonous situation that destroys any ingenuity that might exist in the workforce.

Empowering employees, however, creates excitement, turns ideas into reality, generates efficiencies, and inspires everyone to reach for higher plateaus. When employees have the power to do something, try something new, or make decisions on their own that are in line with company goals, they become more committed and confident in their work. Empowering employees is a key element in creating a long-term, profitable, sustainable business.

Which is more important?

Every action in a business has some type of consequence. When making a decision, consider wisely what will produce the best results, not only for the short term, but for the long term, as well. It can often take just as much effort to produce a negative result as it does to produce a positive result. Direct your energies, therefore, into those areas that have the potential to produce the most positive business results.

RELATED: 5 Lessons I Learned About Business by Playing in a Band

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4 Fundamental Content Marketing Lessons You Can Learn from a Young YouTube Superstar

Success on YouTubeReal estate investor Graham Stephan is knowledgeable, credible, and fun to watch. Entrepreneurs who want to improve the way they market their businesses can learn a lot from his approach.

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I have recently gotten more actively involved in retirement planning and investing for my family’s future. In my research, I recently stumbled upon the YouTube channel of a real estate entrepreneur and investor named Graham Stephan. Graham is a young guy—he’s only 26 years old—but he’s absolutely killing it with his YouTube channel where he offers advice on finance, investing, entrepreneurship, and more. He has over 1 million subscribers, and for good reason.

Usually I am skeptical of internet gurus. We’ve all seen these shady “get rich quick” schemes and people promising to teach you how to make lots of money online. Graham Stephan is something different and better than all that. He’s knowledgeable, credible, and fun to watch, and anyone who’s an entrepreneur or who wants to get better at marketing themselves can learn something from him. 

Here a few reasons why I believe Graham Stephan is successful on YouTube.

1. He understands content 

Graham Stephan’s video content is unique, and he actually delivers substantive commentary and compelling insights; you can tell that he’s put time and effort into every video and he’s really trying to give you something “real.” Most marketers out there rehash the same stuff they have heard elsewhere. The world of content marketing is getting overrun and polluted by too much mediocre content—spammy, insincere, and recycled content that doesn’t really help improve your life. I’ve read and seen way too much content, where afterwards I’ve felt like I wish I could have that time back.

2. He is transparent 

In each of his videos, Graham starts by asking viewers to “like” the video if we like what we see. And he flat out tells us why: the YouTube algorithm rewards interactive content, so if we want to support his videos, “like” them. The thumbnails in his videos have silly faces, and he is upfront and says that he does the silly faces for clicks—he’s actively trying to engage a bigger audience, even before they click the thumbnail on his video.

He lets you know why he does everything. This is a refreshing change from other online “gurus,” who often act like they have secret superpowers or a mysterious black box of manipulative marketing techniques. Graham is more low-key: “Hey, if you enjoyed my video, why not help me out with a like?” 

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3. He’s professional 

While most “finance gurus” out there record themselves talking into a laptop camera in their plain home office, Graham Stephan’s videos have high-end production value. He started creating YouTube videos for fun because he enjoyed camera work and video editing, and he was spending 40 to 50 hours per week making videos, even though they weren’t making any money.

You can tell that Stephan puts a lot of thought into the creative side of YouTube video making. His videos have slick editing and clever cuts, and even if he is just recording a video of himself at a laptop in his kitchen or home office, he uses intriguing camera angles and soundtracks to make the videos entertaining. 

4. He demonstrates credibility

You know how so many financial and business gurus are slick talkers who pepper their speeches with weasel words and BS? Graham is not like that. When he makes factual statements, he will show the supporting evidence. And with opinions, he provides his logic behind them. He’s really quite self-effacing and open about his own mistakes, struggles, and learning experiences. He’s open about his vulnerabilities—he has a video where he talks about his struggle with social anxiety. Perhaps most importantly, he shows the math behind his successes. 

For example, in this video on how he became a millionaire by age 26 by working in real estate, he explains step-by-step how he got started in the real estate industry, why he decided to skip college, how he built relationships with real estate agents and found a niche in the market where he could make money even though he was young, how he gradually started making sales and making big commissions on million dollar homes, and how he started investing in his own rental properties. He shares the real numbers at every step of the way, and he’s believable—because he’s not exaggerating, he’s not being shady, he’s just being real.  

Will Graham Stephan’s career path work for everyone? Well, of course not—not everyone has the same strengths as Stephan, not everyone can get into the lucrative but competitive Southern California real estate market, not everyone likes to spend 50 hours a week making YouTube videos for zero money, and not everyone can be—or wants to be—a millionaire by age 26. But what almost ANYONE can learn is how to improve their marketing skills.

DISCLAIMER: I don’t know Graham Stephan, I have no affiliation or business relationship with him, I have no financial stake whatsoever in people clicking his videos. I’m just really impressed by his work and I wanted to spotlight his videos as an inspiring example of content marketing at its best. 

RELATED: 12 Small Business Podcasts That Will Help You Sell More

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The Most Common Mistake Companies Make With Social Media Marketing

Marketing and social mediaIf you’re struggling to get the conversions you think you should be getting, you may be approaching your social media marketing in the wrong way.

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By Rachel Frederick

Social media can be an incredible form of marketing—and this is not news. It has the potential to reach a large audience, it’s mostly free, and it’s a great way to enhance your brand. Yet it’s so easy to get caught up in the “posting roller coaster” without any real clarity around whom you’re posting for and why they’re following you in the first place.

If you’re struggling to get the conversions you think you should be getting, a lack of clarity and focus is likely the biggest reason why.

What if we start thinking of social media not as marketing, but instead as “maintenance marketing?” As in, social media is most successful when it supports what you’re already doing outside of the platform. Social media will never stand on its own as a marketing tactic. While an interesting post or two might attract followers and a few likes and comments, focused branding, consistent messaging, and a predictable posting schedule is what retains them. In other words, branding is step one, content is step two, and social media is step three.

Start with a solid foundation, position yourself as an expert, and then promote what makes you amazing. I’m guessing this is not the first time you’ve heard that you need to build a solid foundation, and that if you’re missing that foundation, social media has very little chance of helping with your profit margins. Yet so many brands are posting just to post without a content strategy to back it up.

If you don’t have a story to tell, content to promote, testimonials to share, or a business promise worth shouting about, social media won’t help you much in the long run. Let’s back up for a moment, shall we?

Who are you?

Within moments of landing on your Instagram feed, Facebook page, or LinkedIn profile, your visitors should be able to tell who you are. They should be able to tell what you do and why you do it. If they can’t, they won’t stick around for very long. First, find your story, then use imagery, quotes, fonts, and colors to back it up.

So many small businesses are focused on keeping up with their competition that they fall into the shadows. They become followers instead of leaders. Find your story. Find your voice. Find your brand. There is a reason why authenticity is so overplayed right now—it’s a very real, very usable marketing tactic.

Who are your customers?

If you have a brick-and-mortar business, your core audience is most likely within a five to 15 mile radius of your location. This means that shouting about your amazing cupcakes across all of social media may not be the best use of your time.

Your audience is closer than you think and they’re already paying attention. Don’t get caught stressing about finding thousands of followers when 300 loyal, local ones will serve you just fine. In other words, don’t spend time and money promoting your products and services to Los Angeles when your customers are in Chicago.

The same concept applies to online businesses. Because you have a more widespread audience, it’s crucial that you get super focused on your niche market. If you want to make a lasting impact on your customers and clients, write every blog post, every podcast script, and every email as if you are talking to one single person.

Who is your perfect customer? How much money do they make? What is their family status? What types of hobbies do they have? Create an ideal avatar and market to them. You’ll be amazed at the clarity that starts to come into your marketing efforts.

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What happens after you promote your content?

Unless you have a customer journey mapped out, social media will not bring you the leads you need to make a sale. It happens time and time again where businesses post similar content day after day after day.

What is a customer journey? It’s the plan you create to get people off social media and on to your website, or into your store. Likes are not conversions and content is rarely a direct sell to a cold audience.

  • Focus on providing value with your content so you become a notable resource.
  • Tell your business story so people begin to like and trust you.
  • Give more than you ask, but don’t forget to make the ask. Once people like and trust you, they’ll expect the sales pitch—this is your chance!

Without a clear, defined customer path, from brand awareness to asking for the sale, social media will be a large waste of your time.

Are the job demands worth the outcome?

With the 24/7 accessibility of social media, it’s increasingly common for businesses to fall into the trap of making themselves available 24 hours a day. Set expectations upfront that you are a) A real person, and b) have a life outside of your business.

While it’s not uncommon to have one person watching social media accounts 24 hours a day, no one should be asked to give up their entire life for these free advertising platforms. It’s important to give yourself—and your employees—time to rest, unplug, and get away from work once in a while.

As a business owner, make sure you’re setting reasonable expectations and keeping an eye out for any burnout. This is true for both yourself and your employees. More importantly, make sure the outcome justifies the action. What are the metrics by which you measure a successful social media campaign? Do you need to post multiple times a day on multiple platforms? Probably not.

The good news is, marketing continues to consistently be about two things: building relationships and solving problems. How do you make people feel and how are you serving them? If you build your business around these two concepts and use social media to maintain expectations and maintain the life of the amazing work you’re already doing, you’ll find incredible success.

Can you build relationships on social media? Sure. Can you gain a following? Yes. Is social media a useful part of a modern comprehensive marketing strategy? Absolutely. Do you need to post several times a day on multiple platforms in order to make a difference in the world? I’ll leave that up to you.

RELATED: Could Your ‘Facebookonality’ Be Hurting Your Business?

About the Author

Post by: Rachel Frederick

Rachel Frederick is a marketing coach for small businesses in the health and wellness industry. She teaches business owners how to focus their messaging, develop a consistent brand, and automate processes so they can spend more time doing what they love and less time in front of a screen. Read more about her at www.thewellbalancedbusiness.com .

Company: The Well-Balanced Business
Website: www.thewellbalancedbusiness.com
Connect with me on Facebook, Twitter, and LinkedIn.

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How to Get Federal Contracts: Tips for Women Business Owners

smiling businesswomanThe federal government sets aside some of its federal contracts for women business owners. Find out how to compete for them.

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The federal government sets aside some of its federal contracts for women business owners. Is your business ready to compete for them?

For six years in a row, the federal government has achieved a goal set way back in the 1990s of awarding a minimum of 25% of all federal contracts to small businesses. That’s great news—but the federal government is still falling short of another long-time and equally important goal: awarding women-owned small businesses at least 5% of all federal contracts.

Women-owned small businesses received 4.75% of all federal contracts in fiscal 2018. So close to the goal! There is no good reason women business owners shouldn’t be playing a bigger role in federal government contracting. As of 2017, over 11.6 million women-owned firms across the U.S. employed nearly 9 million people and generated $1.7 trillion in revenues, NAWBO reports.

But in order to hit the 5% procurement goal, more women entrepreneurs will have to start competing for federal contracts. Could your small business be one of them? Keep reading to learn more about how women-owned businesses can get federal contracts.

How federal contracting opportunities for women work

Of course, women business owners can compete for any kind of federal government contract if they want to. But some contract opportunities are specifically limited to women-owned businesses. The goal is to help level the playing field for female entrepreneurs in industries that historically lack women-owned businesses.

The federal government sets aside a certain percentage of federal contracts for Women Owned Small Businesses (WOSBs). There are also some contracts that are set aside for Economically Disadvantaged Women Owned Small Businesses (EDWOSBs).

In order to compete for these EDWOSB or WOSB set-asides, your company must get certified as a woman-owned business. This requires your company to be at least 51% owned and controlled by women, who must make the primary decisions for the business. You’ll also need to meet SBA size standards and other criteria to be certified.

There are two options for certification. You can self-certify your business at certify.SBA.gov or go through a third-party organization that is authorized to certify WOSBs and EDWOSBs. There are four of these organizations across the country, each of which handles a different geographic area. Learn more about the WOSB program.

Before getting certified, your need to register your business with the System for Award Management (SAM). This online registry is free; federal agencies use it to find potential contractors.

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Where to get help competing for federal contracts

After going through a lot of effort, my company was certified as a Women’s Business Enterprise (WBE) several years ago. We’re proud of our certification and excited that we can compete for government contracts. But the certification process wasn’t easy, and we couldn’t have done it without expert guidance from outside resources.

Trying to decide if federal contracting is right for you, and wanting to know how to find contracting opportunities and what’s involved in the bidding process? Here are some resources to get you started:

(Disclosure: SCORE is a client of my company.)

RELATED: 5 Essential Steps for Women Who Want to Become Entrepreneurs

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How Whole-Brain Thinking Can Make You a Better Business Leader

Choosing to take a whole-brain approach to decision-making and leadership will pay off with more engaged employees, higher revenues, and greater profits.

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Maintaining agility in a competitive world demands a knowledge of management. We need to look through the lens of history to see what has worked in the past, and we want data to assist in our future decision-making. We also must find reasonable ways to manage our company with informed perspectives of what has worked (or not) and what type of flexibility and new concepts are warranted.

I recently scoured a research report by Accenture—Striking Balance With Whole-Brain Leadership. Through interviews with more than 200 C-suite leaders and over 11,400 customers and employees, it looked at the thinking styles found in organizations and compared them with the styles valued by customers and employees. Not surprisingly, the two didn’t always match up.

The focus of the research was management qualities that are either left-brained or right-brained. The takeaway? We need to develop a greater whole-brain approach to our organizational leadership skills.

Just the facts, please

Since most people reading this report are C-suite leaders of the left-brain persuasion, let’s look at two relevant details:

  • 89% of C-suite leaders have degrees in traditionally left-brained courses of study: business, science, and technology. These fields of study focus on the value of statistics and data, which are critical for decision-making.
  • C-suite execs who adopt a whole-brain approach to company leadership see, on average, revenue growth of 22% and higher profits of 34%.

With these research results, a whole-brain approach is certainly worth considering, but we need to understand what is driving the change—businesses facing disruption, both externally and internally. For our purposes, internal disruptors are employees who value a broader whole-brain approach to management. This group, dubbed Pathfinders, is bold and looking for positive change with the goal of making their companies better.

The report identifies large differences between the perceptions of goal-driven Pathfinders and the perceptions of C-suite executives. When people were asked which leadership qualities are important for high-level business executives, the obvious left-brained qualities of organization, leadership, foresight, and planning were in sync. Both the dynamic Pathfinders and the C-suite executives value those abilities and consider them important for business success.

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In contrast, when right-brain attributes were considered, there appears to be a huge gap. Pathfinders expect C-suite executives to demonstrate high functionality in areas attributed to right-brained qualities: intuition, inclusiveness, creativity, and empathy. However, the C-suite executives did not rate these qualities as high.

For C-suite managers trained to make data-driven decisions, this type of internal disruption of expectations regarding leadership can be a bit intimidating. We can see that we are limited, not only by our own training, but also by our view of what is needed in the organization. It is a time for self-reflection (yes, that’s a bit right-brained) and action to effectively address organization leadership needs to meet disruption head-on and remain relevant in our markets.

Become an ambidextrous organization

Given the tendency for corporate management to be trained in left-brain analytics, turning to disruptors like Pathfinders can offer companies a right-brain perspective. Pathfinders will push for change, demonstrate creativity, tend to believe in social responsibility, and still offer those highly valued critical skills. If we can collaborate with them, they can bring value to a company.

Becoming a company that is flexible in its thinking will help develop elements on both sides of the brain. That is not to say that a C-suite manager will become empathetic, but a good leader will find ways to incorporate an appreciation for whole-brain management. Here is how:

  • Train internally to develop a broader skill set to broaden employee thinking styles. Developing flexibility will create a more diverse and resilient company.
  • Hire different styles of thinkers. Fill in gaps from the outside to improve management capabilities within.
  • Ally with Pathfinders. Eschew traditional paths; instead, listen and incorporate this value group’s ideas. This doesn’t mean a lack of traditional structure but, rather, a more open path for getting good ideas implemented.
  • Use internal prospects with whole-brain finesse to take on growth projects and exemplify what works to create growth and profit. As others see the thinking being rewarded, they are more likely to broaden their brain abilities in the workplace.

With so many interviews on this topic, there is substantial information to digest. As a company, our success is dependent upon broad thinking strategies that complement our own analytical styles and those of our value Pathfinders. Choosing to take a whole-brain approach to decision-making and leadership will pay off with more engaged employees, higher revenues, and greater profits.

RELATED: What’s a Strengths-Based Culture? A Look at Today’s Hot Management Trend

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