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Important Metrics for Small Businesses

Quantifying your success is a great way to see how your small business is doing in an objective fashion. Two metrics in particular are significant in determining if your company is operating efficiently enough to continue to grow and prosper.

Customer Retention Rate

The first is the customer retention rate, which refers to the number of repeat customers of the company as opposed to one time customers. One way to calculate this is using the following formula:

(Number of total customers – number of new customers)/(original number of customers)

The goal is to keep the retention rate as high as possible, which implies that your business is satisfactory and significant to your customers.

Customer Acquisition Rate

The next metric is the customer acquisition rate, which is how much money a business is spending to acquire new customers. To calculate this, you simply add up marketing and sales costs and divide this by the number of new customers.

It is important to keep your customer acquisition rate as low as possible in order to ensure that you are not losing too much money in order to gain a small number of customers.

Both the customer retention rate and the customer acquisition rate should be used as general benchmarks for your company to measure its efficiency. Different industries have different standards, and so it is important to research the values for typical firm in your industry. These metrics can be used to potentially apply for bank loans or can be shown to investors to advertise the success of your business.

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How Inflation Can Affect Your Small Business

Inflation is often considered a tax because of its detrimental effects on the purchasing power of currency. Small businesses find themselves unfairly targeted by changes in inflation because even small fluctuations can have a large impact on their daily operations.

Inflation Effects

Inflation affects businesses in several ways. First off, it increases the prices of raw materials and the price of labor. Additionally, it decreases demand of products because of increasing prices. Small businesses are particularly affected by a decrease in demand because they are generally price takers, and find it more difficult to push higher prices onto their customers. In some cases, they may even find themselves absorbing the extra costs themselves.

Inflation also plays a role in lending costs. Inflation actually helps those who have already taken out loans, as the worth of each pound that needs to be paid back has gone down. On the flip side, because interest rates will have risen, taking out a new loan will be more expensive.

How to Prepare

Inflation is unpredictable and is out of the control of the everyday business owner. Because of this, it is hard to be completely protected from its effects. Following the financial news and keeping updated on government policies are two ways to stay informed to help predict future inflation. Additionally, maintaining a flexible financial budget and leaving reserves will help to lessen the impact.

Inflation can have detrimental effects on small businesses because they are sensitive to volatility. The best you can do to is to keep up to date on the current state of the economy and remain adaptable in budgeting and planning.

For more tips and tricks on helping you grow your business, follow Budget Mastermind on LinkedIn or @budgetmastermnd on Twitter!

Budget Mastermind provides business finance solutions to help grow businesses. If interested in our services, visit our website at www.budgetmastermind.com.

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4 Tips to Improve Your Credit Score

Your credit score is an important way for lenders to easily judge your credibility as a borrower and plays a large role in their ultimate lending decision. The higher the credit score, the more likely you will be able to open a line of credit at the best rate possible. Here are some tips on managing your score to successfully grow your business:

#1 Be sure to pay all bills in a timely manner and stay within your limits. Although seemingly simple, it is easy to fall behind on payments or overborrow. It may seem beneficial at the moment however these decisions will have lasting effects on future borrowing opportunities.

#2 Keep updated on your credit report and ensure that all the information is correct. Even items such as address can potentially affect your score. It is important that any false statements be amended.

#3 Register to vote at the address listed on your credit report, as lenders use this information to confirm what has been listed. If the information does not match, your application could be determined unsuitable.

#4 Be purposeful in credit applications. Lenders have access to previous applications, and if they see several in a short period of time they will be suspicious or question your capability of receiving a loan.

 

It is important to remember that credit scores are ever changing and therefore can be potentially damaged or improved by every day decisions. By staying informed and being cognizant of factors that play a role in your score, you can ensure a better borrowing experience.

 

For more tips and tricks on helping you grow your business, follow Budget Mastermind on LinkedIn or @budgetmastermnd on Twitter!

Budget Mastermind provides business finance solutions to help grow businesses. If interested in our services, visit our website at www.budgetmastermind.com.

10 Biggest Mistakes when Securing Business Funding
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10 Biggest Mistakes when Securing Business Funding

1. Half-baked business plans

A good business plan should not only be realistic it should be specific. It should show how the plan will be implemented, highlight the market opportunity and separate what is an assumption and what is a fact. You don’t want to fall at the first hurdle when securing business funding.

2. Focusing too much on the idea and too little on the management

Having a great idea is one thing but ideas don’t fuel themselves. Making the dream a reality is as much about the mundane paperwork as it is negotiating the perfect deal or creating the ideal marketing campaign.  Knowing who is responsible for what, where, when and how makes sure the ‘machine’ continues to run as the business shifts through the gears.

3. Not asking for enough money

‘Better to have too much than too little’ as the old adage goes.  Being prudent and hedging your bets is one thing but be sure not to leave yourself short.  Make sure you’ve carefully analyzed how much you need including contingencies and if you’re unsure seek expert advice. Nothing worse than getting what you want, only to find out its not what you need.

4. Having too many lenders or investors

This is certainly a case of quality over quantity. While it’s great to have many suitors they will not all be the same, offering the same terms.  It’s better to have the right quality of funding rather than dilute the fundamentals of the business, for what could ultimately be short term gains.

5. Failing to get the proper legal agreements

As with most things in life ‘the devil is in the details’ and this is no different.  The right legal agreement can free you to expand, grow and take the right risks while others can chain you down, becoming a weight on your mind and business. Be sure that the agreement isn’t just right in principle but the conditions and penalties fit your financial structure.

6. Poor cash flow management

So you’ve got the funding you were looking for, great!  Now what?  It’s important to allocate and track spending accurately, adjusting spending to meet changing demands and continuing to look for opportunities to maximize spending. Ultimately it’s about having the right person with qualified experience advising you on your the use of you new funding effectively, ensuring the proper cash flow management.

7. Poor personal credit

Poor personal credit can be a real stumbling block but often isn’t as fatal as expected.  Be vigilant of all the lending and investment opportunities available to you and again seek expert advice where you need it.

8. Not understanding your financial situation

Sadly too many businesses fail to truly understand their financial situation which can lead to underestimating the funding they need.  Underestimating the exponential increase in expenses as they grow the business or just over estimating future revenues are obvious hazards.  It’s never easy to predict the future, which is why it’s so important to analyze the present as best as you can.

9. Under utilizing the management team

Having a strong team is a key component of any successful enterprise.  Finding the best way to utilize the full capabilities of that team can make a huge difference.  Identify the key skill sets of your management team as well as their weaknesses and potential for growth and if you find gaps that can’t be filled you can always recruit or outsource.

10. Lacking a clear go-to market strategy

Your go-to market strategy should be clear and precise, a plan you can follow, execute and track. Once you are ready to go you don’t want be distracted or uncertain, delays can cost you money and opportunities.  Go to market with energy, focus and a purpose for your new funding and the chances of success greatly increase.

 

At Budget Mastermind we offer free initial consultations and work with our clients for all their financial needs from drafting business plans to sourcing funding and managing their accounts. If you have any questions at we encourage you to contact us HERE for a free, informal chat.

You can keep up to date will our blogs and latest news by following us on social media via Twitter, Facebook and LinkedIn.

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BREXIT – Where there is uncertainty there is opportunity

Many entrepreneurs are considering starting their own business in the new economy and for good reason.  While a resent poll showed the number of people interested in starting a new business has increased to 14% from 10% in Q3 2016, it’s still a far cry from the 39% in Q2 2015.  The resent rise could just be the first shoots of recovery for the British entrepreneurial spirit post the Brexit vote.
This has a lot to do with the fact that even though the effects of Brexit are impossible to predict, most business owners in the UK believe that the best thing to do is to keep progressing.  This includes investing strategically which is aided by the fact that uncertainty gives way for more opportunities.  If you take into account the fact that some of the most successful companies originated after the 2008 financial crisis, then there seems good reason to be optimistic.
Irrespective of the business environment you find yourself in, as a new entrepreneur you will face a number of challenges before you can establish yourself.  At the top of the list of concerns for most budding start ups is finance.  As with most things in life, starting with a solid foundation is key and the key to finance is planning.  Here are 3 things every Startup should thoroughly consider.
Cash-flow
Thorough analysis of your cash-flow options (https://www.budgetmastermind.com/services/cash-flow-improvement/), factoring solutions and alternative finance options gives you a clear understanding of what you can do financially at the start, it also shows you the opportunities that are available going forward as the business grows.  Small changes to your business structure can have a tremendous impact on your cash-flow.
Business Plan
It’s easy to overlook the importance of a business plan but that’s never a good idea.  It is more than just a map for you, it forecasts your success and prepares you to navigate pitfalls, when it is structured around facts and informed ideas.  It will also help you control your expenses and determine which aspects can be reduced or even taken out from the budget entirely.
Quarterly Meetings
Quarterly meetings are usually enough to reveal hidden costs that might be draining your business besides assuring you that it is going in the right direction.  It’s important that all responsible partners have a chance to get together with the finances laid out.  Decisions can be made based on solid facts and new opportunities can be identified.
Needless to say, in order to preserve a budding business environment in the UK after its exit from the EU, the need for self-sustainable business solutions is substantial.  Poor financial planning is the main reason why most businesses fail before they realize their potential.  Building a team you can trust to provide solutions and highlight opportunities fundamentally improves those prospects.
Planning takes time, effort and a lot of patience since it is incremental. Changing trends will compel you to change directions multiple times but with a strong financial team working with you, not just for you, you can be sure you’ll be building a business on solid foundations.
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