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What’s the Difference Between Budgeting and Forecasting?

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Budgeting and forecasting are related, but they play different roles in business. In a nutshell, a budget is a step-by-step spending plan, while a forecast is an estimation of an outcome. Both have an important role to play in taking control of your business and preparing for the future, so let’s dive deeper into the key differences between the two tools.

What is Budgeting?

Budgeting is a detailed spending plan for the future. It’s used to provide financial direction while making sure you can meet your business goals and objectives. In other words, it controls what happens in your day-to-day operations by influencing how much money goes into different areas of the business, such as marketing and human resources.

Different Types of Budgets

There are two types of budgets: operational and capital. An operational budget is used to control your day-to-day operations, while a capital budget focuses on major purchases or investments in the business. For example, an annual marketing campaign will probably fall into the capital category because it’s something you do once per year instead of on a daily or weekly basis.

Budgeting Techniques

Budgeting techniques are used to determine how much you’ll spend in different areas of the business, such as sales and marketing. There are many types of budgeting techniques, including:

  • Zero-based budgeting, where all expenses for a period must be justified.
  • Percentage of sales budgeting, where a certain percentage of your total revenue is set aside for spending.
  • Value proposition budgeting, where you allocate resources based on the value each budget item brings to your business.
  • Surplus budgeting, where the total revenue is greater than the total expenses.
  • Gap budgeting, which identifies gaps between goals and actual performance levels in different areas of your business.

How to Prepare a Budget

In order to prepare a basic budget for your business, you need to calculate your total revenue for the period you’re looking at. 

Then, calculate your fixed and variable expenses. You should also factor in any planned purchases or investments over a set timeframe, as well as expected changes to your overall business strategy. 

Subtract your expenses from your income and then create a tax estimate. The final figure will be the profit that you have to invest in your business.

What is Forecasting?

Forecasting helps you create a plan for the future. It’s used to predict if your business will meet its financial goals, and is most commonly employed by growth companies that want to provide investors with an idea of their expected revenue. Forecasts are often related to quantitative data like sales forecasts or cost projections, but they can be based on qualitative data as well. 

The key difference between budgets and forecasts is that budgets are effective in the short-term, while forecasting works best over a longer period.

Qualitative vs Quantitative Forecasting

There are two main types of forecasting: qualitative and quantitative. A qualitative forecast is based on expert opinion, while a quantitative forecast uses hard data to produce numerical forecasts like sales projections.

How to Prepare a Forecast

In order to prepare a forecast for your business, you’ll need to list all of the assumptions that underpin it. This includes things like expected sales growth and any major changes in the market or economy over a certain timeframe. You should also factor in variables such as pricing models, competitor activity and customer behavior into your quantitative forecasts.

The Key Difference 

In conclusion, budgeting helps you control your daily operations, while forecasting is a tool for predicting future performance. A budget is used to set limits on your spending, while a forecast  is used to predict whether or not your business will meet its goals. Both are important tools for business performance and growth, and thus should be taken seriously.

4 Common Leadership Mistakes and How to Avoid Them

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Being a leader is not always easy, but it’s part and parcel of being a business owner. You set the tone for the rest of the company, so it’s vital that you learn how to lead effectively. Let’s examine four common leadership mistakes and how to avoid them so that your small business stays on track for success.

#1 – Lacking a Clear Vision

As a leader, it’s crucial that you have a clear vision for your business. Without one, you and your employees will have no sense of direction. They’ll be stuck without a clear mission, and that can lead to low morale and reduced productivity.

Take the time to cultivate a clear vision for the future of your company.  What do you hope to achieve? What specific steps will your company take in the near future and beyond to ensure success? How does this vision align with a larger corporate mission or values, if necessary?

Once you’ve created a clear set of goals for your business, make sure that everyone on staff understands them. Hold regular meetings where employees can voice  concerns and ask questions about the vision. Over time, this dialogue will help your company grow quickly and adapt to changes in an ever-evolving market.

#2 – Avoiding Confrontation

Now, we’re not suggesting you go on the offensive just for the sake of it, but effective leaders simply cannot afford to be afraid of addressing issues and delivering constructive criticism.

As the head of your company, it’s up to you to guide employees and help them improve as needed. If they make mistakes, don’t be afraid to confront those failures directly and explain what needs to change in order for them – and consequently, your business – to succeed.

You don’t necessarily need to be aggressive with your employees, but you should never shy away from an honest discussion. When they understand what you expect of them, they’ll work even harder to meet those expectations and see that their actions have a direct impact on the company’s bottom line.

Avoiding conflict is not only unproductive; it can also be perceived as weak leadership by your employees. It’s also doing them a disservice by allowing problems to fester and denying them the opportunity to grow and improve.

Remember that you’re not just an employer; you’re also the captain of a ship. You need to communicate with everyone on board accordingly if you want them to act in accordance with their job responsibilities – and that means giving orders.

#3 – Failing to Delegate

Small business owners often feel as though they need to do everything themselves, but this only leads to inefficiency and burnout. As a leader, it’s important that you learn to delegate effectively.

Start by identifying the tasks and responsibilities best suited for each team member. You might not be able to trust certain employees with every job on your plate, but they may excel at one or two specific things when given proper training and support from management.

Then, look for ways to offload the work that you no longer have time for. This could include anything from delegating a specific project to hiring an outside contractor or consultant, depending on your company’s needs and budget.

Once these steps are in place, make sure everyone knows what they should be working on at all times – and hold them accountable for their performance. Make it clear that you expect the highest standards of work from everyone on staff.

When employees know their responsibilities and can meet your expectations, they’ll be more motivated to take initiative and go above and beyond when necessary – benefiting both them and your company’s bottom line.

#4 – Pride

Of course, you should have pride in your values, your mission and your company, but it doesn’t pay to be too proud as a leader – humility is an important quality.

When you make mistakes, own up to them and learn from your failures. Share what you’ve learned with the rest of your team – it will help everyone avoid similar pitfalls in the future.

Never let arrogance get in the way of an honest discussion about how things can be improved; doing so only hurts morale and makes it difficult for employees to  accept criticism.

Instead, be open to suggestions and listen carefully when your employees offer feedback, even if it’s not what you want to hear. Sometimes the best ideas come from unexpected places, so don’t miss an opportunity for growth due to stubbornness or pride.

Final Thoughts

Being a leader isn’t easy. In fact, it’s a constant journey of growth and self-improvement. As the captain of the ship, you need to communicate with everyone on board and make sure that all crew members know which direction you’re sailing in. Failing to delegate, avoiding conflict and becoming too prideful as a leader are all mistakes that can come back to haunt you, but if you avoid them from the start, your business stands a much better chance of success.

How to Build and Maximise Your Referral Network

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Referrals are an excellent way to grow your business and generate a lead flow. However, when you have a very specific ideal client in mind they are not always helpful. By creating a referral network, you can gain more control over the process. There are different types of referral networks you can create, so let’s take a closer look at how to build the right network and make it work for your business.

What is a Referral Network?

A referral network is a group of individuals or organisations that provide referrals for one another. Within certain industries, there are official referral networks that exist, but there are also more informal ones around, too.

An example of an informal referral network might be a loose group of professionals within your niche who share business cards and contact details, and regularly refer clients to one another. There’s nothing in writing, but it’s a de facto “you scratch my back, I’ll scratch yours” kind of arrangement.

Tip #1 – Connect with Larger Businesses

When you run a small business, it may seem counterintuitive to create a referral relationship with your larger competitors but it can, in some instances, be beneficial. For example, if a business only works on large projects, it’s better for their reputation if they refer smaller clients to an appropriate provider rather than flat-out refusing them.

Connecting with these companies means that they can send these leads your way. Equally, if you have a client whose requirements are too large for you to handle right now, then you can return the favour and thus strengthen the relationship.

#Tip 2 – Network

It almost goes without saying that in order to build a referral network, you first have to expand your general network.

This means attending conferences, events and trade shows. Get up on stage if possible – that way, people will be keen to talk to you and even seek you out. The more visible you can be, the better.

Online networking is another great way to build your referral network. Reach out to business contacts, past clients and other professionals within your industry. Swap contact details and even mention that you will send any suitable future leads their way, as they’re more likely to keep you in mind to do the same.

#Tip 3 – Content Marketing

Content marketing is great for a number of reasons. It allows prospective clients to find you more easily and it enables you to build trust and relationships with your audience. What you may not realise, however, is just how useful content marketing can be when it comes to your referral network.

When you are showing up every day delivering value, it’s not only your prospects who will notice. Other business owners are likely admiring you too, even if they’re doing it quietly. If they see you as an expert within your niche, they may well send leads your way if one of their clients or customers has a need that falls outside of their remit.

#Tip 4 – Offer Rewards

Finally, you can incentivise your customers and clients to refer you by offering a reward in exchange. This could be a discount the next time that they buy from or work with you, rewards points or a free gift; it all depends on your specific business type.

A referral reward scheme is also a great low-risk strategy to boost sales because you don’t need to pay out until after you’ve made a sale.

Conclusion

There are several ways to grow your referral network whilst continuing to attract the right kinds of leads. Referrals are a low-cost way of acquiring new clients and so don’t overlook this strategy and its power to boost your business.

Workforce Management Tips for Small Business Owners

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As a small business owner, you need to know how to manage your workforce efficiently and effectively, but that’s often easier said than done. With time and practice, your management skills will certainly improve, but we’ve put together five essential tips to get you started on the road to success.

#1 – Put It In Writing

Let’s be honest: no-one gets excited by rules and regulations, but they are essential to build a strong business foundation. You need to create clear policies and codes of conduct so that everyone understands how to behave. This also helps to prevent unfair treatment and discrimination, and protects you from misunderstandings and even legal action.

#2 – Invest in the Right Software

In today’s digital business environment, the right software is key to ensuring that your team runs like a well-oiled machine.

Scheduling software, for example, not only saves you a huge amount of time but also helps to optimise your team’s time. Cloud software also enables your workforce to access their schedules from anywhere and easily request shift swaps or changes when necessary. Best of all, the information is centralised so that everyone automatically stays on the same page.

Similarly, communication software, such as Slack or Teams is important, especially if your team works remotely much of the time.

Project management software also ensures that all relevant employees are up-to-date with regards to tasks and deadlines. This allows your projects to flow more smoothly, with fewer hiccups along the way.

Finally, payroll software is essential. It saves you time and also makes sure that you employees get paid and taxed the right amount, reducing the possibility of conflicts. After all, paying your staff the right amount at the right time is a key ingredient in keeping them happy – and loyal.

#3 – Ask for Input

Making your employees feel seen, heard and valued is essential for maintaining morale – and this, in turn, is directly linked to the success of your business. Therefore, it’s important to ask your team for feedback and actually listen to what they say.

In addition to this, your team members are on the ground and therefore are often able to pick up on things that you can’t. Asking for their input isn’t just about showing respect, it can also help you to identify problems and opportunities that you may otherwise have overlooked.

#4 – Don’t Micromanage

Micromanaging your workforce is probably the fastest way to turn them against you. When you micromanage your team, you’re essentially telling them that you don’t trust them, and this causes a serious decline in morale. On top of this, it also denies your team members the opportunity to grow and improve.

Your business is your baby and it’s only natural to feel protective over it. You understandably want to handle everything yourself but that’s simply not realistic. Learn to trust your team and create an environment in which they feel able to come to you for guidance if they do encounter any problems, rather than wasting your time breathing down their necks.

#5 – Offer Flexibility

Of course, flexible working isn’t possible for every business type, but if you are able to offer your staff greater flexibility then you should do it. For one thing, it’s a huge mark of trust and respect – and this won’t be lost upon your team.

On top of this, giving your staff greater flexibility will increase their job satisfaction and keep them loyal to you. Offering the chance to telecommute at least part of the time can also increase productivity and save you money in terms of overheads. You will certainly save money on utilities and you may even be able to move to a smaller office space, significantly reducing your rent.

Summary

Managing your workforce effectively isn’t rocket science; it’s a careful combination of the right practices, trust and respect. Make sure to invest in the right software, ask your team for input regularly and help them to work as effectively as they can. Your business is nothing without a strong team behind it, so don’t underestimate the importance of great management.

How to Set Business Goals For 2022 (And Beyond!)

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Setting goals for your business is an important step in making sure it thrives. While some people might think this is a simple task, it can be more complicated than you may think. This guide will walk you through the process of setting goals and provide tips on how to make them actionable, achievable and measurable.

Why Are Business Goals So Important?

Business goals and objectives are important and should be established for a number of reasons.

If you don’t define what success looks like, the chances are that your business will never achieve it.

You need goals to measure growth by comparing them from year to year or month to month. If you’re not seeing the results that coincide with your expectations, then it’s either time to adjust your goals or get to the bottom of why you cannot meet them.

Goals are also important because it shows that you’re organized and have a plan in place, which is especially helpful when raising capital for growth. It lets potential investors know what milestones to expect throughout the process of investing into your business.

Goals keep you and your team focused, and provide a clear benchmark against which to measure your success. Clear goals enable you to prioritise the most important tasks and focus on the things that matter most.

Step 1: Identify Key Areas Of Focus

First things first. What are the top areas you want to focus on in your business? Of course, this depends on your unique business and industry, but some examples to consider include:

  • Improve customer service
  • Reduce costs by 10%
  • Grow sales volume by 20%
  • Be the first mover in your industry with a new product or service offering
  • Increase employee satisfaction to 75%
  • Improve customer retention rate by 5%
  • Reduce company debt and interest expense below a certain threshold, e.g. $40,000
  • Increase profit margin by 10%
  • Reduce time required for product or service production by 12%

Step 2: Set SMART Goals

In order for your goals to be effective, you need them to meet a specific criteria. They must be SMART. This means:

  • Specific  – very clear and easy-to-understand.
  • Measurable  – determined by the numbers or data.
  • Achievable – your goals must be realistic, or else you are simply setting yourself up for failure.
  • Relevant –  each goal should be pertinent and directly beneficial to your business.
  • Time-bound – the deadlines must be clear and reasonable.

“Increasing profit margins” is not a good goal because it’s far too vague. However, “increasing our profits by 10% in the next 12 months by reducing costs and increasing efficiency”  is an example of a SMART goal.

Step 3: Set a Timeline

Your goals need to have a timeframe. This is important because it helps you think about which resources are required, how much time your goals will take and what milestones must be reached along the way. For example, you won’t increase your profits by 10% overnight – it will happen in much smaller increments. Therefore, you should set milestones that will be reached along the way. For example, you might aim to increase profits by 4% by the end of Q1. Then, you can adjust your goals against real-time progress.

Step 4: Review Your Goals Regularly

It is crucial that you regularly review your goals to ensure they are still relevant and helpful. You may find that the market has changed, or that new opportunities have emerged based on customer feedback which would alter some of your original plans – this means it’s time for an update. Maintaining four or five year goals is a good idea, but you should also create one-year and quarterly plans to ensure your business stays on track.

Step 5: Accurately Track Your Goals

You cannot measure progress unless you are measuring against something specific – that’s where SMART goals come in. You need to establish metrics and benchmarks against which you can measure your progress. This way, it’s easier for everyone to see whether they’re on track towards achieving the goal and when adjustments need to be made.

Final Thoughts

Clear goals provide a clear direction for your business and keep everyone on the same page, working towards achieving something that is meaningful and beneficial to all. They can be used as an effective tool when pitching to investors or potential partners to give an idea of how the business will progress over time.

No matter how well your business is doing, there are always areas for improvement and new heights to reach. Setting goals is the first step on the journey to success..

Four Steps to a Successful Profitability Analysis

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Are you uncertain about the level of success you achieved? There’s a quick way to get an overview of your finances.

Not enough companies run a profitability analysis – a defining indicator of profit. Such an analysis relates to costs and overall revenue and it can provide insights into how a business runs.

The occasional analysis can also indicate if it’s time to make some changes. 

Maybe some clients require too much time for the money. Perhaps there are other opportunities around the corner that you can jump on.

Either way, it should be on your list of tasks if you want to ensure long-term business growth. And here’s a simple blueprint to follow for a successful profitability analysis.

Step #1. Calculate Margins

Two of the most important variables in a profitability analysis are gross and net profit margins.

You can get the gross profit margin by knowing your sales revenue minus the cost of labour.

For the net profit margin, you must subtract all expenses from your revenue to get the magic number – the margin – and then divide the previous result by your revenue

Don’t forget to look at the segment profits, too. 

Odds are you offer a suite of services that each has its own revenue stream. Take the numbers for each segment, subtract the costs, and include overheads in your calculation.

If you do this, you get a more detailed insight into how money moves in your business.

Step #2. Perform Client Valuation

Here, you must look at each client and figure out how much each of them brings.

Performing a client valuation essentially means to determine the worth of each client. So, subtract from the revenue all of your costs, such as marketing, hourly labour, travel expenses, and so on.

After all, you want to find out the costs of keeping each client satisfied. 

Some clients may not pay a lot for your services. But you may have a better profit margin with them if their projects take very little time from you or your team.

Maybe you have good cash flow. But it’s possible that when you draw the line, there’s not a lot of profit in it.

Step #3. Look at the Past Numbers

A thorough profitability analysis looks at past quarters over the years.

Why?

Although your current numbers may look good on paper, you need something to compare them to if you want to know where you stand.

Step #4. Benchmark Industry Ratios

Your numbers only mean something in the context of your niche. It’s because profitability numbers aren’t the same in accounting as in health care, education, e-commerce, etc.

If you look at your past and current numbers, you can figure out your business’s progress so far. But what about compared to your competitors?

What about your position in relation to the market?

Always be sure to check average industry ratios to give you a better sense of where your company is as opposed to where it should be.

Do It for Peace of Mind and Direction

A good profitability analysis can help curb anxiety when it comes to your business. At the same time, it can tell you what you should be doing to improve and grow it.

If you ever find your business lacking direction, remember that an analysis can help you spot issues that you couldn’t otherwise. 

It’s a game changer.

How to Set Up and Maintain a Budget for Your Startup 

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Creating and following a realistic budget for your startup is essential. In fact, it can even determine whether or not your business makes it out of the gates. A budget shows you how much money you’ll need to make in order to break even and highlights what you can and can’t afford. It also helps you to forecast and manage your cash flow, which is essential to keep your business in good financial health. Budgeting can be a daunting task but this guide is here to make it easy by breaking it down into four simple steps. 

1. Calculate Your Costs

It takes money to make money, and it’s important to work out how much you’ll need to launch your business. Think about what you’ll need in order to start serving customers, whether that means setting up a website or opening the doors to a brick-and-mortar establishment. You can generally group your costs into three main categories: 

  • Facilities: this could be the location of your shop, restaurant, co-working space or offices. If you haven’t found the right place yet, it’s worth doing some market research to give you an estimate of how much the rent or mortgage will set you back. However, the costs don’t always end there. You might need to remodel your chosen location to fit the needs of your business. 
  • Capital Expenditure: this is how much money you’ll need to maintain and improve your facilities. Office furniture, equipment and decorations all fall under this category. 
  • Materials and Supplies: these are the items you’ll need to use in order to run your business, such as ingredients for a restaurant or beauty products for a salon. 

Remember to stay mindful of smaller costs; it may be tempting to overlook them, but they can add up very quickly.

2. Work Out Monthly Expenses 

Your monthly expenses are the costs associated with the items and services needed to run your business. You’ll need to have an idea of how much you’ll be spending each month in order to calculate the amount you’ll need to earn to break even. These expenses fall into four different categories:

  • Fixed expenses stay the same each month. Examples of fixed expenses include rent, internet packages, subscriptions and insurance.
  • Variables are more difficult to predict as they change in line with your volume of sales. Supplies, shipping costs and raw materials are all variable expenses. 
  • Semi-variables are fixed costs which can become variable if production volume dramatically increases or decreases. A surge in demand might require you to pay your staff overtime or result in a higher electricity bill than usual. 
  • One-time expenses are often unforeseen costs such as equipment repairs, but also might account for planned events such as business conferences. 

3. Estimate Your Monthly Revenue 

It’s difficult to know how much you’ll actually earn during your first few months in business. What’s more is that your monthly revenue is likely to fluctuate, so do your research and take a look at how similar business models fare throughout the year. If you’ve hired an accountant or financial consultant, they might be able to offer some valuable insight. Factors such as retainer contracts and industry-wide seasonal trends will also help you to predict what your income. However, it’s advisable to remain conservative with your estimates to prevent overspending. 

4. Review Cash Flow 

Cash is king in business and maintaining a healthy cash flow is essential for survival. Bear in mind that you won’t always be able to collect money for your goods and services straight away, which can lead to cash flow issues even if profits are sky-high. A booming sales month is great, but you may have bills that are due before you’re able to collect payment. If you don’t have money set aside for this instance, you’ll find yourself in hot water. In this sense, cash flow is just as important as profit for the financial health of your business. 

It’s wise to set aside some business savings for times when the cash flow slows to more of a trickle. Review your cash flow each month to spot patterns, prevent overspending and budget for the future. 

The Golden Rule 

Finally, it’s important to follow the golden rule as you work through the above steps: stay conservative. Highball your expenses estimate and be prepared for low sales. This helps to protect your profits and keeps you on your toes to prevent overspending. Careful budgeting allows you to make prudent financial decisions and keeps your startup on track for financial success.

How to Set Ambitious Yet Realistic Goals

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Adjusting your goals and expectations to what’s within your possibilities will ensure your success. Not to mention, it can help you avoid unrealistic planning frustrations.

Having reasonable goals can be a driving force behind individual, team, and company success. If you precisely determine what you’re aiming at and do it early on, your efforts will have a clear direction and appear more meaningful.

However, setting goals isn’t without its challenges – poor orientation, succumbing to perfectionism, and lack of motivation are among those that are quite detrimental. 

That’s why we’ve compiled a list of steps that will help you determine and set optimal goals while avoiding the common pitfalls.

Step #1. Back Your Goals Up With Solid Planning

The importance of thorough planning can’t be overstated.

A goal without a plan is, in essence, just an abstract idea you can’t act on. That’s why the first thing you should think about is exactly how you’ll achieve your goal.

The most effective way to make a plan is to start with the big picture in mind and go more and more into details.

Start with a general road map – setting a certain finish line and marking every bump and turn down the road. Then take a look at the individual stages of the journey and define the challenges you could encounter.

Keep in mind that this is a crucial step – if there are too many obstacles requiring more energy and resources than you can expend, you will do well to reconsider your main goal immediately.

Finally, once you know where you’re going and how you’ll get there, start preparing contingencies.

A good plan will take you a long way, but it would be wise to expect something to go sideways. Prepare to adjust your tactics accordingly.

Step #2. Be Clear and Specific

Setting goals includes envisioning a certain point in the future. However, it would be best if you didn’t stop at a general, low-resolution picture.

You must define all of the details of what you want to achieve.

For instance, aiming to increase your company’s sales is a low-resolution goal. It could be a good starting point, but if you want to ensure you’re progressing in the right direction, you should consider the specifics.

Exactly how much of an increase would you like to see in your sales? How would you want your business to change before and after you’ve reached that goal? Would you be willing to make sacrifices to get there and what would that entail?

There’s plenty of details to flesh out when setting your goals. If you do it right, all your efforts will become focused on the specific necessary tasks and the progress will become apparent.

Step #3. Establish Milestones

A common mistake in planning goals is that people tend to aim for the grandest achievement, disregarding the smaller but vital victories.

This approach can become draining very soon – you might be overwhelmed by how unattainable the set endpoint seems. To avoid the fatigue and discouragement, make sure to have several smaller goals set as milestones.

Reaching the milestones will give you that precious sense of achievement and progress and motivate you to keep going.

Good Goals Are the Way to Success

Aiming for something you can realistically achieve and having a good plan of getting there will set you on the right path. 

When you’re convinced your goals are the right ones, pursue them with determination. Great results will follow.

The Five Traits of Successful Entrepreneurs

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About 20% of businesses fail during their first year. So which traits should an entrepreneur have to become successful in a highly competitive environment?

Starting a business isn’t easy, especially in the modern environment that favours sound, long-lasting practices and a severe loss-aversion mentality. 

While not everyone is born to be an entrepreneur, there are skills one can learn to jumpstart a business venture in a competitive industry. And even be successful at it.

It’s important to note that some traits can’t be learned and are what separates a good entrepreneur from the best. The list of traits found here includes both intrinsic and trainable skills.

1. Inventiveness

One of the key features of successful entrepreneurs is their ability to come up with new ideas and expand on existing features. That’s why most entrepreneurs start their business with an idea that deviates from and improves upon the current norm.

While it’s almost impossible to teach someone how to be inventive, all people possess virtually unlimited imagination and potential. Tapping into that can lead to exciting results.

2. Confidence

One of the crucial parts of a successful start-up is the pitch. A good entrepreneur needs to have confidence both in themselves and their idea. That confidence is what will sell the start-up to potential investors and allow the business to begin operations.

Entrepreneurs will face rejection along the way, and only those who remain confident enough to keep going will bounce back and thrive among the competition.

3. Work Ethic

The term ‘passion’ is often thrown around as a desirable trait, but it would be more proper to call it work ethic. 

While an entrepreneur will enjoy doing what they created, a proper work ethic is what truly matters.

An entrepreneur needs to put long hours into their business to take it off the ground. That won’t be possible if they don’t love their work or have a developed work ethic to sustain it.

4. Money Management

One of the critical reasons start-ups fail over their first few years is the futile acquisition of capital. This isn’t so surprising, seeing as banks are unlikely to provide large loans. 

Other methods of raising capital, such as crowdfunding or investing, often depend on tangential skills like the ability to persuade people about the idea.

While having a good idea is the key for a start-up, obtaining and managing the capital required to make it into a reality is what separates a successful start-up from a failed one.

5. Knowing Market Needs

While not a trait per se, knowing that an idea for a start-up has real market value and need is what gets a start-up off the ground. 

The ability to develop and market an idea into an attractive product relies on more skills than one, but they all need to combine to deliver to the masses.

According to Forbes, most start-ups fail due to a lack of market need. Therefore, identifying whether a novel idea is useful and adjusting it to cater to the audience should be one of the top priorities.

Learning What It Takes to Succeed

Thankfully, most of the traits of a successful entrepreneur are learnable. For all others, there are always people who can help out and make up for personal shortcomings. 

Teamwork makes the dream work, after all.

What To Do When a Client Won’t Pay

Posted on | by Jessica Weston | Leave a Comment on What To Do When a Client Won’t Pay

Many business owners have experienced the frustration of trying to collect payment from a client who simply won’t cough up. If you are having trouble getting paid, then it is important to take action quickly before the situation becomes even more difficult. In this blog post, we will discuss what to do when your clients won’t pay, and how to avoid this from happening in the future.

Don’t Make Assumptions

When your client does not pay, it is easy to assume that they are being completely irresponsible. However, sometimes clients have legitimate reasons for why payment has not been sent out. It’s important that you don’t accuse them of anything until you know the full story. This is especially true if your client has always been reliable in the past – give them the benefit of the doubt.

Keep Your Cool

In the heat of the moment, it can be easy to want to send a strongly worded email or make an angry phone call in order to get your point across. However, if you take this approach, then there is a good chance that you will only make matters worse and put future business at risk. It’s important not to jump the gun.

Send Reminder

Your clients are only human. If a client is late to pay, resend the invoice along with a polite notice that their payment is now past due. Don’t be demanding or accusatory. You should also make it as easy as possible for them to pay by including links or buttons to your accepted methods of online payment.

Contact Them Via Social Media

If your client doesn’t respond to your follow-up emails within a few business days, try contacting them on social media instead. In some cases, a client might simply be neglecting their inbox and so it’s worth trying another channel. Again, it’s important to maintain professionalism and not accuse them of disappearing on you.

Send an Attorney’s Letter

If you still have not received your payment then it’s time to send an attorney’s letter. You can arrange this for an affordable fee and often the client will be unnerved enough by the suggestion of legal action that they pay up.

Small Claims Court

If you have exhausted all other options, then it’s time to take your client to small claims court. This is a last resort and it’s a fairly costly option, so it’s important to weigh up whether or not it’s worth it. Unfortunately, if this is not the case then it’s best to cut your losses and focus on preventing this kind of behaviour in the future.

Protect Yourself

It’s always better to be safe than sorry. Take steps now that will protect you in the future and avoid having this problem again.

One way to do this is by introducing late fees. Your cloud accounting software should be able to calculate and add these for you automatically. 

If you do decide to introduce late fees, be sure to communicate this clearly with your clients and give them plenty of notice so that they can’t accuse you of taking them by surprise.

You should also make sure that all of your clients are aware of how to pay online so that they have instant access to their account details at any time.

In addition to this, you should consider asking for payment upfront to protect yourself.  This could be a 30%, 50% or even 100% deposit.

Finally, make sure that you have the right legal contracts in place  so that you are better able to take action if a client still fails to pay.

Conclusion 

If you find yourself in a situation where your client hasn’t paid you, it’s important to keep calm and take the proper steps. Make sure that before taking legal action, you’ve exhausted all other options by sending reminders and social media messages. If these tactics still do not work, then consider contacting an attorney or small claims court for assistance with collecting payment from clients who won’t pay on time. Finally, make sure to put the right steps in place to protect yourself against this situation in the future so that you can concentrate on running your business rather than chasing up payments.