Marketlend Academy: Small Business New Year Resolutions

A new year, a fresh start!

 

As you think about New Year resolutions in your personal life, consider also what new goals you can also apply to your business in 2019. New Year resolutions can include reevaluating goals to make sure that you are growing and staying on track. They can also include getting important logistical tasks out of the way for the year so that you can focus on what’s most important for the rest of the year.

 

What are your small business New Year resolutions in 2019? Here are a few suggestions:

 

1. Take a fresh look at your business plan

 

You think you know where you want your business to go, and you’re already on the way there. But now that you’re back in the office from the holidays, it never hurts to take another look at your business plan with a fresh set of eyes. It’s okay to change goals slightly from year to year depending on the progress you’ve made last year, or based on changes in the market. Make sure your business plan is always in tune with your customers and with the market.

 

2. Decide on new goals and how to accomplish them

 

Once you’re sure your business plan is exactly what you want, then evaluate your progress in 2018 and develop your goals for 2019. Think about what kind of business you want to have by January 2020, and ask yourself what you need to do to get there. This may involve things like hiring new staff, upgrading your office space, or investing in more advertising or marketing. Figure out the specifics of what needs to be done, and how you will go about it.

 

3. Work out a 2019 budget

 

This one goes hand in hand with number two. Once you know what you need to do, calculate how much money you’ll need in order to achieve it, and plan for where those funds will come from. Don’t get your hands dirty before you have a budget, or you risk overspending and ending up with a deficit. Make sure you have the money to tackle all your goals, whether it will come from personal funds, the profit from your business, loans, or from outside investors. If you need more funds, then plan for how you’ll acquire them. Marketlend is on hand to help you acquire financing by connecting you with the right investors.

 

4. Update the online side of your business

 

These days you can’t run a business without having the right presence online. Brick and mortar sales are still important, but making sure customers recognise you and can find you online is a must. As 2019 begins, it’s a good time to check your Google analytics to make sure you’re attracting enough web traffic, and that this traffic is translating into sales. Look at how your online customers behave in order to see if you need to change the way you target them. Also check if your website is properly optimised for search engines, and that you’re well-positioned on the major social media sites. If you already have an online brand growth plan, then revisit it and make sure you’re on track to where you want to go.

 

5. Evaluate how you use resources and energy

 

Have you ever thought about how you use your office space, or how much energy your business consumes? At the start of the year, it’s a good idea to check that no space or supplies are being wasted, and review how much power you’re using. This can include things like moving to a more space-efficient office, reducing supplies that you’re not using, changing your electricity provider, or even looking into using alternative energy sources. Reevaluating what you consume and how you consume it can translate into major savings, which equals money you can put right back into your business.

 

Once the year starts in earnest, day-to-day business needs often take precedence and its hard to carve out time for any planning or business self-reflection. With the start-of-year seasonal lull many businesses experience, its perfect time to take a step back and map out the year ahead.

 

Marketlend Academy: Government, SMEs, and a business comparison rate

Government getting too heavily involved in business isn’t always a good idea, as it risks eroding the free market’s power to innovate. However, there is a place for regulation that gives all business the best chance to succeed.

 

When it comes to small business lending, Marketplace CEO Leo Tyndall says one simple change would make a huge difference to Australian SMEs, the requirement of a small business comparison rate. Watch the video or read the transcript below to learn how government can unlock the potential of small business.

 

 

Video Transcript:

 

I’m never a big fan of pushing government to do a lot of things because the the more involvement government has on business the danger it is that it actually doesn’t operate in a capitalistic environment. But what I do say the government need to do is ensure that there is a level playing field. To ensure that the SME’s able to make the right decisions.

 

What I mean by that is the SME itself should be able to within a very short period of time look at all the finance options and then go, “Yes. This is the price. This is the real price of my funds.” And to do that at this present moment, there isn’t a framework for every SME to be able to give a comparative rate.

 

So if we look in the mortgage market, you go and look at the advertising in mortgage market, you can say, “Well what’s the comparison rate?” and you can match them all and put ’em in a line and then say, “This guy’s got the cheapest rate ’cause this is his comparison rate and it’s the lowest.” We don’t have that in the SME market. And that’s what’s needed.

 

The SME market needs the requirement. What the government needs to do is say to SME lenders, “You must give a comparison rate. You must tell them what is the real cost of funds.” [The] very immediate time that [SMEs] touch base with you you should say, “This is what your cost of funds will be”, and so therefore the SME can quickly make a decision whether it is the cheapest or more expensive. Now you can say that you’re more expensive than the others and say these are the reasons why you’ve got all these other benefits. But you do need to give a true, clear price.

 

And that’s unfortunately not available at this time. So this is where I think the government really does need to step in and it’s only an extension of the Trade Practices Act or the the consumer laws. So it’s not like there’s a lot that they need to do there.

 

Marketplace Academy: How Fintechs are changing Small Business Lending

When start-up founders pitch their solutions to social and economic problems, they often sound far-fetched or idealistic. When everyday Australians think about start-ups, they typically think of phones apps, some new gadget at JB Hi-Fi, or a collaboration widget on their work laptop. While these ideas solve real problems and people rely on them, some problems are beyond the consumer sphere, far larger in scale, with the potential to impact entire economies. Small business lending is one of those problems, and fintechs are playing a vital role to solve it.

 

With the considerable credit crunch small businesses are facing from traditional lenders, many SMEs are looking to fintechs for answers because Australia’s big banks simply can’t consider the nitty-gritty when providing a loan. A few over-due payments, multiple credit enquiries, or a seasonal lull can often be explained when looking at the fundamentals of a business, but the big banks are too cumbersome to see the forest from the trees. This is because the banks are churning through thousands of applications a month, constrained by organisational policy and the behaviour of their competitors.

 

Every large bank now has an ‘innovation team’ and makes overtures toward Big Data as a way to increase their efficiency and outputs. Yet, the speed of their lending mechanisms is irrelevant – they’re making the same mistakes, only now they’re making them faster. The issue lies in the fact big banks rely solely on quantitative, rather than qualitative reviews of applicants, and are therefore unable to adequately service the small business community.

 

Fintechs can move away from that model – spending far more time talking with a small business and understanding their situation before making any credit decisions. In doing so, fintechs provide a life-line for small businesses that are facing the credit crunch and supporting many of the communities that investors, customers, and founders live in. For example, marketplace lending removes corporate interference from the credit process, allowing investors to gain higher returns while scrutinising the opportunity themselves.

 

This closer investor involvement leads to higher amounts of debt funding in the small business industry. Most savvy investors can recognise the difference between a company on its last legs and one that’s just had an off-season. For instance, a mechanic receiving no business because of poor customer service and a farmer who has had a bad season due to drought are two completely different prospects.

 

Individual investors are able to consider the bigger picture and understand the broader context of the business. In the mechanic example, a quick Google search would uncover the litany of unsatisfied customers, so while the farmer and the mechanic might have similar quantitative results, looking at them qualitatively separates them – the farmer might receive funding while the mechanic wouldn’t.

 

By placing investors and borrowers as close to each other as possible, as is done in marketplace lending platforms, those businesses best placed to turn their fortunes around can be identified and funding facilitated, rather than having them slip through the cracks.

 

It is impossible for banks to enter this level of nuance when assessing credit applications. Both the farmer and mechanic would be rejected in this example.

 

As bad as these shifts in the economy are, they do provide breathing room for new innovations and allow us to see the real-world benefit of new financial technologies. At Marketlend, we hope to provide where the banks have failed, and see the continued benefits for all of our lenders and borrowers.

 

Marketlend Academy: The Problem With Australia’s R&D Tax Incentive

Small and medium sized business don’t get a lot of tax incentives in Australia, both compared to larger firms and overseas competitors. One of the few SMEs can claim is the Australian Reasearch & Development tax incentive. But Marketlend CEO Leo Tyndall says the R&D tax incentive needs to be improved for SMEs. Watch the video or read the transcript below to find out how.

 

 

Video Transcript:

 

One of the issues than an SME has when they start up for the first one to, say, five years is that the only tax breaks that are available to get is if they’re determined to be an R&D company or something similar. Now ironically, if you’re an R&D company in Australia, unless you can prove that your R&D is out of Australia, and for a lot of these, especially in even our space where the technology’s not here, it’s offshore, you can’t get the benefit. You can’t get a tax break. So if you look at other countries where, you know, SMEs or people have actually started up some type of new business that is a new concept, they’ve been able to get that break and that enables them to grow.

 

I mean, the Googles of the world and all of these type of guys. You know, this is something that the government should really have a better look at and say, “Okay. We’ve got these incentives, these grants, and R&Ds, but if the R&D grant is only working for if the R&D’s done here, how can I do that when the R&D doesn’t come from here?” What you want to say is, “Okay. Are they taking R&D from offshore and then putting it in here so that then they can develop their own R&D here?”

 

Marketlend Academy: Today’s biggest SME business challenge

Every business has its share of pain points, but SMEs have a unique set of challenges when doing business. Marketlend CEO Leo Tyndall says managing cash flows is the number one SME business challenge in today’s market, exacerbated by a lack of capital with borrowing terms that match the needs to SMEs. To learn more, watch the video or read the transcript below.

 

 

Video Transcript:

 

I think the biggest pain for the SMEs is truly cash flow, the inability to be able to match their cash flows and be able to turn around and cover their expenses and their operating business at the same time as receiving money from their customers or paying for goods. So if you look at a typical cycle, you’ll find that the SME turns around, provides a service and then has to wait 30, possibly 60 days to get paid. Obviously during that time it’s got to run a business. It needs to pay its bills, pay staff, these type of things. And they lack the cash flow to do so.

 

The other difficulty they have with that, or the reason why they have that difficulty is that there’s not as many options that they have out there for funding. So the financiers that are available in this type of space aren’t offering them a short-term type of 30, 60-day type credit facility. They’re offering them something like a P&I business loan, which doesn’t really match their cash flows. And then if you look at the bank side, you’ve got the difficulty with the banks not really looking at it unless there’s property collateral. So it’s not really structured in a way that matches what the SME needs to run its business.

 

Marketlend Academy: SMEs are the true north for the 2019 election

Each new year brings a chance to make changes for the better, but with a federal election just months away, this year is one of the more unpredictable.  One thing is certain: SMEs will play a key role in the development of the major parties’ business policy, and for the resulting direction of the economy.

 

With an early budget, the election will probably be held in May, and at this stage it’s not likely to be a tight race. A December Newspoll found 55 per cent believe Labor will win, while just 24 per cent back the government for re-election. But even strong polling guarantees nothing, so both parties will be desperate for support, and every coherent group of voters will be up for grabs. SMEs are high on the list, representing everything from Mum and Dad operations to industry leading firms.

 

That’s a mixed blessing. While both parties courting the sector should lead to progressive policies that benefit both business and the economy, the promise of wholesale change can increase uncertainty. A closer than expected election could also result in political uncertainty, which would cause additional anxiety for the economy as a whole. That could have a pronounced impact on SMEs, especially if the availability of capital is affected.

 

For SMEs to enjoy smooth sailing after the election, both major parties need to be clear on what their policies are, and why they believe in them. The parties must prove they’re serious about supporting Australian business, with the intent to follow through on their promises regardless of the political landscape post-election. A promise not kept does more harm than good.

 

More importantly, policies that support SMEs and the overall economy must be sold to the public. That’s the job of politicians and the business community.

 

SMEs are the lifeblood of the Australian economy, and what’s good for SMEs tends to be good for everyone, especially during a domestic housing downturn and an unpredictable global political climate.

 

By helping the Australian public understand the importance of strong SMEs, the political and policy incentives of politicians become aligned. With everyone paddling in the same direction, it’s much more likely we’ll find a path around those dangerous waters.

 

Marketlend Academy: How to fix cash flow

Managing cash flow can be a challenge for any business, especially an SME when a single supplier, buyer or loan can have a big impact.  Marketlend CEO Leo Tyndall looks at how an SME can fix its cash flow, particularly making intelligent use of trade credit facilities to extend payment terms. If you want to read the full transcript, see below.

 

 

Well, there’s a number of options they can fix their cash flow. Obviously, they can take on trade credit facilities similar to what we offer. And what they can do there is, they can actually, essentially get us to pay and then they can turn around and they can collect the money from their client 30, 60 days down the track and repay us.

The other way that they can improve their cash flow obviously, is with the growth of their business is to change the terms of their debtors on the other side, but that’s not ideal because they may lose business. So it’s more like looking for financial options which actually match their cash flows themselves.

Marketlend Academy: When should an SME not seek financing?

Marketlend CEO and Founder Leo Tyndall discusses the criteria an SME should look at before deciding not to seek financing. If you want to read the full transcript please see below.

 

 

So, they shouldn’t seek finance when the finance itself firstly doesn’t match their needs, so if it’s a principal and interest loan. And they shouldn’t seek finance when the finance itself is actually not designed to help grow their business, but actually is going to strip their cash flow so that they won’t be able to pay for other expenses. And this is a common uh problem that we see a lot. Someone may get $50,000 and then all of a sudden find that they’re paying $1,200 every week. And so, they’ve got the $50,000. That was great. Fills one void. But then all of a sudden their cash flow’s stripped and then they’re all of a sudden $1,250 short every month. And so when they’re looking at their finance, they should say, “Is this finance going – how’s it gonna affect my cashflow?” Because the financiers going to do the same thing. How’s it gonna fix my [cashout 00:23:22]? What is my ability to service the debt going to operate or what’s it going to be like when I turn around and take on these facilities?”

 

If you look at a home loan, typical debt service ratio is 30% of whatever you actually borrow, you should be able to pay it back from your income. Now, similar rules should apply with a SME and SMEs should think about it, is is this going to chop 50% of my cash flow or is this going to chop 12%? They need to look at their cash flow as a whole.

Marketlend Academy: What’s the problem with Fintechs in the SME space?

Marketlend CEO and Founder Leo Tyndall discusses how the problems with the FinTech industry as it applies to the SME space. If you want to read the full transcript, see below.

 

 

So, the issue with FinTechs in the SME space is the fact that the majority of investors and FinTechs have not identified how they can help the SME. They have identified that there is this open market with very little regulation where you can charge rights, which, in any other market, would be not acceptable. So, classic example, we’ve seen announcement by another FinTech saying you bu- uh-uh raise some money and it turns out that the rate that they tell the borrower is, uh, you know, in the teens, but then they have these additional charges, which, if you do the numbers, could possibly add up to 20 to 25%. If you go to the man on the street and say, “Would you like a personal loan?” And you want to pay 25%. He’ll say, “Go away.” But yet, SMEs all day long are turning around and committing to these types of returns. And why? Because it’s not crystal clear. And all that FinTech’s done is opened essentially a market to those FinTechs, or those venture capitalists, to be able to turn around and get a high yield.

 

You only have to look, for an SME, if thy want to understand where the problems are they just have to ask why are all these investors are jumping into the SME funding space. They’re doing it because the yields are so high for the investor. Now they’re doing it because they’re sitting there, with FinTechs, saying, “Hey look, I can get access to this market. This guy’s gonna tap the buttons, within six hours you’ll get the facility, and then he’s gonna pay us 20, 25%. And, by the way, what you may not know is if he pays out within three months, you’re not gonna get 25. You’re even possibly gonna get a higher rate of return because we’re gonna charge him for the full six months.” And this is where the problem in FinTechs is, is that they’re not looking at a longevity of the market. They’re looking at a short term play for them and then possibly IPO or something similarly, and they’ll be gone before everyone realizes that this isn’t a sustainable model.

 

When to grow your business with help of investors or stay the course

One of the most critical decisions you will make in your business is when and how to expand it and take it to the next level. Today, it is easier than ever to find the capital for expansion. You don’t have to go to a bank and beg for a traditional loan. Financial technology (FinTech solutions) abound.

 

If your business involves a physical retail space, the expense involved with expansion is obvious. You have to purchase or lease additional space. You have to hire more people. And you may have to get additional licenses for regulatory compliance.

 

You will also require additional inventory, staff, and support infrastructure. You don’t want to go it alone with a decision like this. The input of your investors and consultants is critical. They will likely be aware of funding solutions of which you may not be aware. There is another reason why investors are beneficial at this stage.

 

Cash Flow

 

One of the biggest motivators for growth is also one of the biggest mistakes if you fall for it. The problem is cash flow. There are any number of reasons good businesses fall behind in cash flow. On paper, your business might be doing perfectly well. But in reality, you are always waiting for the next receivables to come in.

 

The thing you should know is that cash flow problems are not settled by expanding. They are exacerbated by expanding. Like credit problems, you don’t solve them by going even deeper into debt. Be sure to solve the cash flow problems before moving on to the next phase of growth.

 

Solidify Your Base

 

Like a politician, before going for a promotion, you have to solidify your base. First, a strong base acts as a reliable safety net. If you have a solid business with a strong cash flow and a reliable income, you have a solid platform from which to ascend.

 

Expansion introduces instability just by the nature of change. All change is unpredictable. We can try to steer and manage it. But we cannot entirely control it. If your base is not secure at the time of your expansion, your entire operation is at risk.

 

A stable base affords you the luxury of trying new things without risking too much in the process. You always want to avoid moves that bet your entire business on one thing. Making certain your business is firmly established first means you never reach that moment of crisis where everything is at risk due to a single failure.

 

Too Much Growth

 

There really can be too much of a good thing. Growth can be a good thing when it is the right amount and pace. But grow too much before you are ready, and blessing quickly transforms into curse.

 

If you can handle 10% growth, don’t buy into a marketing campaign designed to give you 30% growth. You will not be able to serve the additional 20%. Either your additional customers will quickly leave you and give you a poor rating which would stifle your growth in the future, or you will try to serve everyone and decrease your overall quality of service. Either outcome is the kiss of death.

 

It is very possible to outgrow your own capabilities. You might be a very capable manager of a small, neighborhood business. But you might simply be the wrong person to take on s statewide, or even citywide affair.

 

It also may be the case that some businesses simply don’t scale. If only you and a handful of partners have a particular skill, there are only so many widgets you can hand make, or services you can personally do. In such cases, growth is not the answer. You might want to look into serving more of a premium market. So before expanding, you have to be sure you are not growing beyond your ability to serve your market.

 

When the Market Is Ready

 

Even if all other factors show green, you will still need to wait until the market is ready. You may be ready. Your finances may be ready. But if the market isn’t ready for more of what you are producing, you have to put resources into a market education campaign and be patient.

 

Sure, your neighborhood can’t get enough of your hot cross buns. But your neighborhood may also be filled with people from the old country where your special recipe stirs memories of a care-free childhood. There simply may not be any other place in the city that is as enamored by your recipe. That does not mean you can’t expand. It just means the groundwork has to be properly laid.

 

Expansion can be a tricky affair regardless of whether your business is in the retail space or cyberspace. The same concerns apply to a services business that is entirely online. You still need the advice and capitalization of investors, stable cash flow, a solid base, just the right amount of growth, and all when the market is ready.