Red Rocket's Best Startups of 2020

Red Rocket gets introduced to hundreds of startups each year, in the normal course of doing business, or via our involvement with various startup groups or events.  We wanted to honor the best of these startups that we met in 2020, in Red Rocket's 9th Annual "Best Startups of the Year".  This list is not intended to be an all-encompassing best startups list, as there are many additional great startups that we are not personally exposed to each year.  And, this list is not intended to be only for businesses that launched in 2020, it is open to startups of any age, that they or their advisors had some personal interaction with us in the last 12 months.  The business simply needed to have a good idea, good team or good traction, that caught our attention.  Congrats to you all!!

THE BEST STARTUPS OF 2020 (in alphabetical order):


BioSurplus (CEO, Bill Vandeweghe) - B2B used lab equipment marketplace

Cartogram (CEO, Will Clausen) - B2B indoor mapping & wayfinding platform

Castango (CEO, Chekesha Van Putten) - B2B online platform for casting and booking models

Charlie Health (CEO, Justin Weiss) - B2C telehealth for personalized teen mental health

EcomWizz (CEO, Nikita Danilov) - B2B platform for researching trending products

Get Boat (CEO, Ilya Veller) - B2B yacht booking platform

Greenlight (CEO, Nadeem Mazen) - B2B platform and community for micro-influencers

Lonerider Brewery (CEO, Sumit Vohra) - B2C craft beer brewery

Media Capital Technologies (CEO, Christopher Woodrow) - B2C movie financing marketplace

OneCare (CEO, Tom Glaser) - B2C remote health data monitoring from smart watches

Phone Wagon (CEO, Ryan Shank) - B2B call tracking software

PopShop (CEO, Nathan Franco) - B2B marketplace for finding shared retail space

Sapphire (CEO, Walter Larkins) - B2B accounts receivable collections for hospitals

Torre (CEO, Alexander Torrenenegra) - B2B professional social network for finding remote work

And, don't forget to check out the 2012 winners, 2013 winners, 2014 winners, 2015 winners, 2016 winners, 2017 winners, 2018 winners and 2019 winners, many of whom continue to be doing great things.


Congratulations to you all!!  Keep up the good work.


For future posts, please follow us at: @RedRocketVC

Lesson #332: One Bad Employee Can Tarnish Your Entire Brand

 

In business, a company's reputation can often come down to the lowest common denominator, the actions of one specific individual, especially in small companies.  Look at the image on this post--do your eyes gravitate to all the beautiful green apples, or does it focus on that one rotten apple, that spoils an otherwise perfect picture.  It is often the same thing in business, where the bad actions of one, can overshadow the otherwise perfect actions of others.  Allow me to explain with this case study.

The Situation

At one of our clients' companies, they had a employee that had been with the company for many years.  She was largely a rock star for most of those years.  She had been the company's best selling salesperson, she gave her customers terrific customer service, and they loved her for it.  And, they kept coming back year after year, loyal to the company and that specific salesperson.

But, about a year ago, something started to change.  Her sales started to plummet.  Instead of being the highest-ranked salesperson, she dropped to the lowest-ranked salesperson.  And, her service levels also started to drop off, where many customer calls were going unanswered and tasks were no longer getting done.  When the company's owners investigated further with this employee, she admitted that she had been having health problems. where she could not focus on her work or organize herself.

The Initial Attempt to Resolve

Given the employee's long tenure of success with the company, the owners wanted to try and help her through these difficult times.  They helped consult the employee on where to find medical assistance, which she took them up on.  The doctors and therapists quickly diagnosed the condition as adult ADHD, prescribed medications and other treatments, and suggested things would be better and back to normal in a couple months.  So, the owner's of the business patiently waited for the employees' health and performance to return back to historical levels.

The Damage Done in the Interim

The resulting damage from this employee's poor work performance really started to pile up.  Firstly, the company was losing revenues from the unconverted leads that were sent her way.  Many of these leads vocalized their frustrations to the company, willing to give the business another chance with a different salesperson.  But, the vast majority did not, and decided to take their business elsewhere.  And, secondly, the operational mistakes really started to pile up, with customers having major problems with their orders.  This caused the company to have to offer refunds as a mea culpa, and really started to tarnish the company's brand and reputation, and negative customer reviews started to flood into the website.  And, that didn't even talk about the fellow employees that were witnessing this poor behavior, and wondering what was going on, and how the owners were going to resolve it.

The Second Attempt to Resolve

After many months of patience (and continued lost sales and service breaks), the employee's performance never improved back to historical levels.  The employee even suggested that the owners create some financial disincentives for undesired performance, which they did without any success or change in behavior.  The owners really had no choice, but to cut ties with the former "golden girl", as the parties came up with a mutually acceptable separation.  Which to the owners, was like saying goodbye to a loved family member, you were never going to see again.

The Key Takeaway Here

Cutting ties with employees you like personally and professionally, is very hard to do.  The owners kept hoping that old "rockstar" would walk back into the room, and that never happened despite a year of trying.  But, the damage done to the company's brand in the meantime was immense.  The company got a lot of egg in its face, had to make lots of apologies and refunds, and turned away dozens of prospective customers that would never be coming back to the company.  And, it doesn't matter if those customers had originally started with a different salesperson that would have served them brilliantly.  At this point, that one "bad apple" had spoiled the entire "bushel" from a brand perspective in how they perceived the entire company.  Which is unfortunate, as the company really does deliver incredible customer service, other than this isolated situation.

So, during times like this, sometimes you have no choice but to rip off the Band-Aid, regardless of how painful it may be.  If you can't quickly resolve the situation with your employee, you need to make changes quickly that will best serve your customers.  If you wait too long, you may never get those loyal customers and lost leads back.  Which at that point, that outcome would be a self-inflicted wound by the owners for not acting fast enough in correcting a known material issue inside the company.  Don't let that be you.

For future posts, please follow me on Twitter at: @georgedeeb.

[VIDEO] George Deeb Discusses Mergers & Acquisitions Strategies (on ASBN)

 

I was recently interviewed by the Atlanta Small Business Network (ASBN), an online "television network" serving the small business community, about mergers and acquisitions strategies for small businesses, both as a buyer and a seller.  I thought this video turned out great, and I wanted to share it with all of you, to help you learn how to grow your business through M&A.  I hope you like it!!

 

The embedded video player didn't give me the option to change the size of this video.  But, if you want to see a bigger version, simply click the expand size button in the player above, or feel free to watch it on the ASBN website.

Thanks again to Jim Fitzpatrick and the ASBN team for having me on the show.  I look forward to our next interview together.

For future posts, please follow me on Twitter at: @georgedeeb.

The 5 Steps to Selecting the Best Advertising Agency

If you are investing material dollars in marketing campaigns, more often than not, you have considered engaging, or have engaged, an advertising agency to assist you with those efforts. Those decisions whether or not to manage your marketing campaigns with in-house teams versus third-party agencies are typically not easy. And if you decide to outsource to an agency, the selection process can be overwhelming. This post will help make those decisions easier for you.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Why Google's Search Page Redesign is the Death of SEO

I have been a digital marketer for more than 20 years, which seems like an eternity at this point. Google has always been a staple of any good digital marketing strategy, especially for search engine optimization (SEO), to attract free organic traffic based on the quality of the content on your page. But, when we recently started to see our SEO traffic start to decline, we asked our SEO consultant to investigate the root cause. He said it was due to a recent Google Search page redesign, moving the free organic links to the bottom of the search results page. Even more troubling was his answer on how to fix the situation.

"Start spending more money advertising with Google to get back up to the top of the page,” he said. That's a very strange thing for an SEO expert to say because his services aren't needed in that scenario. This means SEO as a strategy for ecommerce-driven companies is dying, and paid search marketing has become your primary way to gain an audience through the search engines, at least through industry-leading Google. Allow me to further explain.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

It's Time for 2021 Business Planning--Red Rocket Can Help

As we are about to start the fourth quarter of 2020, that means there are only three months left to complete your 2021 business plans.  If you need any help running your team through a strategic planning process, building budgets, detailing your sales and marketing plans or simply need an executive coach to help guide you through this process with a fresh set of eyes, Red Rocket is here to help.  Contact us to set up an appointment with one of our experts today, via the form at the bottom of this page.

For future posts, please follow us on Twitter at: @RedRocketVC.

Lesson #331: Master Your Marketing Funnel and Media Mix

 

One of the biggest struggles that companies have is knowing how to build an effective and profitable marketing funnel and media mix, and using the right metrics to manage such efforts.  And, for most startups, they really don't have the budgets to build an effective full funnel strategy, and typically focus on more immediate cash returning lower funnel tactics.  This post will help you learn the various stages of the marketing funnel, the right tactics and metrics to explore at each stage of the funnel and how to translate that into an effective media mix.

What is the Marketing Funnel

A marketing funnel is the process of making prospective customers aware of your brand in the first place, and then nurturing them over time into buying customers.  The upper funnel is making sure you have brand awareness to prospective buyers.  The middle funnel is making sure your brand is actively being considered when a customer is actively researching their options.  And, the lower funnel is doing everything you can to convert known active in-market buyers to purchase your product. The next stages, typically forgotten by most companies, are getting your customers to become loyal repeat buyers, and more importantly, to become impassioned brand advocates spreading positive word-of-mouth referrals to prospective new customers.

To help visualize this, take a look at this graphic from Marketing Edge Magazine showing the typical marketing funnel:

The Stages of the Marketing Funnel

Let's provide a little more definition to each of the above funnel stages for clarity:

Awareness:  A person is aware of your brand, whether they are buying right now or not.  If someone asks, what is the biggest brand names in soda makers, the names Pepsi and Coke come immediately to mind.  Unaided brand awareness is best, as top of mind with customers without any help.  Followed by aided brand awareness when presenting a list of companies in the space, and them recognizing your brand on the list.

Interest:  A person begins to learn more about your brand and offering, perhaps reading about it in an article or seeing it promoted in an advertisement. 

Consideration:  A person is in-market for products you sell, and is willing to learn more about your specific product.  Often comparing your brand to others at this stage, perhaps on reviews sites.

Evaluation:  A person has narrowed down the list to a couple finalists, and is digging into all the details and differences between various brands, product features and pricing.

Decision:  A person has decided that this one brand or product is the specific one they want to move forward with, when they are ready to buy.

Purchase:  The person officially becomes a customer, swiping their credit card on their first transaction with your company.

Repeat:  That same person has purchased multiple times from your business.  That can either be the same product in higher frequency, or new products altogether.

Loyalty:  That same person is dedicated to purchasing from your brand, anytime they have the need.  They would not consider other brands given their past satisfaction with your brand.

Advocacy:  That person is so passionate about your product, they start to spread the "gospel" and positive word-of-mouth referrals to their friends and family.  And, even better, they are promoting your brand on social media to all their followers (which in turn, helps to profitably build your upper funnel with new prospects).

Using the Appropriate Media Tactics at Each Funnel Stage

This diagram from Visual Paradigm does a good job of showing how you need to tailor your marketing efforts to each of the specific funnel stages:

At the top of the funnel, you are trying to get as much reach as possible, to make sure the market is aware of your brand.  Large brands may do this in television advertising, and startups may do this in more affordable social media advertising.  Once a user makes an action that signals that they are in-market for your products, you want to make sure they are aware of you on review sites and the search engines during their middle funnel consideration stage.  And, once they engage with your site, your lower funnel tactics will take over with things like digital retargeting ads and email follow ups.

But, getting them to buy is only half of the exercise, now you want to get them to buy again (through your email newsletter promotions and joining your customer loyalty program).  And, you want to ask them for positive reviews of your products and to share their love of your product or brand with their social media followers, turning them into brand ambassadors.  As you know, acquiring customers through positive word-of-mouth for free is a lot cheaper than trying to acquire customers with expensive advertising upper funnel.

Using the Appropriate Measurement Metrics at Each Stage

One of the biggest mistakes a company makes is using the same marketing metric across each of the funnel stages.  For example, they compare their cost of acquiring a customer (CAC) to everyone one of their marketing tactics.  If they did that, they would immediate bias lower funnel tactics, as the CAC from in-market lower funnel buyers will be a fraction of out-of-market upper funnel prospects.  That bias may help them drive an immediate ROI on their marketing spend, focusing on the most profitable tactics, but it would hurt them in terms of investing upper funnel and building long term brand awareness with which to better scale the company long term.

To me, your upper funnel would be measured on a cost per impression (CPM) or cost per visitor (CPV) metric, your middle funnel would be measured on a cost per lead (CPL) metric, and your lower funnel would be measured on a cost per acquisition (CPA) metric.  If you set the appropriate metrics for each stage, you will have a much higher odds of scaling your business long term.  It may be a little less profitable in the first few months of "funnel building", but long term you will have a much bigger and more profitable business, than if you simply focused on the lower funnel alone.

Doing the Appropriate Media Mix Modeling 

I prefer to grow my business profitably, not on a grab market share at any cost basis to "own" the market in the short run and drive profits in the long run (after years of huge losses).  So, with that as my guide, I typically split my media mix: 20% upper funnel brand building, 30% middle funnel development, and 50% driving lower funnel conversions.  That will give profits a "fighting chance" for success in the near term, within a few months of starting a campaign.

But, the mix here can be highly variable based on your customer sales cycle.  Let's say you are selling expensive automobiles and customers only buy a car every 5-10 years.  That will take a really long time for your upper funnel brand building to pay back.  So, maybe you should focus more on middle and lower funnel tactics only, to drive a more immediate return on your investment.  And, on the flip side, let's say you are selling an affordable consumable with a high repeat purchase cycle (e.g., Starbucks Coffee).  In that case, you may want to invest more upper funnel, to quickly build up the brand awareness and lock out competitors, as any losses you may incur in the short run from your media spend, will be recouped from the repeat purchases in the following months.

Concluding Thoughts

Doing your marketing funnel planning and media mix modeling is not easy, especially for first timers.  So, make sure you surround yourself by smart mentors, consultants or ad agencies that have deep expertise in this area, to ensure you don't flush your limited marketing dollars down the toilet.  But, hopefully, you now have a better understanding of how it works to help point you in the right direction to building a truly great brand, marketing success, revenue growth and bottom line profit.  If you have any questions on this stuff, don't hesitate to reach out to one of our fractional CMOs to help you with your marketing strategies and planning efforts.

For future posts, please follow me on Twitter at: @georgedeeb.

North Carolina Venture Capital Trends

In case you haven't seen it, the Center for Entrepreneurial Development recently published its 2019 Innovators Report.  It contains  venture capital data going back to 2015, covering funding, funders, deals, and exits. The report explores a number of useful categories, including year-over-year comparisons, sectors, locations, funding and investor types and much more. 

Its great to see the entrepreneurial activity in the Triangle area (and the rest of the state) is doing well.  Kudos to the team at the CED for pulling this together.


For future posts, please follow us on Twitter at: @RedRocketVC.

Lesson #330: The Importance of Conversion Rate Optimization

Getting new customers to your website is hard enough, having to block and tackle up against all your competitors' advertising on Google, Facebook and elsewhere.  But, that is only half of the challenge.  The other half--the more important half--is getting those site visitors to convert into a lead or a sale.  And, that process of maximizing conversions is known as Conversion Rate Optimization, or CRO for short.  This post will help educate you on what CRO is, how to do it and why this matters to your bottom line . . . big time!!

What is CRO?

At the simplest level, CRO is optimizing the ratio of conversions, however you want to define them (e.g., transactions on your website, email lead form submissions, phone calls) as a percentage of the total visitors going to your website.  So, as an example, an average ecommerce website may have a conversion rate of 3%, when looking at the ratio of online transactions to website visitors.  But, there are wide ranges in conversion rates; a brand new startup with no brand recognition may only convert 1% and a huge trusted ecommerce portal like Amazon may convert 8%.  Said another way, there is an 8x difference in revenues to be had, whether you are at the low end of the range, or the high end of the range.  So, CRO is a critical part of maximizing your revenues, and needs more focus than most startups give it.

How is CRO Optimized?

First, you are optimizing for every variation of your user experience across devices.  There is not a one size fits all solution.  Optimizing for desktops, tablets and mobile devices are completely different.  And, more often than not, in today's world, mobile is the most important experience that needs to be optimized, given it represents the majority of inbound traffic for most companies these days (although many designers are still overly focused on desktop design).

Second, you are optimizing your user experience (UX).  That includes things like your site's usability, navigation, page design, process design, email form design and overall site speed (and speed really matters for Google to get higher up their search results).  This is changing things like page headlines, copy, voice, creatives, offers, calls to action, colors, sizes, messaging, etc., constantly A/B testing different variations of each, to see which one helps drive conversions the most.

As you study users playing with your website, you are going to learn where the drop-off points are in the conversion funnel.  How many site visitors, lead to product searches, lead to shopping cart additions, lead to starting the checkout process, lead to a completed sale.  Every step of that process needs to be optimized, from beginning to end.

Third, another part of CRO is seeing how your marketing efforts impact conversions.  Do any marketing channels work better or worse?  Any variations by customer demographics?  Do variations in landing pages from the ads, have an impact on conversion rates?  Do certain products convert better than others?  So, this is not only about optimizing the UX of your site, it is working in partnership with the marketing department to optimize what they are doing, to help maximize conversions.

How is CRO Measured?

There are many ways to study your UX, to learn how consumers are engaging with your site.  You can survey customers to learn what they like and don't like about your UX.  You can A/B test different variations of your page design, to see which version performed better.  You can study your Google Analytics data, and they have ecommerce funnel optimization tools, to learn where the drop-offs are happening.  There are many technologies that can help you learn here--things like heat mapping where a user's eyes are focused on the page, recording user web sessions, doing scroll bar mapping or using other software that can help you study your customer journey on your website (e.g., Content Square, Crazy Egg, Hello Bar).

Who Can Help Me With CRO?

And, if you don't have an internal UX team or enough time to do this yourself, there are many agencies that can help you audit your CRO and make specific optimization suggestions for as little as $5,000.  There are dozens of agencies that can help you here, but I know agencies like The Good, Mirgo Digital, Underwater Pistol, Thrive Digital, 1 Digital Agency and Boostability have expertise as CRO focused agencies.

Closing Thoughts?

Too often an entrepreneur is focused on getting a minimum viable product into the market as quickly and cheaply as possible, which is the norm for most lean startup launches.  But, your website experience is a key part of maximizing revenues, and it needs professional attention, sooner than later. 

Imagine you were shopping in a retail mall, and you walked by a store where the front door was half closed, the light bulbs were off and you couldn't walk through the aisles of the store without bumping into the racks of merchandise or other shoppers.  You would simply leave and move on to the next store that gave you a better experience.  It is that same logic online, with the hundreds of competitors trying get those same customers to visit their websites. 

So, with a little bit of effort here, you can materially increases your revenues and profits by expanding your conversion rates--the only metric that really matters at the end of the day.


For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #329: Leverage Market Downturns as Investment Opportunities

Chaos followed for most businesses in the wake of the Coronavirus:  the stock markets crashed, product demand fell and unexpected losses started to build up.  Most businesses did everything they could to batten down the hatches to help them best weather the storm, including stopping all discretionary investments.  But, should they have?  Most great investors, like Warren Buffett, have been quoted as saying their highest return investments were made during the middle of economic downturns.  So, theoretically, your highest return investments could be made right now, during the peak of the negative economic impact coming out of COVID-19.  So, instead of retreating right now, you may be best served long term by accelerating your long term investment efforts, if you have the capital to do so.  Allow me to explain.

Your Vendors Are Typically More Flexible During Downturns

You are not the only one whose business may be suffering from lower demand right now; most businesses are suffering from lower demand during downturns.  Which means they too are struggling to generate revenues.  And, when that happens, that is when they start to discount their prices, to try and drum up more demand and revenues.  So, if you were normally going to spend $1MM on things for your business, you could now be able to buy those exact same items for $800,000, as an example.  That is like adding $200,000 to your bottom line!!

There is Typically an Over-Supply of Good Talent During Downturns

In the last couple months, over 40 million people have lost their jobs in the wake of Coronavirus.  Most of them are really talented people that just happened to be in the wrong place at the wrong time.  Which is great for you!  These people are now looking for new jobs, and there is an undersupply of job openings.  Which means a couple things for you: (i) you should have the “pick of the litter” of resumes to choose from; and (ii) those candidates may be able to work for lower salaries than they would normally have worked, because they need a job.  So, your chance to “land the whale” in terms of great people at a great price will never be better than right now.

There is Typically Less Competition During Downturns

Many undercapitalized companies will not be able to survive an economic downturn.  Which means, instead of competing against 10 major competitors, you may only now be competing against 7 major competitors.  That 30% of revenues is now up for grabs, between you and your other surviving businesses.  If you get an equal share of that, your revenues will rise 30%.  If you aggressively market your business to taken an even bigger share of that, you could position your business to quadruple your revenues, taking the accounts of four companies instead of your one company.

Advertising Costs are Typically More Affordable During Downturns

The combination of companies going out of business and companies cutting their marketing efforts during downturns means, you should be able to see materially better returns on your marketing spend during downturns.  I know that is true for my Restaurant Furniture Plus portfolio company; that business has seen its cost of acquiring a new customer cut in half in the wake of Coronavirus.  Which means on the same marketing spend, I should be able to convert twice as many customers!

M&A Targets Are Typically More Affordable During Downturns

The same “bargains” can be had in the mergers and acquisitions world, so this would be a great time to try and roll-up a bunch of your competitors at lower than normal valuations.  As an example, let’s say a business that used to be generating $2MM of cash flow would have been valued at 6x cash flow for $12,000,000.  But, today, they are only doing $1MM of cash flow, and that business may only be worth 4x cash flow, or $4,000,000.  That is like buying a business at a 67% discount, when you know the demand and profits should return to historical levels as soon as the market conditions recover.  So, now could be the best time to try and find businesses to acquire to scale your business long term, at low valuations today.

Concluding Thoughts

As you can see, there are a lot of potential reasons you should be accelerating your business investment efforts right now, not reducing them.  Hopefully, you have some capital set aside to make these investments a reality.  But, if you don’t, this could be a good time to raise some capital, with a clear pitch to your investors that this is the perfect time to be “buying low” and “selling high” at a later time down the road, after the markets improve.  A smart investor should understand this concept of turning “lemons” handed to you by the market conditions into “lemonade”!!


For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #328: Creating a Symbiotic CEO and CFO Partnership

One of the most important drivers of a successful management team is the relationship between the CEO and the CFO.  The CEO is often times the headstrong, overly optimistic driver of the business; and the CFO is often the more mild-mannered, ultra-conservative controller of the company’s purse strings.  Too much of one, and the business will race off a cliff, and too much of the other, and the business will suffocate.  This post will teach you how to create that perfect harmony in the relationship between your CEO and CFO.

What Businesses Need

I think most of us would agree, most businesses are looking to grow their revenues at a pace that won’t result in the company running out of cash.  Typically, your CEO is focused on the first half of that mandate (growing revenues), and your CFO is focused on the second half of that mandate (not running out of cash).  If “growth at all costs” CEOs surrounds themselves with people just like they are, there is nobody on the team to “keep them in check”.  And, vice versa, if “cash pinching” CFOs surround themselves with people just like they are, there is nobody to help them “see the forest, through the trees”, propelling the business to new heights through some smart bets.  The right blend of business need, is somewhere right in between.

Your Typical CEO

Having been a CEO of multiple businesses, I can pretty much describe myself.  I am the perpetual optimistic—the glass is always “half full”.  I make most of my strategic business decisions on what will maximize revenues and profits five years from now, not what will maximize profits today.  I prefer to lead, than to be lead, and don’t like it when someone tells me why we can’t do something I want to do.  I have an A-type personally, and like to be around similar extroverts with bubbly personalities. 

Your Typical CFO

Having worked with many CFOs of multiple businesses, they can pretty stereotypically be described as follows.  They are chronic worriers—the glass is always “half empty”.  They make most of their day-to-day decisions based on what will spend the least amount of cash today.  They too like to lead, and have their voices heard, which can often be in diametrically opposite directions to where a CEO may be headed.  And, many have B-type personalities, often as introverted executives that function best from “behind the scenes”.

The Friction Created

Do you see the problem here, as described above?  CEOs and CFOs are often very different types of people, both in their demeanor and in terms of the ways they think and measure success.  The CEO-CFO relationship can often be a tug-of-war, and if not managed well, can lead to lots of internal friction and arguments between the two. 

But, that doesn’t need to be a bad thing.  On the contrary, it could be a very good thing, as both of them are working with the company’s best interests in mind—the CEO for the long term and the CFO for the short term.  The CEO and CFO should just acknowledge their differences upfront, know they are never going to get their way 100% of the time, and create reasonable boundaries for each other to “flex their muscles”, depending on the topic.

How to Create Harmony

To me, the right CEO-CFO relationship begins with recruiting the right people to start.  Speaking as a CEO, just know going in that you need to recruit a CFO that is going to protect the business first, and not “follow you off the cliff” on every one of your growth desires.  It is more important you find someone that has a good balance of short-term and long-term in the way they think, and will support your growth decisions if they are: (1) data-driven and logical; (2) will not create unnecessary strain on the company’s cash flow in the immediate term; and (3) can easily be funded by investors, if any startup investments are required to fund any expected deficits.   And, on the flipside, the CEO should support the CFO’s cost cutting decisions if they are: (1) data-driven and logical (sound familiar); (2) will not materially impede the company’s long term growth goals; and (3) if not following that decision, will potentially put the company out of business.  It is all about getting that right balance between the Yin (CEO) and the Yang (CFO).

Having Mutual Respect

In all cases, the CEO and CFO must respect the roles they each play in the business.  Don’t get upset if your desired actions are getting overturned by the other, but at the same time, don’t expect your desired actions to get overturned every time.  The right CEO-CFO balance is when they are both 50% happy, 100% of the time.  If either one is happy 100% of the time, you either aren’t pushing the business hard enough, or you are about to implode, one way or the other.

Closing Thoughts

So, as you can see, the CEO and CFO both play very critical roles in shaping the future direction of the company, and creating the right balance between the two, is often the right recipe for success.  You may not build as large of a company as you could have, but at the same time, you can rest assured you will never go out of business and will always be able to “live to fight another day”, in both good times and in bad.  Now, if you are a CEO or CFO, get up from your chairs, walk to the desk of your fellow executive, hug and make up, and pat them on the back for a job well done (despite what you may have thought about them before reading this article).


For future posts, please follow me on Twitter at: @georgedeeb.

5 Ways to Leverage Market Downturns as Opportunities to Make More Money

Chaos followed for most businesses in the wake of the coronavirus pandemic: the stock markets crashed, product demand fell and unexpected losses started to build up. Most businesses did everything they could to batten down the hatches to help them best weather the storm, including stopping all discretionary investments. But, should they have?

Most great investors, like Warren Buffett, have been quoted as saying their highest return investments were made in the middle of economic downturns. So, theoretically, your highest return investments could be made right now, during the peak of the negative economic impact coming out of Covid-19. So, instead of retreating right now, you may be best served long term by accelerating your long term investment efforts, if you have the capital to do so. Allow me to explain.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

[VIDEO] George Deeb Discusses How COVID-19 Impacted Small Business (on ASBN)

I was recently interviewed by the Atlanta Small Business Network (ASBN), an online "television network" serving the small business community, about how COVID-19 is impacting small businesses.  I thought this video turned out great, and I wanted to share it with all of you, to help you see how your business is stacking up in comparison.  I hope you like!!

The embedded video player didn't give me the option to change the size of this video.  But, if you want to see a bigger version, simply click the expand size button in the player above, or feel free to watch it on the ASBN website.

Thanks again to Jim Fitzpatrick and the ASBN team for having me on the show.  I look forward to our next interview together.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #327: All Search Engine Traffic is Not Created Equal

It is really easy for a newcomer to the world of search engine marketing to assume that the search engines (e.g., Google, Microsoft) are all the same and the clicks therefrom all behave in the same ways.  In the words of Lee Corso, the ESPN analyst on College Game Day . . . “not so fast my friends”!!  In this post, we are going to learn the differences between Google and Microsoft, their search engines and shopping engines, mobile vs. desktop, and much more, to help you better optimize your efforts here.  As you are going to read, there are probably of lot of things you are doing today, that you shouldn’t be.  And, vice versa, a lot of things you are not doing today, that you should be.

Google vs. Microsoft

Well, first of all, the biggest difference between Google and Microsoft is reach:  Google is materially larger than Microsoft (which includes Bing, Yahoo and AOL traffic in their network).  According to Statista, that difference is around 63% market share for Google and 25% market share for Microsoft in the United States, so Google is around 2.5x the size.  You would think that suggests you should focus your efforts on Google first, to get in front of more users, right?  Perhaps, but everyone else is also thinking that.  There actually is less competition on Microsoft, and you may be able to acquire the same amount clicks at a materially lower cost per click and improve your ROI in the process.

And, there is a material difference in demographics between the two networks.  Google tends to attract younger, more college educated, higher income, and a generally more tech savvy audience.  And Microsoft tends to attract an older, less educated, and less income audience, more likely to have kids.  Maybe that doesn’t matter for your business, depending on your product offering (e.g., either audience watches movies).  But, maybe that demographic difference could be a material issue for you (e.g., selling a product targeting older Baby Boomers may perform better on Microsoft).

There is also a material difference if you are trying to attract users from outside of the United States.  Google’s international reach is materially bigger than Microsoft’s, in case you are targeting international customers, as well as U.S. based customers.

Search vs. Shopping

Just so we are clear, search ads are the sponsored listings that appear at the top of search engine results when you enter in a keyword (mostly textual based links).  Shopping ads are the product listings that appear in the “shopping” sections of those same search engines (e.g,. mostly visual product images), typically loaded to the search engines with a direct feed of your products from your website with feed management tools like Feedonomics or DataFeedWatch.  If you are in ecommerce business selling products, the natural instinct is to be advertising in both sections:  get your link to “chairs” in the search results and get your image of specific chair SKUs you sell into the shopping results.  

That may work fine for you, or it may not, as we learned with our Restaurant Furniture Plus business.  What we learned is the shopping section was mostly attracting consumers, not commercial buyers.  So, we found there was a material difference in our average order size between the two sections, let’s say $500 from shopping and $5,000 from search.  And, based on the differences in cost of customer acquisition, let’s say $100 from shopping and $200 from search, it was materially easier for us to maximize our revenues, profitability and return on ad spend by focusing on search, and not struggle to simply break even on our shopping spend.  The right answer here for any one business, will be different depending on your focus.  Figure out what is best for your business.  

B2C vs. B2B

Related to this search vs. shopping topic, are the implications for B2C vs. B2B facing businesses.  Continuing with our Restaurant Furniture Plus example, let’s say we were advertising for “chairs”.  Yes, chairs are needed for restaurants.  But, they are also needed by consumers in their homes.  When we were simply advertising “chairs”, we were up against a lot of big consumer brands selling chairs (e.g., Pier 1, Pottery Barn, Wayfair) trying to tap into those same “chairs” keywords.  And, those big brands have a lot more marketing muscle and repeat buying potential, as those consumers will most likely buy other products for their homes over time.  Which means the big brands were willing to pay a lot more for those leads, than we were.  It wasn’t until we shut off our shopping feed, and changed all our generic “chairs” keywords to more specific “restaurant chairs”, “commercial chairs”, “foodservice chairs”, that we started to truly optimize for our B2B needs.  Somebody really needs to build the “B2B Only Search Engine”, as you typically can’t get that level of keyword targeting out of the current search engine tools.

Desktop vs. Mobile

When I first started digital marketing back in 2000, there was no such thing as a smart phone.  So, all the traffic was coming from desktop PCs.  But, over the last 20 years, and thanks to the innovations of Apple, Android, Samsung and others, for many companies, searches from mobile phones has actually surpassed searches from desktop PCs.  The problem with that: most businesses have optimized their user experience for desktop, not mobile.  And, the search engine algorithms actually produce search results differently, depending on the perceived user experience and site speed of those different desktop vs. mobile channels.

For example, check out this Google tool that lets you check your site speed on desktop vs. mobile.  If Google thinks your mobile site (compared to your desktop site) is too slow and you are giving a poor mobile user experience, it will not publish your mobile advertising in the same frequency it is pushing your desktop advertising, or the same frequency of your competitors’ advertising or search engine optimization rankings who are better optimized for mobile.  You really need to be living in a “mobile first” way of thinking today, to get the lion’s share of the searches coming your way.

Text (Prospecting) vs. Display (Retargeting)

In addition to the text ads you buy in the search engines, they also let you buy display ads, which publish to those same retargeted users that are visiting other websites that are within those same advertising networks.  There are several differences here:  what you can say and show in a few lines of text, is very different from what you can say and show in a beautiful image.  Not to mention, that image is now being displayed to a user that has already seen your brand once, so they will be much more likely to engage with that second impression image ad, than they were to engage with that first impression text ad.  So, if you are going to run a search campaign, you are leaving a lot of potential success off the table if you are not concurrently running the display retargeting ads.

With Reviews vs. Without

Over the years, Google has added a lot of emphasis on social media data, in dictating how it publishes ads and how it ranks sites for organic traffic.  One of the biggest drivers of that is customer reviews data.  But, the reviews have to come from their list of trusted reviews vendors to give the review credibility, and ensure that you simply didn’t make it up.

The benefit of working with one of these trusted third party reviews vendors is, if you have over 100 reviews, Google will add those reviews (e.g., your summary five star score), next to each of your paid search ads and your organic search result links.  Which does two things: (i) it gives you higher credibility vs. other links on the page, increasing the odds the customer clicks on your links; and (ii) more importantly, it can decrease your cost of customer acquisition by as much as 15%, on average, with a higher likelihood of converting into sales.  So, make sure you have a good customer reviews strategy that will make the search engines more likely to promote you to truly optimize your ROI.

General vs. Custom Audiences

To date, you mostly had to rely on the search engines to identify the audience targeted, and hope they got it right.  In the newest iterations of search marketing, the searches engines are giving you more input on who is being targeted.  For example, if you are a “whitelisted” email marketer, you can give them your list of email targets, they will match it to their users, and target advertising only to those users.  This is great if you are targeting old customer email accounts, or a list of prospects’ emails you have created.  Or, as another example, you can give them a list of competitor or industry websites where your likely customers are looking, and they will target advertising to any users that visit those sites.  That is pretty awesome!!  This is the first thing I have seen, other than customizing keywords from “chairs” to “restaurant chairs”, that will help B2B marketers go after really targeted traffic for their business.  So, be sure to set up your custom audiences in your campaigns.

Closing Thoughts

So, as you can see, a lot has changed in the world of search marketing since I first wrote about it in 2011.  And, I am guessing there will continue to be many more changes to come in the years ahead.   So, please don’t set up your campaigns once and forget about them.  You constantly need to be relearning the new best practices and resetting your campaigns to truly have a maximum return on your search engine marketing investment.

For future posts, please follow me on Twitter: @georgedeeb.

Top 5 Lessons from a Kid Entrepreneur

I was recently introduced to Brendan Cox, a 19-year-old entrepreneur, that has founded 10 different successful businesses to date — starting at the age of nine years old. Collectively, he has grown a $900 loan from his mother into $250,000 of profits today. I have previously written about how elementary school-aged kids are capable of learning and grasping complex business skills, and Brendan is the poster child of proving that exact point. All I could think about was: what if Brendan was actually instructed on such entrepreneurial topics in school, instead of learning about rocks, state capitols and cotton gins. Maybe his successes would have been even higher! This post is going to highlight some of the key startup lessons that Brendan learned along the way.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #326: Kids Can Be Entrepreneurs Too!! (Pay Attention School Administrators)

I have previously written about how elementary school aged kids are capable of learning and grasping complex business skills, if instructed on such topics, and that the core K-12 curriculum is broken—too much about rocks, state capitols and cotton gins, and not enough about entrepreneurship, technology coding and other useful skills they may need to succeed in life—especially if they can’t afford the skyrocketing costs of a college education.  In this post, I am going to bring that point to life with a case study on Brendan Cox, a 19-year-old entrepreneur I recently met, that has founded 10 different successful businesses to date, which collectively grew his $900 loan from his mother into $250,000 of profits today.

Brendan was an introverted, eager, and creative kid with a fascination for business and a drive to be successful (passed down by his mentor father). He was never interested in more typical school-age activities, like playing video games, which he found boring. Instead, at an early age, he was driven by finding creative ways to make money and “scratch” his entrepreneurial “itch”.

Inspired by his fascination with the DJ setups at a few family bat/bar-mitzvahs, his first business was a DJ company that he started at the ripe old age of nine years old. He demonstrated his desire to learn the business and figured out on his own how to mix music by conducting research on YouTube. After pitching this business idea, Brendan’s parents agreed to help with funding for his equipment as a Christmas gift. And, to get the word out there about his business, he created business cards, flyers and promotional products, which helped to acquire new customers, and in turn, happy customer references which helped propel word of mouth marketing from there.  He learned early the mantra of “under promising, and over delivering”, to wow customers and motivate them to help refer new customers.

After working his first job for the community, he was completely hooked and determined to find ways to grow his business and make it even better.  He saved all of his earnings, and once he had enough funds in place, he reinvested his profits by purchasing additional equipment and lighting, party giveaways, company gear he designed and by adding a team member.  Brendan knew his limitations and outsourced the MC’s job at the gigs, so he could focus on his growing his business skills and eliminate his shortcoming as an introverted person.  Brendan was fortunate to have supportive parents, who fostered his interests and encouraged and supported his business endeavors. And, Brendan immediately reimbursed his mother’s investment with the profits from the business.

By the time he entered middle school, Brendan lost his passion for entertainment, which he knew was critical for business success, so he shifted gears and focused instead on using his innovative skills to create a new business. At 14 years old, he took out a $900 loan from his father to start his social media management company. Although his father was skeptical at first, Brendan assured him with confidence in his abilities. His father agreed to let him borrow the $900, and within a week Brendan was able to pay his dad back. Brendan’s success in his social media management is due to his vast understanding of different ways to monetize platforms, which allowed him to grow a combined following of over a million unique users on Instagram. Understanding how to connect with brands, partnering with other agencies, and retaining your audience’s attention are three factors Brendan deems crucial to running a successful Instagram account. Unfortunately, the business side of Instagram became less profitable when Instagram began “sponsored posts” directly through Facebook advertising. So, Brendan switched gears.

Brendan’s next endeavor arose when he saw the profit available by selling phone cases. However, if he wanted to stand out from other competition, he realized his designs needed to be unique and eye-catching. Brendan went back to researching and learned how to master Adobe Photoshop. He named his business Kicks Cases and used social media as his platform to promote his products. While mastering Photoshop, Brendan developed his creative skills abilities beyond phone cases and learned to design advertisements, banners, websites, and other various products.
Brendan got his first design client in 2015 after a start-up company in Brooklyn asked him who his graphic designer was for his phone cases. From there, began outsourcing his talents to other small businesses. He eventually launched Cox Visuals, on a mission to assist small businesses with establishing and growing their brand image. Cox Visuals has since made thousands of designs for satisfied clients who continue to return with new endeavors. Brendan has worked with large startups, such as Habits 365, the next big name in streetwear, that amassed a following of over 125,000 followers on Instagram.

These businesses created a solid foundation for Brendan’s knowledge in business having learned a variety of different skills throughout his multitude of endeavors. Some of the most important skills he learned were through branding various companies. Through these companies he learned: how to create an appealing company image and corresponding content, how to grow a targeted Instagram following, and how to work with difficult clients.

However, his interest in entrepreneurship continued to grow, and his next business emerged when he found a vacant niche in the market he could fill. At age 17, Brendan created Teen Assistant, a business that matches local teenagers with odd jobs from residents that need help in his community. His goal was to provide teens with extra spending money while they learned basic skills needed when entering the workforce. Luckily, many adults don’t have time to spend accomplishing tasks around the house, and this is where the company found success. Brendan sold Teen Assistant in August 2019 as he was ready to move on to his next big idea.

Through this successful business, Brendan learned how to communicate with customers allowing him to apply this new knowledge and focus on his ultimate passion. “Communication is one thing and good communication is another,” said Cox. He explained that being clear with your customers is crucial to retaining customers and establishing a good reputation. “The best way to satisfy any customer is to give them what they want plus more, go above and beyond their expectations,” said Cox, when asked about how he became successful.

Overall, Brendan’s fascination for graphic design and social media management drives his success at Cox Visuals and its sister company Cox Social Media Management. Brendan believes the key to a successful graphic design business is patience, openness and having the ability to take criticism. If you can’t listen and take constructive criticism in business, you will never succeed. His graphic design skills teamed with his knowledge for entrepreneurship allowed him to cultivate a following of over 30,000 on an entrepreneurship account. Brendan’s advice to grow a following on social media is to stay consistent. “So many people reach out to me and don’t understand why they haven’t received 1,000 followers within the first 24 hours of starting their page. Instagram is all about providing consistent valuable content. When starting a page think to yourself if you would follow it yourself?” said Cox, when discussing how to make an account on Instagram go viral.

While focusing on Cox Visuals, Brendan is expanding his knowledge in a new way and creating a podcast called All Up in Ur Business, a way for Instagram viewers (already up to 36,000 followers) to learn about all different entrepreneurs and their businesses. Brendan understands the value of trends in businesses and realizes some endeavors will phase out; however, with constant creativity new ventures are bound to arise. All Up in Ur Business will take the same approach of educating his listeners. Over the years, Brendan has grown an extensive network of likeminded individuals through making an effort to seek out those with the same mindset.  He now wants to use his network to enable others to learn tips of success by those who are continually succeeding.

Brendan is a unique character for his age group. His knowledge and experience have accumulated from vast hours of work and determination to success. A crucial lesson Brendan has learned from his startup companies is how to budget time. Brendan explains that budgeting time is everything in business, “Budget your time wisely otherwise you will catch yourself scrolling through social media wasting time. Download a calendar app and create a strict schedule for your day – of course with time off for relaxation and other activities.” While being in high school for many of his endeavors, Brendan sought out a strict schedule to budget his time for work and school. Although he did well in school, he mentioned that work came first. “Even though I still study hard and maintain good grades, I see my businesses as a higher priority than schoolwork. Throughout my several years being involved with businesses, I have learned so much more than I will ever learn in a classroom,” said Cox.

Brendan is currently in college at the University of Scranton, because he felt he “needed to”, to fit within societal norms and expectations, not because he wanted to.  But, he knew college would help him grow his base of connections and help him mature, socially, more than any other reason.  He is supposed to graduate in 2023, but that entrepreneurial “itch” is scratching again, and he may take the coming semester off, to better focus on growing his business ventures.  The business workload has grown to 90% of his time, versus school work at 10% of his time, and he need to prioritize his efforts.  Brendan much preferred his educational time at the Young Entrepreneurs Academy, as it directly ties to his business passion.

When asked where he sees himself in five years, Brendan says “5 years is tough. Things change everyday for me. My dream is to ultimately be working behind the scenes branding some of the world's largest social media influencers. Since I was young, I have been fascinated by the business side of influencers. When I watch a YouTuber I am not necessarily watching them for their content but more watching them to study them as an entrepreneur. Through my businesses, I have learned the behind the scenes of the social media world and would love to apply that knowledge with influencers and helping them monetize their followings.”

If you are interested in learning more about Brendan, check out his website, which includes links to other feature articles on him in Forbes and elsewhere.  You can also follow Brendan on Instagram @BrendanACox and reach out to him by email at brendan@ coxmgmt.com.

To all you young school-aged readers out there, take these lessons and apply them to your life and educational path, and you may build a small fortune for yourself.  And, to all you school administrators building curriculums for our schools, we can do a lot better for our kids, in teaching them lifelong skills they can immediately apply into success, a lot earlier in their lives, as they may not be able to afford the rising costs of college.  It’s time to step up your game, as our future generations’ collective economic success are relying on you, especially in a world where 40% of jobs today are going to be disintermediated by automation in the next decade or two.


For future posts, please follow me on Twitter at: @georgedeeb.

How to Create a Symbiotic CEO and CFO Partnership

One of the most important drivers of a successful management team is the relationship between the CEO and the CFO. The "typical" CEO is often the headstrong, overly optimistic driver of the business; and the typical CFO is often the mild-mannered, conservative controller of the company’s purse strings. Too much of one, and the business will race off a cliff, and too much of the other, and the business will suffocate. This post will teach you how to create that perfect harmony in the relationship between your CEO and CFO.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

[VIDEO] George Deeb Discusses How to Survive the Coronavirus Pandemic (on ASBN)

I was recently interviewed by the Atlanta Small Business Network (ASBN), an online "television network" serving the small business community, about the steps you need to take to protect your business through the Coronavirus pandemic.  I thought this video turned out great, and I wanted to share it with all of you, to help you learn what you need to do to best position for your business for long term survival during these difficult times.  I hope you like!!

The embedded video player didn't give me the option to change the size of this video.  But, if you want to see a bigger version, simply click the expand size button in the player above, or feel free to watch it on the ASBN website.

Thanks again to Jim Fitzpatrick and the ASBN team for having me on the show.  I look forward to our next interview together.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #325: Reset Marketing Campaigns as Market Conditions Change

It is no surprise to anybody that we are living in a different business climate in the wake of the Coronavirus lockdown.  In the last few weeks, many of us have seen customer demand fall, revenues decline, free cash flow dry up and the stock market crash.  Which means, we need to find every penny we can, to keep our businesses afloat.  I am sure many of you have already cut your payroll expenses, based on the record unemployment filings in the last couple weeks.  But, you may not have given your marketing expenses the attention it deserves during these troubling times.  This post will help you "reset" your marketing campaigns, to help ensure they are contributing positive cash flow again . . . as most likely, they are not today!!

Reset Budgets

Marketing is typically your highest expense outside of payroll.  In normal markets, you are spending around 10-30% of your revenues in sales and marketing related investments.  Which is fine in good markets, as it is mostly likely driving you a healthy bottom line profit (or at least breaking even).  But, let's say revenues just fell 50%; if left unchanged, your marketing investment just doubled to 20-60% of revenues, which most likely is going to result in huge losses for your business.  So, you are going to have to reset your marketing budget to "right size" the investment, in light of the reduced revenues.  In this example, you most likely need to cut your marketing spend in half.

But, which half do you cut?  Hopefully, you have good campaign tracking in place, and you know which campaigns are driving more profitable leads than others.  So, sort your marketing efforts in order, from best performers to worst performers, and take the hatchet out and cut all campaigns that are on the bottom half of the past success list.

In most cases, I would suggest not taking your budget to zero.  That could be the equivalent of slicing your own throat, as without marketing spend, new leads will not be coming into the business, and in turn, no new revenues will be coming into the business.   The only exception to that rule is if you are in an industry that has entirely been decimated by the market conditions.  Think the restaurant industry in the wake of the Coronavirus.  In that case, it may make better sense to put your entire marketing efforts on pause, putting the business into "hibernation" until markets improve.

Reset Campaigns

Once the budgets have been reset, now you need to reset the specific campaigns that were running within those overall budget categories, as most likely their performance today, will be behaving very differently from where they were in normal market conditions.

Let's use a case study from my Restaurant Furniture Plus business, as an example.  In the wake of Coronavirus, our contact rate (calculated as inbound calls/emails divided by website visits) cut in half.  That means on the same amount of spend, we are only going to see half the amount of sales as we were seeing during good times.  Which further means our cost of customer acquisition (CAC) just doubled!!  And, as most internet marketers know, if your CAC just doubled, you most likely just watched your campaign devolve from a small profit to a big loss, with the snap of a finger.

So, don't take anything for granted.  Don't assume your historical campaign metrics will hold up going forward.  You are going to have to restudy everything.  That may result in you re-optimizing each of your campaigns as if you were starting from scratch again, because that is in fact what you are doing . . . starting from scratch again to account for learnings from the new market conditions.  So, relook at every sub-campaign within a marketing channel and make sure it is still pulling its weight.  If not, change the settings or shut it off.

Reset Agency Expectations

If you have a good advertising agency that wants to protect its long term relationship with you, they will understand that market conditions have changed, and they should work with you in coming up with a win-win going forward payment plan together--both in terms of your contractual media spend, and their agency fees.  Just like the real estate landlords are working with restaurant owners to forgive rents, while their restaurants are closed.  So, this is a good time to change any fixed fee overhead at high levels, into variable fees that move up and down with your media spend, most likely at much reduced levels.  And, if you need to shut off your campaigns entirely, set up a month-by-month check-in meeting with your agencies, so when the markets do finally improve, they are all set to go, to get the campaigns restarted again.

Consider New Target Markets

Continuing with my Restaurant Furniture Plus example from above, as you can imagine, trying to sell furniture  to restaurants given the impact of Coronavirus, is like trying to push water uphill . . . it just ain't gonna happen!!  Based on our research, it could take up to two years post the pandemic ending for restaurants to get back on their feet, with enough cash flow to start investing in their businesses again.

So, what does that mean--we need to identify new markets to sell furniture.  For our business, that may mean opening up the government, school or corporate furniture channels, which will recover faster than the restaurant channel will.  Or, instead of focusing our online marketing efforts to restaurants in Google's keyword search results, we focus our efforts on consumers that may need furniture for their homes in Google's shopping section.  So, study your individual businesses and figure out what works best for you, and pivot your attention into those new areas.

Concluding Thoughts

We are living in a crazy post-Coronavirus world today.  What made sense a few weeks ago, from a marketing perspective, most likely no longer makes sense today.  You are very much relearning your business metrics from scratch, much like a startup company would.   So, the sooner you quickly audit your current marketing efforts and reset them, the less time you will be flushing your limited and precious capital down the toilet!!


For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #324: A Guide to Small Business Loans

[Image source: https://cdn.pixabay.com/photo/2017/09/07/08/54/money-2724241_960_720.jpg]


As you know, in the wake of the Coronavirus, the federal government passed the CARES Act in March 2020, an economic stimulus recovery package, where employers who retain their employees through June 30, 2020, will be rewarded by having their payroll and certain other costs paid for with the loan, entirely forgiven.  As I write this post, the application period is just opening today, and there is a mad rush for the potential of "free money" from the government.  So if you think you qualify, you really should be applying today.  As you can imagine, the demand is far going to exceed the supply of capital, even if government is shelling out hundreds of billions of dollars from this program.

So, when that capital runs dry, what are the rest of you going to need to do, to find your much needed capital infusion.  You are going to have to seek it out from traditional lending sources.  That will be a lot harder to do, and the loan won't be forgiven, but it may just be the lifeline your business needs to survive the current economic downturn.  This post summarizes the types of small business loans that are out there, the typical requirements and the typical process you should expect.

In helping me write this post, I wanted to give a special shout out to Luke Hayward, my colleague at Funding Circle, an online lending platform for small businesses, who is an expert in this space who shared his wisdom on the lending market with me.

An Introduction

Many small businesses may not be able to meet all of their financial needs with the money they have on hand. It’s not that they don’t make enough money, but circumstances often require businesses to borrow. Maybe it is just a slow time of year, or the business might need to buy a new piece of equipment, or in the current times--a national pandemic. Whatever the case may be, it is not uncommon for a small business to need a loan.

While the need to borrow might be common, it isn’t always easy for small businesses to get the funding they need. This isn’t just about getting approved for a loan, which is difficult enough task in itself.  But, many small business owners simply don’t understand all of their borrowing options, and this can lead to them taking a loan that is not a good fit for their business.

With this introduction to small business loans, owners can gain a better understanding of their borrowing options, for both in good times, and the current bad economic climate we are currently living in. This knowledge will make it easier to find a loan when you need one, and it will also help you find the lending option that is right for your business.

Types of Loans

Term Loans

A term loan is one of the more straightforward options for small business financing. The business owner gets a lump sum of cash and they have to pay it back with interest over an agreed-upon period. Term loans are a flexible option that can be used to cover a wide range of expenses, and the funding can often be released in as little as two days.

Business Line of Credit

This is a type of revolving credit. A financial institution gives the business a line of credit with a limit. As long as the line is open, the business owner can borrow up to the limit and they only have to pay interest on what they borrow.

SBA Loans

In addition to the Paycheck Protection Program, which is getting all the attention this month, the Small Business Administration (SBA) has a range of other loan programs that are designed to help small businesses. Basically, these loans are backed by the SBA. The intention is to help small business owners get loans that they might otherwise not be approved for and to help them get loans at lower interest rates.

Equipment Loans

These are loans that are designed specifically for helping small businesses finance the purchase of a piece of equipment or any other asset that is vital to day-to-day operations, where the asset is often collateral for the loan.

Merchant Cash Advance 

With this option, the business gets a lump sum of cash that is guaranteed by future credit and debit card sales. This can be a way for a small business to access money quickly, but a merchant cash advance usually comes with high interest rates.

Invoice Factoring

This is a way for a business to get money for outstanding invoices. The lender gives you a percentage of the outstanding invoices and then they collect on the accounts. Invoice financing can be a good option for businesses that need income faster than the invoices are paid by their clients.

Peer-to-Peer Lending

P2P lending is a newer option. The business owner uses an online platform to connect with lenders. In most cases, the business would borrow from a group of investors who would all have a right to a percentage of the interest that is paid on the loan.

Venture Debt

And, I have previously written about venture debt as a a funding source.  Venture debt is a hybrid between debt and equity, and often comes at expected returns on invested capital somewhere in between stand-alone debt or equity financings.  I won't repeat the details here, but please re-read the above linked article.

It is important to note that the terms of the loan will vary significantly for different lending products. You could find short-term loans that are for just a few months, and there are also loans that can be repaid over many years. Along with that, you also have to consider the interest rates with different lending products and fees that may be associated with borrowing. Many loans also have penalties for things like late payments or for paying the loan off too early.

What a Business Needs to Get a Loan

A small business is not going to get approved for a loan just because they ask for one. Each lender has requirements that must be met for the borrower to get approval. These requirements vary from one lender to the next. Even with the same lender, the requirements may vary depending on the type of loan.

The following are a few of the things you will need to prepare in order to get approved for a loan:

Cash Flow/Income

Most lenders are going to want to see your cash flow and income before approving a loan. The better your situation is in the regard, the more likely you are to be approved. Higher income can also increase the amount that a lender is willing to approve.  Your operating income typically needs to be at least 2x the expected interest expense on the loan, and your business plan must show a reasonable path to repay the loan within 18 months or so.

Debt

It isn’t just about income – lenders are also going to want to consider your debt to income ratio. If it looks like the business is already overburdened with debt, it will be difficult to get approved for a new loan.  This works best for companies with under 50% debt to invested capital ratios, including any new loans that are being applied for.

Credit History

Your personal credit history is going to be a factor when applying for a small business loan. Check your credit report and try to improve your score before applying for a small business loan.

Business Age

The reality is that new businesses are more likely to fail. For that reason, lenders tend to favor businesses that have been in operation for at least a few years. If you have been in business for less than a year, it will be difficult to find financing.

Collateral 

It is possible to get an unsecured loan, but lenders view collateralized loans as less of a risk. If you have collateral (e.g., assets, receivables, invoices, real estate), it will be easier to obtain financing and it may even help to reduce the cost of the loan.

Turnaround Time to Get a Loan

The amount of time it takes to get approved and receive funds can be an important factor for many small businesses. This is especially true if you need the money in a hurry, as most of you likely are in today's market conditions.

Unfortunately, there is no straightforward answer concerning how long it takes to get a loan. The approval process will vary from one institution to the next. You will also find that different types of loans might have different approval times.

You will find some financing options that offer cash in as little as 24 hours, but there are also situations where it might take weeks for a loan to get approved. In general, the options that offer fast cash tend to have higher interest rates and more fees, but they can be a good option if your business needs money right away.

How much can a business borrow?

You may also wonder what your borrowing limit is for different types of loans. Different lenders have different limits. Furthermore, the lender is going to consider things like your income and debt to determine how much they are willing to lend.

On the high end, you could potentially get a loan that is for a million dollars or more. Looking at the lower end of the lending market, you also have options like microloans that can offer a sum of just a few hundred dollars.

What is the process of getting a loan?

If you want to get the financing you need and find the right loan, you are going to need to be prepared. The following are some of the steps you should take when looking for a small business loan:

Create a Business Plan

You need to be able to show lenders you have a viable business plan. Not only that, but you want to be able to tell them why you need the money and show them your plan for paying it back.

Get Your Credit Report

Check your credit score and get your credit report from the three major reporting agencies. You should also review the reports for any issues. If you find any problems, try to get the reports fixed before applying for a loan.

Compare Options

Your business plan should provide you with the information you need to know which type of loan is right for your business. Look at the available options and find lenders that offer products that are suited to the financial needs of your business.

Apply for a Loan

Once you find a lender that offers the best loan for your business, start the application process. You should try to have a few options available since you might not get approved for the first loan you apply for.

Popular Online Lending Platforms

The internet age has made it easier for businesses to find and compare loans. You have a range of online lending platforms that can help to ease the process and many of these platforms cater to specific types of loans.

There are many online lending platforms that invest their own capital or are a marketplace where lenders compete; these include Kabbage,  BlueVine, SmartBiz, OnDeck, QuarterSpot, FundBox and Street Shares.  Sites like Funding Circle and LendingClub are two of the top names for P2P lending. Kiva and LoanMe are good sites for microloans. And, that doesn't even talk about industry specific sites, like Fundrise, which is an online platform focused on the real estate market.  Or, sites that have a specific purpose, like Currency, for equipment loans.  There is also this great comparison of various funding platforms completed by QuickSprout, which may be helpful during your research.  And, don't forget about your crowdfunding options.  So, do your online research and figure out the best funding site for you.

Depending on the needs of your business, you should be able to find an online platform that offers loans that can meet your needs – you just need to take the time to find the right option for your business.

Concluding Thoughts

As you can see, there are plenty of small business loan options to consider; you simply need to know where to look!  Thanks again to Luke Hayward for his help here on helping me write this post.  If you think Funding Circle could be a good option for your business, feel free to email Luke at luke.hayward@ fundingcircle.com, and he will help point you in the right direction.  I know the current market conditions in the wake of the Coronavirus may feel bleak, but I promise you, there is a path forward with a light at the end of the tunnel.


For future posts, please follow me on Twitter at: @georgedeeb.