Strength and Growth Come Only Through Continuous Effort and Struggle: A Must-have Mindset for Every Small Business Owner
“Strength and growth come only through continuous effort and struggle.” – Napoleon Hill
The quote above also applies to business of all sizes, big and small. Without continuously trying to make a business better, it loses traction, and fades into what ultimately might be a complete demise. Small business owners often have a mindset that dictates that if something isn’t broken, it doesn’t require a fix, but reality prevails otherwise.
Many small business owners, and sole traders, focus their efforts entirely on their core business. They often know plenty about the product they are manufacturing, or the service they are providing, as well as know their target audience and its demands (especially if they’ve been in business for a long time). They don’t know much about the other aspects of the business, which in some cases could prove as significant as the aspects mentioned above; some areas which are often neglected by SMB owners are the legal aspect, the financial aspect, the higher-level business development side, and the marketing side of things.
These aspects (and others) are often outsourced, as it is common knowledge that no one can become the master of all traits. In the business world nowadays, an SME is fighting against giants, and must become specialised in something that these giants have failed to achieve. It’s all true, but it still doesn’t mean that a business owner should neglect certain aspects of his business. It’s also common knowledge that if you want to get something done right… you should do it yourself.
Financial optimisation to your business
One of the often-neglected-things is the financial side of the business. Obviously, each business owner knows how much he sells, and how much he eventually takes into his pocket. He also knows how much he buys for, and how much money has he borrowed to finance his business.
What he doesn’t know, is that the business margin can be vastly improved by taking care of the small things within this process. Accountant firms, even solid ones, will often overlook some of these things, as they are not an integral part of the business itself, and paid to perform certain activities rather than think of the business in an holistic way.
Here are two examples of things that can improve an SMB’s margin, and put money directly into the owner’s pockets, if other variables remain constant.
1. International Money Transfers
This territory, which was not long ago reserved only for large businesses, is relevant to many types of small businesses nowadays.
Many different types of businesses handle with international transfers, including online merchants, affiliates, importers, exporter, real estate agents and basically all businesses purchasing goods, or selling goods, in foreign currency.
86% of transactions in the UK are still being performed via banks. Banks charge fees on each transfer, and provide individuals and businesses with unfavorable exchange rates. Banks usually don’t provide small businesses with hedging tools (derivative instruments) that can reduce the volatility resulting in FX exchange rate fluctuations.
Are there any alternatives? There most certainly are. In the UK, US, and the majority of Europe, there are FX firms that act as a mediator on money transfers. Companies like MoneyCorp (which is very global and well-known) will receive a wire from you in your local currency, exchange the money to your desired currency, and forward it to your destination, costing you LESS money that you would have paid in banks, and for a smaller fee (which is not applied on larger sums).
Let’s assume you are an importer buying wines in France, for Euro, and selling it in the UK for Pounds. You buy 1,000 bottles each month for 8 Euros each, and sell them in the UK for 10 GBP.
When you use banks: Let’s assume you buy the wine in 500-bottle-cases. So you make two transfers from your UK account to France, each for a sum of 4000 Euro.
While applying a fee of 25 Pounds per transfer, plus a 3% margin from your bank, you end up paying 6,250 GBP for the two transfers together when the exchange rate is at around Euro/GBP 0.74 like it was in February 2015.
When you sell it in pounds, you receive 10,000 pounds, so your total direct profit is 3,750 Pound Sterling. Seems like a reasonable profit that should allow you to maintain your business.
When you use a proper FX company: Use the same data, and applying no fees upon currency exchange, and using a more moderate margin of .7%, you will pay less than 6,000 pounds, which will leave you profit of more than 4,000 pounds at the end of the month, just from this deal, with LESS hassle (as these companies offer an advanced online interface).
2. Business funding
The first go-to place for business owners to apply for a loan is, yet again, the bank.
This doesn’t necessarily have to be the case, because there are plenty of options out there.
Business loan at a bank fits certain businesses, for certain causes, and has a high disapproval rate, as well as often repayment penalties, and always a great deal of effort providing the sufficient papers to apply.
- As a small business owner, that overhead translates into money. Time you could have spent developing other aspect of the business.
- If you need a loan quickly, it’s impossible to do via banks.
- Banks don’t provide short-term loans.
- You have to provide securities with each loan at the bank.
- You can’t always get it at the bank.
Let’s assume you are a business owner that wants an unsecured business loan. You want it quickly, in a matter of days, and you can repay that in a month from now. You can use your credit card, especially if you apply to a 0% interest rate credit card (several companies offer that introductory rate for a set period of time), or better yet approach companies like EZBob, or Iwoca, that will provide the loan within 48 hours, with no securities, and charge 2-4% interest per month (the actual interest amount is dependent on your business’ data, not necessarily credit score, but also other things like credit card history, bank statements, and online marketplace sales).
Let’s assume you want a flexible loan that will be correlated with your earnings. You can use companies like Liberis, which provides a cash advance payable with each sale that you make (automatically deducted from your credit card).
Let’s assume you want a longer-term loan, and want to shop around before you’ll be making a commitment to the bank, why not try FundingCircle? A P2P Business Lending company which offers loans for as low as 6% APR, if you are at the lowest risk level, or higher interest if you are deemed as a higher risk business.
The bottom line is that in many western countries, mostly in the US and in the UK, the business loan market is evolving, and if you’re sticking to banks only, you’re staying behind in the game. Even as a small business owner, you should know your alternatives for funding your business, and find the one that fits you best.
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