Strategies for Success for Business Owners

Many entrepreneurs find themselves branching out on their own because they are driven by passion and skill in their field. From the chef who becomes a restaurateur, to the graphic designer who launches their own advertising agency, or the driver who becomes president of their own trucking company, the possibilities are endless for talented people who want to own and operate a business.

However, as a business owner, it’s important to remember that the passion that prompts people to become entrepreneurs in the first place is only part of their career now that managing the business becomes their main focus. Today, we are already seeing early signs of a shift in how consumers and businesses behave. So how to prepare?

Robert “RJ” Riley, Assistant Vice President and Business Relationship Manager at Fidelity Bank in Pittston offers a few strategies to help business owners make managing their company top priority.

1. Cash flow is king.

Business owners must be sure their company is continuously generating revenue. “Cash flow is king,” RJ said. “You have to make sure you always have cash on hand to take advantage of new opportunities. Steady cash flow means you’ll have the opportunity to grow your business by hiring additional staff and purchasing new equipment. You want to maximize every dollar, and make sure you understand how the cash flow of your business is working.” Here are a few ways to do that:

• Work smarter, not harder. For example, if a business owner has 10 customers and 1 of them is consistently a late payer or fails to remit payment, consider what will be most cost effective long-term: constantly following up with this customer to obtain payment, or securing a new client who will pay on time? In this case, it may be best to look for a new, reliable client because of the considerable time and resources it consumes to repeatedly secure payment. Don’t give up on securing payment but start developing a Plan B for this revenue in the future. “It’s always worth it to chase receivables,” RJ said. “But it’s not always worth it to keep that client in the long term. By working smarter and not harder, business owners have the potential to increase their net profits substantially.
• Analyze the cycle of payables & receivables to maximize liquidity. To maintain a consistent cash flow, business owners should regularly analyze their payables and receivables cycles and look for ways to make improvements. Be mindful of how, and when, money is spent and generated to avoid becoming too low on funds. “If you buy a laptop today and you pay with cash, that’s $2,000 out of your pocket that you won’t be able to use for anything else. However, if you buy that laptop on a credit card, you buy yourself 30 extra days before that $2,000 leaves your account, plus you earn points on your credit card,” RJ said. This is a simple example of how business owners may be able to optimize cash flow. When it makes sense to charge purchases, just be sure to pay that credit card bill on time to avoid late fees and penalties.

To schedule a free, no obligation business efficiency consultation for your business, you can call Fidelity Bank at 1.800.388.4380. Find out if you can save money, time and gain greater peace of mind.

It’s all in the timing. Timing is critical when it comes to maintaining cash flow. If a business owner notices cash flow crunch times, try these tactics:

• Negotiate new terms with vendors that will allow more time to remit payment.
• Use cash back credit cards whenever possible and be strategic about when payment is made. For example, if those who remit payment within 10 days receive a 2% discount, don’t remit payment on Day 1 — wait until Day 9 to make a payment, allow more revenue to stream into the business, and still earn that reward.
• Revise terms with clients if necessary, to improve cash flow. If 30-day terms are creating hardship for the business, move to 10-day terms, or consider implementing a “payment due upon receipt of services” policy. Assess what does, and does not, work, and be willing to make modifications along the way.
• Monitor the receivables cycles and look for ways to expedite the payment process for customers. It’s important to understand what the average turnover of industry accounts receivables is, and to offer quick and easy payment options. “As a business owner, you want to offer your clients the ability to pay you in as many ways as possible,” RJ said. He suggests exploring the option of accepting credit and debit cards. “You may pay a processing fee, but it might be worth it because you’ll get your cash much more quickly than if you wait for your client to cut a check, mail it to you, and then you have to deposit it. Offer as many ways as possible to receive those payments and bring them as quickly as possible.”
• Don’t put all the eggs in one basket — diversify! Is there a concentration of vendors accounting for more than 10% of the business? If so, this scenario has the potential to put the business in a tenuous situation if an issue arises. For example, if the owner of a concrete company is utilizing 1 concrete supplier, and that vendor suddenly goes out of business, this could cause a delay in production and negatively impact revenue. Be sure to diversify vendors to minimize the potential for problems like this. The same principle holds true for service professionals and their client base. Be sure to build a diverse client base so the vitality of the business isn’t dependent upon a small number of clients.

2. Be vigilant about fraud protection.

Here are few good habits to develop to protect against fraud:

• Monitor business account activity.
• Monitor credit scores (personal and business).
• Use credit cards for vendor payments.
• Reduce the number of outgoing paper checks that are issued; and
• Make the most of Bank technology to prevent fraud.

A word about paper checks: RJ said, whenever possible, avoid them. Digital payments are less expensive and more secure. The risk of fraud increases when paper checks are used because they contain the account number, routing number, check sequence number, name, and address – all of the pertinent information a criminal need. It’s more efficient and secure to use an Automated Clearing House (ACH) or credit card.

3. Keep accurate, up-to-date financials.

Documentation is a critical part of operating any business. Be sure to maintain accurate records, including an up-to-date balance sheet, income statement, and statement of cash flow. Invest in accounting software and consult with a Certified Public Accountant (CPA) and/or tax attorney for tax planning. This is money well-spent in the long run.

4. Invest in technology.

Technology may seem expensive, but in the long run, investing in it makes fiscal sense. One of the fastest ways to grow a business is to utilize technology to improve efficiency. Analyze operations to see if there are areas where technology might fulfill a need instead adding employees or paying someone on staff to do certain tasks manually. It’s expensive to hire, train and retain employees. “No matter who I talk to, from trucking companies to professional services, their biggest impediment to growth is always employees,” RJ said. From salaries, to matching 401k plans to paying taxes and the cost of health care, the expense of hiring employees is significant, and there are no guarantees they will stay. Implement automated systems where it makes sense, and then focus on hiring employees for the positions that truly require the skill of trained individuals.

It’s all about using technology to create efficiencies. A few options to consider:

• Automated Clearing House (ACH).ACH is an electronic funds transfer system for use with payroll, direct deposit, tax refunds, consumer bills, tax payments, and many more payment services in the United States. Many Banks, including Fidelity, offer this service.
• Auto debit client accounts.
• Remote deposit. Ideal for businesses that accept a high volume of checks (about 50 per week), remote scanners can save a lot of time because they eliminate the need to pay an employee to drive to the bank and make deposits. The monthly fee for this service may be significantly less than the cost of the employee’s time.
• BILL PAYMENT

5. Create a top-notch customer experience.

Business owners should make a concerted effort to retain and grow their business by providing the best customer experience possible, particularly if they’re in a competitive industry. Whether it’s fair or not, be mindful that word travels fast — about good and not-so-good — experiences, especially on social media. “One bad review online can really impact your business,” RJ said. “You never know who’s going to leave that review. Ninety-nine percent of the time the person who leaves a review is the one person who did not enjoy the experience with you. That has to be top of mind for every business owner.” Be responsive, courteous, and professional, and go the extra mile whenever possible to maintain a healthy client base.

6. Understand the business model and how the cash flow cycle operates in an economic slowdown.

Just like every entrepreneur is unique, so is the model of every business. It is up to business owners to really understand their business model. This insight will prove to be especially helpful if there is a negative shift in the economy. “Let’s say things are going really well. You hire additional people for your team, you hire an internal accountant, and you move your home-based business into a building you purchase for $200,000,” RJ said. “Then we hit an economic slowdown.” This economic slowdown could translate into loss of revenue. “What do you do now that you bought a $200,000 building? How do you make that payment plus pay your employees plus pay yourself a salary?” Try to be proactive, and not reactive, to a change in the economy. Plan an exit strategy with a Banker or trusted financial consultant to avoid making critical decisions under duress.

Remember, in the future, longer-term innovation and changes in trends will come about as consumers and businesses try to normalize the impact of COVID on all of us. Entrepreneurs in the immediate term need to ensure that the health and safety of themselves, their workers and partners come first.

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Fidelity Bank has built a strong history as trusted advisors to customers served and is proud to be an active member of the community of Northeastern Pennsylvania. With branches located throughout Lackawanna and Luzerne Counties, and in the Lehigh Valley, Fidelity Bank offers full-service Trust & Investment Departments, a mortgage center, and an array of personal and business banking products and services. The Bank provides 24-hour, 7 day a week service to customers through a variety of digital banking tools, branch offices, online at www.bankatfidelity.com, and through the Customer Care Center at 1-800-388-4380.