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Advertising Digitally: Novice Guide for Small Business

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digital advertising featured
common excel questions

Some small businesses are quick to embrace technology. Others, not so much.

For small businesses in technology-heavy industries, it’s natural, and often necessary, to understand digital trends. Other small businesses are in more “traditional” industries. Even if they wanted to be on the cutting edge of technology, they’ve still got a business to run. An “analog” business that doesn’t need digital dohickeys to operate.

Digital advertising is a complicated subject. Navigating this domain takes a certain amount of know-how. It might even require the help of somebody with in-depth expertise. This post won’t tell you everything you need to know about digital advertising. Hopefully, it will start you on a path to understanding what your next steps should be.

Consider the following:

  • Are you able to calculate an ROI for your non-digital advertising?
  • Do you currently know all of the digital advertising options available to your small business?
  • What other technological tools have you tried and been pleasantly surprised with?
  • How can you manage your small business’s digital advertising so that it provides a satisfactory ROI?

Awful Marketing Results? Review These 5 Main Activities

What’s the worst that can happen? You can do nothing and your competitors can gain an upper hand. Perhaps jeopardize your business’s existence. Or, you can be proactive and learn a little about this subject so that you can proceed with confidence.

Digital vs traditional advertising

If the media you’re using was created before the internet – it’s traditional. After – it’s digital.

Tradition advertising includes the following mediums:

  • Billboards
  • Radio
  • Broadcast television
  • Direct mail
  • Magazines
  • Newspapers
  • Anything tangible

Not surprisingly, attention has shifted over the past 10+ years away from traditional mediums toward digital. In fact, in 2018, it’s estimated that digital media eclipsed traditional. Source.

digital vs traditional advertising time spent
Credit: statista.com

Simply put, advertising is when you pay for a place to talk about your company. The goal of advertising is to find people who want what you have and convince them to buy it. It follows, of course, that advertising is going to gravitate toward where the attention is.

“I still use, and benefit from, traditional advertising” you might be saying. If traditional advertising is working for you, you’re not going to abandon it. It might be time, however, to start gauging exactly how well those old mediums are working for your small business. One of the simplest ways to do this is to simply ask how customers found you.

Why is digital advertising superior to traditional?

  • Digital advertising is direct and can be tied to sales
  • It lets you make low-cost changes or try new things
  • It requires less of a time and money commitment
  • It facilitates feedback
  • It’s easier to reach your target audience

First and foremost, what makes digital advertising most appealing is its direct interaction with customers. Traditional advertising is more indirect. It’s easier to tie a sale to digital advertising than traditional. This analytical data is priceless when it comes to inventory management, product development, and other marketing duties.

Is 6.2 A Good Retail Inventory Turnover Ratio? Is 8.0 Good?

Digital advertising also allows you the ability to edit, tweak, and A/B test. With traditional, once it’s out there, it’s out of your hands. You can certainly make changes the next go-around. But, traditional advertising can’t compete with digital in terms of flexibility.

The time and money commitments are also less with digital advertising. At least with a given provider/medium. This, coupled with its flexibility, allows you to fine-tune your digital marketing message in a much more efficient manner.

Simple Small Business Cash Flow Template, 7 Week Projection

Feedback is another important consideration. Conveying everything you want your customers to know in limited print space or during a 30 second TV/radio spot is tough. Customers are still left with questions. Digital advertising helps to address your customer objections. This can be done by communicating with them directly, or by making it easy for them to learn more about your products or services.

Finally, it’s easier to get your marketing message in front of your target audience (customer avatars) with digital mediums. This means less waste than with traditional means.

Business Plan Demographics – Defining a Target Market

Downsides to digital advertising

  • Traditional has more research
  • Not all customers are accessible online
  • Ad blockers limit exposure
  • Obnoxious ads can repel customers
  • Complexity and information overload

Digital advertising is still relatively young. And, while the actionable insights are greater, digital advertising simply doesn’t have the decades of research that traditional advertising does.

There are other “cons” too…

Your customer avatar might not spend time online. And, if they do, they might go to great lengths to protect their privacy or not share enough to be identified. 

Traditional advertising is subject to space constraints. But, so is digital advertising. It’s relatively cheap to produce, but not every digital piece of content gets in front of a lot of eyes (trust me!). Social media and the web are winner-take-all domains. So, “prime real estate” is highly sought after and could become cost-prohibitive.

We all know that digital advertising can be obnoxious. Ad blockers are very popular and as advertisers get more creative on how to work around them, the creators of these tools get more creative too. If your target demographic uses ad blockers, then your ability to reach them could be hindered.

Finally, all of those advantages listed above create more complexity. There is a lot of information to wade through and a lot of decisions to make. It can overwhelm you if you let it.

Types of digital advertising

Digital advertising includes the following mediums:

  • Search engine
  • Social media
  • Streaming
  • Websites
  • Videos
  • Anything internet or web related

Keep in mind that these are ever-evolving and this list could grow or these mediums could be obsolete in a relatively short amount of time. Also, there are some blurred lines between these different mediums. Some digital advertising could qualify under two or more of these categories.

Here’s a very general idea of what each medium entails.

Search engine PPC (pay per click) ads appear when people search the web. When, where, and how much it costs for your ads to appear is typically is decided by an auction system.

Social media ads utilize the information that platforms know about their users. This allows you to target very specific types of customers. The ads typically take the form of the normal content on the platform.

Advertising on streaming services is similar to TV advertising. But with a little more control over who sees your ad. Rates for this type of advertising can vary considerably. There is also the cost of production to consider.

Website advertising can also be done on a PPC or cost-per-impression basis. This type of marketing allows you to incorporate graphic elements more than search engine advertising. Which comes at the slight cost of not being able to target your audience quite as well.

Video advertising allows your small business to piggyback on specific topics. TV has conditioned us to tolerate streaming ads – to a degree. However, I think that video (YouTube) advertising had the distinct challenge of competing directly with the content your customers actually want to see. It’s like someone standing in front of their screen when they just want to watch a movie trailer.

How to get started with digital advertising?

  1. Create a website and social media profile
  2. Learn about what increases exposure (for free)
  3. Try other platforms
  4. Draw inspiration from others
  5. Dip your toe into paid promotion
  6. Learn the relevant advertising metrics
  7. Keep failures small and adapt
  8. Get help as needed
  9. Exploit high ROI opportunities as you find them

Familiarize yourself with the digital “terrain” before moving forward with advertising. The name of the game in digital marketing is understanding algorithms and keywords.

The first step would be to create a website if you don’t have one. Try to get it to rank high on search engines. This will help you learn a little about SEO (search engine optimization).

Also, pick a social media platform to experiment with. Try to find out what constitutes popular content and what doesn’t. Once you feel comfortable on one platform, try another.

Don’t be afraid to copy what others are doing. Don’t make carbon copies, but do look to what works for inspiration.

Once you’re comfortable with the “free” marketing, dive into the paid side of things.

Understand your conversion rates, the value of your customers, and your costs.

Pricing Strategies for Startups and Established Businesses + Spreadsheet [VIDEO]

You’re going to fail. Keep those failures small and learn from them.

You might consider getting help with the finer points. Tap into any skills that you may have within your staff. If needed, hire out help. There’s no shortage of digital marketing agencies out there.

Proceed smartly. Get feedback. Learn from it and adjust. When you finally discover that super-high ROI message/medium – put your foot on the gas and reap the rewards!

Here are some videos that will hopefully help you get the ball rolling with digital advertising:

https://www.youtube.com/watch?v=nU-IIXBWlS4

▲ That’s a long, in-depth video. If you’d like something shorter, here’s another:

https://www.youtube.com/watch?v=wZZnxXyES80

Distinguishing advertising and marketing

Throughout this post, I have used the terms advertising and marketing interchangeably. They are not synonymous, however. Here’s how I’d draw the distinction:

Marketing is about understanding your customers and what they need. Advertising is a way to promote your company. It is just one part of marketing.

Utilizing digital or traditional advertising isn’t a black and white matter. There are shades of grey. If you feel that the advantages of digital advertising are worth it, you should consider transitioning to the extent you are comfortable.

Some Simple Advice About Small Business Trademarks & Copyrights

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business copyright trademark featured
common excel questions

You’re thinking of starting a business. You have a lot of great ideas, but you don’t want to work hard to bring those ideas to life – only to see someone else copy them and steal your success. There are protections in place, by law, that can protect you. But, you’re not sure exactly what they are.

Ultimately, questions about the law should be answered by a competent lawyer. So, I’ve included a video at the bottom of this post that contains input on the subject from an attorney. The authors of this post are not attorneys. However, it is hoped that this content can give you a starting point for seeking out the answers you need.

Questions to consider:

  • Are you absolutely sure that a trademark/copyright is necessary for you to be able to successfully conduct business?
  • Is a trademark/copyright more important than the execution of your business ideas?
  • Why not trademark/copyright absolutely everything you can regarding your business?
  • What assets would it make sense to spend the time/money/effort on trademarks and copyrights?
  • How can your business stand out in other ways (USPs) that can be trademarked/copyrighted or stolen by competitors?

“How Do I Write a Marketing Business Plan?” Breaking It Down

This post, for the most part, lumps copyrights and trademarks together. Though they both help to protect intellectual property, they’re not exactly the same.

Copyrights protect something your business created from being copied. For example, advertising, blog posts, or artwork.

A trademark protects something that identifies your business. For example logos, packaging designs, or taglines.

Can you start a business without a trademark?

No, you do not need a trademark to start your business, but it is highly recommended.

A trademark is something that represents your business and is part of its identity. It could be your company logo, name, or even a product or service exclusive to your business. A trademark protects and ensures that these items remain for your company only. It is also a reliable way to protect the reputation of your brand’s images.

Many aspiring business owners think about when to trademark their assets. Customers use trademarks to recognize your brand and build a relationship with your company. With all that said, no, you do not need to register a trademark to start your business. However, if you plan to scale your business and grow it into a large company, you should highly consider trademarking your business assets.

Registered trademarks

Creating a trademark is simple as long as you know what you are doing. It is not legally required to register a trademark, but it is strongly suggested. Once you claim something as your trademark, it becomes your company’s intellectual property and protects it from other companies trying to use it. Before claiming something as your trademark, you should look into the relevant database first to see if it has already been taken.

In the United States, you’ll want to search the USPTO’s Trademark Electronic Search System.

https://www.youtube.com/watch?v=QBjHY00K8V8

To search international trademarks, consider the WIPO IP Portal.

https://www.youtube.com/watch?v=lLe3jalTqlg

Registered trademarks offer more protection than unregistered ones. If a company registers your trademark, then that registered trademark would have more authority than your unregistered one. Even if you technically claimed it before them. A trademark that is registered would protect it in the country you register it in. This protection is extremely important when conducting business on a large scale.

Do You Need A Trademark For Your Business?

Small businesses that operate in one city or state often do not need to register a trademark to start their business. The act of getting your business license (if applicable) protects your company’s name from being used. So, you do not need to trademark it. This protection, however, does not extend further than the city/state that you are operating in. If you plan on operating in more than one area, it is a good idea to register the trademark for your company’s intellectual property. Besides, the benefits a trademark gives are not to be underestimated. They give your brand identity and something for your customers to recognize.

Do I need to copyright the name of my business?

No. It would be more appropriate to trademark a business name. Something you should only worry about as your business’s geographic footprint grows.

Copyrighting/trademarking allows you to make copies of something creative. It is done when you want legal proof that you are the creator or owner of a creative work. For example, say you wrote a thesis. If you don’t copyright it, it may be copied by other people. It is similar to anything your business creates. It is the formality undertaken to own and avoid being copied illegally.

Copyright and brand security

It would be best to copyright/trademark your business’s creative works when you think they could be copied. When you think someone could be planning to steal your concepts and original elements.

For example, say you own a restaurant, and someone copies everything you do. Even worse, that replicated restaurant is doing better than your business. If you have a copyright or trademark, that restaurant can be subject to liability.

Fortunately, though, filing for a copyright/trademark is pretty easy and can be done in less than 90 minutes.

Enlightenment about trademarks and copyrights

Trademarking and copyrighting creative works is great to prevent confusion – to distinguish your business from other companies.

Furthermore, it aids in branding. Customers need to get to know your brand to build trust, earn reviews, and bolster the public perception. Trademarking your brand can give you a distinct persona.

As stated earlier, copyrighting/trademarking your business’ creative works can also prevent other people from suing you. Think of it as a kind of insurance to save time, money, effort, and attention. Also, when you have an official trademark, others who infringe can be notified of their violation. At which point, you’ll have the option to take legal action.

Trademarking business name as a sole prop

Being a sole proprietor is one of the riskiest and challenging legal structures. Even though you have flexibility, it’s tough to manage everything about your business by yourself. So, as a sole proprietor, should you bother trademarking your business name?

It depends on the nature of your business. The industry, the business model, and the products/services. Trademarking/copyrighting certifies uniqueness. So, it is nice to have, particularly if your products and services are unique.

Logos and taglines help to build your company’s brand and to stand out from the competition.

Importance of Trademarking

Aside from preventing confusion, utilizing trademarks/copywrites in your sole proprietor business can help it to look more professional. It shows that you value the things you create and want to protect them.

As your business grows, you’ll want to be known for your symbols, logos, slogans, and other creative works. Having a trademark/copyright can protect your unique identity.

https://www.youtube.com/watch?v=LgijHpOB-xc

How Do I Make a Restaurant Inventory List? Avoid Wasting Money While Still Meeting Demand [VIDEO]

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How Do I Make a Restaurant Inventory List featured & thumbnail
common excel questions

Download the restaurant spreadsheets

What is considered inventory for a restaurant? Video summary

Inventory information is only useful if it contains critical data. Having access to your restaurant’s most important information will help you make smart decisions for your restaurant.

Actual inventory levels must be consistently physically counted and compared to amounts listed in the software. Corrections in the software must be made if there is a discrepancy.

Many restaurant software tools will help to keep track of inventory. However, if they don’t, you can’t neglect this task. Even if they do, periodic inventory counts are still necessary.

What should a restaurant inventory list look like?

There are five fields that are critical for a restaurant inventory list.

These fields are:

  • Item
    • The name of what’s being counted
  • Unit of measure (UOM)
    • A consistent quantity that will be used for counting and costing
  • Quantity on hand (QOH)
    • How many UOM the restaurant currently owns
  • Item cost
    • Don’t count in one UOM and cost in another
  • Extended cost
    • QOH × Item cost
    • The total value of the inventory

Additionally, you can include other fields in your restaurant inventory list if appropriate. For example:

  • Category
    • Meat, vegetables, raw, prepared, etc.
  • Location
    • If you have more than one
  • Any other classification that helps you manage inventory

The restaurant inventory list

Fill out the critical fields for every item you own. If you must, it is okay to use multiple lines for the same item. The pivot table functionality of the spreadsheet can handle it.

Your restaurant’s POS (and other types of) software might be able to help with inventory management. It depends on the software functionality. Some software will track inventory usage. Your accounting software might track purchases too and may keep running inventory levels.

Not every piece of software will keep track of waste, spoilage, and other losses, however. Therefore…

Cycle counting of restaurant inventory will still always be necessary. This ensures that your inventory counts are accurate and you can meet demand and avoid waste.

Employees play an important part in inventory management. Consider giving them an incentive for accurate inventory counts. Explain to them the importance of accuracy.

When cycle counting – maintain a consistent schedule and stick to it! Inventory items with high turnover should be counted more frequently.

Finally, remember to track waste and food loss. Particularly if your software does not. During the hustle bustle of the workday, it may not be possible to accurately measure wasted quantities. Do your best to estimate them. Inventory amounts will be accurately adjusted next cycle count.

Utilize the Food Waste spreadsheet on the Why Spreadsheets Are Your Restaurant’s Best Friend workbook (download above). Also, take advantage of the other spreadsheets in the workbook including:

  • Scheduling template
  • Vendor order sheet
  • Daily prep list
  • Inventory control
  • Food/recipe costing
  • Food waste
  • Sales per day

More considerations regarding your restaurant inventory list

Only consumable items that you use to prepare food should be included in your inventory. Not every asset should be included here. Things such as flatware, cookware, glassware, etc. are not inventory.

It’s important to keep accurate records for these assets, but they are not inventory. Inventory is what you sell to your customers.

Again, make sure you’re using a consistent UOM for your inventory items. Use whatever is easiest to track. Whether it be Lbs, Gal, Oz, Cans, Cases, Flats, whatever – just stay consistent. Doing so will ensure that costly errors in counts and valuation aren’t made.

Food costs are rapidly changing. So what cost should you use?

Your POS or accounting system might track costs for you. If so, great. If not, it might make sense to assign a standard (expected) or average cost to inventory items.

No matter what inventory cost you use, make sure you’re relieving inventory on a First In, First Out (FIFO) basis. E.g. use your oldest inventory first, assuming it’s fit for consumption, of course. No other industry has to wrestle with the issue of spoilage more than the restaurant industry. So, do what you can to avoid needless waste of inventory and dollars.

Again, at the risk of beating a dead horse, make sure your costs reflect your UOM.

Finally, one of the primary benefits of managing your restaurant inventory is that you can measure inventory days on hand. In order to do so, you must keep track of inventory usage on a daily basis.

Inventory days on hand = inventory on hand ÷ average daily usage. Assuming that you are meeting all of your customer’s demand (not running out of stock) then the lower your inventory days on hand, the better.

Questions about How Do I Make a Restaurant Inventory List?

What challenges do restaurants have with managing inventory?

Spoilage is one inventory problem that the restaurant industry is particularly prone to. Many inventory items, by necessity, have an extremely short shelf life.

Accountability is another. With so many different individuals handling and recording inventory, it can be difficult to ensure that QOH in your software matches reality.

Finally, running out of inventory can hurt customer service for a restaurant more than it can other industries. While other businesses can put an item on backorder for a customer – restaurants can not.

These are just a few. There are many more unique challenges that restaurants face in managing inventory.

How does one manage quality control and inventory control smartly in a restaurant for an owner who lives in another city?

Most importantly, it is critical to find employees that can be trusted to manage inventory smartly. Also, while you want every employee to use best practices when it comes to inventory management, you’ll probably want to have one trusted individual who will have ultimate accountability.

Which is the best software for inventory control in a restaurant?

There are a lot of options out there. However, a piece of software called Restaurant 365 seems to be pretty well regarded. I’ve never used it myself. So, I can’t attest to its quality. In my brief searching, though, I never saw any negative feedback. Pricing will run from $250 to more than $450 per month per location.

Spreadsheets are also often recommended. They take some work to get set up, but one major benefit is the ability to customize them to your needs. Feel free to download the inventory control spreadsheet above and check out the Why Spreadsheets Are Your Restaurant’s Best Friend post and video.

Is It Hard to Get Approved for an SBA Loan? 9 Testimonials

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Considering applying for an SBA loan?

Afraid that all your time and effort will leave you saying “Why did my SBA loan get denied?”

  • Lack of collateral
  • Applying at too big of a bank
  • Personal credit score less than 680
  • Business credit score (SBSS) less than 160
  • Poor business plan and financial projections
  • Lack of business equity
  • Poor/lack of documentation
  • Lack of industry experience
  • Applied for more/less than the lenders maximum/minimum

These are some of the reasons your SBA loan might get denied. At least according to a sampling of Reddit users. Reddit can be helpful, particularly in cases like this. It is usually a cesspool though. So, I saved you a trip.

SBA loans are highly sought-after because they have reasonable interest rates and long repayment terms. If you’re considering pursuing an SBA loan, browse through the following testimonials to get a better feel for how hard it can be to get approved. Hopefully, it will help you be better prepared and will increase your odds of approval – if you decide to apply.

Do you need collateral for an SBA loan?

user/TheSuperDanks

If you have minimal collateral, good fucking luck.

My buddy who is extremely credit-worthy had to basically sign his life over to get his SBA loan. He owns 2 houses, has great credit, etc. The program is just a ton of paperwork.

Source

This Reddit user seems to think collateral is needed for an SBA loan. Granted, they didn’t apply for the SBA loan themselves. It was a “friend.” However, as you read on, you’ll see that a lot of other users corroborate the notation that considerable collateral is almost always necessary.

Here’s an idea of what types of collateral the lender might be looking for:

  • Real estate
  • Equipment
  • Inventory
  • Accounts receivable (AR)
  • Personal assets

Chances of getting approved for an SBA loan

user/prosignandgraphics

I have applied twice and received an education in the process.

Application Attempt #1: full business plan, a lot of drive, lots of experience in my field, a great idea but no assets to secure the risk = NO WAY

Application Attempt #2: 5 years of experience under my belt, solid cash flow, good chunk of savings, equipment and A/R to secure the loan risk = YES, how much do you want?

So basically, if you already have the money / collateral / cash flow you have a good chance of getting the loan. If you have no assets, cash flow, accounts receivables, savings etc. then your chances plummet to practically nothing.

Source

This user, again, cites the importance of collateral.

If they’re to be believed, they had a lot going for them when they tried to get approved for their first SBA loan. However, they had no assets to help secure it.

It should be noted that they also had five years of experience upon the second application. It’s unknown how much they experience they had upon the first application. The implication is that they had very little.

Nevertheless, while the experience helped, it seems obvious that collateral contributed to them getting approved the second time around.

So, what are the chances of getting approved for an SBA loan?

Well, it seems to depend on the type of bank you apply at.

Large banks are choosier – only approving approximately 25% of SBA loans.

Small community banks and credit unions are what SCORE recommends that small businesses use. They might be on to something because these types of institutions will approve almost twice as many SBA loans. Source.

Are you personally liable for an SBA loan?

user/Pseudo_Prodigal_Son

So the easiest way to make sure your loan gets approved is to own an asset that is worth as much as the loan amount.

Almost all banks doing SBA loans will want an asset to guarantee the loan. And unless the business has large assets (e.g. a building) they can use as collateral, they will want to use your house as collateral. If you business fails, they will take your house. If you don’t own a home or have other suitable collateral, they will not give you a loan.

Source

This user gets a little more specific regarding collateral. They state that the assets you use for collateral need to be worth twice the loan amount.

While that might not be technically true, it’s generally believable. I’ve worked in personal lending for a while and I know that lenders rarely lend 100% loan-to-value (LTV).

Why do banks loan less than 100% LTV? Because, in a worst-case scenario, when they have to repossess the asset, they’ll rarely get what it’s “worth.” The liquidity of the asset can be very low and/or they’re in a hurry to sell it. Not to mention the asset is probably in less-than-stellar shape. Therefore, they get less than market value. That’s why they like to lend less than 100% LTV.

How much less depends on other factors related to creditworthiness.

As mentioned above, personal assets can potentially be used as collateral in lieu of business assets.

Also, if you own more than 20% of the business, you have to provide a personal guarantee for the SBA loan. Because of these factors, you are most certainly personally liable for an SBA loan.

What credit score is needed for an SBA loan?

user/__Focused__

Loan broker here.

Most SBA-backed lenders won’t touch a deal that is below $50K. Your credit is also bordering on the minimum (many want 680+) and a loan would likely weigh heavily on your assets and/or downpayment.

Source

Here, we see a user touch, again, on collateral. However, they also focus on some different requirements. Specifically, the minimum personal credit score of 680 and the minimum loan amount of $50K.

Keep in mind that there are SBA loan options for less than $50,000 – as mentioned in other testimonials.

The personal credit score needed for an SBA loan is set by the lender, not the SBA. So, the minimum personal credit score will vary.

Generally speaking, if your personal credit score is below 640, it’s very unlikely that you’d get approved for an SBA loan. In fact, plan on having a personal credit score of at least 680 to be “good enough.” As always, though, an even higher personal credit score can only help you.

As far as a business credit score goes, plan on having an SBSS (business FICO) of 160 or greater. No less than 140. Source.

What documents are needed for an SBA loan?

user/sawbucks

I’ve been successful at acquiring two separate sba backed loans. As another has mentioned you will have to write a business plan showing how you intend to use the money, how that plan will increase your revenue, and also how much additional revenue you intend to see. I used my first loan to purchase an existing business and had to show how I intended to improve the current business and come up with 3 years of projections and show how each part of my plan would affect these numbers over time. It was very involved including phone interviews with the underwriter and a very deep dive into the business itself. I was told something like 70% of sba loans dont get approved but if you have strong financials and a strong plan for the money I think youd be ok.

Source

This user had to come up with a full business plan and financial projections.

This intensive documentation shows the lender that you have thoroughly thought out how you’re going to invest those SBA loan proceeds in your business. You’ve also considered the environment your business will operate in and what effect it will have on your operations.

Numbers don’t lie (usually), so you can’t hide behind abstract promises when you are forced to come up with solid financial projections. 

Beyond the documents needed for the SBA loan, notice how the lender also made them qualify their assumptions. So, be prepared to “defend” your position when you apply for this type of financing.

How long does it take to hear back on an SBA loan?

user/abcriot

I just got an SBA loan for $100k, guaranteed by the state (CA). I have a service based virtual business out of my home. I’ve been in business less than 1 year, which is seen as risky. They required I put a capital injection of 20% ($20k), so I had to show that I in my year of business I had put at least $20k of my own cash into my business.

The whole process wasn’t to hard, but it was long. I started in November and got funded the second week of March.

Source

This user bucks some of the other’s experiences. They make no mention of collateral. Just a contribution to capital of 20%.

This goes to show that not all SBA lenders are the same. So, if you are declined at one lender, don’t give up!

The user also claims that the hardest part of getting an SBA loan was the wait.

Their experience doesn’t seem to be too out-of-the-ordinary. From start to finish the process for getting an SBA loan seems to run anywhere from 60 to 90 days. More in some cases.

It’s hard to say when in November this user started the loan process, but, at the most, it only took them one month longer than usual to hear back on their SBA loan.

This could have been due, in part, to the amount of time it took them to assemble the needed documentation. It’s difficult to know. As specified in other testimonials, the documentation requirements can be considerable.

Therefore, try to assemble the needed documents ahead of time. Also, don’t wait until you absolutely need the financing to apply. By the time you hear back, you could have missed the opportunity you hoped to capitalize on. Or, if times are tough, you might have missed the chance to right the ship.

Can you get an SBA loan for a startup?

user/nickwimp

Can you provide a overview of what’s required to qualify for a SBA loan? my father and I are starting a machine shop and need a total of 350k to get the doors open. machine costs are around 250k. Thanks

user/saxscrapers

Solid, well-thought out business plan. Personal credit scores above 640 or if not, a really good story for why so low. All owners greater than 20% guaranteeing loan. For start ups, equity injection of 20-30% (or more- it would only help). Post-transactional (after loan has been made) liquidity of the owners to fund any short term expenses that were not foreseen or some sort of outside income. Good experience of the owners/managers.

If you have all of those things, you should be pretty good. All banks have different credit tastes and prefer some industries to others, so just because one bank is not interested doesn’t mean a different one wouldn’t be willing to work with you.

Source

This testimonial, and a few that follow, are from an “ask me anything” (AMA) Reddit post. In this post, an individual claiming to be a credit analyst for an SBA lender answered some other user’s questions.

This particular user asked about getting an SBA loan for their startup machine shop.

The credit analyst touched on some previously mentioned requirements such as credit score and personal liability. They also mentioned the “skin in the game” needed to get an SBA loan for a startup.

As mentioned previously, 20% equity is pretty standard. This shows the lender that you have something significant at stake. Which, in turn, increases the likelihood that you’ll repay the loan rather than walking away from the venture if times get tough.

The credit analyst mentions that 30%, or more, will only increase your chances of getting an SBA loan for a startup. In the lender’s mind, the more you have at stake, the more you’ll work to succeed.

The credit analyst goes on to mention how financial projections are important. But, they aren’t going to be precisely correct. So, consider how you might finance any near-term startup expenses that you didn’t anticipate.

Finally, the credit analyst mentions something that hasn’t yet been addressed in a testimonial. That’s industry experience. This is an intangible that can help you get an SBA loan for a startup. It won’t necessarily overcome some of the quantifiable requirements (credit score, equity, collateral). But, it can help influence a lender that might be on-the-fence about some of the other aspects of your business plan.

Does an SBA loan show up on a credit report?

user/moneymonda

Do you run business and personal credit reports in the loan approval process? If so on the business credit reports, are they through experian or dnb or something else? How much do the business credit scores weigh on the approval process since it can be common for a small business to not have many (if any) tradelines reported to the bureaus?

user/saxscrapers

We absolutely run personal credit reports on all guarantors of the business (SBA requires anyone with 20% or more to guaranty, or if a spouse owns between 5 and 20%, but the other spouse has over 20%, they both must guaranty). The initial bank i was with did not order business credit reports as they were rather small, but the bank i am with now does. Depending on the type of business, trade line history can range from not applicable (for cash businesses) to pretty important. The business credit reports are from either DnB or CreditSafe and show tradeline history, and collections or tax liens that are outstanding or were in the past and any UCC liens on the business. The business credit reports aren’t as influential as the personal credit scores, but do carry some merit.

Source

This user asked the credit analyst if both personal and business credit reports were run during the SBA loan application process. In particular, they wanted to know what agencies were used to pull credit. Finally, they were interested in what weight was placed for each (personal and business) credit report.

From what the credit analyst conveyed, personal credit reports are almost certainly going to be run on any individual with significant ownership in the business. And, possibly on their spouse.

Business credit reports are a different story. This is up to the lender and may depend, in large part, on the industry you operate in. Additionally, the credit analyst stated that business credit reports didn’t weigh as heavily as personal credit reports. Which is somewhat counterintuitive since SBA loans are, technically, business loans.

Knowing that credit will be pulled might lead you to ask “will an SBA loan be reported on my credit in the future?”

Details are hard to find here, but it seems that the SBA loan will show up on your business credit report. Not on your personal credit report. Even though you will likely provide a personal guarantee on the loan. Source.

How many times can you get an SBA loan?

user/luxorius

How long does it take to obtain a SBA loan, on average? What is the smallest and largest loan size available, typically? What is the duration of the instrument? Do SBA loans typically fund a company more than once? What is the minimum balance sheet coverage and other collateral coverage that SBA loans are backed by? What types of ratios and covenants comprise SBA loans?

user/saxscrapers

From start to finish, if you have all documents needed to underwrite your loan, it can take as little as 2 months from application to closing, but those are pretty rare. Time is always a huge variable, and depending on the nature of the transaction, they can take as long as 6 months or so.

Smallest loan size depends on the bank. The bank I work at doesn’t do anything less than around $150K. There are microloan providers which only focus on loans less than $100K or so.

Duration is 7 years for working capital, 10 years for leasehold buildout/business acquisition, 25 years for real estate purchase or refinance, building improvements and possibly for equipment purchase if you can prove the equipment you are purchasing will have a useful life of 25 years. All SBA loans are fully amortized with no balloon payment.

There is no minimum balance sheet coverage for SBA loans. There is a minimum of 10% tangible net worth for USDA loans.

The great thing about SBA loans is that they are designed for borrowers that don’t meet conventional collateral requirements. Banks are specifically told to not turn down loans based on a lack of collateral given all other factors of the loan are positive (cash flow, credit scores, management capability). The one thing to note, though, is if the loan isn’t fully secured, banks are required by the SBA to lien personal real estate of the guarantor/principal if there is 25% or greater equity in the real estate.

There are circumstances where the same company will get multiple SBA loans but that is a pretty uncommon occurrence. You will see guarantors with multiple businesses that have different sba loans for their different businesses.

Ratios that we use the most are current, quick, debt to tangible net worth, gross profit margin, net profit margin, days receivable, days payable and days inventory.

Source

This user had a lot of questions and the credit analyst took the time to answer them in-depth. So, there’s a lot to address here.

First of all, the credit analyst confirmed what had been addressed in an earlier testimonial. That the quickest you can expect the SBA loan process to go is two months. What was surprising was that they also said it can take up to six! This reinforces my earlier advice to plan well in advance.

The largest SBA loan you can get is $5 million. This is a firm number.

The smallest, though, depends on the lender. Keep in mind that the SBA has several different loan programs, some of which are designed for smaller loan amounts. This would be a good question to ask before the loan application process starts. So that you don’t waste your time and hurt your credit if the amount you need is below the lenders minimum.

From there, the credit analyst addresses the term of SBA loans. This depends, in large part, on what the proceeds will be used for. If it will be used for expenses (working capital) the term will be short. If it will be used for long-lived assets, the term can be longer. Of course, the longer the term, all things being equal, the lower the payment.

Next, we have some new insight, not discussed in any of the other testimonials. It comes back to the topic of collateral. According to the credit analyst, if your collateral isn’t worth enough to fully secure the loan, the lender will put a lien on your personal residence. In fact, they’re required to by the SBA.

I confirmed this elsewhere. Source.

This is very important!

While SBA loans are hard to get approved for, in light of collateral requirements. These requirements can actually be in your favor. Remember the testimonial earlier that mentioned having 2x the loan amount in collateral? That’s probably a good rule-of-thumb to keep in mind, should you decide to pursue an SBA loan.

The credit analyst goes on to briefly touch on financial ratios. These will vary by industry and be calculated in your financial projections.

Finally, maybe the most pressing question in this testimonial is “how many times can you get an SBA loan?”

This depends on what you mean by “how many times.”

Of course, if you got an SBA loan and paid it off you can get another. Assuming that the loan stayed in good standing, I could only see it working in your favor.

What about multiple SBA loans at once?

Well, it technically can be done. Up to a given SBA program’s limits. Source.

But, according to the credit analyst, it’s pretty uncommon. It’s unknown if this is because of how hard it is to get approved for an SBA loan. Or, for another reason. The exception is an individual who owns multiple businesses and takes out an SBA loan for each.

Why did my SBA loan get denied?

As you can see, there are many reasons an SBA loan might get denied. These loans are hard to get approved for and the requirements are stringent. Fortunately, there are other options if you decide an SBA loan isn’t right for you or you get denied. Good luck!

12 Ways to Learn QuickBooks Online (QBO): Pros & Cons

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How can I learn QuickBooks Online for free?

Intuit, the creator of QBO, offers an extensive catalog of lessons on the use of their software. There are also plenty of free resources available in video and print from 3rd parties.

If you’d like a more intensive/personalized experience, courses and classes are an option. But, they are not typically free.

You’ll notice that I tried to gather some simple stats regarding each training option. Some information to help you decide what’s best for you. The navigation rating is my opinion on how easy it is to search the training topics in order to find what you’re looking for.

No guarantee is made regarding stats on QuickBooks training. It’s all subject to change. However, the information is reasonably accurate as of October 2020.

I’ve created some QuickBooks Online training myself. With it, I always strived to be comprehensive yet to the point. If you’d like to check that out, you can do so here:

Spreadsheets for Business QBO posts

SFB YouTube

“Official” QuickBooks Online training

  1. QBO video tutorials
  2. QBO small business webinars
  3. QBO class training
  4. QBO on-demand courses
intuit quickbooks online training
Credit: quickbooks.intuit.com

QBO video tutorials

Link

Cost: $0
Format(s): Video
Number of lessons: approx 130
Typical format length: 3:15
Navigation: 4.0/5.0

Videos are short, easy watches. I know from ProAdvisor training, they can be out-of-date when updates are made.

Good coverage of topics.

Might be difficult to find what you’re looking for if you don’t know the category to search.

QBO small business webinars

Link

Cost: $0
Format(s): (Recorded) webinar
Number of lessons: 8
Typical format length: 1 hour
Navigation: 5.0/5.0

Not as big of a selection of topics as the video tutorials.

The webinar format allows you to ask questions. But, timing is out of your control.

Not every topic appears to be on the calendar.

QBO class training

Link

Cost: $579.95
Format(s): Online class
Number of lessons: 1
Typical format length: 15 hour
Navigation: 5.0/5.0

Classes start every couple of days.

One comprehensive session was offered over the course of two workdays.

Comes with a 200+ page manual for reference.

Likely a more thorough Q&A experience.

QBO “on-demand” courses

Link

Cost: $460-$800
Format(s): Online class
Number of lessons: 1+
Typical format length: Self-paced
Navigation: 5.0/5.0

An alternative to QBO live classes.

Includes a 241-page manual.

Three classes and two bundles (one with live services) are offered.

QBO training through online course providers

  1. Udemy
  2. Lynda/LinkedIn Learning
udemy quickbooks online training
Credit: udemy.com

QBO courses on Udemy

Link

Cost: $0-$200
Format(s): Online course
Number of lessons: Varies by course
Typical format length: 2 to 25 hours
Navigation: 4.5/5.0

Approximately sixty-two courses to choose from.

Some cover general topics, some specific.

The top course, “Mastering QuickBooks Online”, has a 4.4-star rating (2,687 reviews) and costs $14.99. Four hours and 31 lectures.

QBO courses on Lynda/LinkedIn Learning

Link

Cost: $30/month, $300/year
Format(s): Online course
Number of lessons: Varies
Typical format length: 15 min to 4+ hours
Navigation: 5.0/5.0

Not nearly the selection of courses that Udemy has. Only three to choose from.

Two courses are <1 hour. They are not comprehensive.

The top course is QuickBooks Online Essential Training. It has 141,534 views.

QuickBooks Online training on YouTube

  1. Fit Small Business
  2. 5 Minute Bookkeeping
  3. Hector Garcia CPA
  4. BookkeepingMaster
fit small business quickbooks online training
Credit: fitsmallbusiness.com

QBO tutorials on Fit Small Business

Link

Cost: $0
Format(s): Video/print
Number of lessons: 7 (39 tutorials)
Typical format length: 7:20
Navigation: 5.0/5.0

Each tutorial comes with complimentary written content.

All major topics are covered. All topics are listed so browsing is easy.

Top pick.

5 Minute Bookkeeping

Link

Cost: $0
Format(s): Print/slides/video
Number of tutorials: 75
Typical format length: 1,050 words
Navigation: 4.5/5.0

Some tutorials have videos embedded. Some have slides. Some have neither.

What videos she does have can be found on YouTube, typically in the top five for the subject she covers.

Her tutorials have a lot of pictures. They’re also written clearly and succinctly, utilizing a lot of white space.

Hector Garcia CPA YouTube

Link

Cost: $0
Format(s): Video
Number of lessons: approx 135
Typical format length: 17:45
Navigation: 3.0/5.0

Hector’s videos are very helpful and comprehensive. I’ve referred to them several times in the past.

Because they’re comprehensive, they’re a little on the longer side. The shortest is about 6:30 and the longest is nearly 30 minutes.

Since his videos are on YouTube, it can be a little tough to find what you’re looking for. His Playlists are not terribly descriptive.

He has 102K subscribers and his videos are very well-reviewed. You’ll typically find Hector in the top five results for any subject you search related to QuickBooks Online.

BookkeepingMaster YouTube

Link

Cost: $0
Format(s): Video
Number of lessons: approx 36
Typical format length: 5:15
Navigation: 3.0/5.0

I’m not as familiar with BookkeepingMaster. He has, however, 70K subscribers.

His videos are shorter and he doesn’t cover the breadth of topics some of the other YouTubers do. Videos typically run from 3:30 to a little over 7 minutes.

I believe he is British. Which gives him an air of dignity.

It also means that he uses the British version of QuickBooks Online. I don’t know for sure, but there could be discrepancies in the technical accounting. The currency is obviously different. Other than that, the fundamentals should be the same.

Other QBO training options

  1. dummies
  2. QuickBooks Explained
dummies quickbooks online training
Credit: dummies.com

dummies

Link

Cost: $0
Format(s): Print
Number of tutorials: approx 50
Typical format length: 900 words
Navigation: 1.0/5.0

This is not a great option, in my opinion.

Many of the results from searching for “QuickBooks Online” are for QuickBooks Desktop with the word “online” worked into the post somewhere. To be fair, it’s a distinction that Google hasn’t been able to make yet.

Also, you can’t skip pages to find what you need; you just need to keep pressing “Older” or “Newer.”

Dummies does have a unique take on some topics that I didn’t see with any of the other options.

QuickBooks Explained

Link

Cost: $0
Format(s): video
Number of tutorials: 7
Typical format length: 11:00
Navigation: 5.0/5.0

This information is a little dated. Most videos appear to be from 2013.

The videos range in length from 5:30 to 16:30 and they are very general in nature

Most of this site’s effort seems to have been spent on QuickBooks Desktop.

While there’s nothing wrong with it, per se, this might not be your best option for QBO training.

https://youtu.be/5oFRqc9kmWM

Is QuickBooks phasing out desktop?

Yes. Early this year, Intuit announced that outdated versions of QuickBooks Desktop were to be discontinued.

Come June 1, 2021; the company ended all access to add-on services on its Windows 2018 desktop edition. It included older versions of the accounting program, such as Pro, Premier, and Enterprise Solutions of QuickBooks Desktop 2018.

Right after May 31, 2021, users no longer had access to certain features of QuickBooks Desktop 2018, such as Payroll, Live Support, Online Banking, Online Backup, and other services. And, as of June 1, 2021, they no longer received essential security updates.

Concurrently, on May 31, 2021, certain products were also effectively phased out:

  • 2018 QuickBooks Desktop Pro
  • QuickBooks Premier Desktop 2018
  • Premier Accountant Edition 2018
  • Enterprise Solutions for QuickBooks 2018

Right after, on February 2, 2021, other products were also phased out.

  • Payments services in QuickBooks Desktop Point of Sale 12.0

What happens to my software and data, do I need to upgrade?

If you were not subscribed to any QuickBooks Desktop 2018 add-on services, your software should continue to function normally. However, you will no longer have access to live technical support or other Intuit services that work with QuickBooks Desktop.

It’s highly recommended to upgrade to the most recent version of the QuickBooks Desktop to receive all of the product’s features and support. Alternatively, you can also convert to QuickBooks Online.

What happens when I upgrade?

You’ll be prompted to convert your company file so that it will function properly with your new QuickBooks. QB takes great care to protect your information during this procedure. And most importantly, before they do anything, they verify the integrity of your data file and create a backup.

List of other products that are fully operational and available for users:

  • 2021, 2020, 2019 QuickBooks Desktop Pro and Premier
  • QuickBooks Desktop Accountant 2020-2021
  • QuickBooks Enterprise Solutions (versions 21, 20, 19)
  • QuickBooks Desktop Point of Sale 18.0 and 19.0

How long does it take before the upgrade is completed?

Usually, It takes less than an hour, but the larger your file is, the longer it’ll take. You’ll be required to activate QuickBooks Desktop 2021 or QuickBooks for Mac 2021 when you install it.

Is 6.2 A Good Retail Inventory Turnover Ratio? Is 8.0 Good?

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whats a good retail turnover ratio for retail featured

The weighted-average inventory turnover ratio for all retail is 8.0. Different types of retail businesses have vastly different inventory turnover ratios, though.

What does inventory turnover tell you? What do you do with the information? It can take a company years to determine the appropriate quantity of a product to hold in stock. Too little means your consumers don’t get what they want. Too much means you ‘re wasting precious storage space and your money is not working for you. Without a doubt, your product turnover is indeed a major part of the inventory management process.

Before we delve into the specifics, let’s go over some inventory basics.

What is meant by inventory turnover?

Inventory turnover, sometimes know as stock turn, is a calculation of the frequency of sale of a particular product in one year. In essence, it answers the question – “how many times did you sell all of your inventory?”

Inventory turnover can be measured by item, category, or (most commonly) in aggregate.

It is usually measured annually but can be calculated on a quarterly or even monthly basis too. Why annually? Well, a product is not sold in the same manner throughout the year. There is seasonality. Many products will experience peaks and valleys in sales over the course of a year.

So, measuring inventory turnover annually allows you to get a more comprehensive view of the issue. A comprehensive view of any situation will allow you to make more sound decisions.

What is the inventory turnover ratio?

The inventory turnover ratio is a numerical representation of your company’s inventory turnover.

The formula for calculating inventory turnover describes the sales of a particular item, compared to inventory held, over a specific period.

In simpler terms, it helps you to see how fast each product is selling out. Understanding how frequently every item in stock is sold, can improve your operations in a variety of ways, some of them include:

  • Purchasing new inventory
  • Storage costs
  • Maintaining appropriate stocking levels
  • The cash flow of the business
  • Storage space occupied by the products
  • Comparing your business to a benchmark (competition)

Calculating inventory turnover for retail business

The formula used for determining retail inventory turnover is:

Inventory turnover = cost of goods sold (COGS) ÷ average inventory

The term “average inventory” is noteworthy because, at any specific time, the value of your inventory can drastically change. It can be disproportionately high at one point in the year and disproportionately low at another. Thus, in order to reflect precise and accurate figures, an average is used in the calculation. Using average inventory to calculate stock turn will yield more accurate results.

To be honest, average inventory is approximated. It’s not necessary or practical to figure the average based on day-to-day or hour-to-hour levels. Rather, you can add the beginning-of-year and end-of-year inventory dollar values and divide by two. Alternatively, you can use the highest and lowest month-end inventory dollar values. It doesn’t matter which you use, as long as you’re consistent.

What exactly is a “good” inventory turnover ratio for retail?

A retailer, like every other business, always seeks to grow its sales and consequently its profits. In order to do so, a retailer has to utilize the inventory space it has.

There is a fine balance between having too much product on hand and too little. As mentioned previously, too much inventory is costly. Too little inventory probably means you are compromising on sales.

A good inventory turnover ratio for retail is a subjective thing. It depends. Retail encompasses a lot of different types of businesses. Here’s how I went about answering this question.

First, I found a good article with turnover ratios for different types of retail businesses. Source.

Then, I referenced Census data to find the number of establishments in the U.S. for each type of retail business. Source.

Here’s another post where I write about the valuable information that can be found on the Census website.

Then, knowing the number of establishments for each type of retail business, I was able to come up with a weighted-average inventory turn ratio for retail businesses.

Here’s what that looks like:

Retail BusinessNAICS Code# of EstablishmentsInventory Turnover RatioWeighted-Average
Womens clothing44812032,9414.3.55
Jewelry44831021,3001.4.12
Shoes44821024,7162.4.23
Pet supplies4539109,9976.2.24
Furniture44211023,6153.5.32
Sporting goods45111021,4222.7.23
Supermarket / grocery4451064,93814.73.74
Beer, wine, liquor44531034,5106.2.84
Hardware44413015,0312.8.16
Baked goods3118116,91557.51.56
TOTALS255,3857.99

In general, you could say that turning inventory over 8 times (7.99 rounded) is average for retail. “Good” might be considered anything above and beyond that.

That won’t really tell you much, however. As you can see by the table, the inventory turnover ratio varies wildly depending on the type of retail business. The range goes from 1.4 for jewelry to 57.5 for baked goods!

If you’re really astute, you’ll probably notice a correlation between the inventory turnover ratio and what the retail business sells. The more durable the products, the lower the turnover. Cost and shelf life also play a part.

So, the real answer to “what is a good inventory turnover ratio for retail?” is “what is the average inventory turnover ratio for your type of retail business?”

But, that comes with an important caveat!

What also must be asked is “how many times did my business stock out and lose sales?”

Because, if you’re losing sales, a high inventory turnover ratio doesn’t mean much.

Be sure to keep things in context.

Interpreting retail inventory turnover

You might think the greater the inventory turnover ratio the better. However, there are some exceptions. You could be purchasing goods in lower than ideal quantities, which will eventually lead to higher shipping costs and out-of-stock goods.

A low inventory turnover ratio can mean poor output from your sales team or a decrease in your products’ popularity. Perhaps your prices are too high. Or, maybe you’re not marketing properly. Whatever the reason – it translates into products remaining too long on your racks. Storage costs can be high, and they continue to pile up as inventory goes unsold.

Why it is important to calculate your inventory turnover?

Maybe you already actively manage inventory turnover and are looking for strategies. Or, maybe you’re new to the concept and are interested in the benefits that management can bring to the business. Either way, if you own a retail store, it’s important that you monitor this metric.

Here are some of the benefits of measuring inventory turnover in your retail store.

You are financially better off

If you are looking for one KPI (key performance indicator) for your business, inventory turnover is it.

The calculation is valuable if you look for financing from banks too. Since inventory is always set up as security for a loan, companies want to make sure that the product is easy to market and can be converted into cash quickly.

You’ll make better business decisions

Closely managing stock turns allows you to make better purchasing choices. Then, you’ll only keep the storage space for the products that are actually selling. Hence reducing your storage costs, which, in turn, allows you to be more flexible on price.

Some of the decisions that can be made using inventory turnover ratio include;

  • Which products need to be purchased
    • If the ratio is too high for a specific item, that could be an indicator that a particular product should be ordered more often. Is it stocked out a lot?
  • What units must be moved
    • Inventory turnover may indicate when certain products should be given better “real estate” in the store.
  • What needs to be scheduled in advance to provide plenty of flexibility
    • By understanding the frequency of an item that turns annually, you can plan better to avoid stockout situations.
  • Once you have a proper control over your product turnover, it gets easier to tackle the aforementioned situations quicker
    • You’ll likely develop a system or process that facilitates more efficient inventory management.

As a retailer, it is important to ask yourself whether your products are turning faster or slower than they were last year. If so, why?

Has the expected level of sales changed? Do your inventory management processes need to be tweaked?

Inventory turnover has a huge impact on your retail business

Remember, inventory (no matter what type) is the same as taking cash and placing it on a shelf. If it just sits there, it does you no good.

Inventory turnover is a relatively simple thing to measure and it can have a huge effect on your retail business’s success. If you’re not currently managing inventory turnover in your retail business, consider doing so.

How to Choose the Best Location for Your Small Business

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business location analysis featured

The Census Business Builder is a great tool to narrow down possible locations for your business. But, there are other important factors to consider like cost, competition, and capacity.

Why is location analysis important?

Location, location, location. This is often cited as the three most important factors in real estate. They’re also important for your small business too. Particularly if it’s a business that sells to the general public.

If your business doesn’t sell to the public though, that doesn’t mean that location doesn’t matter. You also have to consider your distance from customers, infrastructure, and other not so obvious things that can have an impact on sales and profit.

A business location analysis isn’t just important for your first location either. Yes, that might be the most important location analysis you undertake. But, it’s also important for your second, third,… whatever location.

So, what is a business location analysis?

It’s simply the gathering of location-related information, compiling it, and making the best decision you can. It may not be the optimal decision – which is okay. There are a lot of variables that affect the quality of a location. Probably more than you or I am capable of completely wrapping our heads around.

It is important to put your best foot forward though. If you give a business location analysis its time, you should make a good decision. Making a bad decision can result in costs (ownership or leasing) that are too high to support your level of business.

Remember, fixed costs aren’t necessarily bad. High lease payment can make sense if you’re in a location that’s going to make a lot in sales. Refer to this post on operational leverage to learn more.

A location analysis is vital for your business plan

Those who review your business plan are probably going to know how important location is. So, if you want to raise additional capital, or get a loan, you’ll need to address this important fact. You’ll need to make it clear how your location is going to contribute to your small business’s success.

Be prepared to answer why you’re choosing the location you are. what effect is this location going to have on your success? Take advantage of the tools available and consider the necessary factors. If you do, you’ll be able to confidently back up your location decision.

Factors to consider when doing site selection

Demographics of the area

When you think of demographics you typically think of descriptors for individuals. For example gender, income, age, homeownership, etc. Information like that is important, of course, if you’re relying on those individuals. Relying on them to purchase your products/services or to help sell them.

But, businesses also have demographics. So, if your small business is selling other businesses (B2B) – then you want to know the demographics of the nearby businesses too.

The competition

Where are your competitors located? Are they nearby? Or, are they in a completely different location? What advantages and disadvantages does their location have compared to yours? Do they know something you don’t? Or, maybe they didn’t think it through enough?

Nearby traffic

Traffic plays an important part in a business location analysis. If you’re selling to the people in those cars, and then you probably want to see more of them. That is, given that the local infrastructure can handle that volume of traffic. If it’s difficult to get in and out of your business, then all that traffic might be a deterrent for your customers.

Traffic also affects your employees. Depending on your geographic location, people’s tolerance for traffic might be different. If your location is going to be in a major metropolitan area, a lack of traffic might serve as something of an incentive to potential employees. If your location is going to be in a lesser metropolitan area, then being near the most congested traffic in the city might serve as a deterrent.

The local economy

Even if your business is based online, and you have minimal needs in terms of employees – the health of the local economy will still have a bearing on your business. Consider the economic implications of the different locations you’re reviewing.

Your business’ initial and ongoing location costs

As mentioned before, you need to make sure that the location you choose represents a good return on investment (ROI). Keep in mind what the initial location costs might be. So that you don’t spend too much before you’re even able to utilize the location.

Of course, you want to be cognizant of the ongoing location costs too. What the fixed costs will be and how they will affect your breakeven point and degree of operating leverage.

Will the location make business easier?

A lot of business revolves around the “numbers” making sense. But, there are human beings behind all those numbers. You being one of them. The best return on investment in the world probably isn’t worth it if it makes you, your employees, or your customers, miserable.

So, think about the intangibles. Don’t just quantify your analysis. Qualify it to.

Look at it from your employees’ perspective.

On the same token, how will the people working at this location feel about it? I mentioned traffic earlier, but there’s more to consider from the employees’ perspective. Are there places to eat nearby? Is this a part of town that employees will want to travel to?

Really try to look at this through your employees’ eyes. They don’t reap the same benefits that you, as an owner, do. If you were an employee, would you want to drag yourself to a job at this location day in, day out, year after year?

Adequate space and capacity considerations

It goes without saying that you need a building that facilitates the nature of your business. If you need warehouse space you’ll probably need loading docks. Or, doors that are big enough to drive a forklift in and out of.

If you have a computer-intensive business, you want to make sure that it has the broadband capability as you need.

Keep in mind, that you wanna look a bit into the future here. Don’t just think about what your needs are today or tomorrow, think about your best-case scenario. If your business grows faster than you anticipate, are you going to have the capacity to handle that level of business? Of course, don’t overspend just have a lot of excess space. Think of it as a balancing act.

An example of location analysis

As with most of my business plan related posts, I like to include an example. Previously, I had used my own aspiring business as an example. This business involves the manufacture and distribution of a topical hair thickening treatment.

I’ll rely heavily on the Census Business Builder (CBB) to narrow down a location. From there, potential locations can be qualified with some of the factors mentioned above.

Here’s a post I wrote on navigating the CBB.

Finding a location for a distribution center

As I mentioned in my Market Size for a Business Plan post, I would initially plan on outsourcing manufacturing. But, even though I’m not choosing where to locate a manufacturing facility, I may still need a location for distribution.

One of the potential manufacturers I found was in Florence, KY – which is near Cincinnati, OH.

So, on the CBB homescreen, I enter my NAICS code: 424210. Not because I’ll need it, in this instance, but because it’s required to get the map to come up. Then, I’ll enter Florence, KY as my location.

census business builder home screen
Credit: cbb.census.gov

Next, I’ll Select a Map Variable that will help in my search. My first thought is that I want my distribution center to be relatively close to the bulk of my customers – though I plan to eventually ship nationwide. This should help to keep shipping expenses down. So, I’ll use Consumer expenditures per household on Nonprescription drugs as my Variable.

I’ll also expand my geography out to the State level. I want to start broad and then narrow down.

census business builder state map
Credit: cbb.census.gov

As you can see, with the map centered around Cincinnati, the states represented in blue are those in the top quintile of spending on nonprescription drugs. Almost all of them stretch up the Northeast coast.

With that knowledge, I might start looking in Virginia. The closest of the high-spending states. Virginia is also, relatively speaking, closer to the West coast than the other states.

If I zoom in on Virginia and change my geography to County, I can narrow down further. Many of the counties are around the Richmond area and in Northern Virginia, close to Washington D.C.

What I’ll also do here is change my Map Variable. There isn’t one that details the average cost per sq ft of warehouse space (unfortunately). So, I’ll have to use something else.

I’ll use Average payroll per employee. I don’t want to hire just anyone, but I do want to keep costs manageable. So, I’ll focus on the second-lowest quintile ($34.7K – $44.3K).

Viola! I found it! Prince George’s County, Maryland will serve as a valid starting point for searching for a distribution center for my product. It’s not in Virginia, but it does seem to meet all of my initial requirements.

census business builder county map north virginia
Credit: cbb.census.gov

From here, I would search the web for available warehouse space and would qualify the choices with the factors listed above.

If I found another potential manufacturer, I could apply the same rationale to find more location options. Or, I could apply a completely different rationale. The steps I used to arrive at this location were just the first to come to mind. They aren’t necessarily the best.

Address potential problems with your business location

It’s best to get out in front of potential problems with your location. Just as it’s important to acknowledge your weaknesses and threats when doing a swot analysis. Think about how you’re going to handle your location’s shortcomings. Nearly every location has some.

Additionally, you want to acknowledge where your competitors are at. Consider the advantages and disadvantages of their locations.

Also, think about the best-case, most likely, and worst-case scenario. Just as I suggest you do with your annual budgeting.

How are you going to take advantage of the location? How are you going to overcome the shortcomings of your location?

Avoid picking a location just because it seems like a bargain. There’s more to consider than just the rent. Like almost everything in business, at the end of the day, it’s about the return on investment.

“Where Can I Get Data for Market Research?” 6 Gov’t Sources

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market research data sources featured

You know that market research is important. It helps you to better understand your customers and your environment. Are the market research data sources you’re using painting a complete picture?

Do you have unanswered questions? Or, perhaps, you’re missing things that you didn’t even know would affect your small business.

Complete the picture of your market research by checking out the valuable information available for free from these government resources.

1. Statistical Abstract of the United States – A summary of…everything

Link

The Statistical Abstract of the United States was a yearly document published by the Census Bureau. This tool for market research was a summary of the most important statistical information collected by the government. A really great reference that died in 2012.

stat abstract of us
Credit: census.gov

The entire document, itself, is a beast, at over 900 pages. Alternatively, if you want market research piecemeal, you can browse information by topic and download relevant spreadsheets. 2011 is when the spreadsheets were last updated. To get more timely information, you’ll probably have to reference what agency the data was compiled from.

The Statistical Abstract of the United States is a neat concept. But, as of the time of this writing (2019), the information is pretty dated. Like the USA.gov website, it can serve as a starting point to ultimately find the market research data you need. Like an old-fashioned card catalog.

2. American FactFinder – the (former) granddaddy of all demographic information

This tool is part of the Census website. It has an enormous amount of demographic, economic, and geographic statistics. If you could use only one source of information in your market research, this might very well be it.

In July of 2019, the Census Bureau transitioned to Data.Census.Gov as its main portal for public access to information. The American FactFinder (for now) can still be relied upon to provide valuable, timely info for market research.

Because of the breadth of information available, it’s unlikely that there isn’t something here that could help you with your market research project. A better understanding of your customers and your business environment will help you make better decisions. Not to mention, avoid potentially disastrous mistakes.

The American FactFinder tool is basically a guide to the relevant Census tables that have the market research you need. You pick topics that are of interest to you. The American FactFinder will return the tables that contain pertinent information. From there, you can view or download the information.

There are three primary ways to find what you need.

First is the Community Facts. Here, you can find some high-level information along with some links to tables related to various topics

The Guided search walks you through a series of questions and then presents you with tables that match the criteria you set forth.

Finally, my favorite method to use is the Advanced search. Here, you select your Topics individually. The relevant tables are presented as search results.

market research data sources american factfinder table
Click to enlarge Credit: factfinder.census.gov

No matter what method you choose, all paths lead to the Table viewer. It’s here that you can add and remove information and format it as you see fit. It’s also here that you can download into a spreadsheet for further analysis, if you wish.

3. Federal Reserve Consumer Credit Data – American consumer and student debt

Link

For better or worse, Americans like to borrow money to purchase things. Things that don’t (typically) give them much of a return on investment. The Consumer Credit Data (G.19) report has statistics on the amount of credit extended to the public – real estate excluded.

This report is relatively small. Especially when compared to other government market research sources. Yes, I know the Fed isn’t technically part of the government.

market research data sources federal reserve g19
Click to enlarge
Credit: federalreserve.gov

Here is a link that describes how to read this report.

First of all, information is broken up into sections that are Seasonally adjusted and Not seasonally adjusted.

The information about who holds the debt (Depository institutions, Finance companies, etc.) probably won’t interest you much. The levels and flows of revolving (credit card), nonrevolving (student and car loans) might interest you, as a business owner.

It’s a highly technical report. Probably not something you would reference unless you had a business that was sensitive to consumer debt levels.

So, for instance, if you have a business that was very un-recession proof, then this is something you might keep an eye on. Because once debt (fixed costs) start to balloon to unsustainable levels, it could be your businesses such as yours that suffer first.

In cases such as that, you might cross-reference another source of market research. One that would give you corresponding information on disposable income.

4. Consumer Product Safety – Avoid potential liability

Link

The Consumer Product Safety Commission publishes information aimed at decreasing injuries and death from consumer products. They also have the authority to implement standards regarding public safety.

For small business owners, this information is useful because it lets you know potential sources of liability. Whether it be products you sell or equipment you use in the normal course of business.

From a market research standpoint, this information might be useful if you were designing a brand new product. It might help you avoid some of the safety pitfalls of existing products.

market research data sources cpsc
Credit: cpsc.gov

Information is broken into nine categories. Each category has a list of dated reports and injury statistics on related products. It’s also broken out by hazard category. For example – electrocutions, fire, poisonings, etc.

Additionally, the CPSC has a section of their website dedicated issues facing small businesses. Here’s a link to that. I think a quick browse through that page is a good idea for any small business owner.

Of particular interest, for a business designing a brand new product, is the Regulatory Robot. This is a wizard that asks you questions about your new product. It then delivers customized regulatory information that you need to know. A real time-saver for market research and risk management.

5. BLS – market research and help with forecasting/budgeting

Link

As the name implies, the Bureau of Labor Statistics measures labor activity. In addition, it also collects and interprets information on working conditions and price changes.

The Bureau of Labor Statistics prides itself on its objective reporting of the facts. Transparency and accurate data are among its core values.

An entrepreneur could use BLS statistics to forecast revenue. In particular, it would be useful in creating best-case and worst-case scenarios. By knowing how prices changed in different economic conditions – a more informed forecast can be created.

Furthermore, data can be found on wages that would help a startup better estimate labor costs when drafting a business plan.

Beyond that, there is a lot of economic data. Much of this is geographically specific. Which will accentuate information pulled from elsewhere.

market research data sources bureau labor statistics
Credit: bls.gov/data

Data from the BLS usually comes in a handy tabular format. Finding what you need isn’t as intuitive as other sites. But, it’s not too complicated. You’ll see that it’s grouped into categories (Inflation & Prices, Employment, Pay & Benefits, etc…) and sub-categories.

For each sub-category, there are several options. These are Top Picks, Data Finder, One Screen, Multi-Screen, Tables, and Text Files. Each is a different means to the same end – the tables that have the statistics you want.

I prefer the Top Picks and One Screen options for finding what I need.

6. Bureau of Economic Analysis – a look at the bigger picture

Link

The Bureau of Economic Analysis focuses on the U.S. economy. This government agency is responsible for calculating the GDP among many other important economic indicators.

As goes the economy so goes business. Some businesses are recession-proof. But, most are not. If you’re a small business planning for the coming year, or an entrepreneur needing market research for a business plan, you’ll want to familiarize yourself with the economic cycle.

You’ll not likely be able to predict when the economy will expand and contract. However, when you compare BEA statistics with those from other sources, you can get an idea of cause and effect. This will give you a better picture of the business environment. In turn, you’ll better understand what it would mean for your small business if ___ happened.

There are three general methods for accessing the Bureau of Economic Analysis’ data. These methods are the Data menu, the Tools menu, and the Interactive Data Application (accessed from the Tools menu).

market research data sources bureau economic analysis
Credit: apps.bea.gov

Of these three methods, I prefer the Interactive Data Application.

From the main menu of the App, you can browse National Data, Industry Data, International Data, or Regional Data. Each choice will lead you to a sub-menu and some will give you the option to map your information.

From the sub-menu, narrow down what you want to see further. Many of the tables will allow you to specify what state/region you want data for and the year of the results.

Market research data sources

Are there any other market research data sources that fly under-the-radar? What are they?

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Census Data Market Research at the New Data.Census.Gov

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In an effort to modernize, the Census Bureau recently launched its new portal for census data market research. It is located at Data.Census.Gov. Here, you can find information on a bevy of subjects including population, economics, education, business, and many other topics.

Market research is important to know who your customers are and where they are at. No other free resource (that I know of) has the breadth of information that the Census does. It is your ticket, as a small business owner, to better understanding your customers and your environment.

What is Data.Census.Gov?

This tool is part of the Census website. It has an enormous amount of demographic, economic, and geographic data. If you could use only one source of information in your market research, this might very well be it.

The main portal for accessing Census data used to be the American FactFinder. In July of 2019, the Census began using Data.Census.Gov as its primary means of providing Census data.

The user experience is much more polished on Data.Census.Gov than it was on the American FactFinder. It seems to have been built with the general public more in mind the data-centric business users.

Why use Data.Census.Gov?

It’s unlikely there isn’t something here that could help you. A better understanding of your environment will help you make better decisions. Also, avoid potentially disastrous mistakes.

Most people think of the Census of only having data on population and demographics. In fact, the Census has a lot more. You can find data on health, housing, business/trade, employment, and more.

So, whether your business is retail, manufacturing, B2C, or B2B, you’re likely to find insights here that you would not have otherwise known.

How to access census data market research?

With the American FactFinder, there were four ways to conduct a search: Community Facts, Guided Search, Advanced Search, and the Download Center.

At Census.Data.Gov you are presented with two options. A search bar at the top, and “canned “searches at the bottom.

Start your search with whatever’s most important to you. If it’s a geographic area, start with that. If it’s related to employment, population, or some other topic, start with that.

At any time, if you want to start over, click on the United States Census Bureau button in the upper left. That will take you back to the home page to start a new search.

A solely geographic search

A geographic search will bring up a screen full of “quick facts” about that area. To access this information you need to select the geographic area you want from the drop-down menu that appears as you enter your query. Don’t just type it and click Enter.

The “quick facts” include things like People and Population, Race and Ethnicity, Families and Living Arrangements, among other topics. Basically, the same topics outlined in the “canned” searches at the bottom of the home page.

A topic-based search

A search that includes a topic such as health insurance or housing will give you a results page that includes TABLES, MAPS, and PAGES related to your query. By clicking on the corresponding result-type along the top of the page, you’ll be taken to results that are exclusively that type.

Tables

census data market research tables
Credit: data.census.gov

TABLES are the bread and butter of the data-centric user. Upon clicking on the TABLES option, you’ll see a list of tables in the left-hand menu that corresponds with your query.

Once you find the table you’re interested in delving into, click the Customize Table button. It’s in the upper-right.

Now, you can expand and collapse rows so you can only see the data you’re interested in.

When you’re ready to get this information into a spreadsheet, click the chevron (two arrows pointing up) by the title of the table. Select Download/Print/Share. Next, you’ll select the years you want information for and click Download when you’re ready.

Unfortunately, the downloaded data sucks. As I also outlined in the Defining a Target Market… post. It’s difficult to read and can’t easily be put into a format that facilitates understanding. It can’t be copied and pasted into a spreadsheet easily. The American FactFinder site did allow for easy copying and pasting..

Also, if you’d like to add or remove other geographic areas, or the year of the data, click CHANGE GEOGRAPHY or CHANGE YEAR respectively.

Also using the Filter with the tables will allow you to use similar functionality as the Advanced Search option. The Advanced Search will be covered later.

Once you’re satisfied, you can click TABLES in the upper left corner to return to the main tables page.

Maps

census data market research map
Credit: data.census.gov

The map and table are tied together. The changes you make in one will bleed over into the other. For instance, if you choose a different Geography in the map, your table will change accordingly.

Along the top, you can also change the Data Variable. These options correspond with the rows in your table.

Geographies will change color according to the data variable. In the lower-left, you’ll see a legend that shows the amounts and quantity of Geographies in each quintile.

You also have the option to click on surrounding Geographies (states, counties, etc.). When you do, they’ll be added to your analysis.

Filters

In the tables, maps, and the Advanced Search, you can narrow down the results by adding Filters. The Filters are pretty intuitive. Select those that you want to use and the data will be updated accordingly. If a Filter isn’t available, it will be greyed out.

Census data market research

What other tips and tricks do you have for finding the data your business needs with Data.Census.Gov?

Do you know of a better way to get information from the tables into spreadsheets?

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Using Census Data for Business – Find the Perfect Location

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The Census Business Builder is an interactive tool that allows small business owners to make educated decisions about the location of their businesses. Of course, the location of a business can be an enormous factor in determining whether it is successful or a failure.

Click here to try the Census Business Builder for yourself.

What is the Census Business Builder?

This is a “wizard,” of sorts, for small businesses to use to find an ideal location. Information is presented in a map or report format.

Go To Map

The map is, as you would expect, very visual. It allows you to view the information by state, county, city, and zip code. Different sections of the map are color-coded depending on the variable selected.

using census data for business census map
Credit: census.gov

Variables include, but aren’t limited to the following:

  • Demographic information
    • Age
    • Income
    • Education
  • Business & workforce information
  • Consumer spending

Beyond that, you can filter any of the variables to reduce the “clutter” on your map. Then you can focus on the information you’re really interested in.

Create Report

Whereas the map allows you to customize what you see, the report gives you a rundown of the information it thinks you want.

There are three main sections of the report. They are listed below along with their sub-sections.

  • My potential customers
    • Demographics
    • Socioeconomic characteristics
    • Housing
  • Businesses like mine (based on the NAICS code)
    • Employer businesses
    • Business revenue
    • Nonemployer businesses
    • International trade
    • Workforce
  • Consumer spending

Not all the Businesses like mine information is always going to populate for a given geography. The more pinpoint the geography (Census tract, ZIP code) the more likely that information will be omitted. I assume this is done to protect privacy.

This resource is a tool for finding information about different industries. Information is available from the neighborhood level up to the national level. The information is presented in a more visual format; whereas a lot of other Census data is in tables.

Why should I use the Census Business Builder?

Because it is map-based, the primary purpose of this tool seems to be to find a good location for your business. Thus, it might prove more beneficial for retail or business-to-consumer (B2C) businesses than other types.

That being said, there are business-related variables and filters too. So, you might find information for business-to-business applications too.

If you have a good grasp on your “customer avatar,” and you are looking for the ideal place to locate your business, then the Census Business Builder could help you avoid costly mistakes and give your retail business the best chance at success.

Gathering and acting on market research takes scarce resources like time and money. You want to know that those resources are well spent.

market research data sources census business builder
Credit: census.gov

How to use the Census Business Builder

Using the Census Business Builder is relatively easy and surprisingly intuitive for a government website.

The first step is to select your industry, or manually type it in.

When browsing the map, I couldn’t ascertain what difference it made to select one industry over another. I think this only affects what you will see in the report.

From there you’ll select the location you want to analyze and then Go To Map or Create Report.

Using census data for business – the Census Business Builder map

The map will allow you to move around and see a visual representation of your location, the selected variable, and the selected filters. If you’re viewing data by city, then each city will be color-coded based on which quartile it’s in. If you Change your location to a ZIP code, state, or something else, the map will change accordingly.

Changing the Map Variable is going to affect what you see on represented on the map. Note that you can scroll down on the Map Variables. So, if you don’t see what you want at first glance, there are more options below that.

Your filter options are the same as the Map Variables. By choosing a filter, you’ll be able to exclude geographic areas from your map that don’t meet certain criteria. You’ll set a minimum and maximum for the filter and then select Apply Filter. Your map will update accordingly.

Remember, that like the Map Variables, you can scroll down to find more options for your filter. Apply up to five filters.

At any time, in the map view, you can create a report based on the industry and location selected. Just click Create Report in the lower-left corner.

Using census data for business – the Census Business Builder report

The report will provide a nice summary of the location selected. Included will be every piece of data available in the map, in a presentable format. Ready to be copied and pasted into your business plan, if desired.

using census data for business census report
Click to enlarge
Credit: census.gov

Obviously, the report is less interactive than the map. There are some adjustments that can be made, though. Along the top, you see the option to Display MOEs (margin of errors), Configure Contents, and Download Data.

The MOE information probably won’t mean much to the average small business owner. But, if you’re curious, it simply means that the data isn’t exact and could actually be higher or lower by the MOE amount. For instance, let’s say the Percent high school degree or higher is 90% and the MOE is 1%. Then, the actual Percent high school degree or higher is anywhere from 89% to 91%.

The option to Configure Contents allows you to remove sections of the report that might not be relevant.

Finally, the Download Data option allows you to create a spreadsheet or a PDF with the information in the report. From there you can perform your own analysis, copy to a business plan, or whatever else you wish.

Using Census data for business – a valuable tool

What are some “hidden” treasures in the Census Business Builder map that I missed? Is there a combination of variables and filters that provide especially useful information?

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