5 Tips to Ensure Customers Pay You On Time

No one likes doing work and not being paid for it. Yet let's face it: We business owners know it happens all the time.  RocketLawyer.com recently released a survey of 475 members of its website: 25 percent had trouble collecting payments, and of those, 60 percent had to write off bad debt. As a bonus, the survey release included Rocket Lawyer's tips for getting paid. I thought they were worth passing on:

1. Perform a background check.

Check the client and make sure they have good credit. If you can't afford the credit check services or if you're not sure about the client's ability to pay, get a portion of the project up front before you start.

2. Create and sign a contract.

A contract not only protects you, but it protects the customer as well. A contract should spell out deliverables the client will get as well as the payments the client will make to you, along with a schedule. According to Vito Mazza, Senior Consultant at GreenFlag Profit Recovery, "In the current environment, people should start considering 20-day terms for payment instead of the standard 30 days."

3. Bill customers consistently.

Bill on a schedule that keeps them from "forgetting" they owe you a payment. In the survey, more than 35 percent of businesses had one customer that was more than 90 days delinquent. The survey also reports that only 29 percent of businesses call customers when they're late. "Regular contact is critical," says Mazza. "Most people wait too long to get started asking for money. They don't get paid after 30 days, so they wait until 60 days and send a note, then 90 days they send another note." One of Mazza's services includes what he calls "first contact courtesy notices" which go out after a client misses the 30-day deadline. Those are followed by an automated call that allows the debtor to press one and speak with you (and not GreenFlag.) "It gives a big company feel for a small business."

4. Have your attorney send a letter.

When I recently ran into a deadbeat in my business, my attorney chose a "take no prisoners" approach that listed possible legal actions that would arise should the client fail to respond by a certain date. This did the trick. Remember, though: This gambit may be too strong in some cases. You have to weigh such "motivational" tactics against the circumstances of the late payment and the nature of your relationship with the client.

5. Send them to collections.

If you still can't get the customer to move, find a reputable debt-collection agency. You may give up a percentage of the money owed, or pay a flat fee, but you'll likely get something and you'll stop wasting your time on a deadbeat. If you work with a debt recovery firm the industry claims a 12 to 14 percent recovery rate. Mazza claims his strategy recovers 50 percent and costs are fixed at roughly $12 to $14 per file. GreenFlag works with many medical offices and even the Girl Scouts.

Don't let customers take advantage of you by making you wait for your cash. Share your tips on collecting on time in the comments below.

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Reach Customers and Employees via Mobile Apps

If you’re a small business owner with customers on the go, or employees that work in the field or remotely, you may want to provide them with a mobile app to connect with your business. This week I’ve found two technology solutions to help you create a mobile app simply, that won’t cost you a lot.  

The CTIA reported there were over 78 million smartphones active in the US in 2010, or about 25% of all phones. Forty percent of mobile consumers over 18 in the U.S. now have smartphones, according to July 2011 data from Nielsen, with 40% of those people using Android, 28% using an iPhone and about 19% using a Blackberry. At any given time, between 25 and 40 percent of your customers could be looking for a business like yours on a smartphone. How can you get them to think of you first?

How about creating an app that lives on their phone and sends them offers and updates from your business directly? Scott Hirsch and Arsen Pereymer created Appsbar to help small businesses create simple apps that run on iPhone and Android (about 68% of the smartphone market). Appsbar allows any business, from accountant, band, club or restaurant to quickly (and I do mean quickly) create and publish an app for review by the major app stores (iTunes and Android Market with more coming soon).  Appsbar’s community has suggested many of the business templates they currently provide, according to Pereymer.

I was able to create an app that has links to my column, a form to book me for speaking engagements, social network connections, pictures and contact info in less than 20 minutes. Now you can download the HowardGr app at the Google Marketplace for Android. I used pre-created icons and backgrounds, uploaded my own pictures and chose one of their color schemes. It's not fully polished, but it was quick and fun and I can update it.

If you already have the information about your business, perhaps from creating a website or some recent marketing material, you’ve probably got plenty to put into your app. Businesses can create coupons, QR barcodes and more on their apps. They can even notify customers when promotions are occurring. Want to send a 5pm reminder for happy hour? Done.

Now what about your mobile workforce? Earlier this year I reported on Podio, a simple app creator for the web. As of yesterday, those apps are able to follow users to their iPhones (with Android about 3 months away.) “We’ve had 200,000 apps created or modified on our platform since March,” said Tommy Ahlers, CEO of Podio. “We now have a simple interface for people to find, filter, and edit items in their Podio apps on the go.”

I spoke with Thomas Nicholls, Director of Mobile for French IT consultancy Ekito who has been beta testing the Podio software. “We started using Podio to track client leads, so our management and sales team could exchange information. Many of our people work at client sites, so we used this to make our lead exchanges and deals quick and web-based. Some of us have IT background, but our non-IT colleagues were able to modify and configure the Podio-supplied apps for our internal use very easily. I can immediately enter leads from mobile, and see the status of others’ leads.”

Nicholls notes that we all have the tendency to check lots of different social apps on our phones several times a day, like Facebook or Twitter.  “Now I also launch Podio several times a day to check on our projects, and I’m working not playing. They have done a good job making a well done integrated social aspect of their ‘work feed’ for your team from a mobile interface.”

Podio has a free version for one project and 10 people, and unlimited usage costs $4/month per person.

Will you be adding a mobile version of your tools for customers or employees? Let us know what you’re thinking about in the comments.

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Tool to Predict Tech Start-up Success

A few months ago, the team at Blackbox seed accelerator set out to decode the "genetics" behind successful startups (See this short piece at Fast Company and also "Love in Startup Land."). Their initial report, the Startup Genome Project, surveyed over 600 tech startup companies in Silicon Valley and around the world and gave them insights that let them continue their survey. They also started to develop a tool that will help startups see their current state and things that will help them move ahead. It will also warn them of potential disconnects and provide a report that will let them improve. That tool is being released today, and an updated report is now available.

"The Startup Genome Compass is a benchmarking tool for high growth technology startups,” said Bjoern Lasse Herrmann, co-founder of Blackbox (now called the Startup Compass.) “Startups fill out a monthly survey and receive a personalized benchmark based on their type and stage. The benchmark helps founders identify upcoming problems, set priorities, align the team and measure progress over time. We hope this regular data driven feedback loop can help founders significantly reduce their chance of failure.”

The Compass analyzes five dimensions of a tech startup: Customers, Product, Team, Business Model and Financials. It gives direct advice about how to scale each of the dimensions at the right time.  “Prematurely scaling” is how the startup genome describes getting out of sync along one of the previously mentioned axes. Companies that don’t take the time to validate their market but instead jump right to creating a product would be considered “inconsistent” in the language of their findings. (See page 11 of the report for the definitions).

For example, from their report, “Almost 80% of inconsistent startups focus on product and 45% of consistent startups focus on customer development before they reached product/market fit…In the beginning startups can get easily lost in building a product without validating the actual demand for it. Based on interviews most inconsistent startups are under the impression that they are an exception of the rule. They believe they have found a special insight for a disruptive startup that no one else has. Unfortunately most of these startups fail."

Says Herrmann, “Too many startups start building first without talking to customers. A structured customer discovery process makes a big difference in defining the key features for an early prototype. Building a product without finding problem/solution fit by talking to customers is one form of premature scaling.”

The report advocates constant feedback loops about how customers are using your product, how sales cycles work, and other measurable items. Just one of their findings: “Inconsistent startups are 2.3 times more likely to spend more than one standard deviation above the average on customer acquisition.“

“We describe entrepreneurship as a search process,” says Herrmann. “A company needs to discover the right product, customers, team, business model, etc. The faster you learn all of these things the more likely you will succeed. The more you execute on un-validated assumptions the more likely you are to fail. With the Startup Genome Compass we help startups to learn faster.”

As more people use the tool, Blackbox reports that they will be able to return more detailed analyses, and more personalized recommendations. So, companies using the tool are also creating a better tool for all concerned. The updated report is quite an in-depth read, with lots of charts and graphs to help you digest the information. It is clearly intended only for the tech startup market, with 50% of the research coming from the US and the balance from other tech hubs around the world. The US data is skewed towards Silicon Valley, with the next largest data contributions coming from Austin, Texas and the New York Area. Herrmann and the team have a big vision. They’re looking for a scalable way to accelerate startups.

This Startup Genome Compass tool is a simple product to help companies to reduce failure rate. Have you used it to benchmark your company yet? Let us know if it was useful to you in the comments below.

(Updated 12/26/11 to reflect the new websites for the Startup Compass tool.)

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Do Facebook Ads Bring Customers?

Start-ups and small businesses are always looking for more customers, and there are a lot of potential customers on the Internet, right? But what online strategy is going to help you to gain the customers you need in a cost-effective manner? Today, let’s dive into Facebook advertising. With 750 million members, and 225 million in the U.S. alone, there’s a large audience to reach.

Similar to many other online sites, Facebook ads are a marketplace–you’re making a bid about how much you’ll pay to reach people, or how much you’ll pay if they take an action. (See some resources below for more info on how to use them.) There are a lot of people using Facebook to build their brand by increasing the amount of fans on their pages, and that is absolutely a good strategy for many companies. These fans are customers or customers waiting to happen. Fans are great–but what about revenue driven as a result of a specific advertising campaigns? Marketing 101: Your return on investment is the Gross Profit from that campaign minus the expense spent on the campaign, divided by the expense and that gives you a percentage, which you can compare to other marketing expenditures to see what is most effective for you.

Anna Strahs of AnnaB’s Gluten Free started her baking business out of her Richmond, Va., apartment about a year and a half ago, and now she has commercial ovens and a wholesale business. Anna did a targeted ad for people in Richmond who were fans of restaurants and markets that had gluten free products and went through $25 in a few hours. That money bought her the first 50 "likes" on her page. "Since then we’ve run ads intermittently, we put our Facebook page info on our packaging, and at our markets we advertise it. When we offered some cupcakes colored with vegetable dye instead of food dye, we got 11 likes, but we also got six orders. We keep up with the Facebook page more than our regular website and we get direct feedback. People recommend and share our posts on their own pages, and we’ve had restaurants that carry our products repost or share our posts.” Anna can’t directly track the revenue from the fans, but that number is increasing and she can directly tie sales to content on her Facebook page.

Manish Vora co-founded Artlog in early 2008 as a platform connecting people to contemporary art galleries, museums, and artists. “We want to help the institutions broadcast themselves online,” said Vora, “As well as combine their offline efforts, providing access to have people visit galleries, museums, and fairs.” Vora’s team recently did an internal study tracking their use of Facebook advertising as an event promotion platform. “We’ve used FB ads to target people for paid events and paid software products. We had been using Google Ads, in a very targeted manner, but Facebook’s ads were significantly cheaper, and we stopped advertising with Google six months ago. Generally, the ability for us to target age, geography and interest help us target event by event. So promoting an art crawl on New York City’s Lower East Side with Thrillist, we can target 21-26 year olds in geographic NYC. For a Chelsea neighborhood crawl on a recent Thursday, we’re working with 20-30 galleries and 1000 attendees, and we targeted a 25-45 year old audience with a different NYC geography. The flexibility from event to event and by interest makes it more effective.”

How effective? Vora estimates about 8 percent of attendees come from their Facebook ads, and their margin is such that they’re making about $200 for every $75 they spend on ads. That’s gross profit-investment/investment, or (200-75)-75/75 for a 66 percent return on investment.

A start-up using Facebook ads is Synergy Beads of Ann Arbor, Michigan. CEO Adam Dion reports that spending $50 on Facebook ads brings him between $220 and $250 of revenue per month. (ROI (250-50)-50/50=300 percent ROI!  “I believe the return rate on FB is higher because of the ability to particularly select an audience who have specific and very strong, closely related interests…rather than abstract, loosely related keywords, which is key for a niche business like ours.”

Floptopz of New Jersey creates Flipflop insoles. Their Facebook campaign has translated to 300 percent more site visits, but their sales have only covered the cost of their campaign–no extra profit. Owners Donna and Dave Hill report, “We have definitely seen good traction and traffic, but we have also capped our daily spend (as a start-up, we are budget conscious) in order to keep our budget intact.”

GovernmentAuctions.org CEO Ian Aronovich told me, “While Facebook does not work well for us to make immediate sales like, e.g., CPC ads on Google Adwords, it builds awareness of our brand and "likes" on our company page. We can then use that over time to build an innovative sales funnel.” He also noted that his typical customer is older and “While 55+ is the quickest growing demographic [on Facebook], it seems to us that until recently, they were not really engaging with brands that much (including ours) compared to the yourger demographic.” This is only one company’s experience–it will be interesting to track over time.

Vora of Artlog notes that recently the cost of the ads he’s using on Facebook have increased, though they are still effective because they’re paying less than they were with Google Ads. I had a few others e-mail me from my outreach to tell me the same thing. A Facebook spokesperson told me that this is “a result of a general increase in activity within the auction marketplace. Price is a function of auction dynamics, but businesses always have control over their budget, and Facebook's system helps them find the optimal bid that works for them.”

Are Facebook ads working for your business? Let us know your experience in the comments.

Finally, a thank you to the over 50 replies I got from posting about this story on HARO. I couldn’t reply to everyone, but they gave me great background for this piece.

Resources:

How to Advertise on Facebook

Measure Your Online Engagement

 

 

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New Discounted Legal Services for Small Businesses

One challenge for many startups is the high cost of legal fees. Rocket Lawyer recently did a study that found 45 percent of businesses have legal issues to resolve in the next three months. From incorporation to contracts, quarterly meetings, and more, there are lots of legal expenses that are required of a startup owner. The company is now offering legal help in a group-buying, insurance company plan format.

I spoke with Founder and Chairman Charley Moore to learn about Rocket Lawyer On Call, a benefit for people who sign up for their legal plan service. For $40 a month, your small business can have a lawyer review contracts and documents (whether created via the Rocket Lawyer service or not) as if they were on retainer to your company. Letters and corporate minutes can also be reviewed. Additionally, if this legal review is not enough, the company has partnered with Legal Club of America to provide lawyers from their network that will work with your company at 40% off of their typical fees. Some additional services are a fixed cost, such as a $750 bankruptcy filing, (which you hopefully won’t need.)

“Every small business needs legal help. What we’ve done with Rocket Lawyer On Call is to make it affordable for them to get it. There are small business issues every quarter, from filings to minutes, and we’re trying to make it easier for companies to get regular legal help,” said Moore. I asked Moore why lawyers would provide such a steep discount. “We have 2.5MM registered users, and more than 40,000 people on this legal plan. So we’re giving almost a group purchase of legal services option.”

Small business owners can also use the services for estate planning. “We help the small biz owner to integrate their business, which is often their largest asset, into their estate planning early on, since legal issues should be part of their personal and business plans.”

In addition to the discounted services, the plan also allows subscribers to use some cloud-based storage of documents, and to use Rocket Lawyer’s document creation and legal health score engine. We covered that feature previously, but Moore told me they’ve since updated it based on use requests and feedback. One thing that often shows up on a legal health checkup is the lack of an employee manual, said Moore. “If you have hired, but don’t have employee handbook, you may be in violation of state law and if an employee has a grievance, you can be in a large amount of trouble.”

The Rocket Lawyer On Call service has been in testing during the spring, but rolls out to the public today. What do you think of this offering? Let us know more about the legal needs of your small business in the comments.

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How to Show Market Traction

When pitching your business for funding, a common question that investors will ask is “Have you achieved market traction?” Market traction is just one factor that that will determine a VC or Angel’s interest in funding your company, but it can be very important.  One simple definition of market traction, credited to Angel List co-Founder Naval Ravikant, is “quantitative evidence of market demand.”

I spoke to serial entrepreneur and angel investor David Beatty about finding quantitative evidence. “What I like to see is a story that shows me you have traction. One investment I have now where they make a physical product, their clients were going to use the product throughout the US in all their store locations. In order to get to that level it was going to take 6 months to 2 years. In order for my investment’s product to be specified, their client had to get the product, sample it in one of their locations, then test it in multiple store locations, purchase some units, and finally be accepted into their corporate purchasing pipeline. There can be any number of steps.”

Recently, I participated on a panel at Astia's New York Chapter with Maia Benson, who agrees. “For companies with products/services they want to bring to market, I think having a 'virtual pipeline' is key.  A 'virtual pipeline' is a set of prospective customers that would 'trial' your offering once it is available for alpha or beta release.  It demonstrates that the entrepreneur is customer-centric, can network their way to the right decision makers and has identified a true customer 'pain point' that would make their solution a need-to-have versus a nice-to-have.” 

Long time venture capitalist Bob Greene, General Partner at Contour Venture Partners was also on this panel, and he wants to see customer acquisition. “Whatever sector, it is great to see tangible evidence of how you’re going to acquire customers – and that should be consistent with your business plan.” But if the company is early stage, they may not have that evidence. “Pre-launch they should have an experience base on the team, so that their assertion of how they’ll acquire customers carries weight and makes sense to us. We also typically would have a feel for some of the target customers, and we’ll do our own spot checks with them as to the value proposition of product or service.”

Beatty also does due diligence, talking to the users of the product in the market to get their side of the story. However, he wants to see promises fulfilled. “If we hear about a 1MM deal for your product but 6 weeks later you don’t have a signed contract, we’re going to get scared. Investors and angels are optimists and entrepreneurs are optimists, so the numbers help ground your over-optimistic projections.”

Entrepreneurs want to create a business and marketing plan that sets your company up for a virtual pipeline. Fellow panelist and Founder/CEO of strategic marketing firm the Geppetto Group Julie Halpin noted "When we are helping clients build a proposition that is hard-wired for market traction, we ask ourselves four key questions:  What is the benefit this proposition delivers and to whom? Why is this the right time in our culture for this proposition to work? What unique technology, R&D, attribute does this idea bring to the market? And finally, what is the business model that ensures this idea will make money both now and into the future? If the answers to these questions are precise, thoughtful and vetted, then the new idea is wired for success and traction."

Setting up your story, researching the market elements that will make it successful, plotting your pipeline, getting customers and showing you can grow them from trial to purchase are all ways that you’ll help potential investors decide whether your company has traction and potential. Let us know your tips and ideas below.

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"Wherehouse?" Outsource Your Storage and Shipping

Growth is a challenge for a small business, especially when it comes to warehouse real estate. You don't want to carry costs for more space than you need. But if you are just starting, or if you are expanding into new products, how much space will you need to receive your deliveries and ship? Do you build to the maximum capacity for the Christmas season?

Kickstarter (for more: Using Kickstarter To Launch a Business ) is a site that lets people fund creative projects with an all-or-nothing funding method. People propose projects and the community bids in advance to buy a product or support a project. One challenge – not knowing the demand till the project is over. Studio Neat had a recent success with the Gilf, a small tripod for iPhone users that allows them to take better pictures. Dan Provost and his partner Tom Gerhardt told me that they expected to sell 500, but instead sold 5,000. 'We produced the first 500 from Kickstarter and shipped them ourselves. It was a very telling indicator that we needed a service to do this. We were coming into [business] with no order fulfillment. We were totally new to the idea of SKUs, inventory, etc.'

One set of entrepreneurs saw a hole in the market for outsourced warehouse and shipping for small businesses, and Shipwire was born. 'Our CEO is a serial entrepreneur, he wrote a book about logistics, and had created a lot of software company solutions,' said Nate Gilmore, VP of Marketing and Business Development for Shipwire, Inc. While talking with the chief logistics officer at Costco, he asked about the entrepreneurial opportunity, and he was told to bring the operational logistics of a Costco to the small business.' The idea grew out of that seed.

'As a large company you get benefits when you ship a lot and for renting warehouse space, since they like larger businesses with large volumes. Small businesses end up using smaller warehouses with fewer services. We thought, if we can aggregate a lot of small businesses, and we can have volume, then we can aggregate the benefits of large companies. We can get them enterprise level muscle – physical facilities on a 'software as a service' type model.'

Shipwire is providing outsourced physical hands to receive and send packages on demand. They have service guarantees and service levels that you would hear about at a large company level. They provide these services in the US, Canada and Europe. 'Startups can get global on demand and tap into a team of logistics experts. They can outsource the problems to us, and we give them a single neck to choke,' said Gilmore.

For Studio Neat, Dan looked at Shipwire, Amazon and others, but in the end they got a software toolkit from Shipwire that let them manage their inventory and shipping. 'We shipped them about 10,000 Glifs in bulk, in boxes and uploaded an order spreadsheet from Kickstarter with names and addresses. They shipped 7,000 units in 24 hours. We had trapped ourselves right before holidays, so we made it clear to them that it would be awesome if they could help, but we didn't think they could turn it around that quickly. They busted their a**es and their turn around was really impressive.'

From Shipwire's side, Gilmore told me that the management team hadn't heard about Studio Neat's situation until after it was done. 'One of our sales guys just made it happen.' Now Studio Neat is just selling through. Dan said 'We have a Shopify ecommerce store. Our orders get placed, the order goes right to Shipwire, and we monitor inventory on the software.'  Shipwire told me they now integrate with over 50 online shopping cart systems.

Gilmore told me for a startup manufacturer or direct to consumer company in the $1MM to $5MM product range, 'This is a point where if a small business doesn't invest capital wisely they won't reach the next level. We allow them to keep money in their inventory and marketing and just pay for the shipping and storage (usually 10% of a business). This helps them keep shipping at a variable basis. When investing in warehouse space as a leased facility, if I know I'm going to have 2 containers at holiday time but usually only a few palates at a time, I still need to lease or rent for the most space, secure it, have software, labeling, and employees, and ramp up during busy times. So I'm carrying the cost to have to have a facility to fit holiday volume all year long. With us the company won't spend leasing money, it doesn't build out a facility, hire employees, buy trucks, or insurance. If one month you store a palate you pay for that, in another month if you have multiple containers, you pay for that.'

Shipwire is allowing companies to scale in a friction-free manner, locally and globally. How have you solved scale, shipping and logistics issues? Let us know in the comments.

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Fight Credit Card Processing Fees

Start-ups are always looking to increase revenue or save costs. When Sean Harper was running his e-commerce business, he started looking at costs, and zeroed in on how much he was paying his credit card processor. When he started comparing, he realized he had overpaid by about $40,000 in a year. This gave him his next business idea—a comparison engine and marketplace where people can compare credit card processors in an apples-to-apples way and get the best prices and features they need. FeeFighters was born.

According to Stella Fayman, Marketing Ninja at FeeFighters, a lot of card processors make their money off small businesses who don't read the fine print. 'Often you'll be sold 'tiered pricing,' where you're quoted a low rate, but only for 'qualified' transactions. Then you find out over 70 percent of your transactions are not qualified like a 'rewards card'—and the rates are much higher on those card transactions.'

A business goes to FeeFighter's site, answers a few questions, and gets several bids to compare. I tried the process and it took about 2 minutes. The card processors don't get your information; they don't get your number or any details until you decide to choose one. Once you go through the auction, FeeFighters offers a free statement analysis to let you know how much you can save by switching compared to your current plan.

FeeFighters doesn't deal with processors that use hidden tiered pricing models, and they don't deal with companies that have lots of fine print. In order to participate processors have to follow specific, merchant friendly terms, and the contracts and all fees are transparent.

'We get paid when a user converts,' said Fayman, 'So we get the statements for the customers, and we audit them to make sure that terms stay the same. There are hefty financial penalties if processors change terms and they can get kicked out of our marketplace.'

According to Tom Auer, President of Bearse USA, a manufacturer of bags, cases and pouches for specialized clients including the US military, they were able to save about $5,000 a year for the last two years. 'We're primarily business to business—so we're getting corporate cards from small companies. Fee Fighters put us through a process so we could effectively comparison shop between processors. It's almost like a strategy for these companies to confuse you so you don't really know what you're paying. We never got what we thought we were getting and there were always surprises on the bill. It's brilliant that they let you fairly compare pricing between competing processors.'

I asked Faymen about how this affected ecommerce processing. 'In order to accept payments online, there are 2 pieces: a gateway and a processor. People like Authorize.net are a gateway – similar to the black box in a merchant store. The processor can be changed at any time. So it is easy for anyone to switch out the processor, and keep the gateway in place. Most people think they're locked into their processor, and are surprised at how easy it is to change.'

Said Auer, 'Previously we had no idea what we were paying and why. FeeFighters made the process much better than it was before.' It seems like a no brainer to do a card-processing checkup, and see if you can save money. Let us know if you do so, and how it works for you.

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