Factor in the Factoring

Factor in the Factoring

Image copyright of selectfactoring.co.uk

With any small business one of the most difficult things to learn is how to manage cash flow. Most business courses and books harp on about it - quite rightly - but sometimes even with your best efforts the cash flow for your business just doesn't function the way you would want.

There are a number of interim solutions for cash flow issues you might face but this post is specifically about the use of Factoring to help make those cash flow issues a little less profound.

What is Factoring?

Factoring is effectively the selling of an outstanding invoice to a financial company at a  discount.

The three parties directly involved are:

- The seller (one who sells the invoice)

- The debtor (customer of the seller)

- The factor (financial organisation)

In invoice factoring, the factor provides financing to the seller of the accounts in the form of a cash “advance,” often 70-80% of the invoice face values, with the balance of the purchase price being paid, net of the factor’s discount fee (commission) and other charges, upon collection. The emphasis is on the value of the invoice which is essentially a financial asset. The seller is borrowing against its debtors.

So an example would be:

You are the seller and your client owes you £10,000. You're cash flow means that you need money quicker than the invoice will be paid.

You go to the Factor and sell the £10,000 for £9,000. You therefore have 90% of the invoice value to help your cash flow.

When the invoice is paid by your client, the full £10,000 goes to the Factor - thereby they make £1000 for extending you the £9000.

What's the downside of Factoring?

The real downside is that this is an expensive way of managing your cash flow. Its not a strategy that will help your business in the long term but for a short term requirement its often a quick and easy way to address any issues your business is suffering.

How does this effect my clients?

In theory not at all but not all clients are created equal. Sometimes your business is not the issue and your clients are:

- Customers with a higher than average credit risk and don't pay on   time
- There are service related problems with queries, disputes,      complaints
- They are not you and don't chase debts in the early stages as you   would i.e. deal with service issues or use your trading history    and customer relationship.

What this means is that although your business is acceptable for the Factor your clients might not be and therefore their invoices can't be used in the factoring.

How do you find a Factor?

The best place to start is with your existing bank. Most large banks have a factoring company that they either own or partner with. Because of the existing relationship then its likely this is the route of least resistance in terms of getting some invoices factored. A Factor that has no previous knowledge or relationship with you and your business will need to do some due diligence to understand how your business works ahead of agreeing anything with you.

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Email has become the de facto weapon of choice for most of us when it comes to conducting many of the business functions we are required to carry out on a day to day basis. Email transformed the way we do business and the speed at which it takes place. It does however have a down side - especially within the sales function. What I'm going to try and tackle in this post is what I think the #1 mistake is with email and how you might negate this as an issue.

Scenario

You've been to meet a prospective client and the meeting has gone superbly. The client likes the product, has indicated they want to buy it and didn't baulk at the price. You tell the prospect that you will confirm everything in a follow up email.

Jump forward a few weeks and the client hasn't responded to your email and isn't replying to your calls.

What went wrong?

Follow Up Emails

One of the most common flaws with the use of email is the idea that everyone you deal with sees them the same way you do. To some people emails are important - they're like legal documents. To others they are a trivial and less important issue.

The real issue then becomes that you left an important business matter subject to an email at all - follow up emails are a fragile business mechanism when concluding a deal or a sale.

When concluding a sale, the best approach should be to use the last five to ten minutes to book the next call or meeting. In doing so, it eliminates the need to follow up post-meeting or post-demo. I now always try to establish:

• If they're actually interested?
• If I'm talking to a decision maker?
• If they have money?
• The game plan for the sale
• What makes sense as the next step?

Trying to remove the follow-up email as a possible block on moving forward is a very good strategy to adopt, it often makes the sales cycle shorter and clearer.

Follow Up Email Tactics

So what's the scenario if you're already on the follow up email merry-go-round?  There are two variants of emails you can send for the follow up email. The choice of words in each email is different but key to getting the recipient to react in the way you would like.

Email 1 - "Unsure, can you advise?"

This email should have the subject line as "Next Step?" or "Potential Next Step?". The question mark is a must.  Clearly state in the email that this is a follow up - no point in masking it.  "I'm not sure what the nest step is?" is a line that offers the opportunity to the other person to take control and dictate back to you what the step is - like a teacher to a pupil. whilst this might be a little patronising it also means that there is a next step and the opportunity has not just ground to a halt.

Email 2 - "Update"

When the subject line of an email is "Update" people tend to act differently. Just the single word can be read in 2 ways, its either information offered or information requested but the recipient will read it almost immediately to find out which one. This email works better if there is a 3rd party referenced as part of the request. Something like "My boss just asked me what the current situation is so I wanted to speak to you". This creates urgency to reply with the recipient.

Summary

The thing I have got used to is that in reality people don't get back to you. Its a common outcome of a meeting for both parties to placate each other with the promise of follow up but for it to then not take place. If possible the end of the meeting should be about not allowing the progress to die in this way and to create an action plan that does not allow either party to hide in their inbox and not communicate.

Get Alert

Google Alerts

What is a Google Alert?

One of the best and most under used Google feature is Google Alerts. This is an automated search bot that trawls the internet looking for content based around key words or phrases that you give it. Its extremely easy to use and a very useful tool for entrepreneurs and small businesses.

- You can set up an alert for yourself or your own business. This can help you manage your own presence and reputation on-line.

- You can set up an alert for your competitors, allowing you to monitor their presence and reputation on-line.

- You can look at the sites that carry news or articles related to your business, identifying them as quality back-linking opportunities.

- You can use Alerts to follow breaking news stories or debate.

How do I use Google Alerts?

Below are some suggestions to get the most out of your Google Alerts:

Use your business name and personal name. Are people saying good things or bad things about you on-line? This is your opportunity to thank the good ones and address any issues that are being published on-line.

Set up an alert for your website URL without the www. This will help you find out who is linking to your website and talking about your website.

Understanding your competition. Who is doing the best job on-line in your sector? Create alerts for their name, track them and learn from them. This will help you with your on-line strategy and open up new opportunities.

Industry Information. What is the latest news and developments in your industry? This is very useful for giving you ideas for blog posts and news articles to add to your website and to talk about on social networking sites.

Prospective new clients? Understanding their company and learning more about their on-line activity will put you one step ahead of the competition.

Back linking opportunities. Blog links are sometimes the easiest for finding a place to link back to your website as they are well set up for comments. When commenting, add interesting information and answer questions on these blogs and include a link to your site, in this way your post is more likely to be accepted by the blog moderators. 

You will soon find the alerts that really suit the information you find useful. Some will inundate you with far too much information which will take forever to wade through. Delete these and concentrate on the good ones.

Tips and Tricks

If you're interested in something that's a real name then put it in quotes. So someone's name is "Dave Sharp" or "Virgin" if its a business name. It helps the search algorithm understand what you're referring to.

Use the + sign to help remove words from within words. So if you're interested in hands then the search will be +hand. This will then remove things like "handing", "handler" and "handling" from being caught up in the search. The plus indicates to Google Alerts that your just interested in the term "hand".

You can use the minus sign to help you in the same way, especially with place names. So there is a Durham in the UK and a Durham in North Carolina in the USA. So to focus a search on Durham in the UK the Google Alert reads Durham -carolina. This tells Google Alerts to remove references to Durham that also include Carolina. It will not remove everything from the USA but it will get rid of most of it.

You can search a specific website using a Google Alert:

If you want to focus on the Techcrunch website for news about Mark Zuckerberg then you would use:

site:techcrunch.com "mark zuckerberg"

This Alert will just focus on Techcrunch and Mark Zuckerberg.

You can also use the minus sign to ignore a site in the same way so that would read as:

"mark zuckerberg" -site:twitter.com

This will trawl the entire internet for news and references to Mark Zuckerberg but will ignore all the references on Twitter.

Summary

I use Google Alerts a lot. I find them extremely useful for just harvesting information that I don't have the time to research myself. Its good reading material when I'm on the road or have 15 mins to spare. Its worth spending the time to (a) get the hang of them and (b) refining them so they deliver useful information. It can take a bit of time but the best decisions come from the best set of information.

The Power of Saying No!

The Power of Saying No!

Image copyright of papernstichblog.com

This post is an attempt to try and position the usage and the reasoning for saying no to customers. The prevailing wind of client management theory has always been about saying yes to everything and then trying to figure it out afterwards. I've always gone along with the idea that if someone is trying to give you money then you should let them, but under certain conditions it would be better not to. This is my attempt to explain that ideology.

There are a number of reasons why you might want to say no to a client. These are my top ones but there are undoubtedly more:

- The client is asking you to do something that is not in your core skill-set or within the focus of your business.

- The timing is wrong, the work being offered is above your current capacity to deliver to a high standard.

- The method is unacceptable. The client is asking you to produce the work in a way that you don't agree with or can't manage effectively.

- The regime is not acceptable. The client is asking you to work in a way that is not in the best interests of your staff (night shifts, weekends, extended days)

- The money is wrong. The work or service you are providing is undervalued.

Within small businesses especially there is an overwhelming urge to accept almost any work that comes your way but this is often a false economy. Taking on a contract that will require you to spend £50k to earn £60k is bad business. Its too much financial exposure for not a lot of financial upside - particularly if you have to wait for the money. This kind of deal only really works if the time-scales are short and payment is on delivery.

For me, all of the above represent risks past a point where it makes sense. Most of them come at the risk of work delivered being less than the highest quality and therefore your reputation in the marketplace is in jeopardy. A tarnished reputation can take years to repair and cost you more work that the value of the original contract. Other issues include internal staff problems caused by clients dictating to the company. You might deliver the work OK and end up losing a valuable member of staff - at which point any profit is lost as you incur the costs of replacing the employee.

Its not a bad thing to say no to a client on the basis of what I've listed above but what about if you're the one being told no. What are your options?

In my experience most no's are not absolute. There are a number of unspoken aspects to a no and its a case of understanding what those unspoken issues might be.  I tend to start with a question:

"I understand you've said no, and I'd just like to know if its a no not now or a no not like that?"

My current experience is that the timing and the method/end result are the first two objections that will produce a no. Timing is an easier one to deal with. Just ask when the right time to come back is. Its common for companies to work in cycles and have key points in the year for certain activities - its just going to be better for you to interact with them at the right point in the cycle.

"No not like that" has a number of possible outcomes. They may just mean that they would like a red one not a blue one and it could be just something that simple. It might be that its the right design in the wrong material or the other way around - the material is great but the design isn't what they would like. The key thing is that the no has not brought the discussion to a negative conclusion and that the dialogue is continuing and you are moving towards a solution and a solution inevitably means a yes.

So in recap:

Its perfectly acceptable to say no to work that is likely to effect you negatively in some way. It's sometimes difficult to walk away from money on the table but its about creating the right business stance. Customers will not misunderstand why your saying no if you take the time to explain and will most likely respect you for the stance you've taken.

When you hear no then its not the end of the story. No not now and no not like that as questions take you down different paths but those paths are forward not backward facing. The important outcome is that the conversation and the relationship are maintained and are likely to bring you to a new point of dealing with each other.

The Perfect Customer?

The Perfect Customer?

Someone just asked me if there was such as thing as the perfect customer. I immediately said no. In the field of software development and digital in general no customer comes to you in the ideal situation where they know exactly what they want and has the funds to pay for it. It just doesn't happen. It did set me off thinking how I would categorise customers and what stance I would take with each category.  This is how I see it:

The Novice: This is the person who comes to you and in a very honest way tells you that they don't have a lot of knowledge but they do need a website or app and they want you to help them understand what they need and how to get it delivered.

The Wannabe: The old adage is that a little bit of knowledge is dangerous and this is where I see this customer. They have a "friend" who has given them some advice or they "read somewhere" how this all works. They're intent on telling you what they know whether you like it or not.

Mr Busy: This is the person who could do it themselves but they have declared themselves too busy. They did it last time or before, they have made a list of requirements (usually poor) and what ever you do it will never be as good as if they had done it.

Mr Price: This is the person who knows they need you to do it, they understand its difficult and they can't get it done without you but they are going to torture you over the price. Every pound is sacred and they consider it a "win" if they manage to get you down a bit.  

So what is my strategy for dealing with these people?

The Novice: This customer is looking for some free consultancy from you to work everything out without paying for it. If the contract is large then you can tolerate it but if the value is sub £15,000 I send them a load of web-links and video links for them to watch. At the very least I want them to write the use cases from which I can work everything else out, but I'm certainly not going to do all the work for them. I do quote them for the working in case they just want to pay for it but its usually not the case. If you don't start the education process with them then they are continually beholding to you and you've created a risk in their business - you might not always be around to hold their hand.

The Wannabe: This is the one I struggle with the most. I often end up not wanting to deal with this customer type. If they start telling me what "their friend said" then I just want to tell them to go get their friend to do the work. I don't say that obviously but its often in my head. I need to undo the bit they've learned and get them back to the right starting point and then work forward from there. As with the Novice if you don't start to educate them on the process and the technology they are just tied to you and the frustration is never ending. I also get them to do a small amount of work (inside the CMS usually) so they start to understand how hard/long things get. It stops them making unrealistic time based requests.

Mr Busy: This is where the difficulty goes up a notch. The person you're dealing with is often technically competent but is time poor. This means they will set tight deadlines but if you're not managing them properly they will not deliver from their side and therefore you fall behind. You might need text, or a logo, or a decision on red versus blue. They don't have time (or they would be doing this themselves) and that lack of time means lack of progress - and you can end up with projects taking far longer than they should, causing you the problems as projects overlap and payment for completion is delayed. If I have Mr Busy I use an extra document that sets out their contribution and the dates on which its due. If they don't make those deadlines I reserve the right to move on with place holders. I can then keep the overall deadline and they can see that its them that didn't deliver on the timetable not me.

Mr Price: This is the customer that can do the most damage. Giving a discount in principle is not a problem if its a discount on a price provided not one they provided. So if I quote the true cost of the work as being £15k and I offer it for £13k then I know that this is realistic. What I dont do is have the other person tell me the value of the work is £15k and can I do it for £13K. I always establish the true cost of the work and make sure the client knows what that cost is and how it was derived. I can then take a view on a discount but discounting is dangerous if done unscientifically. I prefer to give the client more than they were asking for the same money rather than discount to provide the work as described. If I was selling pipe it would be that if 1 meter of pipe was £1, I would be providing 1.5 meters for £1 rather than 1 meter for £0.80p. I try and keep the revenue up and make the scope of the work the negotiable. Its just a safer way of negotiating.

In digital you just don't get the "perfect customer". Its really just a case of having the guile to see what kind of customer your faced with and having the approach for each customer type nailed down. 

Cloudy Days Ahead

Cloudy Days Ahead

Images copyright mashable.com

Professor Ramnath Chellappa was the first to use the term "cloud computing" in 1997. At the time it didn't mean anything. Hosting was still done from specific data centres that you connected to. Without doubt it now probably the most overused (and misused) term bandied around in the tech world.

If you're not one of those currently consumed by technology then this blog post might help you make sense of this "cloud" thing. Hopefully I can get you off first base with the whole concept of the cloud and you can amaze friends and colleagues with your new-found expertise.

What is the cloud in layman's terms?

The first thing to get your head around is that the cloud isn't a physical object. Its essentially a collection of computers called servers that do slightly different things in collaboration with each other. Some servers are running software, some are storage.

If you're a user of graphics tools like Photoshop you will have noticed that you can't buy the software on a disk any more. The same is also true of Microsoft Office. Its now called Office365 and you subscribe with a monthly fee. These are all now cloud based services.

Other servers in the network are responsible for storing data.

We're all very used to taking photos on our phones. Its stored locally on the phone. When we add the pictures to Facebook to tag our friends we are adding the photo to the cloud.

What are the benefits?

If your a business then there are a couple of benefits. Firstly you don't have to buy expensive equipment any more to run your own on-line services from. Equipment became out of date very rapidly and was expensive to keep up to date.

Secondly you can access your information from any location on any device. Before the cloud you could only retrieve information in the office or copy it to a dedicated device. The cloud allows ubiquitous access on the go.

What's this "scaling" thingy?

Working in the cloud allows your company to have more resources when you need it and for it not to be there when you don't. If your company quickly needs access to more resources, it can scale quickly and automatically in the cloud. You will pay a little more when you scale up and pay a little less when you scale down. Because of this scalability, the cloud's "elasticity" is often compared to that of a rubber band.

How big is the cloud exactly?

We're not going to fill it up any time soon. There is a great infographic that shows the overall storage capacity of the cloud here. The cloud never stops growing so in theory its impossible to really know what the overall capacity is. Lets just agree its big!

Can my stuff be lost or be stolen?

The cloud is based on replication, your information is mirrored in several places so if one machine did fail or the building where its stored burned down then your information isn't lost, it can be brought back from one of the mirrors.

Security from theft is a different problem all together. Big cloud based services like Amazon, Google and Microsoft are well defended from cyber attacks. Smaller cloud providers are another matter. I would always recommend going with one of the big guys to get that extra protection.

So how do I get started?

Its most likely you already have several cloud based products that you use. Gmail, E-bay, Amazon, Dropbox, Office365, Skype - these are all cloud based. If your a little more technical and want to delve a little deeper then check out Amazon's cloud hosting for businesses - AWS.  The beginners guide to using AWS can be found here.

Want to see more?

Here are a few cloud-based services that are small business orientated and might give you a few ideas about how your business might be enhanced by using the cloud:

For small business HR and employee tracking check out Bamboo HR

For cloud based invoicing take a look at FletchFlow.

For employee / client collaboration give Multiwall a try.

For task and project management try Trello.