How to use ROBS to get a financial advantage for your business
This is a sponsored post written by me on behalf of 401(k) Business Financing for IZEA. All opinions are 100% mine. The relationship between startups and banks is – more often than not – a tenuous and uneasy one. While many business owners view banks as “too big to fail,” thousands of those same entrepreneurs wanting to get their small business ventures off the ground have been rejected as “too small or risky to bother with.” If only budding entrepreneurs could fund their own business financing, that would be living the dream, right? 401(k) Business Financing: A unique twist. Talking to some of my friends at Guidant Financial the other day, they reminded me of the rollovers for business startups (ROBS) arrangement, more commonly known as 401(k) business financing. With ROBS, you have a tool to invest in yourself using your own retirement funds tax penalty-free; it can eliminate dealing with bank loan officers or asking relatives for money. ROBS is one of the important areas of specialization at Guidant Financial and the last figures I’ve seen from them indicate that they have helped more than 14,000 entrepreneurs finance their businesses to a tune of more than $4 billion. If you’re familiar with financial lingo, the word “rollovers” has probably given you a clue about the nature of this financing arrangement. The way it works is that you use funds from an eligible retirement account – typically a 401(k) or IRA – to invest in your business. You probably know the various penalties for taking money out of retirement accounts before you hit age 59 ½ – those don’t apply to ROBS financing. Further, unlike borrowing from your 401(k), you don’t need your current employer’s approval, nor do you need to pay the rollover back. Debt Free Financing Let me return to the “rollover” part of this arrangement. ROBS is not borrowing from your retirement account. As you’ll see when I list each step in the process below, with ROBS, your retirement money is ultimately used to invest in your small business. Here are the basic steps. You form a C corporation. ROBS cannot be used with S corps, sole proprietorships, or LLCs. You create a retirement plan for your new C corp. This is the recipient of the “rollover.” You transfer funds from your old retirement account to your new company retirement plan. Your C corp’s retirement plan purchases stock in your business. (By the way, you don’t have to use all of your retirement money, nor does this have to be all the money you use for your business. If you want to hit up relatives or apply to the bank, you can do those things too.) Your business can use the funds from the stock purchase. The pros at Guidant tell me that it takes about three weeks on average to complete the ROBS process. And while you don’t have to go through a painful application process like would be required for a loan, you do need to have a minimum of $50,000 in eligible retirement funds and be an active employee of your small business. Also, while the “S” in ROBS stands for “startups,” that’s a little confusing. You can use 401(k) business financing to buy a franchise or existing business, or in many cases to capitalize your existing...
read moreAre you ready for a quiz on social media quizzes?
I bet you’ve taken more quizzes on Facebook than you did throughout your four years of high school. Am I wrong? To be honest, I always suspect they have just made up those claims that “97 percent can’t answer (fill in the blank),” but in any case, these quick quizzes often pull us in. There are free – and paid – tools for creating you own quizzes that you can embed in your Facebook page and website. Posting a quiz on a regular basis isn’t a bad idea. Your audience will appreciate the different kind of “content,” and there’s a decent chance that your quiz will be shared and therefore bring new visitors to your social media account or website. Various quiz styles Most of the quiz-building apps require you to input the questions and answers yourself. There are a variety of quiz “styles” available among the providers, including lists, polls, trivia, swipers, personality-based, and more, including the currently popular “What kind of (fill-in-the-blank) are you?” As a small business owner, you can create quizzes that not only engage clients and prospects, but also teach them about your product, service, or industry along the way. This can serve to build your authority among your target audience. Or, you can go in the completely opposite direction and make your quiz pure fun or funny. Hint: If you want an easy “hook” for a funny quiz, base it on the incredible exploits of Chuck Norris! Top quiz apps Some currently popular quiz-building apps are: Quizworks. Free to $99 per month. Quizmaker. $15 to $99 per month. (Free trial period.) Free Online Surveys. Free to $20 per month. Qzzr. Free to $300 per year. Also, higher priced enterprise plans. Playbuzz. Free entry level, but also has an advertising program. OneClick Quiz Maker. SurveyAnyPlace has a free quiz maker that does all the work for you. You enter a person or organization and it looks up info on the web to create the questions. Due to human nature, I believe quizzes will continue to be popular on the Internet. We love to be included in the top 3 percent of all people when it comes to identifying movie characters or having command of any other area of knowledge. We also want to know what Jane Austen character we would be or what color best represents our personality. With those facts clearly established, be sure to include quizzes, polls, and surveys in your content and social media marketing...
read moreFollow the four compass points for paths that lead to growth
Have you considered all your options for growing sales? You can think of the growth paths as points on a compass: North: Expand by adding higher priced offerings. South: Expand by offering a lower priced, entry-level offering. East: Expand your territory geographically. West: Expand your territory through exploration. Adding higher priced products or services In many ways, this is the most desirable way to increase sales because the margins are better. I remember an old friend who sold new cars. He had the job during one of the eras when gas prices shot up and people turned to buying smaller cars. He (along with the automaker) didn’t make as much money selling small cars because it basically cost as much to make and sell an economy car as it does a larger, luxury car. They both have four wheels that need to be installed, one engine that needs to be built and installed, the same number of seats, and the list goes on. Further, the cost is the same whether you’re marketing an economy car or luxury car. In your business, you already have systems in place for sales and service. If you can work some higher-priced products or services into the mix, it’s the ideal way to increase profits. Add a lower priced product or service As big as I am on increasing prices, it’s a fact that even “freemiums” work for many businesses. If you need to get people through the door to introduce them to your superior products or services, you might try lowering the barrier to entry, in other words: your price. Don’t cannibalize your money makers, but find a way to offer a stripped-down version of your product or service and devise a system through which you pull people up to your higher-priced offerings over time. Expand your territory geographically Have you sensed a demand for your product or service in other locations? If so, that’s a great sign that it’s time to expand. If not, find a way to test demand in other locations. Take out a short-term lease on a location, for example, or piggy-back in another business’ location. But here’s what’s important: If you expand geographically, be sure you use the systems and services of your “home base” so you aren’t duplicating overhead, or fixed costs. You want to increase profit margins! Expand your territory through exploration Go where no man has gone before…or at least where your product or service hasn’t gone before. Find new markets and applications for your product or service. Talk to existing customers and see how they use your product or service. It might give you hints where new markets might be. Consider tweaks to your product or service, or to your marketing, to make it more appealing to a new group of consumers. With so many immigrant groups in the United States, adapting your product or service to meet the language and/or cultural requirements of these new groups could expand your business. Here’s one final note that applies to each of these “compass point” paths: Offer an impressive money-back guarantee. In every case, you’re trying to sell to people who haven’t bought from you previously. Dispel their fears and reluctance by offering a guarantee that eliminates their risk. It’s a strategy that virtually always...
read moreThis week in small business: Got intelligence?
Intelligence. You just can’t get enough of it. And, among this week’s nuggets of golden content from around the Internet, you’ll find some good insights on how to boost your natural intelligence and also how to take advantage of artificial intelligence. Leadership, management, and productivity Success is a catalyst for failure. Agree? Before you say anything, read Benjamin P. Hardy’s article, “How to go from successful to very successful (and why most people can’t do it.) In this profile by Kandia Johnson, she relates how Jessica Smith, a business counselor at the Women’s Business Center of Northern Virginia, says that women in business can help other women break barriers. Elle Kaplan gives us seven brain hacks (ouch!) that she says will dramatically improve our intelligence and success. Are you failing fast enough? Daniel Newman says that the secret to digital transformation success is to fail fast in order to innovate faster. Marketing and sales If your social media marketing depends on clickbait, you need to read Tamar Weinberg’s article on Facebook guidance for publishers. John Nemo discusses a new LinkedIn feature that he says might change the game for B2B marketing. Writing for the Forbes website, R.L. Adams offers his definitive guide to affiliate marketing. A.J. Agrawal makes a good case that artificial intelligence is changing SEO and points out the danger of falling behind. John Swanciger also checks in on the topic in “Why small business should be paying attention to artificial intelligence.” If Khuram Zaman is right, the future is going to be fun. He says that game playing is the future of e-commerce. Larry Alton explores an important question in his article, “Should you specialize in one online marketplace or all of them?” Entrepreneurship, startups, and innovation Robin Bruce kicks off her three-part #IfIOnlyKnew series with, “How To Learn Entrepreneurship: Closing The Gap Between Theory and Real World Experience.” Continuing on the learning theme, Alex Krause’s “Why the Study of Entrepreneurship Improves Outcomes for Startups” is a good read. This advice from Manar Al Hinai is incredibly sound: Do not base your entire business model on a trend. And if you catch Jay Kim’s message, you’ll understand that entrepreneurship isn’t what you think – its 100 percent about serving others. There’s a difference between being childish and childlike, and having a childlike curiosity can inspire the entrepreneurial mindset, says Rachel Hentsch. Brian Rashid profiles Tami Fricks who went from mom to entrepreneur and disrupted the wine industry on the way with her Sassy Bitch label. Four successful founders share how they effectively transitioned from employee to entrepreneur in this article by Rhonesha Byng....
read more3 examples of niche marketing vs differentiation
The riches are in the niches. That’s a truism I often cover in great depth when I’m doing a keynote presentation for an industry group or business conference. I also discuss the importance of differentiation. Niche marketing and differentiation are closely related, but not the same, and to mistake one for the other can be disastrous to your business plan, so let’s look at some examples to help you get a feel for how they diverge. From the mobile phone world Consider a mobile phone with an edge display vs mobile phone with oversized buttons and simple operating system. These are products that currently exist in the marketplace. The first – the phone with the cool display that goes around the phone’s edges – might be purchased by almost anyone. It’s just a matter of personal preference and affordability. However, there are other expensive phones on the market; in this case the display makes it different from most of its competitors. This is differentiation. The second phone is designed for senior citizens who want a phone that is easy to understand and operate. This group is definitely a niche market. You can easily see how understanding each of these mobile phones in relationship to marketing is critical. A company could market the edge display phone almost anywhere other phones are being marketed. However, the phone for the senior market would benefit from a much more targeted and specialized approach. From the banking world If you live in an area that has a major sports franchise there is probably a bank in the area that offers a credit card with the team’s logo on it. The interest rate and fee for the card is probably identical or about the same as any other standard consumer credit card. The pro-sports-team graphics help differentiate it from other cards. It gives the bank a “hook” to use in advertising and marketing materials – but those materials would be suitable to use anywhere credit cards are generally marketed. However, the Ritz-Carlton Rewards Credit Card is a different animal. It comes with a hefty yearly fee of some $400, but if you stay in that hotel chain (a lot!) it offers some excellent rewards. This product is certainly geared to a niche market. The company would never advertise this card alongside general consumer-level credit cards. From the food industry Several years ago, we may have considered gluten-free foods to be a niche market, and compared to all food sales, it probably still is. However, it has grown so much that many of the global food brands are now marketing gluten-free products. If you’re selling packaged food, it is no longer a niche market. If you’re a local bakery, offering and promoting gluten-free items would help differentiate your operation. But let’s not give up on finding a gluten-free niche market. I would suggest that gluten-free kosher products or gluten-free “soul food,” would offer niche marketing opportunities. If I were featuring your product or service here, where would it go? Does it appeal to a specific niche, or does it have some features that allow you to differentiate it from more “generic”...
read moreWhich bottom-line booster is right for you: Upsale or Upscale?
The sales strategy of upselling is fundamental to business, and there are various ways it can be accomplished. When a customer is making a purchase, the sales rep can suggest additional items that would complement the core purchase. Another common approach is to find a more expensive item that better fits the customer’s requirements. Any of these strategies would fall under the category of the upsale. But, in addition to this, there is another way to upsell and it can go beyond the incremental upsale. I’m talking about “upscaling” your offerings. This merchandising and marketing strategy has many applications. In the classic upsale setting, you could suggest a better-known, more upscale brand to your customer. This would increase the size of your tickets and pump more dollars to your bottom line. The upscale strategy Upscaling your offerings can be a more generalized strategy, and it applies to virtually any business – from vacuum cleaner stores to coffee shops. In this setting, the idea is to feature or deal exclusively in the upscale, more desirable brands. To go back to my examples, the vacuum cleaner store might specialize in Miele vacuums, the coffee shop might offer Cinnabon rolls instead of generic pastries. By carving out a business with a more upscale focus, you do two things: You piggy back on the upscale company’s marketing and you make it easier to define and find your customers. I doubt I’ve touched on your industry, so ask yourself this question, “Who makes the Cadillac of (whatever you sell)?” Many of you are probably thinking that you need to offer a wide variety of price points to satisfy the needs of your customers. Don’t accept that logic without careful examination. Specialization always leads to higher margins. Trying to satisfy everyone can be very frustrating. How do you market yourself when you want to appeal to virtually the entire world? The marketing advantage Let me elaborate on one part of this strategy: Taking advantage of a well-known brand’s marketing. Hunt Brothers Pizza is mostly sold in convenience stores in the Southeast and Midwest. The company does a lot of advertising and is often featured at professional sports venues and broadcasts. Adding a high-profile brand like this to your lineup will lead to additional sales. In this example – a convenience store – adding pizza is doing the opposite of specialization, but after all, that’s really what a convenience store is all about. The point I want to make is that some of the risk of adding an upscale offering is lessened when the offering has already established a good reputation for itself. Finally, remember that upselling isn’t merely a technique to teach your sales staff, it is something that can be accomplished by upscaling the products and services that you...
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