Part of my job involves conducting detailed research, keeping current on business trends and indicators and being aware of issues that may impact my clients.
Should I start a business?
Reply Hazy, Try Again
In many cases, we spend a lot of time educating callers about the reality of getting a business loan or starting a business.
1. Mobile use is still a key factor (and increasing daily).
Mobile device ownership has increased 30% in the past five years. In 2011, 35% of Americans owned a mobile device; it was 64% in 2015.
Read my earlier blog on why mobile is not a trend, it's a reality. Another factor in mobile is getting found in search engines. Local search tools and providing quality, fresh content will play a big part in this.
2. Customer experience is even more important than ever.
Customer experience. Customer engagement. Customer Relationship Management (CRM).
We hear these terms frequently, but what are you doing about it? Do you reward your current customers? Do you have a customer database? Are you engaging with your customers on social media? How do you manage bad reviews?
Today's customer wants more engagement than ever before. They want to read online reviews, post reviews, have a 'relationship' on social media and interact online with other users. Reviews can be especially influential, both positive and negative.
|Nordstrom Rack User Generated Content|
The online shopping experience will change as well. It is not enough to offer the lowest prices - someone will always be cheaper or faster.
Retargeting, personalization and customer segmentation will become even more popular. Companies will be using detailed consumer data to target specific messages.
For instance, those ads that show up in your Facebook feed after you were searching for new shoes are not an accident. Get used to seeing even automated marketing systems sending personalized emails and texts to customers.
3. Buying a business could be more attractive than starting a business.
In the past year, we have seen a steady increase in clients seeking to purchase or sell a business. As the population continues to age, there will be more business owners wanting to sell out. Many owners put off selling when the recession hit and are now ready to retire.
|What's an exit strategy?|
ValuePlanGo.com (VPGo) provides some alarming estimates:
- Up to 70% of current business owners plan to exit by 2020.
- 80% of these owners are not ready for an exit or sale.
VPGo continues on:
- A third hope to sell, a third want a family member to buy the business and a third plan on closing and walking away.
"The number of retiring business owners between now and 2020 will continue to accelerate. But the number of potential buyers is actually falling. In 2000, there were about two buyers for every one seller. By 2018, it's only one potential buyer for every one seller. By 2025, sellers will outnumber their buyers." (valueplango.com)What does this mean?
For buyers: there could be some attractive business opportunities in the coming years. Industry experience can make the difference in a loan being approved and can help you learn if you even like the business.
Buying a franchise can have some built in processes that can be attractive for a first-time business owner. As always, do your homework. FranNet is just one helpful resource for learning about franchise ownership.
For sellers: don't wait. Start preparing a 3-5 year plan for selling your business. Some businesses want to reduce the tax burden and as such, claim numerous deductions and show a loss. If this is the case though, who wants to purchase a business that operates at a loss? Finding a targeted buyer (valued employee, competitor) can yield almost double the sale amount compared to listing it with a business broker.
4. Borrowing is not going to be any easier.
I hope I am wrong on this one, but in light of two clients' recent loan declines, I don't see the lending climate changing much. With 2016 being an election year, it tends to make banks nervous and as a result, can tighten lending requirements even further. There are more alternative lenders and crowdfunding options than ever before, but I'd advise doing your homework before jumping in.
Another client had a hard time coming up with the 10% down that the bank wanted to see on a $100,000 business purchase (and 10% is low; usually the lender will want to see 15-40% cash contribution for a start-up). He said, "I'm just struggling with how a small business can ever get started with so much money needed down".
And I'll repeat this message again, there are generally not grants to start a business. If I talk with a client and he or she is struggling to come up with the money to get a business license or develop a website, it raises serious red flags about the owner's readiness.
5. Employee relations will be just as important as customer relationships
All employees are not created equal. Understanding generational differences is also important. Setting the stage prior to hiring your first employee will pay off in the long run. For example, defining what kind of owner you are, developing employee job descriptions and expectations, outlining employee benefits in a personnel manual and learning how to hire and fire employees. How much does it cost to keep disengaged employees on payroll?
Your employees can make or break your brand and in some cases, your business.
|Image from Virgin HotelsVirgin Hotel launch in Chicago|
Richard Branson regularly posts articles and quotes about how Virgin regards and treats employees.
"Wholeheartedly believing that the strength of the brand is dependant (sic) on our employees, we send out hundreds of thank-you cards every year to members of the Virgin family", said Branson. "Without our amazing people Virgin would not be where it is today – and nor would I."
If you have read anything about millenials in the workplace, there are some common traits.
They are computer savvy, many are not motivated by money and change jobs more frequently than Gen X and especially Baby Boomers. It is not unusual to see a millenial's resume and notice that he or she has held four jobs in the last three years. The boomer generation tended to stay at the same job until retirement; this is not the case anymore.
Many business owners complain to me about bad employees yet they do not want to say anything because they don't like conflict. Disengaged and toxic workers will bring down your workplace morale quickly if the owners do not address the behavior. You also run the risk of losing good employees to another job with a different employee culture.
6. Social media will continue to evolve
Social media is not about selling, it is about building a relationship with your customer in an engaging, entertaining way. Invest in social media as part of your overall marketing plan.
If you are just starting out, I suggest starting out with one or two social sites and dedicating regular time on a consistent basis. Personally, I have started unfollowing many Facebook businesses that post irregular, irrelevant content. I also recommend knowing your customers and where they 'hang out' online.
Images and video will become more relevant. Good, quality images can make or break a customer's experience to your Instagram or Facebook. For retail, hospitality or other industries that rely on visual, invest in a good camera or professional photographer.
Looking ahead at 2016
Each of these predictions is worthy of a blog post by itself and there are surely other predictions and opinions. It is important to be aware of trends as you make business decisions, but also look at your history and experience as you make goals for the next year. I don't know who said it, but one of my favorite quotes is, "You can't move forward if you're always looking back". So here's to the new year!