How to Find New Clients and Keep the Ones You Already Have During the Pandemic and Beyond

by Blog

How to Find New Clients and Even Keep the Ones You Already Have During the Pandemic and Beyond

Finding new business and retaining your current clients is hard enough work as it is. However, this has undoubtedly been made more difficult by the coronavirus pandemic. Not only is client turnover much higher these days (for obvious reasons), but many businesses are also hesitant to commit to new contracts and relationships with so much economic uncertainty. This isn’t to say that finding new clients is all but impossible at present. Rather, you need to tweak the way you do business and prove that what your business offers is worth it. Let’s see how you can make this happen.

Think Out of the Box

Desperate times call for desperate measures—or at least, creative ones. The COVID-19 pandemic has been awful for businesses and workers alike. But though clients may seem few and far between these days, there’s still no shortage of people and businesses who need to get things done. Positioning yourself accordingly will ensure that they come to you.

  • There is no doubt that switching gears is necessary as you adapt your business to better survive the new normal.
  • Despite the challenges brought on by COVID-19, it’s also a great time for innovation, and it would do you and your business well to take a ride on this wave.
  • You’ll need to proactively respond to the challenges to keep your clients and be more compelling to new ones.
  • Most importantly, communicating with clients, both old and new, will now require more empathy and sensitivity.

Harness the Power of the Internet

In the age of social distancing, the internet has arguably become the lifeblood of business. It’s high time to get on the technological bandwagon to keep your work and business flowing and your client base growing.

  • There’s no better time than now to take your work online to weather the pandemic and maybe even grow beyond it.
  • You can make great use of reputable job websites to find new clients and grow your business.
  • Better yet, use freelance job boards to connect with companies hiring remotely, even as COVID-19 rages on.
  • And don’t underestimate the power of social media as your networks can also be a real goldmine of potential clients.
  • Connect with Bootstrapp to find additional funding to help maintain cash flow and grow your business.

Take It Up a Notch

Just because you’re operating out of your home, doesn’t mean that you don’t have to make an effort at professionalism. In fact, taking measures to keep things professional as you work and operate your business can do wonders for your productivity, which, in turn, can increase the quality of your output and service. 

  • Home office costs may be the last thing you want to commit to right now, but this is actually an investment toward your productivity and, ultimately, success.
  • These days, you can even attract more business without leaving your home office.
  • You’ll definitely want a home office that inspires productivity.
  • Investing in productivity apps and tools is a must, too, to keep you focused and, by extension, your work running smoothly.

Ultimately, the pandemic will end, but there’s no telling what your industry and business, in general, will be like at that time. But by giving your work and your business the right tweaks, you prove your adaptability and improve your chances of success. 

Guest post by Derek Goodman from Inbizability.com

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How much does revenue-based financing really cost?

by BlogFundraising

There’s an incredibly counter-intuitive aspect of revenue-based financing, which is this: the more successful you are as a company, the higher the cost of capital associated with your RBF.

This is counter-intuitive for a few reasons:

  • It’s the opposite of how society typically views capital. If you walk into a bank and have a successful business, you’ll get a cheaper rate because you’re a less-risky borrower - not a more expensive one.
  • Most people - myself included - generally equate time with money. (You know, the old saying goes…). For example, if you take out a car loan and then pay it back earlier than expected, you’d pay less interest than if you took the full term to pay it back. This makes sense - the lender has their principal plus the pro rata interest, so now they can go lend it to the next person. And you, the borrower, just saved all of the interest that would have been accrued moving forward - had you kept the loan open.
  • It appears that RBF has a structure that punishes borrower for good behavior. In this case ‘good behavior’ meaning that they run a successful company. When someone is more successful than expected, are they expected to actually pay a higher cost of capital?

However, the kicker that will clarify it all is this: The amount of capital paid back in addition to the principal is set in stone, and time is the variable that can change, which is the inverse of the typical model. Compare this to the car loan example above in #2 - where the total amount of money paid back is flexible dependent on when its paid back, and the interest is fixed - based on a fixed period of time set by the lender. For example, many car loans may be structured for 60 months. Time is set in stone, and how much you pay back depends on your ability to pay that loan back faster (assuming no pre-payment penalties).

 

Let’s simplify and use some real numbers. Scenario A: If you were to take out a traditional car loan of $10,000 and pay it all back 1 day later. You’ll only have to pay interest on that 1 day when you had the capital. If you took out a relatively expensive loan and agreed to pay a 10% APR, that 1 day of borrowing would only cost you .027% in interest.

 

However, let’s run Scenario B, this time using the revenue-based financing model: You take out a loan of $10,000 with a fee of $1,000. Most RBF lenders operate on this fee-based model which gives the borrower flexibility as to when they pay back the loan (i.e. time is the variable that can change). Now, no matter when you pay it back, you have to pay back $11,000. If you were to follow the same payback timeline as scenario A, and pay back the $11,000 the next day - your APR would be 3,650%.

 

Obviously RBF loans aren’t built to be paid back the next day, but the math illustrates an incredibly important point: revenue-based financing can be tricky to leverage, as you may actually be leveraging incredibly expensive capital if you’re more successful than you originally projected. It’s a relatively new model where time is a major factor in the cost of capital you use to grow your business - and adds to the complexity of your decision: which instrument do you choose to finance that growth?

How does revenue based financing work?

Check out a quick video walk-through of the tradeoffs you’ll want to consider:

The Full Spectrum of Non-dilutive Growth Capital

by BlogFundraising

The first major venture capital deal was made in 1957, in the form of a $70,000 investment in Digital Equipment Corporation (DEC). Since then, the industry has hardly evolved at all, until recently. 

Over the past few years, the pace of evolution has quickened. There are various investment models (the SAFE, the SEAL, revenue-based financing, and more). However, because the models are still quite young, there isn’t much publicly available data on them, let alone clearly defined definitions of each. 

This post is a simple attempt to simplify the conversation. I’ll dive in much deeper in following posts, breaking each financial instrument down into its component parts so that we can better understand the mechanics of them, but for now let’s consider that detailed breakdown as out-of-scope. 

Today, it’s all about simplifying the world of startup financing - particularly the non-dilutive realm. So let’s start with the basics: 

How are each of the non-dilutive financial instruments defined in layman’s terms? 

Leaning heavily on my experience in the startup finance space, lots of reading, research, and the collection of data on over 140 non-dilutive financing options, I’ve developed the below definitions. They are ordered roughly along a spectrum from debt → equity - meaning that the first item listed (Term Loan) is the most debt-like, while the last (SEAL) is the most equity-like. 

Have a different perspective? Do you disagree with any of the definitions above? I’d genuinely love to hear your thoughts. Please shoot me a note or comment so that we can develop a shared language (i.e., a commonly understood set of references, visions, experiences, and/or interactions that provide a foundation for strong communications) with regards to non-dilutive financing. 

With definitions of each type of financing somewhat settled, I then captured all of the typical attributes of each as well: 

There are certainly exceptions to the typical attributes as I’ve outlined them above. However, in my experience these are directionally correct in the vast majority of cases. If you disagree - please chime in so that the entire community of startup founders can benefit. 

No silver bullet

With a very general and broad understanding of the financial instruments we’ve covered here, it’s clear there is no silver bullet for all founders, and there’s no way to be 100% certain that a particular source of capital is the best one. However, after speaking with hundreds of founders looking for funding, it’s become incredibly clear to me that it’s really difficult to even understand the trade-offs between the various options. And if you can’t even properly account for the trade-offs, a founder can’t be expected to make the best decision for their company. 

As such, this is a framework that is meant to help all founders consider what trade-offs they are making when they decide to choose one type of financing over another. 

Hope it helps, and reach out to our team if you have any questions about anything growth capital-related.

There Is No Golden Rule

by BlogFundraising

First off, there are no golden rules that come to the world of financing. As any mortgage lender would say, they “take into account numerous factors.”
But that’s not very helpful, is it?

What is helpful, is knowing precisely what works. And from the numerous conversations I’ve had with lenders, investors and financiers overall, the ideal business to lend to is this:

A B2B SaaS company, generating $100k in monthly gross revenue with 80 - 90% profit margins.

Easy right? You just have to go build the perfect business and then someone will finally lend you some cash. But that doesn’t mean you must meet all those criteria for funding. Far from it actually.

In fact, we have an investor in our database who funds a revolving line of credit for as little as $1,000. Now THAT seems reasonable. You don’t need a 90% margin, million-dollar run rate business to justify $1,000 in credit. What do you need? Use our web app to find out.

See you there,
Thomas

Is Revenue-based Financing Right for You?

by BlogFundraising

If you want to learn about revenue-based financing (RBF), you typically end up at a site where they are also trying to sell it to you. And as a result, the message gets muddled. All of the benefits of RBF are raining down on you from on-high, and along with them, the trade-offs have been stripped out.

If you’re thinking of RBF, you’re going to be making trade-offs, so let’s display them loudly here:

You’ll pay more cash long-term, in order to pay less during your months with lower-revenue.

That’s the primary value prop of RBF. Your repayment of the loan goes up and down with your revenue, which is great, because as a startup you’re no longer stuck servicing a debt that you may not have the revenue to properly cover if you’re going through a slow month or two. The repayment adjusts to the performance of your business. However, as a result, the lender is taking a bit more risk on you. i.e. What if every month for your startup ends up being a “down-month”? Well, to make up for that risk, they charge higher interest. 

Lighter Capital for example, explains that “repayment caps usually range from 1.35x to 2.0x”. This means that the greatest amount you’ll pay back, regardless of what happens with your revenue, is 1.35 to 2 times the amount you borrowed. Seems simple enough.

That is the “cap”, which feels good to have a limit on how much you’ll be forced to repay. On the other hand though, if you went into a bank and they informed you that you’d be paying 100% APR on a loan, it may sound somewhat ludicrous. Essentially, you’ll likely be paying a high interest rate, but you’re getting lots of flexibility in return.

You’ll also give up far less long-term, than you would otherwise with equity-based investments from an angel of VC (that is, if  your startup does well).

Paying 2x the amount of the loan seems outlandish, that is, until your startup succeeds and you compare it to equity. 2x on a $500,000 RBF loan that helps you scale is certainly hefty, but it’s nothing compared to 20% of equity in a company that ends up being worth $10M. Instead of paying $500,000 of effective interest, you’re giving up $2M in equity at the exit (in this scenario at least). Those numbers obviously get even more dramatic if your company grows beyond that and becomes worth more. Imagine having a $50M startup, giving up $10M in equity – all when you could have taken out a $500k loan and paid a “measly” $500k in interest back on that over time. It kind of hurts to consider.

Revenue-based Financing is non-dilutive.

Simple. You’re trying to attract the best talent. If you have more equity on your cap table, you have more flexibility when creating compensation plans for potential co-founders or employees.

Save yourself time.

If RBF is a good fit for your company, you won’t have to spend 4-6 months doing the VC roadshow. Assuming you qualify, there are typically a few meetings, a few emails, and some paperwork and then you’re off to the races. Much better than pitch after pitch, and then driving the VCs to a close.

The obvious caveat: All of this only works if you are generating revenue.
It may be obvious, but let’s be explicit. If you’re super early-stage and don’t have revenue, RBF will clearly not be a fit. You then may have to go the angel / pre-seed route.

See what we’re working on as it relates to revenue-based financing over at Bootstrapp. I also plan to keep digging deeper into this subject moving forward so stay tuned and let me know if you’d like to see anything else in particular.