Many businesses will need to raise funds at some time – either at the start-up stage, or to fund ongoing expansion. With credit currently in short supply, here is an overview of the various options open to small businesses looking to raise funds.
Bank Overdraft
Many businesses will have an overdraft facility with their bank – this adds short term flexibility to provide cashflow when you encounter late payers, or to cope with an unforeseen expense. With instant access, you won’t need to consult your bank manager if you keep within your pre-agreed overdraft limit.
Business Loan
Rather like personal loans, there are a vast number of providers of business loans. Loans can be unsecured or secured, and have variable or fixed rates of interest. Unsecured business lending has also been scaled back due to the current economic climate. Read our guide to small business loans.
Asset Finance
This type of finance allows you to borrow against assets owned by the business. Leasing arrangements are essentially rental agreements with the finance company. The two main types are:
a) Direct Leasing, where the lender buys an asset from a company and the company “rents” it back from the lender.
b) Sale & Leaseback – Where a company sells an asset they already own, but still have access to the asset.
Invoice Finance
Specialist companies allow you to borrow against the value of invoices you have raised (but have yet to be settled). No other assets are required to secure invoice finance funding and you can typically receive up to 90% of the invoice value within 24 hours. You can read more in our dedicated guide to Invoice Finance and Factoring.
Small Firms Loan Guarantee Scheme
Many small businesses don’t have the financial history to borrow significant sums from traditional sources such as business loans. Backed by the Government, the Small Firms Loan Guarantee Scheme (SFLG scheme) allows qualifying businesses to borrow up to £250,000 over 2 to 10 years – with 75% of the loan value guaranteed by the Department for Business, Enterprise and Regulatory Reform (DBERR). You can read our overview of the SFLG Scheme.
Please note that the SFLG scheme was suspended following the launch of the Enterprise Finance Guarantee (EFG) scheme in January 2009.
Commercial Mortgages
Commercial mortgages allow you to borrow against any property (or land) owned by the business. A type of commercial loan, the lender will have a legal claim over the property until the mortgage has been repaid in full. The range of commercial mortgage offerings has shrunk even quicker than the consumer mortgage market, but a range of fixed and variable rate mortgages are still available.
Investment Funding
In addition to the funding options discussed above, small businesses may elect to raise investment capital – such as Enterprise Capital Funds, business angels and other commercial investment companies. You can read more about these options in our dedicated guide to investment funding.
Tuesday, 1 December 2009
How to fund your business - Overview
One of the least exciting things about starting your own business is getting the finances sorted out (unless you’re an accountant of course).
But it’s one of the most important things. Doesn’t matter how good you are at what you do – if the money runs out, your business is dead.
Before starting up, you should have a clear idea of how much money you are going to need to invest into your business. Even companies that are quickly profitable can burn through a fair amount of cash at the beginning.
Do a simple forecast for your first year: For each month, what money will come in, and what will you spend? Most people overestimate revenue and underestimate costs, so take account of that. And think how late payers and seasonal effects could put extra pressure on your cash flow.
You should now have an idea of how much cash you’re going to need to fund your business. There are several different ways to find this money:
Use your savings: The safest and cheapest way to fund a business. If it goes wrong, you’ve only lost your cash, and won’t be lumbered with a load of debt.
Do it part-time: Could you start your business while continuing to work for someone else? You may struggle to grow past a certain point, but it could help to ease the financial pressure. This has the added bonus of being a low risk way to prove your business idea works.
Get a grant: Several organisations may give you a lump of cash you won’t have to repay. Your eligibility normally depends on you, where your business is based and what it does. The Prince’s Trust offers some grants in exceptional circumstances. Other grants are available from the government, EU, regional development agencies, some charities and Business Link. They have a searchable directory of grants.
Borrow some money: Many small businesses are started using personal debt raised by the owners. Unsecured loans give you the advantage of fixed repayments over a certain period of time, helping your financial planning. It may be cheaper to borrow more money on your mortgage, but you will have debt secured on your home, making the risks higher. You can also read our guide to small business loans.
You could also use overdrafts or credit cards, although these are expensive and unreliable ways to borrow money in the long-term. If you do manage to secure commercial funding, it’s possible the bank will demand your house or other property as equity.
Borrow from families, friends and other idiots: A phrase used by business advisors! If people you know want to lend you money, agree concrete terms first and get a legally binding agreement signed. It’s easier and cheaper to sort these things out before problems crop up.
Lease things: If you don’t need to own equipment, why not lease it? This can work out more expensive in the long-term, but will help your cash flow when you’re starting up.
Factoring: This is where you sell your debt to another company. It’s normally used by businesses that must offer credit terms on invoices, but don’t want to wait 30, 60 or 90 days to be paid. The factoring company pays you immediately, and gets the money from your customer when it’s due. Although the company will charge you a percentage fee, it might stop you needing to borrow a lump sum just to keep your cash flow healthy. You can read more about Factoring and Invoice Finance.
Equity: This is where you give up a part of your business in return for an investment of cash – what you see on Dragon’s Den. It’s a lot harder to pull off in real life. You need a sound business idea, a solid business plan, and a good opportunity for fast growth. Then you need to find potential investors and pitch to them.
There are two types of equity investors. Venture Capitalists are typically large firms that put in £1m or more. Business Angels are private investors who will offer smaller amounts, from a few thousand up to £100,000+. Sometimes several Angels will club together.
For the investors, the risks are high, so they expect a good return on their investment. And it’s likely they will want to be involved with the strategic decisions you make in your business, as it’ll be partly their money you’re working with!
Remember to get professional advice from a qualified accountant before taking any action. Don’t rely purely on information contained in this article.
But it’s one of the most important things. Doesn’t matter how good you are at what you do – if the money runs out, your business is dead.
Before starting up, you should have a clear idea of how much money you are going to need to invest into your business. Even companies that are quickly profitable can burn through a fair amount of cash at the beginning.
Do a simple forecast for your first year: For each month, what money will come in, and what will you spend? Most people overestimate revenue and underestimate costs, so take account of that. And think how late payers and seasonal effects could put extra pressure on your cash flow.
You should now have an idea of how much cash you’re going to need to fund your business. There are several different ways to find this money:
Use your savings: The safest and cheapest way to fund a business. If it goes wrong, you’ve only lost your cash, and won’t be lumbered with a load of debt.
Do it part-time: Could you start your business while continuing to work for someone else? You may struggle to grow past a certain point, but it could help to ease the financial pressure. This has the added bonus of being a low risk way to prove your business idea works.
Get a grant: Several organisations may give you a lump of cash you won’t have to repay. Your eligibility normally depends on you, where your business is based and what it does. The Prince’s Trust offers some grants in exceptional circumstances. Other grants are available from the government, EU, regional development agencies, some charities and Business Link. They have a searchable directory of grants.
Borrow some money: Many small businesses are started using personal debt raised by the owners. Unsecured loans give you the advantage of fixed repayments over a certain period of time, helping your financial planning. It may be cheaper to borrow more money on your mortgage, but you will have debt secured on your home, making the risks higher. You can also read our guide to small business loans.
You could also use overdrafts or credit cards, although these are expensive and unreliable ways to borrow money in the long-term. If you do manage to secure commercial funding, it’s possible the bank will demand your house or other property as equity.
Borrow from families, friends and other idiots: A phrase used by business advisors! If people you know want to lend you money, agree concrete terms first and get a legally binding agreement signed. It’s easier and cheaper to sort these things out before problems crop up.
Lease things: If you don’t need to own equipment, why not lease it? This can work out more expensive in the long-term, but will help your cash flow when you’re starting up.
Factoring: This is where you sell your debt to another company. It’s normally used by businesses that must offer credit terms on invoices, but don’t want to wait 30, 60 or 90 days to be paid. The factoring company pays you immediately, and gets the money from your customer when it’s due. Although the company will charge you a percentage fee, it might stop you needing to borrow a lump sum just to keep your cash flow healthy. You can read more about Factoring and Invoice Finance.
Equity: This is where you give up a part of your business in return for an investment of cash – what you see on Dragon’s Den. It’s a lot harder to pull off in real life. You need a sound business idea, a solid business plan, and a good opportunity for fast growth. Then you need to find potential investors and pitch to them.
There are two types of equity investors. Venture Capitalists are typically large firms that put in £1m or more. Business Angels are private investors who will offer smaller amounts, from a few thousand up to £100,000+. Sometimes several Angels will club together.
For the investors, the risks are high, so they expect a good return on their investment. And it’s likely they will want to be involved with the strategic decisions you make in your business, as it’ll be partly their money you’re working with!
Remember to get professional advice from a qualified accountant before taking any action. Don’t rely purely on information contained in this article.
Business Valuation Guide - How to value a business
When it comes to selling a business, the most important question you need to ask is - how much is it worth?
Unsurprisingly, there are no precise ways to value a private business. The seller will want to drive the price up, and potential buyers will want the opposite.
Although there are relatively easy ways to value certain parts of the business - such as stock, fixed assets (land, machinery, equipment, etc.), there may well be a sizeable intangible element to the value of a business.
Intangible elements would include "Goodwill" - this could include trademarks, and the reputation of the company. Such things are notoriously difficult to value, and in many cases will come down to how keen a potential buyer is to acquire the business in question.
When looking at the overall value of a business, there are a number of different valuation methods which are commonly used - from using earnings multiples, to calculating how much it would cost to create a similar business.
In this article, we look at some of the most commonly used valuation techniques, and how other factors may influence the value of a business at any given time.
Common Business Valuation Methods
EARNINGS MULTIPLES
Quite often, multiple of earnings are used as a business valuation method. This method would be suitable for companies with an established financial history. The Price/Earnings (P/E) Ratio represents the value of the business divided by its post tax profits. It may not be easy deciding what P/E ratio to use (some industries, such as high tech / IT ones will have a much higher P/E ratio than, say, an estate agency). The P/E Ratios used in the financial press should be reduced significantly when valuing a small business, as the barriers to acquiring a small company are much higher than buying quoted shares on the stock market. Quite often, business advisers will suggest a valuation of between 5 and 10 times the annual post-tax profit.
ENTRY COST
Quite simply, this is the predicted cost to set up a similar business to that being sold. This would include the cost of developing a customer base and reputation, recruiting and training staff, purchasing assets and developing products and services.
ASSET VALUATION
This method is more appropriate for established companies with a large amount of tangible assets (such as property companies). The valuation is made by calculating the net realisable value of all assets.
DISCOUNTED CASHFLOW
This method uses an estimate of the company's cashflow over a certain period of time. The "terminal value" of the company is also calculated after this period has expired. The value of the predicted cashflow, plus terminal value, is then discounted, to provide a current business valuation. It may be hard to establish this terminal value, as it relies so heavily on the cashflow estimates. This valuation method may be used when a company may have a lot of potential, but few assets and little financial history to speak of - for example, a web business.
INDUSTRY VALUATIONS
In certain industries, when businesses change hand on a regular basis, industry-wide rules of thumb are sometimes used to value a company. Examples of such industries include recruitment agencies, accountancy firms, etc.
Other Considerations
When calculating the value of a business, one or more of these valuation methods may be used. There are also a large number of other factors which may be taken into account - several of which are intangible.
ECONOMIC CLIMATE
Clearly, a buyer may be more cautious when buying a business during an economic downturn.
FIXED ASSETS
Quite often, such assets can be valued by using the original purchase price and using a depreciation calculation on each item. Things aren't quite as simple however, as property prices may have risen or fallen since the original purchase, and even after a deduction to allow for depreciation, many business assets (such as vehicles, and equipment) may be worth a lot less if you tried to sell them right away.
INTANGIBLE ASSETS
Some of the most valuable parts of a business may not appear on any balance sheet - these may include trademarks, reputation, branding, key people, the size and quality of the customer base. Valuing the potential value of a business is notoriously hard to do, but clearly a rapidly growing business will be very attractive to buyers.
REASON FOR SALE
If a sale is forced, any valuation methods are bound to be discounted to encourage a quick sale.
REALITY
It may be a cliché, but a business is only worth what someone is willing to pay for it. Many small business owners grow attached to their businesses, and often value their companies at higher levels than industry conventions would dictate. So, it is worth being realistic about the true value of your company before offering it up for sale.
GOOD ADVICE
You should always consult an accountant, or financial adviser, before selling your business.
Unsurprisingly, there are no precise ways to value a private business. The seller will want to drive the price up, and potential buyers will want the opposite.
Although there are relatively easy ways to value certain parts of the business - such as stock, fixed assets (land, machinery, equipment, etc.), there may well be a sizeable intangible element to the value of a business.
Intangible elements would include "Goodwill" - this could include trademarks, and the reputation of the company. Such things are notoriously difficult to value, and in many cases will come down to how keen a potential buyer is to acquire the business in question.
When looking at the overall value of a business, there are a number of different valuation methods which are commonly used - from using earnings multiples, to calculating how much it would cost to create a similar business.
In this article, we look at some of the most commonly used valuation techniques, and how other factors may influence the value of a business at any given time.
Common Business Valuation Methods
EARNINGS MULTIPLES
Quite often, multiple of earnings are used as a business valuation method. This method would be suitable for companies with an established financial history. The Price/Earnings (P/E) Ratio represents the value of the business divided by its post tax profits. It may not be easy deciding what P/E ratio to use (some industries, such as high tech / IT ones will have a much higher P/E ratio than, say, an estate agency). The P/E Ratios used in the financial press should be reduced significantly when valuing a small business, as the barriers to acquiring a small company are much higher than buying quoted shares on the stock market. Quite often, business advisers will suggest a valuation of between 5 and 10 times the annual post-tax profit.
ENTRY COST
Quite simply, this is the predicted cost to set up a similar business to that being sold. This would include the cost of developing a customer base and reputation, recruiting and training staff, purchasing assets and developing products and services.
ASSET VALUATION
This method is more appropriate for established companies with a large amount of tangible assets (such as property companies). The valuation is made by calculating the net realisable value of all assets.
DISCOUNTED CASHFLOW
This method uses an estimate of the company's cashflow over a certain period of time. The "terminal value" of the company is also calculated after this period has expired. The value of the predicted cashflow, plus terminal value, is then discounted, to provide a current business valuation. It may be hard to establish this terminal value, as it relies so heavily on the cashflow estimates. This valuation method may be used when a company may have a lot of potential, but few assets and little financial history to speak of - for example, a web business.
INDUSTRY VALUATIONS
In certain industries, when businesses change hand on a regular basis, industry-wide rules of thumb are sometimes used to value a company. Examples of such industries include recruitment agencies, accountancy firms, etc.
Other Considerations
When calculating the value of a business, one or more of these valuation methods may be used. There are also a large number of other factors which may be taken into account - several of which are intangible.
ECONOMIC CLIMATE
Clearly, a buyer may be more cautious when buying a business during an economic downturn.
FIXED ASSETS
Quite often, such assets can be valued by using the original purchase price and using a depreciation calculation on each item. Things aren't quite as simple however, as property prices may have risen or fallen since the original purchase, and even after a deduction to allow for depreciation, many business assets (such as vehicles, and equipment) may be worth a lot less if you tried to sell them right away.
INTANGIBLE ASSETS
Some of the most valuable parts of a business may not appear on any balance sheet - these may include trademarks, reputation, branding, key people, the size and quality of the customer base. Valuing the potential value of a business is notoriously hard to do, but clearly a rapidly growing business will be very attractive to buyers.
REASON FOR SALE
If a sale is forced, any valuation methods are bound to be discounted to encourage a quick sale.
REALITY
It may be a cliché, but a business is only worth what someone is willing to pay for it. Many small business owners grow attached to their businesses, and often value their companies at higher levels than industry conventions would dictate. So, it is worth being realistic about the true value of your company before offering it up for sale.
GOOD ADVICE
You should always consult an accountant, or financial adviser, before selling your business.
Sell your Business - FREE (limited period)
Why sell with RightBiz.co.uk?
CONFIDENTIAL AND SECURE
Your contact details will only be shown to registered members.
NO COMMISSIONS
Sell your business without paying any commissions, no hidden costs, get maximum market value for your business and save thousands in business broker fees and commissions.
LISTED WITH PHOTO (optional)
You can upload your photo of your business this will significantly increase your selling chances.
LONG TERM LISTING*
Your listing will remain until business sold.
PROSPECTIVE BUYERS
Our visitors are business buyers looking to buy business.
FULL PAGE ADVERTISEMENT
Your listing will have a full page dedicated to your business for sale.
EMAIL ALERT TO BUYERS*
Listing will be emailed to buyers via email alerts.
UNLIMITED BUSINESS DETAILS
All business details will be published and your ad will be edited for grammatical and typographical errors and for infelicities of style or presentation.
FREE UPDATES
If you need to amend your business listing, need support or help simply contact us we're here to help you whenever you need us.
LISTED WITHIN 12 HOURS*
Business listing will be reviewed and listed on our RightBiz.co.uk within 12 hours of submission.
TOP IN SEARCH ENGINES
We have many top positions on search engines including Google, Yahoo and MSN for many keywords, this makes RightBiz.co.uk easy to find throughout the UK.
CONFIDENTIAL AND SECURE
Your contact details will only be shown to registered members.
NO COMMISSIONS
Sell your business without paying any commissions, no hidden costs, get maximum market value for your business and save thousands in business broker fees and commissions.
LISTED WITH PHOTO (optional)
You can upload your photo of your business this will significantly increase your selling chances.
LONG TERM LISTING*
Your listing will remain until business sold.
PROSPECTIVE BUYERS
Our visitors are business buyers looking to buy business.
FULL PAGE ADVERTISEMENT
Your listing will have a full page dedicated to your business for sale.
EMAIL ALERT TO BUYERS*
Listing will be emailed to buyers via email alerts.
UNLIMITED BUSINESS DETAILS
All business details will be published and your ad will be edited for grammatical and typographical errors and for infelicities of style or presentation.
FREE UPDATES
If you need to amend your business listing, need support or help simply contact us we're here to help you whenever you need us.
LISTED WITHIN 12 HOURS*
Business listing will be reviewed and listed on our RightBiz.co.uk within 12 hours of submission.
TOP IN SEARCH ENGINES
We have many top positions on search engines including Google, Yahoo and MSN for many keywords, this makes RightBiz.co.uk easy to find throughout the UK.
Registering a Branch or Place of Business for Oversea Companies
There are two standard situations where oversea companies can be deemed as having business activities in Great Britain.
The first scenario is where there are physical premises from which the business can be seen to be operating or where there is frequent commercial activity from a specific address. Where this is the position, the oversea company must register with Companies House and deliver the required documents to them.
The other situation is where there are no physical premises which are used to conduct the business of the company. In such cases there is no registration requirement.
Branch or a Place of Business
An oversea company which is required to register can do so using one of two methods. The first means is through a branch where people effectively run the company’s operations in the local marketplace.
The second option is to register a place of business where there are insufficient grounds for there to be a branch.
A placer of business means that the oversea company has activities in the UK, but these are not of the required magnitude to signify autonomous commercial activity.
Registration of a Branch
The registration of a branch requires that the oversea company submit a Form BR1, the last set of audited financial statements, the company’s equivalent of the memorandum and articles of association and the fee payable to Companies House of £20.
Registration of a Place of Business
A place of business registration is submitted on Form 691 together with the memorandum and articles processed during company formation and the fee.
For both types of registration, the memorandum and articles of association (their foreign equivalents) must be certified as true and correct. They should be in their native language and where this is not in English, a copy which has been translated should also be presented.
The translated version should contain a certification that they accurately represent the original foreign documents.
The first scenario is where there are physical premises from which the business can be seen to be operating or where there is frequent commercial activity from a specific address. Where this is the position, the oversea company must register with Companies House and deliver the required documents to them.
The other situation is where there are no physical premises which are used to conduct the business of the company. In such cases there is no registration requirement.
Branch or a Place of Business
An oversea company which is required to register can do so using one of two methods. The first means is through a branch where people effectively run the company’s operations in the local marketplace.
The second option is to register a place of business where there are insufficient grounds for there to be a branch.
A placer of business means that the oversea company has activities in the UK, but these are not of the required magnitude to signify autonomous commercial activity.
Registration of a Branch
The registration of a branch requires that the oversea company submit a Form BR1, the last set of audited financial statements, the company’s equivalent of the memorandum and articles of association and the fee payable to Companies House of £20.
Registration of a Place of Business
A place of business registration is submitted on Form 691 together with the memorandum and articles processed during company formation and the fee.
For both types of registration, the memorandum and articles of association (their foreign equivalents) must be certified as true and correct. They should be in their native language and where this is not in English, a copy which has been translated should also be presented.
The translated version should contain a certification that they accurately represent the original foreign documents.
Branch and Place of business registration
for an Overseas Company Trading in the UK
A company incorporated outside the UK may trade in the UK either through a UK subsidiary company or through a branch office. The UK branch may sign contracts which are binding on the overseas company. To register as a branch you must establish a place of business in the UK through which the company conducts its business such that persons resident here can deal with the branch directly.. Places of business which perform operations ancillary to the company’s business are generally not branches within the required meaning. You do not need a place of business in the UK if you wish to incorporate a subsidiary company as opposed to a branch.
The decision whether to establish a UK branch or to incorporate a UK subsidiary must be taken separately in each case, but is normally based on the following considerations:
Commercial. A subsidiary is often preferable because some UK companies would prefer to do business only with other companies incorporated in the UK. Grants, loans and other finance may also be easier for a UK company to arrange.
Taxation. The relevant considerations are normally the tax system in which the overseas company does business, the terms of any double tax convention with the UK and the expected trading results in the UK. Sometimes it is more advantageous to start with one structure and then to transfer the UK business to the other structure. For example, the starting up costs and initial trading losses of a branch may be deductible from taxable profits of the overseas company in its home country but this advantage will be lost when the UK branch becomes profitable in its own right.
Legal. A UK subsidiary may afford some protection to its parent from trading and other losses or liabilities of the UK operation, since the parent will benefit from its limited liability. However, this will not always be a protection, eg the parent will be fully liable where it has guaranteed the liabilities of the subsidiary.
Audit. A UK incorporated company has (except for certain very small companies) to have a statutory audit of its accounts, whereas an overseas company may be based in a country where this is not necessary.
Publicity of Accounts. A UK company has to file annual accounts which are available for public inspection. A branch has to file the accounts of the overseas company. If the accounts are in a language other than English a translation certified in the prescribed manner must be annexed. The disadvantage of revealing the overseas company’s accounts can be removed by interposing a non-UK company between the overseas company and the branch, so that the branch becomes a branch of the subsidiary of the overseas company.
A branch or subsidiary that has a name containing certain words (eg international, royal) can be required by the Secretary of State to change its name or give reasons justifying its use of the name. (Care should also be taken not to infringe a registered trademark.)
Our fees for registration of a UK branch or place of business are £150 plus vat of £22.50 making a total of £172.50
A company incorporated outside the UK may trade in the UK either through a UK subsidiary company or through a branch office. The UK branch may sign contracts which are binding on the overseas company. To register as a branch you must establish a place of business in the UK through which the company conducts its business such that persons resident here can deal with the branch directly.. Places of business which perform operations ancillary to the company’s business are generally not branches within the required meaning. You do not need a place of business in the UK if you wish to incorporate a subsidiary company as opposed to a branch.
The decision whether to establish a UK branch or to incorporate a UK subsidiary must be taken separately in each case, but is normally based on the following considerations:
Commercial. A subsidiary is often preferable because some UK companies would prefer to do business only with other companies incorporated in the UK. Grants, loans and other finance may also be easier for a UK company to arrange.
Taxation. The relevant considerations are normally the tax system in which the overseas company does business, the terms of any double tax convention with the UK and the expected trading results in the UK. Sometimes it is more advantageous to start with one structure and then to transfer the UK business to the other structure. For example, the starting up costs and initial trading losses of a branch may be deductible from taxable profits of the overseas company in its home country but this advantage will be lost when the UK branch becomes profitable in its own right.
Legal. A UK subsidiary may afford some protection to its parent from trading and other losses or liabilities of the UK operation, since the parent will benefit from its limited liability. However, this will not always be a protection, eg the parent will be fully liable where it has guaranteed the liabilities of the subsidiary.
Audit. A UK incorporated company has (except for certain very small companies) to have a statutory audit of its accounts, whereas an overseas company may be based in a country where this is not necessary.
Publicity of Accounts. A UK company has to file annual accounts which are available for public inspection. A branch has to file the accounts of the overseas company. If the accounts are in a language other than English a translation certified in the prescribed manner must be annexed. The disadvantage of revealing the overseas company’s accounts can be removed by interposing a non-UK company between the overseas company and the branch, so that the branch becomes a branch of the subsidiary of the overseas company.
A branch or subsidiary that has a name containing certain words (eg international, royal) can be required by the Secretary of State to change its name or give reasons justifying its use of the name. (Care should also be taken not to infringe a registered trademark.)
Our fees for registration of a UK branch or place of business are £150 plus vat of £22.50 making a total of £172.50
Social Networks And Their Place in Business
Are social networks key to improving customer relations and product development?
This prompts an interesting discussion into whether companies should use social tools to promote their business online, and if so, how exactly they should do it.
In short, I believe that yes, companies should be making use of these tools. Nearly everybody has Internet access now, and the social platforms that exist are sophisticated enough to segment user groups for targeted advertising. In effect, we’re now being fed information based on our interests which leads to less annoying adverts and higher conversions for businesses. This is social networking at its base level.
To truly harness its power, you need to delve deeper. Tools such as Twitter can be used to interact with prospects/customers, websites like Digg can be used to share information and Facebook is the place where everybody talks.
And talk people do. Your online reputation and, ultimately, your company’s reputation rests on how you use these tools. You have a platform on which to deliver information directly to your customers – great! Just make sure you don’t hit them with the hard-sell all the time; engage with the community on an almost personal level, dropping your opinion in from time to time and sharing links to informative websites and blogs. Essentially, give them a reason to listen to you.
In turn, you will receive their feedback and reviews of your business. The results will be far better than any questionnaire you could send out. Social platforms allow you to gander much more feedback than you would probably expect, because it allows you to “spy” on what people are talking about. I’d be surprised if any medium-large organisation doesn’t search its company name daily on Twitter to see what people are saying about them. They can then act on this.
I attended a talk by Julian Sambles from the Telegraph a few months back and he was tasked with boosting the online presence of the traditional newspaper. This meant a massive shift in thinking, at every level in the company, was required to be successful. He talked of how they utilised social bookmarking links, and how they explained to the readers what they were; he said how microsites have been used to promote specific offers and how article headlines differ from online to the paper publication (think SEO keywords).
This, as far as I am concerned, is proof that not only is the Internet crucial for business success, but utilizing its many social assets can help boost your growth by interacting with your customers on a more than seller/buyer basis.
This prompts an interesting discussion into whether companies should use social tools to promote their business online, and if so, how exactly they should do it.
In short, I believe that yes, companies should be making use of these tools. Nearly everybody has Internet access now, and the social platforms that exist are sophisticated enough to segment user groups for targeted advertising. In effect, we’re now being fed information based on our interests which leads to less annoying adverts and higher conversions for businesses. This is social networking at its base level.
To truly harness its power, you need to delve deeper. Tools such as Twitter can be used to interact with prospects/customers, websites like Digg can be used to share information and Facebook is the place where everybody talks.
And talk people do. Your online reputation and, ultimately, your company’s reputation rests on how you use these tools. You have a platform on which to deliver information directly to your customers – great! Just make sure you don’t hit them with the hard-sell all the time; engage with the community on an almost personal level, dropping your opinion in from time to time and sharing links to informative websites and blogs. Essentially, give them a reason to listen to you.
In turn, you will receive their feedback and reviews of your business. The results will be far better than any questionnaire you could send out. Social platforms allow you to gander much more feedback than you would probably expect, because it allows you to “spy” on what people are talking about. I’d be surprised if any medium-large organisation doesn’t search its company name daily on Twitter to see what people are saying about them. They can then act on this.
I attended a talk by Julian Sambles from the Telegraph a few months back and he was tasked with boosting the online presence of the traditional newspaper. This meant a massive shift in thinking, at every level in the company, was required to be successful. He talked of how they utilised social bookmarking links, and how they explained to the readers what they were; he said how microsites have been used to promote specific offers and how article headlines differ from online to the paper publication (think SEO keywords).
This, as far as I am concerned, is proof that not only is the Internet crucial for business success, but utilizing its many social assets can help boost your growth by interacting with your customers on a more than seller/buyer basis.
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