Saturday, April 2, 2022

KillerStartups

KillerStartups

Brand Positioning: 5 Ways to Stand Out During the Great Startup Wave

Posted: 31 Mar 2022 01:45 PM PDT

It's the perfect storm in the startup space. First, the pandemic, plus the Great Resignation, plus the "if not now, then when?" mentality equals more new business applications than ever on record in 2021, outpacing even 2020 which was a banner year for starting businesses. Attention must be paid to brand positioning more than ever before.

It's hard enough to be a startup without competition. Today, with potentially tens or hundreds of companies trying to do exactly what you want to do simultaneously, it's overwhelming.

For many years, startups were in a sparse field of competitors, could lean on their products' attributes to differentiate themselves and spend money on social media ads and watch the algorithms work their magic. The cash would roll in. That is not today's reality.

Following are five key learnings to help your startup stand out from the pack.

1. Decide what your greater contribution is to culture.

Since entering the startup world after years of working with legacy brands, what I quickly noticed is how product-forward startup communication tends to be.

When speaking to many startups about differentiation, I discovered their perception of their difference was rooted in their product description from their investor deck. What was almost always missing was a bigger insight about how people behave and where culture is going beyond the category that underpinned their reason for being.

The first page of any deck you write introducing someone to your brand should be an explanation of  why you actually exist.

Identify what you're championing or railing against. This will create a springboard for your communication to be rooted in purpose and product. And today, that's what buyers want. They want a reason to belong to a brand and a reason to believe in your product.

Toothbrushes are a good example. They look the same and they function similarly. Just because you make toothbrushes doesn't mean you can only be in the teeth cleaning business. You can be in the business of "instilling confidence in every child," or "increasing the average number of daily smiles shared in the world." The product becomes proof of the purpose of your brand, not the story of it.

2. Positioning, positioning, positioning.

Brand positioning is a necessity when bringing any product to market. Companies often abandon brand positioning for product positioning.

Brand positioning is basically how you want your brand to show up in the minds of your customers. It goes hand in glove with the reason you exist as covered above, but one level down — closer to your product.

Brands that only talk about product and function are playing the short game.

Many products are challenged to adapt quickly to changing competitive environments. However, they can maintain their power through a strong and unique brand purpose and positioning that includes emotional benefits. That's what's so great about brand positioning. If it’s strong, it can be your rock and carry you through times when it gets harder to differentiate.

3. Invest in the all-important step of determining your conceptual target.

Your target audience is more than a demographic. It's more than people you think will use this product because there is projected growth among that audience in your sector.

All of this is important, but what is equally important is the mindset of that person. Tribes begin with shared values and you want a tribe of people rallying for your brand.

You must understand the values that your customer sees as important and tap into them. What's the tie that binds your potential customers? What do they care about? What's their lifestyle like (beyond how they use your product in your category)?

When competition is fierce, you can bet that if you define your customer by category consumption and demographic alone, you'll just be competing for the same keywords, the same customers with the same message.

The consumer target is your starting point for your brand positioning. Getting this right and taking a values-based approach to identifying your target audience is crucial to creating strong, emotionally connected, and differentiated communication approaches.

4. Context is everything, especially in brand positioning.

Even though you've put tons of time, attention, and resources into your brand, you still have to be willing to change it.

You can't be stubborn when the category competition demands that you pivot. You can't reinvent your product in response to each new competitor. Instead, you need to stay on top of your brand message. Use it as a means of addressing and responding to the changing competitive landscape.

The biggest challenge for startups is their competition. Today, functionality and cute names won't allow you to weather a competitive storm. Staying on top of your competitive context and reevaluating your brand positioning as new entrants come into the category is imperative to ensure you're still standing out.

Additionally, cultural changes may affect the uptake of your brand. As a result, it's important to stay connected to behavior trends and cultural movements happening around you to either use to your advantage or to stand against.

5. Be honest with yourself.

I recommend the classic "wall test" to see how your brand stacks up against others and if it's indeed differentiated.

Throw everything in your category up on the wall. Do you look like everyone else? Are you using the same words? Behaving the same way? Using the same playbook? Are you all doing paid social and influencer and search?

If you don't look, talk, or behave differently and you use all the same tactics, the winner is the person who can spend the most. That's not real differentiation.

The faster you transcend product with your brand, the better. You have to rise to an emotional and cultural story that's authentic and harder to replicate.

Once you have a clearly defined brand purpose and position rooted in a strong conceptual target, the rest of your messaging and choices come from a position of much greater strength.

Startups start because they found a hole where innovation should be. Don't abandon that desire to be different when it comes to your marketing messaging and playbook. You were born to stand out, so don't allow yourself to fit in.

The post Brand Positioning: 5 Ways to Stand Out During the Great Startup Wave appeared first on KillerStartups.

What is a Tax Sheltered Annuity?

Posted: 31 Mar 2022 05:00 AM PDT

Are you employed by an educational institution, church, or nonprofit? If so, there's a retirement savings program authorized by section 403(b) of the Internal Revenue Code that allows eligible employees to set aside up to virtually 100% of their income for retirement in a tax-sheltered annuity.

What is a Tax-Sheltered Annuity?

An annuity that's considered tax-sheltered is a way for employees of tax-exempt organizations and the self-employed to generate retirement income with pretax dollars. In addition, by having the employer make direct contributions to the plan, an employee is able to accumulate even more tax-free funds.

Generally, tax-sheltered annuities have provided dependable retirement income and have provided consistent payments over time.

An Overview of Tax-Sheltered Annuities

An example of a tax-sheltered annuity is the 403(b) plan in the U.S. Employees of specific nonprofit or public organizations may participate in this plan to save for retirement at a tax-advantaged rate. The maximum contribution an employee can make to the plan is usually a set amount. However, there are some plans where employees can make additional contributions to make up for the amount they did not contribute in previous years.

For the tax year 2021, the IRS will limit contributions to TSAs to $19,500. But, this will increase to $20,500 in 2022, matching the contribution limits of 401(k) plans. A TSA also offers a catch-up provision for participants 50 and older, which amounts to $6,500 in 2021 and $6,500 in 2022.

In addition, tax-sheltered annuities offer lifetime catch-up for participants. But, there is a catch. Thye must have worked at a qualified organization for 15 years or more and contributed no more than $5,000 during that duration. Moreover, the total contribution cannot exceed 100% of earnings up to a certain cap, including the contribution and catch-up provisions.

To withdraw from a qualified retirement plan, you must be at least 59 ½ years old. Unless certain exemptions apply, early withdrawals from most annuity types, including a TSA, are subject to a 10% IRS penalty. In addition, since the SECURE Act was enacted in 2019, withdrawals from IRAs are taxed as ordinary income, and they must start by the beneficiary's 72nd birthday. Prior to that, withdrawals had to begin when the beneficiary turned 70 ½.

What's more, employees may be able to borrow funds before reaching age 59 ½ — depending on the plan's provisions. Additionally, a disabled employee may also withdraw from these plans as most qualified retirement plans allow it.

Tax-Sheltered Annuity Example

"The chief advantage of a TSA is that it can help reduce your taxes," notes Bankrate. At a public university, Suzy is a professor of rhetoric. She earns $70,000 per year. Since her projected retirement age is 15 years away, she decides how much she will need to save each month.

"At retirement, Suzy expects to be making an annual income of about $100,000 a year, and would like to earn 75 percent of that amount once she has retired," they add. She will generate nearly $60,000 a year from Social Security, her university pension, and saving, but she will still fall short of her goal by $15,000 each year. So, according to Suzy's advisor, she should consider a TSA.

"To earn the $15,000 in additional annual income, Suzy's advisor calculates a monthly contribution of about $700, for a total annuity of $210,000," states Bankrate. In Suzy's case, her employer contributes $700 to her retirement plan each month, which reduces her taxes by about $230 each pay period. With a TSA, Suzy earns income while spending only $470 out of her own pocket.

What Is a 403(B) Plan and How Does it Work?

"403(b)s are retirement plans offered by nonprofit organizations and some tax-exempt employers, such as not-for-profits and some governmental organizations," explains Due Co-Founder John Rampton. "A 403(b) plan is named after the section of the Internal Revenue Service (IRS) code for which they are designed."

The Investment Company Institute reports that in 2018, approximately one in five U.S. employees had access to these accounts. Nonetheless, they receive less attention than their for-profit, private counterparts, 401(k) plans. The difference between a 403(b) and 401(k) is that eligible employees can contribute to their retirement fund through payroll deductions (also known as elective deferrals) based on a percentage of their pay or a budget they set.

"As an additional benefit, employers can also contribute to your accounts — aka matching contributions," adds Rampton. "When you are ready to invest in the 403(b), be sure to invest at least that percentage of your employer's match

403(b) plans are generally divided into two types: traditional and Roth." It's worth noting that not all workplaces offer the Roth version.

An employee's personal retirement account is funded with pretax money deducted from their paychecks under a traditional 403(b) plan.

Furthermore, the employee has been able to save some money for the future and reduce their taxable income. It is only when an employee withdraws funds that taxes are due.

To establish a Roth 403(b), after-tax money must be contributed to the retirement account. As a result, tax benefits are not immediately gained. "However, when the money is withdrawn, the employee won't have to pay any more taxes on that money or on the profit it accrues," he adds.

Who Is Eligible for a 403(b) Plan?

There are some restrictions on who can sign up for a 403(b) plan. The plan is only open to specific organizations and institutions due to tax purposes.

According to Rampton, those who are eligible to participate in a 403(b) plan include:

  • Individuals who work for tax-exempt 501(c)(3) organizations
  • Public school, college, and university employees
  • Teachers employed by Indian tribal governments
  • Employees of cooperative hospital service organizations
  • Faculty and staff members at Uniformed Services University of the Health Sciences
  • 501(c)(3) ministers
  • A minister or chaplain whose primary job function is serving as a minister for a non-501(c)(3) organization
  • Self-employed ministers

According to the IRS, employers can exclude employees who work less than 20 hours a week from participating in a 403(b) plan.

Advantages and Disadvantages of Tax-Sheltered Annuities

You would need to weigh the pros and cons of using the TSA or tax-sheltered annuity account, such as your contribution flexibility. Depending on your situation, you can increase or decrease the number of contributions you make to a tax-sheltered annuity account, such as a 403(b).

Moreover, in the event that circumstances in an employee's life or financial situation change unexpectedly, they may have access to optional loans and hardship distributions. Keeping in mind that your investment options might be limited by your employer is essential. As a result, you have little control over how your funds are invested. However, many of these plans offer a greater variety of investments these days, such as well-known mutual funds.

Advantages of TSAs and 403(b) Plans

  • Tax-deferred retirement savings.
  • Your employer handles the majority of the paperwork once you enroll at work.
  • Benefit from high annual contribution limits
  • Your annual taxable income is lowered when you contribute
  • At 50, you can make higher "catch-up" contributions than someone with a 401(k).
  • If you've worked at the same organization for 15 years or more, you can get a catch-up contribution of $3,000
  • Your fund might become yours sooner (a process called "vesting"). In addition, a few 403(b) plans allow you to access your funds immediately.

Disadvantages of TSAs and 403(b) Plans

However, these accounts come with some downsides as well.

You may find that your choice of investment options is an advantage or disadvantage depending on your experience. For example, a brokerage company can help you open a separate individual retirement account (IRA) if you want more options.

  • Withdrawal of funds before age 59 ½ will be subject to an additional 10% IRS tax.
  • The fees associated with these plans are usually higher.
  • 403(b) plans do not undergo nondiscrimination testing, meaning top management and highly compensated employees can reap the most rewards.
  • Employers are less likely to match 403(b) contributions than 401(k) plans.
  • The investment choices you have may be much more limited than those in a 401(k).
  • Funds invested in a 401(k) do not have the same protection from creditors as those invested in a 401(k).

Before enrolling in a TSA like a 403(b) plan, make sure to check the fees and costs involved.

Tax Sheltered Annuity Contributions

As a refresher, an IRS-approved tax-sheltered annuity, also known as a TSA or 403(b), is a retirement plan offered by public schools and some nonprofit organizations with 501(c)(3) tax-exempt status. Section 403(b) of the Internal Revenue Code allows employees to make pretax contributions to individual accounts up to a predefined limit each year.

The employee contributes via a deduction from their paycheck and places it directly into a tax-sheltered annuity account. This is typically accomplished by specifying the percentage or amount they would like to have deducted. In addition, employers can contribute to an employee's account. Funds contributed to tax-sheltered annuities are tax-deferred until withdrawn, which typically occurs after one retires.

An employee who has withheld funds designated to a tax-sheltered annuity (TSA) typically has the option of choosing the investment products to which their money will be allocated. In most cases, employers pre-approve the products to be included in a plan.

Among the various options for annuity products, there are multi-year guarantee annuities, which earn a fixed and steady interest rate over time and fixed indexed annuities. In contrast, the latter link their interest earnings to an index rather than to the stock market's performance.

Initially, TSA plans were specifically limited to annuity choices. The reason? At the time, annuities were mandated by law. The Employee Benefit Income Security Act of 1974 (ERISA) widened the selection of annuity products to include mutual funds. This was despite annuity products remaining the most popular option among tax-sheltered annuity plan participants.

Here is the complete annuity formula to understand the math behind each annuity plan.

TSAs vs. 401(k) Plans

TSAs are often compared to 401(k) plans. And, it's easy to understand why.

Specific sections regulate both plans in the Internal Revenue Code that establish whether they can be used and whether they qualify for tax benefits. Also, each plan facilitates individual saving by allowing pretax contributions for tax-deferred accumulation of retirement savings.

After that, both plans differ. Mainly, 401(k) plans are offered to all eligible private sector employees working at companies with plans. On the other hand, a TSA plan is exclusive to employees of tax-exempt organizations and public schools. In addition, employers who work for nonprofit organizations with charitable, religious, or educational purposes can join TSA plans if they are qualified under section 501(c)(3) of the Internal Revenue Code.

Tax Sheltered Annuity In Retirement

You may annuitize a TSA annuity at any time once you have become eligible to receive distributions. To those not familiar with annuities, there are two phases. The first is the accumulation period, and this is followed by the distribution period.

TSA Withdrawal Rules

Before retirement, you may withdraw funds from your TSA only under the following situations:

  • Job termination
  • Disability
  • A financial hardship caused by medical bills or college expenses;
  • Death
  • In the case of a divorce, a qualified domestic relations order (QDRO) is required.
  • Deferrals of excess elective benefits

However, the contract may include surrender charges for withdrawals. And this can't be stressed enough: withdrawals from a TSA before age 59½ will result in an IRS 10% early-withdrawal penalty and income taxes. But, you cannot be penalized by the IRS for withdrawals after age 55 if you terminate employment.

  • Loan Provisions. A TSA retirement plan loan may be available to you once per calendar year. Each loan must have a minimum of $1,000, and if you have another loan or an outstanding balance, your borrowing limit may be reduced.
  • Required Minimum Distributions. The IRS may not charge a surrender fee when you receive Required Minimum Distributions.
  • 90-24 Transfer. With this, it's possible to change a tax-sheltered annuity (TSA) contract with another 403(b) contract. When in transition between jobs, for example, your employer is required to withhold 20% of any retirement savings funds distributed directly to you, leaving much less money to transfer into another qualified plan.

Frequently Asked Questions About Tax-Sheltered Annuities

1. How can I contribute to a TSA?

Employees can deduct contributions to their TSA or 403(b) through a payroll deduction. Contributions to TSA annuities must be taken directly from payroll. Your employer will be notified of your decision through a salary reduction agreement. A new salary reduction agreement can be completed to modify the number of your contributions.

2. How much can I contribute to a TSA?

There is an annual limit on how much can be deferred by the IRS and changes frequently. Participants over the age of 50 and employees who have worked for the same employer for over 15 years may be eligible for special catch-up provisions.

3. May I contribute from a checking or savings account?

Not at all. You must make your TSA 403(b) contributions via payroll.

4. When can I take money out?

If you are fully disabled or no longer with the organization, you can begin taking distributions from a 403(b) plan at age 59 ½. However, you can expect a 10% IRS penalty if you make withdrawals. If you have a financial hardship, you may be able to receive a distribution. Or, you may be able to take out a loan.

5. Who is a Plan Administrator?

To ensure compliance with IRS rules and guidelines, most school districts engage third-party administrators (TPAs) to manage their 403(b) plans.

What is a Tax-Sheltered Annuity? was originally published on Due by John Rampton.

Image Credit: Nataliya Vaitkevich; Pexels; Thank you!

The post What is a Tax Sheltered Annuity? appeared first on KillerStartups.

4 Business Tools You’ll Need to Build and Run a Successful Company

Posted: 30 Mar 2022 07:00 AM PDT

If you’re a business owner, you must have thought “24 hours are not enough for one day.” Running a business and controlling its operations feels incredibly difficult if you don’t have the proper strategies or tools to make tasks quicker and easier.

From recruiting applications to checking emails, from managing social media marketing to meeting with clients, and maintaining pace with new market trends…your days just feel too short. In this era of a digital revolution, even the most efficient business owners need software tools. These help them run their companies effectively and divide their burden.

Luckily, advancements in software and tech have resulted in numerous digital tools to strengthen and streamline business operations. Here are four business tools that will help you run a successful company.

Software Tools That Are Essential for the Smooth Running of a Business

A specific company needs a specific set of online tools to carry out its daily business operations. It’s important to identify the software that your business needs. The type of software tools affects the business operations.

For example, if your company has a huge employee base you will certainly need comprehensive accounting and payroll software. However, the four software tools that we have discussed here are generally required by every type of business, big or small.

1.  CRM Software

Developing a good understanding of your customers is one of the key features that drive business growth. That is why customer relationship management (CRM) software is one of the most essential and needed business tools.

It is equally important for small-scale or large-scale businesses. CRM enables you to centrally track, evaluate, and analyze most of the operations related to customer management. If you have a CRM tool in your kit, you can easily measure and manage all the customer relationships and touchpoints effectively without lag.

CRM is so effective that it can tell who is visiting your website, how much time someone is spending on your website, who is clicking your emails and reading emails with interest. All this data helps you figure out your potential customers.

Based on the data you can target your clients for advertising campaigns in the future. Customer relationship management software also points out the high-value customers that you need to contact. CRM can monitor the customer’s attitude and analyze their demands. Also, you can effectively manage and communicate with your customers through CRM tools.

2. Business Tools for Communication

Proper communication between a workforce, managers, directors, and the CEO is at the heart of any company. The delivery of a concept or perspective to higher authorities or external parties such as contractors, customers, or vendors is vital for a peaceful and productive atmosphere.

Whether it’s a small business or multinational company, internal and external communication is the foundation for successful strategies and operations. That’s why communication software and tools are essential for better collaboration and exchange of notions between employees, managers, and external affiliates…such as customers.

No matter which type of business you operate, communication is considered an integral part of growth. The benefits of communication tools include anywhere and anytime conferences with clients and contractors, data transfer through flexible and inexpensive software, and you can organize important meetings without delay. Also, it enables your team to globally connect easily and effectively.

3. Project Administration and Task Management Business Tools

To keep numerous balls in the air at the same time you have to boost your management skills.

That means if you want to run multiple business operations at the same time with accuracy and pace, you need task management software tools. These tools enable you to administer your projects and manage your tasks without lagging. Task management and project administration software also help you to track and end your new projects within the allowed time.

These useful tools automatically remind you about deadlines, appointments, new tasks, upcoming events, and meetings. Similarly, project management tools also send periodic reminders to the contractors or suppliers to aware them of delivering the service or product within the expected time.

Task management tools help businesses to organize complicated projects in segments and streamline the overall operational flow. A professionally organized project and on-time completion of tasks encourage your clients and help you grow your networking.

4. Email and Social Media Management Business Tools

Being an owner of a business, you must be aware of the importance of social media and email for marketing and awareness.

Today, you can automate almost all your business operations to focus on the major hurdles in the way of growth. Marketing is the chief factor that significantly affects business growth. Many businesses do not know that they can automate their social media marketing too.

Managing social media manually and sending emails to potential customers is a time drain.

However, with the use of machine learning and artificial intelligence, you can effectively manage your social media. You can send personalized emails to your potential buyers without spending hours.

Also, management tools enable you to schedule the social media posts with time and date for a whole week or a month. Throughout the month you won’t have to worry about your social media just because of these scheduling software tools.

Final Thoughts

The type of software tools you’ll require depends on the size of your business, your position in the market, level of business maturity, and your budget.

However, the above-mentioned business tools are important for all types of businesses. Once you start using these tools, the spectrum of your business growth will be broadened.

We live in an era of technology and automation. To get the maximum return on your investments, make sure that you are up to date with the tools and features of your time. If you don’t focus on saving your time and investing it in your primary product or service, there’s a good chance you won’t keep pace with the market.

The post 4 Business Tools You’ll Need to Build and Run a Successful Company appeared first on KillerStartups.

5 Tips for Taking Your Small Business International

Posted: 29 Mar 2022 11:00 AM PDT

Global expansion isn't just for the big dogs of the business world. Small business is ripe for international growth, especially as remote work has blurred the lines previously defined by geographic borders.

If you've got expansion on your mind, it may be time to consider making your next move internationally.

Potential customers can come from anywhere. Likewise, so can employees. Why not make your business available and attractive to them, no matter where they live? However, before you start daydreaming of serving an expanded clientele, you need to create a plan to help you reach them.

1. Research your target markets.

Any good plan begins with research. Likewise, preparing your small business for international expansion is no exception.

While making a broad goal of going global may be inspiring, it doesn't do much to provide strategic direction. Where would your offering fill an underserved market niche? Consequently, identify which countries are your prime targets for expansion and take it from there.

Tap into your existing data to determine whether it will provide the answers you need. If it won't, you'll need to conduct a more extensive research effort so you can target the right market segments.

Don't skip this step. Heading into an expansion plan without a base of knowledge is a recipe for disaster. Therefore, take your time, prioritize your questions, and document your findings so you can make the right decisions the first time.

2. Secure your ideal talent.

Your international small business expansion will present unique opportunities and challenges. One significant hurdle to overcome is talent acquisition.

Your stateside employees are great, but you may need to add international talent to serve your expanded clientele. As a result, time zones, cultural customs, and physical proximity are all things you'll need to take into account.

Unless you establish a physical presence in countries you hope to serve, you'll need to utilize employer of record services to secure top talent. By contracting with an EOR, you'll be able to hire employees in multiple countries while minimizing your administrative burden.

Your EOR will take care of the paperwork and navigate employment and benefits laws, saving you time and money. With all of this taken care of, you can focus on hiring the right people, no matter their location.

3. Get the right tech.

Communicating with your customers and your teams is essential no matter where you are in the world.

Nail down your technology and communications best practices so you can nimbly serve your customers. If you aren't sure where to start, begin examining how your internal teams work together.

Identify small business collaboration tools that can serve remote international teams.

Consider how you'll manage workflow and touchpoint opportunities with teams working on differing schedules. Determine what devices, software, and tools are needed by your expanded team to accomplish their tasks. Adopting cloud-based solutions will help ensure that your chosen software performs well in all locations.

4. Learn international small business practices.

Cultural customs are dynamic and require careful attention, even if your business is known to be headquartered stateside. A sensitivity flub could tarnish an otherwise sterling reputation, so it's important to be mindful of social norms.

Prioritize learning about workplace practices in the countries where you plan to do business. Create standards for your small business team to lean on as they do business with international customers.

The goal here is to be welcoming and courteous to all of your potential customers, no matter where they're based.

Make similar efforts with your international employees, taking note of any specific needs. This may manifest in observing certain holidays, establishing particular work hours, and/or being mindful of word choice.

The additional research and training required to fine-tune your practices are worth it when your team and customers feel respected.

5. Plan thoroughly.

You've identified your expansion target(s) and hired employees. That means it's "go" time, right?

Not so fast. Jumping into expansion without a comprehensive plan is almost sure to fail. Work with your international team to identify specific steps toward small business expansion and assign dates to each milestone.

If you reach a rough spot, pause your plan and assess the situation with your leadership team.

Most plans need to be adjusted once you get into the execution phase, especially as you encounter real-life issues. As Gen. Eisenhower famously said, "Plans are worthless, but planning is everything." While "worthless" is a bit strong, you will want to develop a thorough, measured expansion plan that's able to flex with reality.

As the world gets smaller, your small business scope can get bigger.

Global business growth is exciting, especially if your small business was once a dream.

Immerse yourself in the international small business landscape and keep tabs on best practices. Observe trends in the markets you plan to enter and adapt your offerings accordingly.

When you're prepared, you can be an early adopter of new ideas and practices. In doing so, you can establish your brand as the go-to in your category.

Network with other smaller businesses that have successfully scaled on the international stage to learn from their triumphs — and mistakes. Connecting with those who have real-life experience can help you avoid big problems. With a solid plan, the needed support, and the right talent, your opportunities truly are limitless.

The post 5 Tips for Taking Your Small Business International appeared first on KillerStartups.

How to Make Six Figures Referring Business to Others: Here’s How

Posted: 29 Mar 2022 05:00 AM PDT

If you're looking to make some extra cash on the side, you should definitely consider referring people to businesses. It is pretty much like free money. For example, over the weekend I received a promo email from Acorns. If I referred three friends, I would get a $600 bonus. Sweet.

Of course, Acorns isn't the only company that offers a referral service. In fact, a wide range of companies offer lucrative bonuses when you invite others to join. Robinhood, Rakuten, SoFi, Swagbucks, Xfinity, T-Mobile, Dropbox, Coinbase, Fiverr, and TurboTax are just some of the best referral programs out there.

While these programs are an easy way to make some cash on the side, referrals aren't going to make you wealthy. But, if you up your game, it's totally possible to make six figures referring business.

1. Decide who you want to refer.

Your first order of business? Determine what businesses you want to refer to others. Ideally, these should be businesses that you not only patronize but are enthusiastic about.

A contractor referral service, for example, might be something you'd enjoy starting if you dig home improvements. Maybe you should consider using a tutor referral service if you are a teacher or retired educator. Or, perhaps a business went above and behind and you went to spread the word about them. For instance, I still rave about my mechanic. Besides being a quality mechanic, he's speedy, affordable, and is always transparent.

At the same, don't just consider your expertise or personal preferences when choosing businesses to refer to others. If you want to expand your business and reach more customers, you should also take into account your community. As an example, if there is a growing number of seniors moving into the area then you need to focus on businesses that cater to that demographic.

2. Do your research.

Next, you will need to find out what the licensing and insurance requirements are for the service providers you are referring to. And, after that, create an exhaustive screening procedure based on that information.

To ensure the highest level of customer satisfaction, every business in your network needs to be thoroughly vetted. Why? Because it's your reputation on the line.

Let's say that your niche is home repair. Referrals are of little value if you let just any contractors, plumber, or electrician join your referral business. Sure, some of them may do excellent work. But, others may be shoddy and end up causing thousands of dollars in damages.

In order for both service providers and customers to be interested in working with you, they have to be worth something. So, make sure that you can personally vouch for these businesses. If not, you should get recommendations from others you trust or by checking out online review sites.

What's more, you should also check around and see if there are any other competitors. There might already be an established referral service in your niche or community. If that's the case, you want to make sure that a second service is viable and financially successful.

3. Establish your payment method.

Due to the nature of this business, it can be tricky to quantify how much you may earn. However, usually, referral businesses operate in the following ways;

  • Each business that wants to join your network pays a fee — usually around $200-$500.
  • The referral business charges a fee from the consumer for getting their list of recommended businesses. The usual range is $10-$50, though it is likely you will sell more of these if the information is valuable.
  • In exchange for referrals, the business offers free services.

It is possible to run a referral business that combines all three elements. However, you can also be commission-based, be paid per lead, or charge a flat monthly fee.

The best compensation model for your business will be determined by researching similar referral companies in the same field. Also, it wouldn't hurt to ask a few professionals in the referral service industry about the type of compensation that is fair and or standard.

4. Build meaningful relationships.

Here's the truth. If you want to succeed at referring businesses to others, then you need to be a people person.

"This may sound like a daunting truth to the non-networker or introvert, but here's good news," writes Randy Garn in Entrepreneur. "I've created and proven a winning formula after years of experience and trial and error. It's gone through many iterations, but these are the steps that lead to what I call the Velocity of Relationships."

  • Become a habitual networker. "Make a list of people, then be strategic in the way you build relationships with them," he suggests. "Create connection points and prioritize your time." For example, join Linkedin Groups, attend local trade shows, or host business events.
  • Understand that relationships are built on knowledge. Invest the time and effort in learning the insights that are hidden beneath the surface.
  • Make meaningful memories. When possible, spend time outside business to create strong bonds and lasting relationships.
  • Never gossip. "When a conversation turns stagnant, we often turn from discussing ideas to dissing people," says Garn. In turn, this kills trust. Instead, offer praise.
  • Get in the habit of being happy. People who are negative are not desirable to work with, let alone spend free time with, he adds. Your network needs your positive attitude, your zest for life, and your optimism. "So, take care of yourself, take time for yourself, then give your positivity to others."
  • Treat taxi drivers and CEOs the same. The poor treatment of a receptionist led to the failure of multi-million dollar deals. In contrast, multi-million dollar deals have come from the mind of a customer service representative. Status does not matter, especially when you see the potential within everyone. "Treat every individual as if they're a CEO. One day, they just might be," Garn advises.

5. Pinpoint your target audience.

You will need to determine who your customers are and how you will get in touch with them after you have established a network of providers.

Prepare a market segmentation study and identify your ideal customers' key characteristics. Where, for instance, are your potential clients located? Do you have both male and female prospects? What is their age? Do you cater to families with children or seniors?

6. Follow the 80/20 rule.

Alternatively, ask anyone who has owned a business for a while and they'll tell you that it's rare to get new referrals from existing customers. That's just how the cookie crumbles.

According to the philosopher Pareto, though, 80% of your results were the result of 20% of your efforts. And, that principle also holds true for any client base. In other words, for businesses you're going to get 80% of your referrals from 20% of your customers. These are those loyal, raving fans that are going to tell their friends about a product or service they love.

In order to increase your referral network, you will need to identify and connect with that group of customers. And, eventually, you can refer them to other businesses that they would be supportive of.

Remember, people who hear friends or family talking about a product or service will instantly trust them. After all, it's impossible for any other marketing method to match. In fact, it's been found that when it comes to seeking our trusted brand information 93% of people trust friends and family the most.

7. Provide integrity and value.

Obviously, you need to promote your referral service. And, the best possible way is through a well-designed website. More importantly, though, it should have valuable content that not only details the services that you provide but also why others should trust the businesses that you're referring to.

For example, your blog could feature reviews of the products and services you use. You could even have guest posts from the businesses you're referring to others. In these posts, they could share what they offer, contact information, and why they deserve your business.

In addition to a blog, you could have a monthly e-newsletter or launch a social media campaign. If you're staying local, you could embark on offline promotions like direct mail to prospective clients or place yard signs of the business you're referring to in your front yard.

8. Introduce additional revenue streams.

Speaking of promotion, did you know that it's possible to make a profit promoting others? The most obvious example would be through affiliate marketing.

The affiliate marketing process is quite straightforward. A link on your website points to a product or service on another company's site. There is a unique code that identifies you in the link. If someone clicks on that link and buys something, that sale is credited to you. That means your business will get a commission.

If you have enough traffic to your site, you could accept sponsored posts. Examples include brand mentions, product reviews, or a link back to their website. You could promote products or services that complement other businesses, like connecting vets with pet stores.

Outside of promoting other businesses, you can also earn a passive income by referring businesses to others. How? While, if you're successful at it, then you can share this knowledge with others.

Take, for example, Lewis Howes. He made a full-time gig out of connecting people on LinkedIn. Because of his success, he started coaching others on how to do the same. This led to his first webinar where he made $6,200. From there, his business earned $2.5 million annually for three years in a row.

Howes has since sold his business. But, he has gone on to write three books, host a popular podcast, and coach other entrepreneurs to earn a passive income.

Frequently Asked Questions About Six Figures Referring Business

What is a referral service business?

Basically, you will help connect those who would like to buy a product or service with those who would like to sell it.

It's up to you to decide what type of referral business you'll have. It could be from a dentist-to-client program (like the old 1800 Dentist program) to a service where you help connect people looking for writers with those willing to work (like Text Brokers).

How much does it cost to start a referral service business?

According to Entrepreneur, startup costs for referral service businesses are between $2,000 to $10,000.

What are the different types of referrals?

Generally, there are four types of referrals;

  • Word-of-mouth referrals. Word-of-mouth referrals remain the most-trusted method of attracting new prospects.
  • Online reviews. Online reviews are just as trusted as personal recommendations from friends and family, according to 88 percent of consumers.
  • Social recommendations and sharing. Through social channels, you can network, nurture relationships, and share valuable content.
  • Email referrals. The same principles that work on social media also apply to email. Sometimes it even works better. One of the best ways to increase awareness, acquisition, conversion, and retention is through email. It's easy to understand why with a return on investment of 4,400 percent.

How to ask for referrals.

While there is no one-size-fits-all approach, here are four tips you should use when asking for referrals;

  • Reach out to the right businesses. Depending on your needs, you may reach out to an extensive list, or just a select few. In either case, be thoughtful about whom you approach.
  • The ask should feel natural. Developing a relationship with a customer should lead to asking for a referral. When you meet with a new customer, it shouldn't be your first interaction. Typically, we don't like being asked to join something or do something after meeting someone for the first time.
  • Ask at an appropriate time. When should you invite others to your referral program? Despite there being no right or wrong answer, certain times lead to a higher conversion rate. For example, promoting a lawn care business during the warmer months of the year.
  • Don't be pushy. Referrals can be strongly suggested without making others feel pressured. Try asking them, "Is there anyone else you know I can help?" It's a small request without them having to commit to your referral business.
Image Credit: Karolina Grabowska; Pexels; Thank you!

The post How to Make Six Figures Referring Business to Others: Here's How appeared first on KillerStartups.
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