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Improve Your Social Media Marketing Efforts Using Facebook Messenger Chatbots

Posted: 11 Sep 2019 01:00 PM PDT

Technological advancements have made it possible for marketers and business owners to strategize their marketing campaigns in various social media platforms. Consumers nowadays rely on the internet when they want to look for products or services they need.

Social media has opened up new opportunities for businesses to grow without requiring huge upfront marketing budgets.  According to a report from eMarketer, 45% of consumers said they make purchasing decisions based on the opinions posted by consumers on social media. 

According to a report from Hubspot, 92% of online marketers consider their social media marketing strategies crucially important to their business or specific campaigns they are running. Nearly 50% of marketers who utilized social media in the past two years report improvements in their conversions.

Managing social media campaigns can, indeed, be daunting and require a lot of effort and oversight to attain your goals. However, there are now convenient tools offered by social media platforms that allow businesses to connect, interact with, and communicate with their customers and improve their marketing executions. One such tool is a chatbot.

More and more businesses are using chatbots as a proper marketing tool.

Why social media marketers are using chatbots

Social media chatbots can automate and facilitate many social media marketing tasks, and devising creative and efficient ways to utilize them can take your marketing game (and your business) to the next level.

Facebook is the top social media site, and chances are you already have a business account for Facebook. Within Facebook Messenger, you can create a Facebook Messenger bot to communicate with your customers that helps your business achieve several goals. Below are five reasons why your business should utilize Facebook Messenger chatbots in your social media marketing efforts.

1. Chatbots increase visitor engagement

Chatbots can provide a personalized experience for your visitors by monitoring their posts and noting their personal preferences. Over time, chatbots can provide accurate information, including products, to your visitors based on their preferences. This can help your business attain more engagement with consumers.

2. They help spread consumer awareness of your brand

A chatbot not only delivers content, but you can use chatbots to deliver specific information about your brand. For instance, you can send industry-related news that may interest your visitors or inspire them. You may also do minifeatures like a "brand fact of the day" or a shortlist.

3. Chatbots provide personalized content delivery

Marketers and business owners strive daily to determine the best ways to attract their targeted audiences in a more personalized form – chatbots can do just this; they can be programmed to deliver personalized content based on your visitors' preferences. Just by asking a few questions, it can give visitors the content they are looking for or need.

4. They provide analytics instantly

Data gathered by chatbots, such as preferences, purchase history, customer behavior, and demographics, are crucial for you to create personalized products or services offers, promotions or advertisements. 

5. Chatbots can provide 24/7 customer service

Customers always have questions about products and services, and they expect an immediate response. If they don't get an immediate answer, they seek other options. Chatbots can help you establish timely, excellent customer service with a lot less tedium.

They can help you build good relationships with your customers while not having to hire so many customer service representatives to handle common inquiries. You can use chatbots for your general, frequently asked questions while letting your personnel resolve more pressing concerns.

Due to their recent prevalence, people are now more willing to interact and communicate with chatbots. On Facebook alone, there are around 300,000 chatbots installed in Messenger.

How do major brands currently use chatbots on Facebook Messenger? 

Below are a few examples of how different brands are using chatbots on Facebook Messenger. You might want to consider some of these applications for how your business helps customers. 

1. TechCrunch 

TechCrunch's chatbot sends its followers the content they want, when they want it. Followers choose the number of times they'd like to receive new content and what kind of content they want. Users aren't spammed, and, the chatbot tracks the types of articles users read so it delivers similar content and suggests new articles for followers.

2. Sephora 

Sephora's chatbot, which the company calls your "personal assistant," provides makeup tutorials, product reviews and ratings for customers shopping the beauty company's online store. Also, consumers can book appointments for makeovers or skincare consultations using Sephora's chatbot. Customers don't have to call their local store to schedule these appointments; the chatbot asks the customer for their location and schedules the appointment.

3. Spotify 

Spotify makes it easy and convenient for their followers and subscribers to search, listen, and even share music with their family and friends. Once you get started, you're given playlist recommendations that are based on your mood, the music genre you want and what you are doing. Chatbots make it easier for both businesses and customers to interact and engage to communicate about what they need and want.

The limitations of chatbots

While it may seem like chatbots are miracle workers, they're not without their drawbacks. Many misunderstand what chatbots do and what they're good for. Chatbots do indeed make social media marketing easier, but they don't make it hands-free. Knowing their limitations allows you to use chatbots wisely within your own business.

1. It's not a "set it and forget it" tech tool

No matter how good the chatbot is, you can't leave it to its own devices and not do anything else. Chatbots automate chat correspondences with customers, but they're not a computer version of you. They still need to be monitored to ensure they're providing satisfactory responses to consumer questions and feedback.

Chatbots are not there to replace customer support jobs; they are there to supplement your customer support team's efforts and make their jobs a little bit easier.

2. Chatbots handle small problems, not big ones

Chatbots are usually designed with live chat takeover, which lets a human jump in at any time. While good chatbots can learn or be programmed to handle higher-level concerns as time passes, there should always be the option that an individual can intervene when an issue has been escalated and requires more serious help.

Even if your chatbot has been programmed over a period of time to handle just about every single problem you can think of, it still isn't capable of handling inquiries that involve nuance and human understanding.

While chatbots make customer services more convenient, only human representatives can handle customers with unusual requests and inquiries, in addition to resolving complicated problems.

3. Chatbots can be abused

In using a chatbot, your aim might be to let the tool handle every inquiry, and while you might think it's not a big deal to use a chatbot as a way to respond to customer concerns, it matters greatly in the long run. Not having adequate measures in place to address and resolve customer concerns and complaints is unethical.  

Another potential abuse with chatbots is chat blasting, where you send messages to contacts on your list. Right now, customers can simply not respond to your blast, but if you chat blast contacts with reckless abandon, you may get the attention of Facebook. If your activities are found to violate Facebook's terms and conditions, you may be banned from the platform.

Bottom line on Facebook Messenger chatbots

Marketers and business owners can create intelligent chatbots within Facebook Messenger to act as a useful and helpful resource for their customers. Your business can offer consumers extensive information about your brand, products or services through a chatbot. Many chatbots seamlessly integrate into Messenger. Regardless of the type or size of your business, many chatbots take just a few minutes to set up, and then you're on your way to increased sales, leads and higher customer engagement.

Why Mentorship Matters to the Startup Community

Posted: 11 Sep 2019 07:00 AM PDT

  • Mentors are integral to founders' success because they can provide different opinions, a helpful community and valuable connections.
  • Mentors have as much to gain from mentorship as their mentees.
  • A strong mentorship network strengthens the global startup community.
  • To lend a helping hand to those looking for mentorship, get personal, give advice at the right time and place and create connections.

In business, the line between success and failure is often paper-thin. The more you learn from those who've walked both sides of that line, the better your chances are of staying on the right side of it.

Entrepreneurs know this instinctively. A recent survey by global finance, technology, and data firm Kabbage Inc. revealed that 92% of small business owners acknowledge the impact of mentors on their businesses' long-term viability. Yet nearly two-thirds of owners lack any professional guidance when launching their businesses. 

It's not difficult to see why there's a disconnect. While many seasoned professionals acknowledge the impact of this gap, those professionals aren't necessarily offering up their time to other growing companies. If more experienced individuals could truly see the benefits and far-reaching effects of mentorship, though, more would be quick to accept – and offer – guidance themselves. 

Mentorship molds careers

I'd be lost without the mentors I've had and the lessons they taught me that have guided my entire career. My very first mentor, Brian Hamil, was the national chair of biomedical services for the American Red Cross, and we met while I was working alongside the organization's president. When I was just 22 years old, he taught me business lessons big and small, like how to handle a growing workload, navigate internal politics and even influence my boss. More importantly, he taught me how to hold to my values close and let them guide my work.

I wouldn't be who I am today without Brian and many others who have invested their time in me. When my management style needed work, I needed advice on hiring and firing, or I simply required more resources to grow, mentors were a vital part of it all.

My story is like so many others. Now, as the CEO of an organization that connects startups with the human and financial capital they need to support and foster their growth, I've watched more than 12,000 startups go through one of the more than 110 accelerators in our community. The main reason 85% of them make it past the critical five-year mark? Mentors. 

I believe there are three primary reasons mentors are integral to founders' success:

  • Different opinions: If entrepreneurs knew all the answers starting out, a greater number of businesses would succeed. Early on, you have to see your business from other angles, so having more voices in your ear means having more experience at your fingertips. At GAN Accelerators, startups have an average of 167 mentors, giving them access to more knowledge and ideas than they'd ever have found on their own.
  • A helpful community: From mentor relationships, startups often cement a few invaluable, long-term partnerships. These form a lasting community that will help them long after the startup phase ends. We've even found that many of our accelerator startups ultimately remain in the city where they went through a program. Why? Community has a strong pull, and their community is there. 
  • Valuable connections: Mentors can do more than teach you the ways of business – they can connect you with clients. And there's no better connection than someone who already wants to see you succeed.

This access proves invaluable for any young startup facing the many land mines in their way during those early years of business.

Mentorship gives back

Mentorship isn't a one-way street, though. In truth, mentors have as much to gain from the relationship as those they teach.

Sometimes, the give-and-take is direct. A mentor might work with a startup and land their next gig. But if landing a job is the mentor's primary motive, returns will be limited in the long run.

Psychologist and Wharton professor Adam Grant argues this in his book, "Give and Take." Grant describes three types of people in the world: givers, takers and matchers. Takers might give but only minimally and with the sole objective of getting what they want. Matchers, somewhat similarly, expect to receive in-kind for what they give. But givers share their knowledge and connections freely without any expectation of return. 

Which of these types do you think is more successful? While it might seem counterintuitive, Grant's data shows that it's the givers. Despite not directly pursuing returns, those who freely give are consistently rewarded with promotions, profits, and more. Why? Because all those they've helped want to return the favor. 

Mentorship strengthens the startup community

The advantages of mentorship extend well beyond the immediate mentor-mentee relationship, too. A strong mentorship network makes for a stronger global startup community.

Sharing knowledge is a major part of this. As mentorship increases, more startups will launch with access to knowledge and expertise that the startups of earlier generations lacked. This makes for a better-informed startup community and one that is less likely to make the mistakes of those that came before.

More important than knowledge, though, are the connections that the best mentors help startups make. When mentors make not only their own knowledge accessible to young entrepreneurs, but also the experience of their entire networks, they strengthen connections across the whole startup community. New people are continually brought in from the sidelines and into the mix of supporting startups. 

Our community of accelerators provides valuable services to thousands of startups with 9,692 mentors worldwide, and staff at those accelerators, much like me, see this as so vital because of the help we've all received along the way. It's the ultimate measure of mentorship success – those who've been mentored choosing to make mentorship available to others.

Good mentorship is not complicated 

If a thriving global startup community is the goal – and it is – more business leaders must take on the mentorship role. Becoming a good mentor doesn't have to be a burden, though. Here are three simple but powerful ways to lend a helping hand: 

1. Get personal. Anyone can write a blog post about scaling a new company. However, if you instead give specific advice on scaling to a company that puts cameras on the bottom of airplanes and operates in Denver, that takes skill and sets you apart as a helpful partner who is tailoring its expertise to meet the needs of mentees. Good mentors give particular advice to particular startups in particular industries and cities.

To personalize your style of mentorship this way, ask your mentees exploratory questions. What does success look like for them? What do you hope their development will look like? What steps will it take to get there? Be as specific as you can to see fantastic outcomes.

2. Choose the right time and place for advice. Mentorship is a process, and overwhelming a new CEO with too much advice at once subverts it. It's unreasonable to expect anyone to receive and integrate all of your advice without time to try it out or weigh it with any other advice they're getting, too. Being a good mentor means knowing when the time is right to step back and when it's time to offer guidance.

To avoid over-advising, establish a regular rhythm of communication with your mentee. Set a regular meeting monthly, weekly, or otherwise for in-depth discussion. Outside of that, agree on parameters for what kind of communication works best. For example, be open about what kinds of questions you can tackle over email instead of through a true meeting. This will protect your mentee from too much advice and protect you from taking time to field a barrage of minor questions.

3. Create connections. Once again, the best mentorship extends beyond mere knowledge sharing. As you grow to understand the company you're mentoring, think about your network. Who do you know that could help this company with its specific needs?

While you might be connecting your mentee with potential customers, there are many other helpful resources your network could provide, like strategic engagements or potential investors who'd be much more likely to take a referral from someone in their network seriously than someone outside of it. Connections compound the value of your mentorship 10 times over. 

Mentorship is a long game

We hear again and again that startups are creating jobs and building the future. But for them to do this, they need more support than just posts on Medium or even great books for guidance. Their success depends on strong, engaged startup communities, and those communities depend on actively involved mentors to make things thrive.

Creating that community doesn't happen overnight. It requires mentors who are playing the long game and not just looking for quick returns. In fact, it means acknowledging that returns aren't even guaranteed. But as more leaders accept the responsibility of mentorship, more startup success is sure to follow. 

For the best mentors, that will be reward enough.

How E-Commerce Brands Can Use SEO to Boost Their Online Traffic

Posted: 11 Sep 2019 06:00 AM PDT

For e-commerce brands, increasing site traffic is an ongoing priority. While it's true that many brands successfully generate revenue through Amazon and other platforms, the vast majority of e-commerce companies see their own website as the primary source of revenue.

Of course, to boost traffic to your own site, you need to invest in SEO. While activities like guest blogging on other sites or bidding on competitive keywords can certainly give you a rankings boost, I've found that many e-commerce stores have an unfortunate tendency to overlook the technical elements that influence their ranking.

These tech adjustments to your site and its content may not be as flashy as a PR placement in a big-name publication, but they can prove just as important for improving your online visibility.

The right back-end adjustments will send the right signals to search engines, while also making your site more user-friendly. This way, you won't just boost your SEO ranking and number of site visitors, you will also see an uptick in conversions.

1. Make your site mobile-friendly.

E-commerce brands should never assume that their audience is shopping from a desktop computer. According to Pew Research, 81% of Americans own a smartphone, a greater percentage than those who own a laptop or desktop computer.

The increased penetration of smartphones in the United States also means that people are becoming more comfortable with the idea of shopping from their mobile device. As reported by AdWeek, 46% of consumers "prefer to use their smartphones for the entire purchase process." Depending on your target audience, this percentage could be even higher.

Needless to say, you need to make sure that your e-commerce site is optimized for mobile users. AdWeek further noted that a whopping 73% of consumers will abandon a site that doesn't deliver a quality mobile experience.

Not only does a mobile-friendly site provide a better experience to your users, it has a direct influence on your SEO rankings. Google has recently switched to mobile-first indexing as part of a continued shift toward prioritizing mobile-friendly sites. If your site isn't mobile-friendly, your rankings will lag far behind the competition.

These days, a responsive website design is the easiest solution for ensuring that you don't miss out on mobile users. If you're not sure if your site is mobile-friendly, use Google's Mobile-Friendly Test so you can identify needed changes.

Editor's note: Looking for the right e-commerce website design for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

 

2. Optimize site speed.

How quickly a website loads depends on much more than the user's internet connection. Much of it is largely dependent on technical elements related to your site, and any shortcomings will affect both the user experience and your SEO rankings.

Loading time is especially important for mobile users. Google research found that 53% of smartphone users would abandon a website that takes over three seconds to load. This increases your bounce rate, another negative ranking factor. Not surprisingly, Google executives have frequently advised site owners to ensure that their pages load in two seconds or less.

Even a relatively small improvement in site speed can make a big difference. In a BigCommerce case study, it was reported that e-commerce brand US Patriot Tactical improved its conversion rate by 17% as a direct result of increasing site speed by 30%. Upgrading its web hosting played a big role in this by helping prevent slowdown during spikes in traffic or shopping activity. This also kept the site from crashing during high-traffic periods, which had previously been a common issue that negatively affected consumer trust.

To enhance site speed, make sure you are using a quality server and content delivery system. You should also optimize images and other site content. Compressing images and other HTML files can greatly improve site speed by reducing the size of the files that will be loading on your page. Finally, enable browser caching. The faster your site loads, the better it will rank, and the easier it will be to convert your visitors.

Google has also recently begun encouraging sites to install its AMP (Accelerated Mobile Pages) plugin. This plugin is designed to improve site load time for mobile users, further boosting your overall performance.

3. Get an SSL certificate.

Digital security matters to consumers, and as a result, it matters to search engines as well. All the way back in 2014, Google confirmed that SSL certificates were being used as an SEO ranking signal. Despite this, I've seen far too many e-commerce sites that continue to only offer an unsecured browsing experience.

This puts consumers at a much greater risk of cybercrime, and can negatively impact your site's perceived trust with potential customers and search engines. When over 210 million cyberattacks occurred in Q1 of 2018 alone, it becomes clear that fraudulent purchases, particularly shipping and billing fraud, are a major threat to consumers. 

This makes getting an SSL certificate an essential part of any e-commerce brand. By establishing encrypted links, these security protocols ensure that payment credentials and other personal information cannot be stolen by a third party. All communication between a customer's web browser and the site's server is safe.

Many browsers now provide "not secure" warnings to users visiting a site that doesn't use HTTPS. Such warnings could easily encourage users to click away from your site, increasing your bounce rate and giving your competitors an even greater opportunity to move up in the search rankings.

At the end of the day, however, SSL certification isn't just about avoiding a negative impact on your SEO rankings. It's about protecting your customers. Establishing trust by prioritizing their data security will go a long way in helping you grow your brand.

4. Find and eliminate broken links.

E-commerce brands are constantly updating and refining their product offerings. This can greatly increase your risk of having broken links on your site. Not only does this make your site harder for your customers to navigate, but it also disrupts Google's crawling process. Any time an internal site link sends users to a "404 error" message, you have a problem.

When Google discovers a large number of broken links on your site, it sends several negative messages to the ranking algorithm. It indicates that your site content is not updated or maintained with regularity. It can also hurt your site's perceived relevance and quality, further lowering your ranking.

To avoid these pitfalls, e-commerce brands should regularly audit their site to check for dead links, particularly after performing a refresh of their product lineup. There are actually several site crawling tools available, such as LinkMiner or SEMRush, that can crawl your site to identify potential red flags.

Once you've identified the dead links on your site, you can either remove the broken link entirely or redirect it to a new URL. You will likely need to update links after installing an SSL certificate to ensure that all links are taking users to an HTTPS page.

The larger your site becomes, the more likely these issues will occur. As your product lineup expands, you may wish to consider performing link audits on a weekly basis to ensure that everything is working as it should. Eliminating these technical issues will improve usability and help you avoid costly penalties from Google. In my experience, regular audits will keep broken links and other issues from getting out of hand.

5. Don't neglect the alt text.

Appropriate keyword implementation is an essential part of on-site SEO, but all too often e-commerce sites will only focus on the written content of their site. Keywords also play an important role in image optimization.

For images, keywords come into play via the alt text. This is text that is added to the HTML code to describe what appears in an image on a website. Alt text is important, because Google's crawlers don't actually see the image when going through your site. Instead, they rely on the image's metadata; namely, the file name and alt text to identify its content.

Because of this, the alt text plays a crucial role in signaling the image's relevance. Providing a descriptive alt text that incorporates your primary keywords can send a powerful ranking signal.

However, alt text is also meant to improve accessibility for web users who cannot actually see the image. Because of this, alt text descriptions need to be truly helpful, so that individuals who use a screen reader or have a browser that blocks images will still understand what the image was meant to convey.

This means you should avoid keyword stuffing. Instead, write a helpful description that sounds natural. I believe the best alt text reads more like a short sentence rather than a collection of keywords. Try to keep it as short as possible without resorting to a one-word description to achieve the right balance Google indexing and user-friendliness.

SEO is about much more than producing blog content and getting third-party links to your site. While these tasks are certainly important, e-commerce brands cannot afford to neglect the technical side of SEO.

By ensuring that your site is technically sound and better optimized for search engines, you will improve its discoverability and usability. As you use these tactics to help drive fresh traffic to your site, you will be far more likely to see the sales growth your brand needs to thrive.

How to Compress Photos

Posted: 11 Sep 2019 05:10 AM PDT

  • Image compression isn't hard, and the process can help with computer storage space and branding purposes through the use of quality images that load quickly.
  • You can use photo-editing software or programs like Microsoft Word to compress image files.
  • The process of compressing JPEG images is similar to compressing any other type of image file.

In 2019, using technology is a necessity. Whether you're running a website or using social media, consumers love to see images – no matter which type of device they're using. If a website uses poor image quality or its pages take too long to load because the image files are too big, some consumers will immediately be turned off, while quality images that load quickly can enhance a brand's reputation. Images matter.

The importance of images means your business needs to know the basics of image sizing and editing. You don't need to be a graphic design expert; resizing images and compressing photos is something everyone can easily learn.

What is photo compression?

Photo compression is a process that reduces an image's file size in such a way that it takes up less memory in your computer without messing up the image's quality. It's not an overly complicated process, and it's a good way to save computer memory.

Why compress photos?

Compressing photos saves space on your computer and makes them easier to email or post on the web, as the photos will take up less memory. Compression is a helpful tool, especially if you need to alter an image for your website or a social media post. Considering it's not too difficult to compress photos, there's no reason to shy away from the process due to initial lack of knowledge. Image optimization is a best practice for posting images online, and compressing photos to reduce file size is one popular way to optimize images.

How does the photo-compression process work?

Photo compression takes just a few steps and can be done using photo-editing software or a word processor such as Microsoft Word. If you don't know how to compress photos, here are the steps using either type of software. Even small business owners or entrepreneurs who rarely use computers can figure out how to compress image files.

Compressing photos using image-editing software

  1. Open the photo you want to compress in your photo-editing software.
  2. Go to the file menu in your software and choose "Save As" or "Save."
  3. Click "Options" in the popup menu.
  4. Select the "High Compression" option in the Photo Compression section of the menu.
  5. Select "Lossless Encoding" in the Encryption section. This will help to save the integrity of the photo.
  6. Click "OK."
  7. Hit "Save." Your computer will compress the photo and save it.
  8. If you are saving the photo as a JPEG, you may lose quality, so the photo needs to be protected while compressing. Saving your photo in a format other than JPEG – such as TIFF, PNG, GIF or BMP – will help prevent quality loss.

If you are afraid of messing up the original photo, always use "Save As" to create a compressed version that is separate from the original.  Then, if you ever need the original version, you'll have it saved. Image editing can be tricky at times, so it's a good practice to save an original copy should something go wrong during the process. It's never a bad idea to use a duplicate image to make changes.

When it comes to your photo-editing software, there are dozens of quality options on the internet. You can use advanced platforms like Adobe Photoshop or the simplified, less expensive version, Adobe Photoshop Elements, to perform image edits. You can use something free like the GNU Image Manipulation Program, which is better known as GIMP. Paint.NET is another free alternative that tends to be widely regarded by users, and it should be simple enough for even new image-editing users to pick up.

If you'll only use photo-editing software to compress or resize a few images, don't pay for a service like Photoshop when you can use a free option like GIMP or Paint.NET. There's no need to spend additional money for an easy editing task.

Compressing photos using Microsoft Word

  1. Open Microsoft Word and open a new Word document.
  2. Click on the "Insert" tab on the top left side of the screen.
  3. Choose the picture icon from the list of choices.
  4. A list of files on your computer will pop up. Select the picture file you want to compress by double-clicking on it. The picture will be added to your document.
  5. Click on the picture. Under "Picture Tools," select the "Format" tab. In the "Adjust" group, choose "Compress Pictures."
  6. A popup screen will give you options. Either click "OK" to accept the default resolution or choose the quality of the photo compression by ticking the box beside the option you want and then press "OK."
  7. Save your document and the photo will compress.

If you just want the photo to appear in the document without a lot of white space around it, then you will need to change the size of your document to the size of your photo or as close to the same size as you can get. Here's how:

  1. Go to the "Layout" tab at the top of the Microsoft Word screen.
  2. Click on the "Size" icon from the "Page Setup" group.
  3. Select your custom paper size.
  4. Save your document.

How do you compress a JPEG file?

Whether you're using a JPEG or any other image file, the process to compress the image should remain largely the same, but with JPEG files, you risk losing resolution when you compress images. If the image is large, you can get around that by using Microsoft Paint to resize the image, which should reduce the file size as well.

  1. Open the image in Microsoft Paint.
  2. Select the image and use the resize button. Select whatever image dimensions you like and keep the "maintain aspect ratio" box checked.
  3. Click "OK" and the image will resize.
  4. If you want to crop the image, use the "Select" button to choose the portion of the image you want to keep, then click "Crop."
  5. Save the image.

You can also compress a JPEG file using the other methods we shared above. It depends on your preference and your business's software capabilities. Compressing JPEG images isn't rocket science, and platforms like Photoshop, Word and Paint can all get the job done.

How Leveraged Buyouts Can Help Small Businesses

Posted: 11 Sep 2019 05:00 AM PDT

Small businesses are constantly on the prowl for additional funds, and who could blame them? It's only possible to remain competitive in the modern marketplace if you're constantly investing in your future, and this may mean selling the company, or large swathes of its shares to a third party, in order to get your hands on the financing you need.

Leveraged buyouts are a fantastic option that can help many small businesses on the road to success, yet few entrepreneurs and would-be financiers truly understand them. 

You can't possibly hope to take advantage of a leveraged buyout if you don't thoroughly understand what it is and how it's orchestrated. Your first step should be to comprehensively educate yourself by familiarizing yourself with the ins and outs of the average leveraged buyout. Put simply, a leveraged buyout is when a majority share of a business is acquired using outside capital; a significant amount of borrowed funds that must be repaid with interest being used to purchase a property is the defining facet of a leveraged buyout.

There are a number of useful examples that you can study if you're still struggling to understand what a leveraged buyout is. Hilton Hotels was famously acquired via a leveraged buyout that exceeded $20.5 billion in debt financing, for instance, illustrating that even historically renowned mega-companies can be purchased via leveraged buyouts.

Small businesses can benefit from leveraged buyouts, too, however, and it would be a terrible mistake to make the assumption that only a massive corporation could be bought out in such a fashion. The major difference between leveraged buyouts centered on small businesses versus those focused on corporations is the amount of debt involved. A massive conglomeration could be worth billions, whereas most small businesses won't be worth anything near that amount. Using a leveraged buyout to scoop up a company by harnessing the power of debt can be a tantalizing investment option, but it also carries with it certain risks which must be considered well ahead of time.

The market can be defined by risk

If there's one thing that can safely be said about the leveraged buyout market, it's that it's often defined by risk. One of the greatest signs of peril in the marketplace is an ever-growing reliance on extra debt and a low reliance on equity cash. Too many people borrowing too much money at risky levels is a warning sign that too many illegitimate leveraged buyouts are occurring. Small business owners, in particular, should pay careful attention to the return of risky deals to the leveraged buyout market if they're about to foray into it for the first time, especially as economic tensions stemming from the ongoing trade war continue to simmer.

Leveraged buyouts can nevertheless prove to be a godsend to some small businesses; after all, if you're trying to sell your company or a majority of its shares but find yourself incapable of locating a suitable buyer, the leveraged buyouts market may be your last chance at securing additional financing in exchange for control over your company. Few entrepreneurs look forward to ceding sovereignty in exchange for cash, but the truth of the matter is that many small businesses need a constant influx of capital to keep pushing ahead in the market, and leveraged buyouts frequently offer that much-needed cash.

In the early days of the leveraged buyout market, it was entirely commonplace for massive corporations to be purchased via a leveraged buyout before being split into disparate parts that were then sold for a profit. If you're a small business, however, or a brokerage interested in scooping one up via a leveraged buyout, there's a strong chance you won't be able to profit by splitting the company into multiple parts before selling them off to whoever comes calling. For most small businesses, a leveraged buyout likely means a change in leadership when the new leader simply doesn't have enough cash on hand to purchase the company outright.

Know what you're giving away

If you're a small business owner considering a leveraged buyout with a financier, what would you be giving away? If you're the owner of the business, a leveraged buyout effectively means that you're turning over control of the company to whoever is orchestrating the leveraged buyout. In exchange for their debt-financed lump sum of cash, you're likely giving away a majority share of the company or even all of it outright. For an entrepreneur who has established a neat commercial empire for themselves, leveraged buyouts could be a springboard into early retirement if they're content to sacrifice their business in exchange for a mountain of cash.

As the Harvard Business Review makes clear, the market for leveraged buyouts has radically changed over the past decade or so. Once upon a time, a bank or major finance company was usually your only hope when it came to securing enough financing to rely on a leveraged buyout when you otherwise couldn't afford to acquire a company. These days, however, many financing options can be relied upon by clever entrepreneurs who know where to turn to if they find themselves cash-strapped and in need of a loan.

If you're a small business owner eager to sell your shares to an outside financier or an investor trying to scoop up that kind of business, understand that the assets in question are crucially important. If the company being sold via a leveraged buyout doesn't have sufficient assets to convince lenders that the entire initiative is worthwhile, not enough financing can be collected to facilitate the sale in the first place. A leveraged buyout that is cash-flow based will obviously need to be centered on a company that has a robust-enough cash flow to convince investors that the operation won't fall apart because of some diminished sales or a local recession.

Know why they're selling

Finally, if you're buying a company via a leveraged buyout, understand why they're selling in the first place if you don't want to end up inheriting an economic headache. A small business can greatly benefit from a leveraged buyout. The old owner can happily retire, the new owner can inherit a budding company via debt-financing despite not being able to personally afford it and the workers get to keep their jobs. If the person selling you their business doesn't have a compelling reason to part ways with their commercial empire, beware that you could be inheriting a struggling business that's unlikely to turn a profit anytime soon.

Leveraged buyouts can reshape small businesses in a number of ways. Whether it's putting a new owner in charge or achieving new levels of financing that can help a company expand, leveraged buyouts regularly display fantastic results for those involved as long as they're orchestrated carefully.

Spend plenty of time determining the overall health of a company before getting involved in its leveraged buyout, but understand that such an arrangement can be an economic godsend to those facilitating it.
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