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3 Ways the Government Can Help Small Businesses Through the Pandemic

Posted: 30 Mar 2020 11:24 AM PDT

Small businesses are an integral part of the U.S.economy. Companies with fewer than 100 workers employ about 33.4% of the U.S. population. There are countless impressive small business statistics you can read to appreciate how important it is to help them survive. This is especially true in light of the fact that the majority of small businesses have said they can only operate under the current conditions caused by COVID-19 for about three months, according to a new Goldman Sachs survey.

In addition to encouraging consumer support of small and local businesses, there are steps the government has taken and can take to continue to prop them up. Small businesses can buckle down and cut costs in bad times, but there are four costs a business always faces: taxes, wages, rent and commercial debt. If a small business can receive help with these expenses, it will go a long way to help them weather the storm.

What the government has already done

Because things are moving fast, this is what some governments have already done as of the morning of March 30.  

1. Passed a $2 trillion stimulus package

On Friday, President Donald Trump signed the Coronavirus Aid, Relief and Economic Security (CARES) Act. This package provides $350 billion for Small Business Interruption Loans, which are meant to help small businesses (those with fewer than 500 employees) make payroll and cover other expenses. Small businesses may take out loans up to $10 million and cover employees who make up to $100,000 per year; loans taken for this purpose may be forgiven if the business does not lay off its employees. To be eligible for a loan, a company must maintain an average monthly number of employees during the covered period that is no lower than the number it had before the crisis began. Companies that have laid off employees may qualify for forgiveness if employees are rehired by April 1, 2020. You can read more about what's in the coronavirus stimulus package for SMBs here.

With things changing so fast, you can check the U.S. Chamber of Commerce website for live updates.

2. Extended the tax filing and payment deadline

The U.S. Treasury Department extended the upcoming April 15 tax payment deadline to July 15, giving many individuals and businesses an extra 90 days to pay without penalties or interest charges. However, tax returns and extensions must still be filed by April 15. All individual taxpayers qualify for this extension and do not have to file any special paperwork or requests, as the payment deadline will be automatically extended. Individuals owing up to $1 million in taxes (regardless of filing status) and corporate filers with tax debts up to $10 million can defer their liability for 90 days. This extension also applies to quarterly estimated payments normally due on April 15, but it does not include an extension for June 15 quarterly estimated payments as of now.

It's important to note that this is a federal Treasury Department decision, meaning that some state filings and payments may still be required by April 15. While many states have already delayed filing and payment obligations, some states have yet to make any moves. 

3. Made SBA loans more available

The Small Business Administration's Economic Injury Disaster Loans offer up to $2 million in low-cost loans to pay fixed debts, payroll, accounts payable and other bills that businesses are struggling to afford because of the disaster's impact at an interest rate of 3.75% for small for-profit companies and 2.75% for nonprofits. The loans may be eligible for long-term payouts of up to 30 years to keep payments low. Small businesses can apply on the SBA website. 

4. Offered tax credits to help with expanded FMLA and paid sick time

To encourage those who are sick to stay home without worrying about missed time at work, Congress passed the Families First Coronavirus Response Act. It expanded the Family and Medical Leave Act for employees whose children's schools or other child care facilities are closed because of COVID-19. It also mandated up to 80 hours of paid sick leave for employees affected by COVID-19 and provided tax credits for employers to offset the increased costs.

These expanded employee provisions, which apply to companies with fewer than 500 employees, will become effective April 2 and are set to expire Dec. 31 of this year. (You can read more details about what this means for your small business here.) Because everything is moving so quickly, there are likely to be ongoing changes to the rules that try to strike a balance between encouraging sick employees to stay home without loss of income and alleviating the burden on small businesses. As of this writing, to compensate for the additional burden, employers are entitled to a refundable tax credit.  

For a comprehensive roundup of resources available to small and midsize businesses in this difficult time, you can visit business.com's page of COVID-19 business resources.

What else should the government do?

In addition to the CARES Act, governments can take more steps to encourage and help companies to keep people on the payroll despite decreasing revenues. These suggestions should apply for 60 days, for two reasons: Firstly, a 60-day horizon signals optimism that things will be better by then, and it also allows companies to forecast whether they can make it through the next 60 days so they can make better (albeit difficult) decisions about their employees. The timelines for all of these steps can be extended as necessary.  

1. Help businesses keep their people employed

A payroll and sales tax holiday

Although there is a strain on unemployment demands right now, state and federal governments could provide payroll tax holidays. This would save almost 10% for many employees on their payroll expenses over the next 60 days. While it does not sound like that much, if you have 20 employees, the payroll holiday would save you the money to keep two of them on the payroll. 

While there may not be time to complicate things, governments could stipulate that if the employer terminates an unemployment-eligible employee, any amounts not paid as to that employee during this holiday are immediately due. This may incentivize companies to try to retain their employees and keep them on the payroll.

The same could be done with sales tax. The lower costs could spur more economic activity from consumers. States and localities will take a short-term hit in revenues, but it may pay off if a longer-term economic disaster is avoided. Governments could tie the sales tax holiday to retaining employees on the payroll as well and graduate the amount of tax holiday to the number of employees laid off.

Removal of the S-corp reasonable salary requirements

Many small businesses make an S-corp election to save on the payment of employment taxes owed by the owners. To take advantage of the S-corp election, business owners have to pay themselves a "reasonable salary." The IRS does not allow business owners to avoid all employment taxes by paying themselves a salary of $1 and taking the rest in profits free of the employment taxes. In normal times, that makes sense, but perhaps the rules should change for 2020.

Some business owners may want to reduce their own salaries so they can use that savings to keep others employed. There may be hesitation about this, because an unreasonable salary may invalidate an S-corp election. Therefore, the IRS should waive the reasonable salary requirement for the calendar year 2020. If a business owner pays herself a "reasonable salary" of $200,000, she can forgo the rest of this year's salary and use the $150,000 to keep others on the payroll. These owners should not be penalized.

Does the U.K. approach of helping with actual payroll make sense?

The U.S. government could be more aggressive and emulate the U.K.'s approach. The U.K. government will pay 80% of the salary for employees kept on staff, up to £2,500 (about $2,800) a month. The U.K. is applying this to companies that have already instituted reductions in force as long as the employees are brought back on the payroll; it would not apply to new terminations. The pay is backdated to the beginning of March and will last for three months.

If there are massive layoffs, governments will be paying unemployment and other safety net measures for a longer period of time, so this may actually be cheaper in the long run. The problem with this proposal is that it would be hard to apply. Is it rewarding those who were quick to make layoffs while still making it difficult for small business owners who tried to hang on longer?

2. Offer rent relief

Another expense that does not go away is rent. While this would be unprecedented, governments could provide interest-free loans to all landlords who provide rent deferrals for the next 60 days. These could be interest-free loans payable over two years. The government could also provide a tax credit to landlords to encourage more of them to do it. 

The Federal Reserve is already pumping cash into the system. If it targeted some of this money to landlords to keep them afloat over the next 60 days, the landlords would waive commercial rents. The unpaid rents could be amortized into the remaining term on the lease or over the next 12 months so the landlords can eventually receive the money from the tenants and repay the government.  

Because the landlords would have the benefit of no defaults plus possible tax credits, the burden of paperwork to show the number of rent deferrals should be on the landlords and not overburden small businesses. We know many landlords are small businesses themselves, but they too would prefer not to have massive defaults by their commercial tenants.

3. Offer commercial debt relief

The government should consider a similar proposal for commercial debt. In addition to taxes, payroll and rent, many small businesses continue to have interest and debt expenses. Governments could encourage commercial lenders such as banks and credit card companies to defer debt payments over the next 60 days, supported by interest-free government loans and tax credits.

The lenders would also apply for interest-free loans and tax credits to keep them afloat over the next 60 days. They would use the deferred payments that will hopefully start flowing again in 60 days to repay the government. 

Some of these suggestions are quite radical and may stretch the authority of government power. But these are extraordinary times. By putting 60-day time limits on some of these proposals, governments can quickly make adjustments as needed.

Your E-Commerce Data Security Checklist for 2020

Posted: 30 Mar 2020 10:20 AM PDT

Your store's e-commerce data is very valuable, and not just to your business. As more merchants store data and build profiles on their customers to offer customer experience enhancements like seamless omnichannel shopping, cyberthieves are taking notice.

To protect your business from hackers and data theft – and to keep the customer trust you've worked hard to earn – it's important to make sure your company follows data security best practices.

Even if you have a data security program in place, it's wise to review it periodically to make sure you're keeping up with industry changes and evolving security threats. These steps are a good place to start.

Review your company's security budget.

Many merchants focus on fraud prevention solutions, which is critical, because card-not-present and account-takeover fraud have a huge financial impact on e-commerce sellers. However, there should be room in your security budget for data protection as well. A single breach of just a few thousand customer records could significantly damage your reputation and erode your customer base. A breach could also cost up to 4% of your worldwide turnover if the EU's GDPR applies to your business or any of your customers.

Evaluate your encryption practices.

Online stores know that having an SSL certificate and encrypted transmission of payment data is a must to maintain PCI compliance and the ability to accept card payments. However, that's not the only place in your business where encryption is a must.  

Any sensitive data –  especially any customer data that's covered by GDPR, the new California Consumer Privacy Act or HIPAA in the U.S. – should be encrypted for storage. If you store this data in the cloud rather than on premises, don't assume the encryption your cloud services offer is robust enough on its own. American Express recommends implementing stronger encryption tools than what's bundled with many cloud services. (You'll also need to make sure that your cloud storage is configured properly to keep intruders out.)

Refine your data-collection focus.

Don't collect more data than you need to serve your customers, and don't keep data any longer than you need to. When there's less to store, there's less to potentially lose. Schedule regular reviews of your collected data, and only keep what you need. Destroy or completely delete what you no longer use.

Take stock of your physical data security.

How easy would it be for an employee or visitor to walk out of your offices with a laptop or external storage device with your customers' data on it? Do your employees keep their laptops and phones secured at all times when they're out of the office?

Physical data breaches are rare, comprising only 4% of the attacks, according to the 2019 Verizon Data Breach Investigations Report. But when they do happen, the resulting data loss can generate bad press, brand damage and penalties.

While you're focused on physical security, find out what devices are connected to your network. A comprehensive, up-to-date list can help you and your IT team see who's using your network – with or without your authorization – now and going forward.

Restrict data access, and segment your system.

Not everyone in your company needs access to all your data. Giving employees and vendors access only to the data they need to do their jobs reduces the risk of hackers getting into your customer data via email phishing and account takeover attacks.

Segmenting your network can reduce the risk of data compromise. Separate your customer data from any other systems within your network that don't need access to that data. For example, if hackers break into your building's management system (the system that controls HVAC, alarms and cameras), they may be able to pivot and get into your customer databases if your network isn't segmented. Although it's not a PCI-DSS requirement, PCI recommends segmentation and says it may reduce PCI DSS scope if done correctly.

Require strong passwords, and limit data entry attempts.

Set up your customer, employee and vendor access to require a strong password. Simple passwords are a common risk because they're easy for hackers to guess or crack using bots that can test combinations until they find a match. A longer password that includes special characters, letters and numerals makes guessing virtually impossible and can make cracking take so long that criminals move on to easier targets.

Another way to reduce break-ins via account logins is to limit the number of login attempts a user can make before they are locked out of the system. This prevents password guessing or cracking. Likewise, if your online store's checkout process doesn't already limit card data entry attempts, adding that feature can reduce your exposure to card-testing fraud.

Keep your software patched and updated.

"Every time a vulnerability is disclosed, or a system update or patch is released, a hacker sees an opportunity," cautions the authors of the 2019 Verizon DBIR report. To keep your business from giving hackers that opportunity, make it a priority to patch software vulnerabilities and keep your software up to date.

Strengthen your malware protection.

Website security tools that continuously scan your site for malware can prevent a number of problems, including formjacking attacks that "skim" customer data as they enter it on your site, regardless of SSL protection. Although skimmers have gone after major sites like Ticketmaster and British Airways, they also target vulnerable smaller merchants. Of 40 sites known to be infected by organized skimming group Magecart this year, it appears that several are small business retailers.

Malware protection for your company's email system is important, too. Business email compromise (BEC), a type of targeted phishing that impersonates company executives, vendors and customers, accounted for half of all U.S. cybercrime losses in 2019, according to the FBI. In a BEC attack, fraudsters may impersonate an executive and request that an employee make an "urgent" wire transfer to a vendor with a particular bank number. Or they may target the payroll department with a request to reroute an executive's direct deposit to a "new" account.

Email is also a vector for other types of cyberattacks, including ransomware that can lock you out of your company's databases and bring your business to a standstill. Although ransomware attacks typically make the news when they hit government agencies, it's a growing threat to businesses of all kinds. In 2019, about 40% of EU-based SMBs said they'd been the victims of ransomware attacks, most often due to phishing emails.

Check your chargeback rates.

Poorly secured data can lead to card-not-present and account takeover fraud that results in costly chargebacks. Monitoring your chargeback rate can help spot emerging fraud patterns and keep your payment processing rates as low as possible.

If you see a spate of fraud-related chargebacks on orders that made it through your anti-fraud controls, (or if you get a wave of complaints about customer loyalty points going missing) it's possible that criminals have taken over customers' accounts with your store and used their stored data to commit fraud. It's also possible that they've extracted that customer data to create new accounts elsewhere.

If this happens, it's important to work closely with your customers to resolve the problem. To detect it sooner, consider adding group order analysis to your anti-fraud program to quickly spot trends that indicate sophisticated fraud.

Build a data breach response plan.

After all these tips on keeping bad actors out of your systems, it may seem odd to recommend that you plan for a breach. However, a written plan can help you limit the damage in case of a breach by helping you decide what to do with infected equipment and systems, who to call for help and who to contact to report the incident.

Following a plan may also limit your liability by helping you to meet legal requirements and deadlines for breach reporting. For example, the GDPR requires entities to report customer data exposure within 72 hours of discovering it.

Working through all the steps in this checklist may take a while, but then, cybersecurity is an ongoing process. Once you've identified the areas where your business can improve, and made those improvements, keep reviewing your data protection practices to keep up with the always-evolving threat landscape. Doing so will help you keep your customers' trust and help your business stay healthy.

7 Steps to Sales Success in a Shutdown

Posted: 30 Mar 2020 09:32 AM PDT

During market shifts, businesses adjust to the way that they work and what their priorities should be during challenging times. One significant challenge for most companies in a downturn is how to find and manage their pipeline and sales process.

Sales are essential for business survival, and there are necessary steps companies can take to ensure that they make progress and enhance their sales results both during and after a period of market stagnation. All business starts with a sale and a focus on how to bring products and services to the marketplace. Enhanced selling is an excellent exploration at any time and in every season.  

My friend Chris Cocca (CEO of Strategic Sales Solutions) and I have developed seven actions that every small business should consider to enhance their sales effectiveness during difficult times. These steps are both practical and applicable to businesses of every size and shape, from solopreneuer to large enterprises.

To become or stay a market leader in an industry, the product or company has to become well known, trusted and widely implemented. These steps will guide companies and sales leaders to enhance their sales performance during and after any downturn.  

Invest in or improve your customer relationship management tool 

Many companies make the mistake of trying to manage prospects or customers without a customer relationship management (CRM) tool. More than half of small businesses do not have a CRM, but every business can sell better when they employ one.

There are many relatively inexpensive but effective options to consider if you have never deployed a CRM. Options such as Nutshell or Fishbowl can be viable options for small companies, whereas Salesforce or Hubspot is a widely accepted CRM for larger organizations.

CRM tools help companies track the progress of a sale and gather critical information pertaining to a customer to build a stronger relationship with the potential customer. CRMs provide helpful information to a company when the relationship with a prospect is transferred from one salesperson to another.  

Good sales start with good data. CRMs allow companies to gather good data so they know more about the prospects and their needs. The more information that can be collected about a customer, the more efficient a salesperson can become as they understand how to suggest the right product at the right price to a potential customer at the right time.  

Many CRMs offer free trials so you can make sure they fit the budget for your business. It is critical that you leverage technology to track your pipeline and create an accurate forecast for your business.

Update your sales pipeline 

A period of slow growth is an opportunity to remove prospects that have been in the sales pipeline that should be removed. A review of prospects to determine if they are still viable is a good use of time for any business, but even more so when the market slows.

Many sales pipelines can become bloated with lost opportunities and stalled contacts because, in times of high growth, salespeople do not always have the time to update or remove prospects that are no longer interested in a product or service.  

All sales start with a good list, and downturns provide an excellent opportunity to improve the sales list so that after the decline, the sales team is not wasting time on prospects who are no longer interested in the sale.  A reassessment of future opportunities can also be helpful to provide an accurate assessment of the company's future sales forecast. 

Documentation in a CRM tool as to the reason that the opportunity was lost is also essential. A review of lost prospects can help the organization and the sales team learn and make adjustments to be more productive with future leads.

Reach out to current and past customers 

Every customer is important and essential. This fact is even more true during times of a downturn. Companies that wish to be effective in a shutdown should reach out directly to both current customers and prospects to better understand their current situation (both business and personal), and ask what the company could do to help support them. Companies and sales teams that show empathy and cultivate an authentic relationship with customers will find that those relationships will pay dividends for the company in the future.

Downturns also provide an opportunity to connect with past customers to restart relationships.  Many companies neglect previous customers, and they do so at their own peril.  Past customers always have the potential to become future customers when the prior customer is shown value and a new opportunity to become a customer again.  

Former customers should be seen as warm leads as they are already familiar with company products and services.  A connection with a former customer also will allow companies to hear why a customer left and potentially solve issues for the customer was not previously addressed.  One quick way to enhance sales performance and grow a business is through the enlistment of past customers.  Past customers can purchase products in a more timely manner and quickly add a margin to the bottom line.  

Growth companies develop the habit of reconnecting with past customers as part of their sales process. In a time of downturn, every company should value both current and past customer relationships.  

Align the CRM with your current sales process  

Any review of the CRM should include consideration of the sales process and should reflect the current sales process that is being practiced by the sales team. Many companies invest time and energy, developing a robust sales process, but then they don't implement or execute the sales process with the entire sales team. When sales teams and sales tools are in alignment, sales become easier, and salespeople become more productive. Many salespeople underperform because they do not actively work the sales process, but choose to believe that their method is better than the strategically thought out sales process that has been developed by the organization.   

Salespeople are often self-starters and rugged individualists. This attitude can be helpful in sales activity, but can often sabotage sales performance.  Sales leaders in every industry understand the value of working and executing an effective sales process.  

One excellent use of time during a downturn is to review all information in the CRM thoroughly and map it to the sales process. Detail notes should be added to a customer information profile, tasks, and appropriate next steps about projects and prospects should be considered to help the sale to continue to move forward along the well thought out the sales process.

Strategize about a limited time offer

Downturns provide an opportunity to offer discounts to products and services to intrigue potential customers to begin a relationship with a company. Consider discounting your most profitable products and services to drive immediate profit to the bottom line and to increase cash flow. Discounts provide an excellent opportunity to contact the customer to inform them of a new opportunity to purchase that product or service at a lower rate for a period of time.  

Downturns are often experienced by multiple customers in the marketplace. Therefore, when a discount is offered due to a change in the marketplace, it is often understood and appreciated.  Premarketing the discount is a helpful tool for educating the customer base.

Discounts should be offered to start a specific time and only offered for a limited amount of time.  Every customer enjoys believing that they are getting great value at the best possible price. A limited time discount strategy can restart customer relationships that have grown cold or stagnant and reenergize the sales team to communicate to customers about a unique opportunity that the organization is offering.  

Analyze the strengths and weaknesses of the sales team 

During a downturn, an evaluation of the developmental needs of each salesperson on the sales team can be profitable. An assessment of each salesperson to determine long term company cultural fit can provide clarity to know if a company has the right team to produce the right results after the market starts to progress. Honest and authentic conversations with each salesperson can prove useful in helping the salesperson achieve breakthroughs and make necessary corrections to sales behaviors to produce a higher level of production.  

One area of assessment that should be considered is the growth and learning potential of the salesperson. When a salesperson quits growing, sales are sure to stop flowing.  Companies that focus on growing and developing their sales team will often see a direct result in the growth of their sales performance.  

An ineffective team will never produce great results. In today's crowded marketplace, it is even more critical than ever that companies have the right salespeople who are a good fit for the organization. The organization that develops the right sales team is the organization that is ready to grow sales and expand after times of contraction and correction in the market.  

Invest resources and time in training and the development of salespeople

Downturns can be a valuable time for training and the development of the sales team. After an examination of the strengths and weaknesses of each salesperson, a training plan should be created and implemented. Although sales training should be individualized and specific for each organization, a few macrolevel sales training examples might include learning how to tell your sales story, practicing active listening, and how to discover new leads and lead sources. Any investment in the sales team will prove to be helpful in the sales team performing at a higher level compared to a sales team that is never trained, developed, or improved.  

Organizations should prepare their team to be better and become more capable while the market is slowed so that when the business comes back, they will be positioned to handle the volume of potential new business. Sales that are not prepared for are sales that are never obtained. A sales team should prepare today for tomorrow's sales.  

One last thought

These tips and insights can help any business improve the effectiveness of their sales. Companies that use a downturn in the market to enhance their sales processes, and people will find themselves in a better position to increase sales after the downtown and into the future. In sales, there is always work to do and actions to be implemented.  

Downturns can impact organizations and many different departments in those organizations, but they should never impact sales activities. Sales teams and sales activities are recession-proof.  In fact, during times of downturn, the sales components of any organization should be more active and more engaged than at any other time or period of the organization. In downturns, the sales team and sales behavior are critical to the current and future success of the entire organization.  When the sales team is active, it can become a leading indicator of the future of the business. Therefore, every sales team can take steps to ensure sales success even amid a downturn.

Employee Retention: What Does Your Turnover Rate Tell You?

Posted: 30 Mar 2020 07:07 AM PDT

  • You can calculate your employee turnover rate by looking at the average number of workers who exit your business during a specific time period and are replaced by new staff.
  • Your business should monitor and track its employee turnover to gauge how appealing your company is employees. It can also help you improve areas that may be causing workers to leave your company.
  • Your employee turnover rate helps you evaluate your risk of an employee leaving and recognize opportunities for retention when you hire new employees. 

Some level of employee turnover is natural for all businesses. While employees used to stay with one company for the majority of their careers, job hopping has become much more common for today's workers. 

If several employees have recently left your business, however, you may be wondering if that's normal or, if it's not, whether there's a problem that you need to identify and address. To get a clear picture, you first need to determine your employee turnover rate and see how that number compares with businesses nationwide. 

Once you're armed with the data, you can then come to conclusions about whether your employee turnover is a problem. If it is, you can take steps to figure out why employees are leaving and what you can do to make your organization a place where employees want to stay. 

What is employee turnover?

Employee turnover is the loss of talent in the workforce over time. This can take many forms of employee separation, including layoffs, location transfers, resignations, retirements, terminations and even deaths. 

Employee turnover should not be mistaken for employee attrition. Attrition is the loss of employees through a natural process, such as resignation, retirement or personal health. However, unlike with traditional turnover, these jobs will remain unfilled when the employee leaves.

Employee turnover is the voluntary or involuntary loss of an employee who leaves an open position that your business will need to fill. Turnover can be due to the same reasons as attrition, but it's generally viewed negatively and as a burden for employers. 

There are two standard types of employee turnover: 

  1. Voluntary: This refers to employees who willingly leave their jobs.
  2. Involuntary: This refers to employees who have been laid off or fired or whose employer has terminated their contract. 

How do you calculate your employee turnover rate?

To figure out if you have an employee turnover problem, you first need to determine your turnover rate. When calculating your turnover rate, you look at a set period of time – usually one year. Sue Andrews, HR professional and fellow of the Chartered Institute of Personnel and Development, says that to calculate turnover, you'll need three separate figures: 

  1. The number of employees who left in the time period (including both voluntary and involuntary leave)
  2. The number of employees at the beginning of the period
  3. The number of employees at the end of the period 

To calculate the average number of employees, you take the number of the employed at the beginning of the period and add it to the number of the employed at the end of the period. Dividing this figure by 2 will give you the average employee count. 

You can then calculate your turnover with this simple formula: 

Turnover = (Employees who left ÷ Average number of employees) x 100 

Why should a company track its employee turnover?

Your business should monitor and track its employee turnover to gauge how attractive your company is to employees and to help you improve areas that may be causing employees to leave your company. 

A high turnover rate can have a negative impact on your bottom line if you aren't prepared for it, according to Ellen Mullarkey, vice president of business development for Messina Group. 

"If you know that you have to hire several times a year, you should set aside enough time and money to do so," Mullarkey said. "It's not cheap, so you have to plan. Tracking your turnover rate can also let you know if your company is a good company to work for." 

Marc Prosser, CEO and co-founder of Choosing Therapy, believes there is both good and bad employee turnover. He said these are the differences: 

  • Good employee turnover: With good employee turnover, you can include employees who leave the company for a major promotion and employees who were on performance improvement plans. You want to be a company where people can learn and advance their careers. Your reputation as a business where workers can learn new skills and become more attractive to future employers will help your recruiting efforts. 
  • Bad employee turnover: Bad turnover is when moderate- or high-performing employees are leaving for lateral positions. This means you have a bad work environment or are paying under-market. If your bad turnover rate is more than 15% per year, you should take a close look at your compensation and company culture. 

Is there a tool to help you track this rate?

While some businesses choose to manually track their employee turnover rate, others opt for human resources outsourcing services or human resources software. 

HR software can help your business track its staff turnover, according to Bob Teasdale, sales and marketing director at Myhrtoolkit. 

"For example, our system generates an exportable staff turnover report that automatically calculates staff headcount at the end of each month and provides a turnover percentage," Teasdale said. 

Most HR software helps you track all employee information, including hire dates, leave requests, training, payroll and benefits administration. 

When making hiring decisions during the turnover process, you may want to consider an applicant tracking system that allows you to electronically track and manage all applicants throughout the employee recruitment process. 

How do you analyze your turnover rate?

Regardless of the tool you use, it's crucial for your business to make the purpose of its turnover analysis abundantly clear. Generally, employee turnover is an indication of your overall employee satisfaction – low employee turnover is a result of high employee satisfaction. 

Your goal should be to make sure employee morale and satisfaction are constantly growing within your workplace. Therefore, it's best to use a benchmark turnover rate to see if your rate improves yearly. You can also compare your turnover rate against national and industry averages. 

The SHRM Human Capital Benchmarking Report found that the average employee turnover rate in 2017 was 18%, and that less than 50% of organizations had a succession plan in place. 

While the rate of employee turnover varies by industry, an effective retention plan can help you retain talent and reduce turnover costs, no matter what industry you're in. 

What does your turnover rate tell you?

Your employee turnover rate tells you your risk of an employee leaving and your opportunities for retention when new employees come on board. This data also helps you see if your compensation is on par with the market, what your employees' work environment is like and how they view future opportunities in your business, according to Josh Dane, owner of Dane Salon Group. 

"We analyze employee turnover based on our estimates of our competitor turnover levels, as well as tracking period to period," Dane said. "If turnover is increasing, we need to figure out what is causing this." 

It's no secret that high turnover can be expensive for any business. Reducing employee turnover costs begins with determining your direct and indirect costs. 

Belinda Wee, associate professor at the Husson University School of Business and Management, said direct costs include the replacement of employees who left, such as the costs of background checks and training, while indirect costs are not as easy to quantify. One example of an indirect cost is the cost of finalizing paperwork when an employee leaves, which can include benefit paperwork and unemployment documentation. 

"Losing an entry-level employee costs a business about 50% of that employee's annual salary," Wee said. "Losing a technical or senior-level employee costs a business about 125% of the employee's annual salary to the business." 

Improving your retention rate begins with refining your employee onboarding process, evaluating the employee experience at your company and finding opportunities to enhance your company culture. These preventive measures can produce the yearly employee turnover rate your business wants and reduce the associated costs.

How to Find a Gap in the Marketplace

Posted: 30 Mar 2020 04:07 AM PDT

  • To find a gap in the marketplace, start by analyzing your own pain points.
  • Look at trending business models to find a unique way to solve the gap in the marketplace.
  • Don't be afraid to innovate and test the status quo with your business idea. 

Thinking of a successful business idea isn't always easy, and while researching topics like "B2B business ideas" and "best low-cost business ideas" can be helpful, it can only get you so far. You want to create a business that provides a unique, necessary experience for consumers, but how do you find that market gap? With marketplace trends constantly changing, it can be difficult to find a way to incorporate them into your business model. 

Source: Kate Paguinto

To combat these issues, we spoke with Kate Paguinto, founder of Presko, to learn how she found a lucrative gap in the marketplace and capitalized on a trending business model to create a successful business that fills a unique need. Presko is an online marketplace that helps e-commerce brands rent a portion of store space in local brick-and-mortar stores to sell products directly to consumers, face to face. 

Although this may seem like an incredibly niche business idea, Paguinto knew from personal experience that there was a need for it. 

"I started Presko because I owned a jewelry business and was primarily selling online," she told business.com. "I wanted to connect with my customers in person but never really had much luck with flea markets or art shows. I wanted to find a way to reach my target audience and sell on my own schedule." 

Paguinto knew other small business owners were facing the same problem she was, so she wanted to create a way for them to easily connect with each other through shared resources. 

Here is the market gap and trending business model she identified: 

  • Market gap: Small online business owners needed an affordable, effective way to occasionally sell their products in brick-and-mortar stores.

  • Trending business model: The sharing economy business model was a feasible new trend that could be used to connect small business owners. 

1. Find a gap in the marketplace.

The inundation of advertisements and social media marketing can make it seem as though there is a product, service or application for anything a consumer could ever want. However, there are still gaps in the marketplace – you just have to find them before someone else does. While this may seem like a daunting task, it may be easier than you think. 

The best way to identify a gap in the marketplace is to reflect on your own consumer needs. Paguinto said to look at all the problems you deal with personally and try to identify your pain points. You can also ask around to see what challenges your family and friends encounter. Once you identify the current market problem you want to address, figure out what can be done to solve it. Paguinto created Presko as a response to a market gap she saw in her own industry. 

"I realized that there was a gap because so many people are selling online and it's easy to get lost in the noise," she said. "On the other hand, I felt that selling at markets isn't always feasible because they require a lot of time and manpower – from making enough inventory to filling your booth to setting up your space and spending hours in a tent. I felt like there had to be a better way."   

With Presko, vendors can partner with stores that align with their brand and sell at a time that's convenient for them, instead of waiting for the third Saturday of the month to do a six-hour show. The demand for an online marketplace that connects small business owners was something that Paguinto identified as a pain point in her own life. What pain points exist in your life? Are there viable business opportunities that could solve them? 

2. Consider trending business models.

Whether you are creating a new business or looking for a way to improve your current company, you can take advantage of several new business trends, primarily with emerging technology and resources. For example, you can enhance a service with machine learning and AI, create a sustainable alternative to a current product, or find a way to personalize an otherwise impersonal service. Paguinto capitalized on the sharing economy trend to create Presko.   

"Take the sharing economy for example: Airbnb and Uber allow people to make money off of things they already own, and this concept can easily be applied to other markets," she said. "I used this sharing model to create Presko because people are already paying to rent or lease commercial space, and allowing other businesses to come in and sell there could help to offset the cost." 

Entrepreneurs can look at unique ways to apply current business trends to new industries where they may not already exist. 

3. Create a business to fill the market gap.

Once you've identified a gap in the marketplace, found a business strategy (whether traditional or trending) that can solve the need, and determined your idea is good enough to act on, it is time to create a business plan and work to build your business. 

Since creating a business is hard work that can take countless hours of dedication, Paguinto has two pieces of advice for entrepreneurs to keep in mind during the process: 

Don't be afraid to test the status quo.

Innovative thinking and breaking restrictive boundaries may be necessary to create a successful business. Don't let societal limitations keep you from building your dream. Paguinto had to do this by emerging into the tech field as a woman of color. Being a woman in tech – especially a woman of color – is not the norm, and it was intimidating for Paguinto to break into. 

"In college, I interned for a tech company, and the majority of people I saw in the incubator were men," said Paguinto. "It never occurred to me that I would eventually venture into this space, but here we are. I think it's important to go into it with an understanding that I will need to work much harder to get where I want to be, but I am willing to take that challenge. I feel very fortunate that I have built a community of diverse and supportive women to help me along the way." 

Learn to rest when you need it.

The life of an entrepreneur is a busy one, but it is important to create boundaries and place high importance on self-care. Find a manageable work-life balance that allows you to get work done and still rest when you need it. Paguinto said there is nothing worse than a tired founder. 

"It's so easy to get caught up in 'hustle culture' and feel like you constantly need to be doing something to be successful. In reality, it's the opposite. If your mind and body suffer, your business will suffer. So, learn to rest."
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