Business Information for Entrepreneurs by an Entrepreneur

What are your customers saying about your business? Thanks to the customer-friendly website, Yelp.com, customers can say just about anything about almost any business. Reviews may be positive or negative; Yelp posts them all.

However, for a fee, Yelp can help your business improve its image on their website. But the method and process of Yelp's "advertising" has raised a lot of questions about whether it is geared to legitimately help businesses, or whether it is ethical or even illegal.

Advertising Opportunities

Yelp has admitted that they use posted reviews as potential sales leads. Yelp salespeople will look for negative reviews and spend their time cold-calling those businesses with an advertising proposal.

Advertising subscriptions for a Yelp page range from $299 to $499 a month, and by purchasing Yelp advertising, the salespeople promise to improve a business' image on their website. In fact, the company even allows the advertiser to pick a favorite review to be seen at the top of their Yelp page. Advertising on Yelp also gives the advertiser the option to have ads show up on local searches or even on competitors' Yelp pages.

The Potential Scandal

But what if you choose not to advertise with Yelp? By declining the sales pitch, a business could face even more negative response on Yelp. Businesses have reported that after declining a Yelp advertising offer, they witnessed their Yelp ratings fall.

An article published in the East Bay Express out of Oakland, CA reported that at least six business owners received a barrage of phone calls from Yelp salespeople, even after declining to advertise.

The business owners said that Yelp salespeople promised they would remove negative reviews if they advertised, but after declining the Yelp offer, the owners saw even more negative comments. That raises the questions about whether real people are writing real reviews on Yelp, or whether Yelp employees 'anonymously' post additional reviews to punish a business for not advertising with them.

Is Yelp engaged in scandalous behavior? The company denies "extortion" tactics used by their salespeople. The fact that Yelp posts consumer comments can be a big help to small local businesses looking for testimonials. However, many businesses are treading carefully when it comes to (not) advertising on Yelp.

Did you start your business to operate in perpetuity? Or did you start a business with the intention of selling it for maximum value and profit once it became successful? All entrepreneurs should have an exit plan when they start their business. Whether you intend to sell or must sell your business, there is always a right time to do it.

Starting a business can be compared to buying stock from the stock market. But rather than looking at historical profit trends and future potential that is in the charge of others, you are in full control of your business and its profit potential. By increasing sales, making operations more efficient, and developing the right procedures, you can increase the value of your business and make it an attractive investment for others.

Factors that Influence the Timing of the Sale

When is the right time to sell? If your exit plan involves selling your business, then you have various influences that can affect the value of your business, such as:

• The profit and growth potential you have created
• Economic factors that could limit or increase the value of your business
• The number of potential buyers in a market

Remember, you can only control the first point. All other economic and market demand factors are out of your control. Thus, you must determine whether your exit plan is ready to execute or whether to wait.

Considering the Market Conditions

For instance, say you started a business in 2003 with an exit plan to sell in 5 years. However, based on a poor economic climate in 2008, your exit plan may not be at its full potential because you cannot sell for your full asking price. You have the option of selling at a lower price and not reaping your small business's full value or waiting until economic factors are once again in a positive light.

Remember this: when preparation meets opportunity, this is the right time to sell. Whether you have an exit plan or an interested party approaches you to buy your business, you must be prepared with a plan to sell if the time is right for you.

Your business thrives or dies by your cash flow. A consistent flow of cash will help you to keep your debts current and ultimately save money on penalties, interest, and fees.

Of course, one important element of keeping a positive cash flow is collecting on your invoices. One method that many businesses have found to maintain cash flow is through invoice factoring.

What is Invoice Factoring?

Invoicing works much like credit. When you issue an invoice to a business or other customer, you give them a certain amount of time to pay the amount due in full. This can be anywhere from 1 day to 90 days, although typically invoice dates are 30 days from the date of the invoice.

During that time, you do not receive any cash, although your business activities must continue. And while most businesses pay within 30 days, others are chronically late. How can you keep cash in your business while you wait for invoice payments?

Invoice factoring is when a third-party business pays you a portion of an invoice balance, then makes the collection efforts on the invoice. The factoring company then pays you the balance of the invoice, less their fee.

Pros of Invoice Factoring

Invoice factoring has many advantages, such as:

• Keeps cash in your business the moment an invoice is created
• Can help inject a portion of cash at needed times
• Saves time from collecting on outstanding invoices
• Low fees - most invoice factoring groups charge reasonable fees for their services
• Not a loan - invoice factoring groups pay you the arranged up-front percentage, which is up to 90% guaranteed. If the company does not collect on an invoice, they do not owe you the balance, nor are you required to pay the advance back.

Cons of Invoice Factoring

While there can be good benefits of invoice factoring, there are also negatives. Here are a few you might want to consider:

• You do not receive full invoice amounts. - Although you get cash upfront for your invoices, the fees charged by factoring companies reduces your total revenue amount.

• Poor customer service by the factoring company. - Many businesses are concerned about losing customers and damaging relationships due to factoring collections. However, most invoice factoring lenders will work with you to assure that their efforts match the needs of your business.

If you are interested in this type of cash flow help, research potential factoring companies, and find the right facility that can help your business meet its financial needs.