Lending to Home Based Businesses Increases, Reports Kabbage

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• Lending to Home Based Businesses Increases, Reports Kabbage
• Top Small Business News Stories: Week of April 26
• Oberweis Dairy: A Story of the High Value of Analytics
• Wow Me, Dazzle Me and Impress Me

Lending to Home Based Businesses Increases, Reports Kabbage Posted: 26 Apr 2013 01:30 PM PDT More home-based businesses involved in online selling are getting cash advance loans for their businesses. Kabbage Inc. reports paying out more than $200 million in annualized cash advances to more than 100,000 small business customers so far in 2013. The company says the advances represent a substantial increase over the estimated $15 million in annualized cash advances paid out a year ago. Kabbage is a financing company specializing particularly in loans to small online merchants working from home offices that sell goods on Amazon and eBay.  Eighty-two percent of Kabbage customers use money from Kabbage to buy inventory, for example. Last month, the U.S. Small Business Administration reported an increase in small business lending for the first time in 10 quarters. Overall, the SBA report found small business lending had increased by four-tenths (0.4) of a percent, from $584.1 billion in September last year to $586 billion by the end of 2012. The SBA report noted an increase of loans in several categories including under $1 million, between $100,000 and $1 million, and under $100,000 in the final quarter of last year. However, the Kabbage Inc. report suggested some loan sizes are still underrepresented. According to Kabbage’s latest lending numbers , the company's advances have grown by 298% from 2012 to 2013, while SBA loans under $150,000 have decreased by 8% in that time. (See graphic above showing year-over-year growth,) Because Kabbage mainly funds home office businesses, particularly those that sell goods on sites like eBay and Amazon, their numbers aren’t necessarily indicative of growth in small business lending as a whole. The company is also just a few years old, so the increase in lending could be more indicative of its own growth and access to funding than of general economic factors. For instance, Kabbage just closed on a $75 million financing from Victory Park Capital and Thomvest Ventures. This represents the company's largest funding transaction to date. The post Lending to Home Based Businesses Increases, Reports Kabbage appeared first on Small Business Trends.

Top Small Business News Stories: Week of April 26 Posted: 26 Apr 2013 11:00 AM PDT Here's a recap of the key small business news stories for this week. Online retailers in particular were focused late this week on an anticipated U.S. Senate vote on an Internet sales tax bill. If passed, the law would give states the power to require out-of-state sellers to collect sales tax for online sales. The vote has been delayed for at least a week, and opinions are mixed on what it would mean for online businesses. Meanwhile, CISPA — another bill passed by the U.S. House of Representatives — is supposed to protect data in the event of a cyber attack.  But privacy advocates including small business leaders worry the cure could be as bad as or worse than the disease. Below, the Small Business Trends Editorial Team puts your small business news for the week into perspective: Tax and Policy The U.S. Senate is considering an Internet sales tax.  It now looks like lawmakers won’t vote on the issue until after returning from a week-long vacation, in early May. Affiliate marketers support the proposed law, online sellers not so much. Geno Prussakov shared more from the affiliate marketer’s perspective recently with a post to the BizSugar community. The U.S. Senate is also considering a new “Startup Visa” program. The legislation would create a pool of 75,000 immigrant visas for entrepreneurs. But the effort has stalled, and Scott Shane has a different way to “sell” a startup Visa program. Visas, he says, are cheaper than tax breaks for attracting new companies. Small businesses offer a mixed reaction to President Obama’s budget. The budget unveiled recently by the President touches on issues like taxes, minimum wage, entitlements and pensions, all important issues for small businesses. Rohit Arora, CEO of Bi2Credit, gives another perspective on what the budget proposal might really mean to small businesses. The IRS is looking at taxing free lunches at tech firms. Businesses of all sizes offer benefits to employees that go beyond monetary payment. Rules are complex about which of these compensations constitute taxable perks. So it’s unclear how an IRS decision on free lunches at tech firms might affect other perks. Texas tops the list of business-friendly tax environments.  That’s according to the Small Business and Entrepreneurship Council’s annual Business Tax Index.  California languishes at the bottom of the list.  Twenty-one factors are taken into account in determining the rankings. Security A report says small businesses are being targeted for cyber attacks. The Internet Security Threat Report 2013 issued by Symantec says small businesses have a problem. The report suggests firms of fewer than 250 employees were the focus of 31 percent of cyber attacks last year. That’s up 18 percent from 2011. Your business must take the proper security steps. CISPA Passes House Over Objections. Supporters of the Cyber Intelligence Sharing and Protection Act say it is needed to protect U.S. citizens and companies from computer attacks. However, opponents including small business owners, worry it lacks any protections on the government’s use of our private data. Tech Dell introduced a huge 18-inch tablet/laptop hybrid. Dubbed the XS 18, the device weighs less than 5 pounds and features an 18.4-inch touchscreen display. Despite its portability, it can be used as a desktop or laptop with keyboard and mouse.  For a tablet, it’s got a huge screen, although it is thin and small compared to other desktop computers. Google Drive, Gmail went down for a bit. Users noticed disruption in the service after 9 a.m. Wednesday, April 17. Some users may have experienced the outage as early as 8 a.m. Service was returned by 11 a.m., but the company has still offered no definitive explanation. New BlackBerry Q10 has Skype and a physical keyboard. The Skype feature is something new for BlackBerry’s latest device. But the physical keyboard is a link to the mobile device’s past — it’s what dedicated BlackBerry (NASDAQ: BBRY) users enjoyed about the devices traditionally. The question is whether it will win or retain enough fans in an age of touchscreen technology. Facebook Home hits half a million downloads. The app is currently exclusively available through Google Play, and only on select phones. Still, observers consider this a slow start. So far, reviews of the phone are mixed. But we’ve reported at least one expert would list it as a potential Facebook marketing resource. Financing Latino Small business owners lack financing. There are an estimated 3 million Latino owned businesses in the U.S. producing $500 billion in revenue annually. It is projected that number could grow to 12 million businesses by the end of the decade, a great engine of economic recovery. But first they will need sufficient financing, say advocates. Social Media 39% of small businesses get ROI from social media. A survey by Manta released recently also found that small businesses are investing more time and dedicating additional employees to social media. This was a survey widely reported in some lazy coverage as proving social media had no value — but to our analysis that is not what it found at all. The post Top Small Business News Stories: Week of April 26 appeared first on Small Business Trends.

Oberweis Dairy: A Story of the High Value of Analytics Posted: 26 Apr 2013 08:00 AM PDT If you’ve never given thought to the value of analytics, the story that follows will prove to be a reminder of its worth.  The story concerns Oberweis Dairy in Aurora, Illinois.  Bruce Bedford, Vice President of Marketing Analytics and Consumer Insights for Oberweis Dairy, joins host Brent Leary to share the story of how analytics resulted in a 30% increase in customer retention. * * * * * Small Business Trends: Can you tell us a little bit about your background? Bruce Bedford: I might have a bit of an unusual entry into the world of marketing. I actually began my career as an engineer. I have a PhD in Chemical Engineering. I began working as an engineer doing all sorts of design projects for large corporations. Then I made my way into the world of business and marketing after a couple of years of engineering work. Small Business Trends: Can you tell us about Oberweis Dairy? Bruce Bedford: Oberweis Dairy has a network of retail dairy stores where we sell fresh fountain ice cream treats, cones, mike shakes, banana splits and sundaes. We actually sell fresh bottled milk as well, and a wide range of other products. We have 47 stores located throughout the Midwest. The second line of business is a home delivery business where all of those grocery items we sell in the retail stores can be delivered right to you door step. We do that generally on a weekly standing order basis. Then, because we manufacture our own dairy products, we distribute those through a network of regional and national grocery store chains – places like Costco, Target, etc. Small Business Trends: Lets talk about the in-store experience. You had a lot of folks coming in and the lines were backing out of the stores. How did you tackle that challenge? Bruce Bedford: When the weather gets nice, the ice cream business really takes off. We observed people might stand in line for quite a while, but generally they were stuck behind a person who was looking at our menu boards trying to determine what appealed to them at the moment. As we looked deeper, we realized we were exacerbating the wait time by having a menu board layout that wasn't nearly as efficient as we might have liked. We began a study of that problem to understand if there was a better layout we can produce with a goal of minimizing wait times. Immediately we determined reordering the ordering process flow would be beneficial. However, as soon as we started doing that, the concern came that in reordering the flow of the menu board, it is very likely that we can shift the product mix in such a direction that we lowered the average ticket value. We call it value for transaction. We went through a pilot phase program where we tested a variety of designs for the menu boards. Through a series of analysis we determined there was one particular design that solved two problems. We were able to measure a decrease in wait times. And we were able to determine people were selecting items that increased the revenue per ticket. With that insight, we redesigned the menu boards for all locations throughout the Midwest. We achieved a dramatic increase in profitability per ticket as well as decreased wait times. In fact, we found that one of the items that was not a large mover in the past actually increased by over 80%. Small Business Trends: You went into this trying to improve the experience of the customer by decreasing their wait time in line, but also increased the revenue per transaction? Bruce Bedford: Absolutely. That really highlights the power of an analytical approach. Small Business Trends: You also did a program using your analytical approach to determine a way to build customer retention around your home delivery business? Bruce Bedford: We maintain an old fashioned home delivery business where we deliver farm fresh milk right to the doorsteps of tens of thousands of homes across the Midwest. For a company our size, there are some very large national competitors that distribute their products across the nation. Our focus of getting product out to customers' doors on a regular weekly basis is very important. Once we obtain a customer, it's critical that we are able to maintain that business over a long period of time. Simply because it costs quite a bit to acquire a new customer. One of the most popular promotions for our sales team had been a free delivery offer. We deliver our products with a standard product price. The product price is the same whether you go to one of our dairy stores, or whether we deliver the products to your home. We compensate for the additional cost of delivery by charging our customers a modest delivery fee of $2.99 per delivery. With the promotion, we historically waived that fee for six months. That is roughly 26 deliveries. What we discovered through a technique called survival analysis, was that the retention of customers who took advantage of that free delivery offer was actually not that great. In fact, we found out that at the six-month mark, customers tend to drop off at a fairly rapid rate. So we thought, what is going on with that six-month mark? We realized if you consider the difference between the 26th and the 27th delivery for customers on one of those promotions, there is no change in value from their point of view. The only thing is that they are now seeing an increase cost of $2.99 from us. We thought, ‘What if we offer a promotion, but don't create a scenario where there is a such a sharp contrast at that six month mark?’ We used the Valpak Blue Envelope Service to put out a couple of competing coupons and did a randomized AB test, where we sent a coupon offering the six months free delivery. The way that works is, it turns out to be about $100.00 worth of value. Because we also offer a free Porch Box with that promotion. That Porch Box adds another $25 of value to the whole offer. We also created a second promotion that stretched the time of the promotion out to one year where we offer a $.99 delivery for one year, basically reducing the cost of delivery by $2.00 with each transaction. In the course of doing that, the headline still read ‘$100 savings.’  So the direct mail pieces looked very similar, with a little bit of difference in the construction of the offer. We sent that out to two random groups. We found a statistically insignificant difference in response rates. Both coupons performed exactly the same when it came to receptivity. We tracked those customers in both groups for a year and found the retention rate for the group receiving the $.99 delivery offer retained at a substantially higher rate. Approximately 30% higher than the group receiving the free delivery for six-month offer. Small Business Trends: It doesn't sound like a huge difference, 99 cents versus free. But I guess you identified the bargain-hunters and as soon as they saw the "free" wear off they were out? Bruce Bedford: We hypothesized that there is psychological effect happening there. Most people hate the idea of giving up value that they know they already have acquired. What we discovered is, if we can continue to have value hanging out there that the customer can claim, they would continue to desire that value. The value of the program is the same in both cases, $100 savings. In the one example with the six month free delivery, you get all of that value in the first six months. In the second one, it takes you at least a year to claim that value. What we hypothesized is that people are willing to stay around for a long time if they know there are additional savings to be had. By the way, a 30% increase in retention translates into millions of dollars in added value. The power of analytics has allowed us to unlock this. Small Business Trends: Bruce where can people learn more? Bruce Bedford: You can go to Oberweis, or visit us on our Facebook page.   This interview demonstrating the value of analytics is part of the One on One interview series with some of the most thought-provoking entrepreneurs, authors and experts in business today. This interview has been edited for publication. To hear audio of the full interview, click on the player above. The post Oberweis Dairy: A Story of the High Value of Analytics appeared first on Small Business Trends.

Wow Me, Dazzle Me and Impress Me Posted: 26 Apr 2013 05:00 AM PDT I read something in the paper recently about how an employer in an interview wanted to be “wowed” by an applicant. Listen, I give a good interview. I’m a funny guy; I know what to say and I think I know my stuff. But if you want me to “wow” you. . .I don’t know how to do that. So I took it to an extreme in this job interview cartoon. Note: I don’t know why this guy wants to be made to feel sad at one point, but for some reason once I’d written that into the caption, I couldn’t take it out. The post Wow Me, Dazzle Me and Impress Me appeared first on Small Business Trends.

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