Welcome to the Bcast, the official podcast of Bplans.com. Each week we discuss the latest news, resources and advice for entrepreneurs and small business owners. Hosted by Jonathan Michael and Peter Thorsson.
In this week’s episode we discuss:
- 10 Things the Bank Will Ask When You Need a Business Loan
- 5 Things Your Website Must Do (featuring John Procopio)
- Our Thoughts on the Apple Watch
Do you have a question you’d like us to answer on the show?
Send us an email: Bcast@Bplans.com
Peter: Welcome to the all new Bcast, the podcast for small businesses where we’re going to be giving you some ideas, some insight, some tips and some thoughts on how to make your business better.
Jonathan: I’m Jonathan.
Peter: I’m Peter. We’re out here. We’re helping small businesses. We get to read articles on Bplans all day and pretty much comment on them.
Jonathan: Yeah, that’s right. The first article that we wanted to talk about is one written by the founder of Palo Alto Software, Tim Berry. The article is Ten Things The Bank Will Ask You When You Need A Business Loan. Peter, I’ve got to be honest, I have no experience ever asking for a business loan, never starting a business, so I’m a total newbie in all this kind of stuff. What about you?
Peter: That’s great, man. That’s a good start. This podcast is going really well.
Jonathan: Thanks. Yeah.
Peter: No, I appreciate that. That’s good and a lot of people don’t. I think that’s the starting point for most businesses is that things like the bank lending space, the what is the SBA and how are they here to help me? Are all kind of a mystery to them.
For the most part I think this goes back to that idea of a small business isn’t generally a small business. They are a bread baker, a guitar maker, a lawyer, an accountant.
Jonathan: A bike shop owner.
Peter: Bike shop owner, sure. That’s what they consider themselves so they don’t educate a lot about this idea of how they get the best possible money, what they need when they walk in the bank.
I think that was Tim’s idea when he wrote this article is before you walk into any bank they’re going to ask for things. Here’s ten of them. This is going to happen to you if you go in that bank, so know what to expect.
Jonathan: What should I expect if I wanted to go in and get a business loan? What do I need to prepare? What am I doing?
Peter: One of the things they’ll ask you for is a business plan. The business plan has to contain a thoughtful overview of your entire business. It doesn’t necessarily need to be 20 pages and certainly not 40 pages of raw text, raw financials, that kind of thing. It does need to contain certain things. It does need to contain the financial details of your business. What does that mean?
We could go on and on forever about that, but things like accounts receivable and accounts payable, the complete financial statements of your business are going to be included in that plan. That’s going to be what the bank looks for. The reason they look for that is because they need to compare you to all the other businesses that they’ve lent to in the past and make sure that you’re not a high risk.
Here’s where I think a lot of people get tripped up. As a small business, you’re going to think about those financials and maybe it’s a little scary. Maybe you feel like you’re not entirely confident with the numbers that you’re putting in there. Maybe you keep your receipts in a shoe box. I’ve seen worse. Maybe you just take the cash and at the end of the day you reconcile and that’s how your business is run.
That’s fine, but the bank needs a little bit more idea of where you think you’re going to go in the future and how you’ve been doing up until now. If you don’t expect this, the bank might ask for things like collateral. I think Tim put that as number one, and I think he did not mean to scare people off by doing that.
Jonathan: Maybe he did.
Peter: Collateral is a major sticking point for a lot of small businesses. Now we’re talking about collateral in terms of assets that the business might own.
Jonathan: Uh huh, like a truck…
Peter: Sure, but if you’re earlier stage, think of that business collateral as maybe your actual house that your wife and kids live in and you’re going to that home at the end of the day and you don’t consider it part of your business. Collateral can be part of your personal life and not necessarily part of your business life.
A lot of people don’t necessarily consider that when they go in for this kind of lending and when it comes up, again, they get that kind of slight fear, the slight work up thing. I think that’s why a lot of people consider these business loans or these SBA loans a little bit daunting and maybe even a little confusing.
Jonathan: Sure, sure. What other kinds of things would a bank ask?
Peter: Right. Tim details also the insurance information. Again, that’s just a risk mitigation tactic. Knowing what kind of insurance that business has, the background of that insurance, whether it’s up to date is super important. Copies of past returns is his number nine on the list. Now the reason he’s going to ask that is the past returns are the actual indicator of the past of your business. Your accounting software, you’re entering those numbers. The past returns are what you’ve been reporting to the IRS and we’re assuming are the truth behind those numbers. Some people don’t understand, why do I have to have past accounting plus past returns. That’s part of the reason.
Again, it comes back to that point of if your numbers don’t quite match, a lot of us know where we’re weak. When I started my first business I knew we were weak in accounting. We weren’t just weak. We were terrible. Our accountant charged us extra money because we we re so bad in fact. Twenty-three year-olds in New York City running a small business. We thought what’s the worst that could happen?
The fact is, the worst that can happen is you get to the end of the year and you have to spend weeks reconciling your books. Fortunately we never needed a bank loan. I don’t think we would have ever gotten one for that reason, but it’s juts a good thing to know. I think there’s again, a lot of unnecessary fear that a small business will have before they’ll go into a bank, thinking okay, my books aren’t exact or they’re not perfect. That’s okay. They don’t need to be pristine, but they do need to be audit-able and the bank will be double checking this stuff.
Jonathan: Sure, but why shouldn’t you be daunted? Why shouldn’t you be afraid of walking in and trying to get a bank loan or an SBA loan?
Peter: Yeah, that comes back to the positive aspects of these. The SBA loan is going to provide you with probably some of the best interest rates that you can possibly get. Not necessarily if it goes out to friends and family, that kind of thing, but between the bank loan and the SBA loan, these are going to be highly secured and again, really highly regulated, but also have really amongst the best rates that you can possibly get.
With an SBA, for example, with an SBA 504 loan, that’s one of the only ways to get a 25 year term length. If you’re looking for a loan to get the space that your factory needs to exist in, then that could be time away for your business to be profitable over that 25 year period and not have to have a massive influx of cash on the onset of the business starting. That’s one great way. Another thing to think about is a lot of businesses run and run fine and they never really think about what it takes to get to that next level of profitability.
If I’m cutting down trees all day and I’ve got one truck, a lot of businesses say that’s good. I’m doing well. Everything’s fine. They don’t say well, if I were able to take out a loan, get two trucks and pay that off within five years, does that make my business in fact more stable and more sustainable? Also, is the interest rate low enough so that I can guarantee the fact that I can pay that off?
Again, that comes back to why you need that business plan, why you need that financial forecast in place, but it also comes back to that idea that the lower the interest rate, the more flexible you are in taking that money, making sure it’s applied to good business practice and then insuring that your business can grow after you get that money.
Jonathan: Okay, so what if I have just a good business idea? Can I go get a bank loan off of an idea? You’ve mentioned a lot of financial statements. Do you have to be an up and running business before you can apply for a loan?
Peter: Yeah, that’s a good question. Yes, absolutely and there’s lots and lots and frankly an increasing number of options for the folks who aren’t qualified for an SBA loan or a bank loan. If you want to go into the bank and ask for money, if you want to go into a bank and again, here’s the confusing thing. Some banks house SBA loans. Some banks don’t. Some banks house their own lending in addition to SBA loans.
That’s why I’m trying to make sure you understand the distinction here. There are certainly lots of other option and a lot of them are called alternative lending options. Alternative lending options include things like Kabbage.com, Ondeck.com, these kinds of things. There’s a lot of ones out there that you can visit in person. Almost guaranteed each one of those will have a significantly higher interest rate.
I don’t think we want to talk about them too much here because it’s really difficult to recommend them almost on any level. If they are a good fit for you, if you’re able to pay them off fast and you know that your business can be profitable after you receive that money, it’s a great way of getting a quick injection. There’s equipment loans for example which is exactly what it sounds like. If I need a new refrigerator in my pizza shop to serve cold pizza I guess …
Jonathan: Well, to keep the dough cold until it’s ready to be used.
Peter: Is that what they do?
Jonathan: I think so.
Peter: Cold dough. Fine.
Jonathan: The meat needs to be cold. The cheeses need to be cold.
Peter: If I’m going to do some cold bread sticks or whatever it is that you’re suggesting and I know that that’s going to sell, then I might want to get an equipment loan, get that refrigerator in and then make the money back quickly.
The trouble comes, and this is like where it starts to get almost like a payday loan, over time if I don’t pay that money back, the interest rate is so high that it can start to gouge my business. It’s a bad choice for that cold pizza place that we were just talking about.
Jonathan: Okay, so you definitely want to …
Peter: On a college campus to there.
Jonathan: Cold pizza?
Jonathan: I’m just saying you can, well in fact, you actually have to keep some of your ingredients cold before you use them. Obviously …
Peter: I’ve never thought about where pizza comes from.
Jonathan: I used to work at a pizza place and would walk into the refrigerator to get some of the ingredients. It’s definitely a needed piece of equipment in a pizza place.
Peter: Weird to me.
Jonathan: Peter, what we’re going to do each week is a new guest will come on and give us a quick tip about anyone of their areas of expertise, so today we have John who’s our eCommerce guy at Palo Alto and he’s going to give us some tips. John, welcome to the show.
John: Thanks Jonathan. Pleasure to be here. With my role at Palo Alto I think about marketing most of the day and as a small business owner you’re obviously thinking about marketing, probably online marketing. Great way to get your business represented online and bring in new customers.
I really wanted to focus on your homepage. It’s really the front facing part of your website. Everyone has one if they have a website and really what should your homepage be doing. What should it be conveying? I’ve got five tips for you today.
Hey guys, what do you think makes a great homepage? Have you been to any cool homepages? What actually stands out to you?
Peter: Do flash animations still work?
Jonathan: I love flash animations.
John: I don’t think that’s …
Jonathan: Is that what makes a good homepage?
Peter: I like skipping intros.
John: Yeah, skipping intro. Your mouse will never move faster.
Jonathan: Sometimes I just go to a website just to go to the intro.
John: There’s a code I actually remember and like to live by when it comes to homepages and that is the goal of your homepage is to actually get people off of your homepage.
Jonathan: Like have them close the window and just get up and leave?
John: No, get them into your site. Google started the ultimate extreme of this. You come there, there’s nothing but a search bar. It’s just a window into their site. That’s obviously the extreme, but conceptually what this means is that people shouldn’t have to be hunting and pecking to figure out what they should do when they get to you.
We as marketing people and people that use the web tend to over-estimate homepages in terms of their importance because they’re the front page of your site. For one, most people don’t come into your site on the homepage. They actually come in from interior pages. If you’re an eCommerce site, your category page or your product page is much more likely entrance into your site than them just typing in your domain name.
Jonathan: Now why is that? Why would they be coming into your site on a different page? What’s causing that to happen?
John: It’s really because they only care about the thing on that page. They don’t care about you as a brand. The search engines have done a wonderful job of really serving that up.
Also think about, Jonathan, you manage our social media presence among other things and so you understand more than ever it’s really about getting those specific posts out to people through those channels, through email and that’s very much the same thing. I can’t even think of the last time I went to a publisher’s homepage just to sort of browse outside of some breaking news event. It’s just not the way I use those types of sites.
Homepages, they’re kind of more of a branding thing, right? Any eCommerce site owner will tell you that anyone that comes to their site, they’re much more likely to convert if they use the search box. Why? Because it’s more user-centric. It’s what the user thinks. It’s almost arrogant to us to think as marketers I’m going to put the perfect thing on my homepage.
In fact, Jeff Bezos of Amazon had that famous quote when he was asked about what he wanted Amazon to be. He said, “I want to show you the thing on my homepage that you always wanted, but you didn’t know you wanted.” Which is probably the most ambitious thing you could possibly serve.
One thing we definitely know we want to avoid is sliders. They’ve pretty much been widely disdained for a variety of reasons. It’s a lazy thing that homepage owners employ.
Jonathan: What’s a slider?
John: A slider is when you come to those pages and things just cycle through on the content, basically say, “Oh, you might like this.” Wait two seconds. “Oh, you might like this.” Wait two seconds. It’s really not user-focused at all. They’ve no control over the slider in most cases and it’s just a lazy way to put information on the page.
John: Have you guys ever heard of the HIPPO effect?
Peter: Is that a healthcare thing?
Jonathan: That’s HIPAA.
John: It’s this thing, it’s got a funny acronym. It stand for the highest paid person’s opinion.
Peter: It’s like a squeaky wheel thing?
John: Yeah. What happens here, it usually happens in more like corporate environments, is all the various senior level executives get in a room and they’ll basically make the play for I want this represented on this site, so …
Jonathan: I’ve been in those meetings.
John: PR wants some event calendar. Cody, the VP of Sales wants this lead form on the front page. The marketing team wants this video. The web designer’s like, “What do I do?” How do you defeat the HIPPO?
Well, you focus on the user because it’s really all about the user. What does the user want? Here at Palo Alto we’re a very data-driven company. We like listening to our customers and seeing what they do. That’s how we react and give them the best product that we can.
The exercise around that when it comes to your homepage is to actually list out all the conversions that you want. Let’s say that you sell flooring. Your ultimate conversion would be, “I want someone to fill out a lead form so I can come and measure their house to get an estimate,” or “the secondary conversion would be I want them to view this gallery of work that we’ve done.” The third might be just to call us.
Once you list those out you can prioritize those and you have those are a marker as to say should this be on the homepage or should it not? Does it support that conversion goal? That’s the intro. Here’s the five things that I think our reader should have on their webpage. Or I should say, the things that your homepage must convey.
First and foremost, who the heck are you and why do I care? Establish your identity and your value proposition. This is often covered by the homepage’s headline and sub-headline when you come to the page so it’s right there in front. Sometimes it’s up in the header. How long have you been in business? It really is about in seconds, conveying that through text and design. They want to know very succinctly how you’re going to make their life better. They don’t care about you. It’s only about them and how is your company the best solution for whatever the user is looking for. Period. That needs to be conveyed upfront, number one.
Jonathan: Okay, who the heck are you and why do I care?
Jonathan: Got it.
John: Number two thing you must convey is that you care about mobile users. Mobile obviously trending hugely up. I think two-thirds of emails are opened on mobile. It’s eclipsing desktop searches at this point or close to be. You must have a mobile friendly website.
Next week actually Google is rolling out a new algorithm that if your website is not mobile friendly and people are searching on mobile devices, they’re actually going to deprecate your results. Four out of five websites actually are not responsive, not mobile friendly. They’re going to be in a world of hurt. You really need to get with your development team and if you don’t know what the word responsive is, ask them and make them make your website that.
Peter: John, about that, I’ve got let’s say I’ve got three websites for three small businesses I’m running and I’m out there. Those things cost me $5,000, $10,000 a build five or 10 years ago. What am I going to do? Call those guys up? They’ve all moved to different places. I pay them again to make this happen? How does the average guy like me make that work? This sounds intimidating.
John: That’s really fueled the advent of the WordPresses and the Shopifies and really kind of hitching your cart to these enterprise people that make those changes for you and sort of iterate over time.
If you invested five or 10 years ago in a static site that was coded, you frankly are just in need of a refresh and unfortunately that’s just a sum cost that you need to invest in. You might find that mobile is not important for your business. That is unlikely, but eventually especially the younger users are going to demand that.
Jonathan: Okay, so the homepage must convey that you are caring about your customers and you need to be mobile.
John: Your homepage also must convey, number three, that your customers care about you. Here we’re talking about customer proof. All the stuff you’re thinking about here, testimonials, social proof, think about reviews. Like 10 years ago reviews on product pages were nonexistent. Now close to 85% of customers say that they read 10 or more reviews about a local business before engaging services.
I’m personally a Yelp junkie. If you tell me about a restaurant, I’m going to go right there. I’m going to look. If you’re searching for a new camera or a new whatever, you’re going to read those reviews. Really having those on your site.
Even if you’re not an eCommerce site, if you’re a lawn service or whatever, show me some real customers that have used you and that’s going to go a long way. Or maybe you have awards or recognition in your industry. That’s also really important. Really making the case that you’re existing, that you have current customers and that they think you’re great.
John: Number four, your homepage must convey what you want the user to do. We’ve talked about presentation and branding and positioning, but really it’s just about getting them into the site. You need to provide clear paths to the other pages on your site that drive the desired result. You can get this done via crisp copy and distinct calls to action.
Here you really need to speak the customer’s language. They will sniff you out in a heartbeat if you’re speaking in jargon, if you’re in corporate speak, that you’re not addressing their needs. You don’t want to be wishy washy here. You want to tell them exactly what you want them to do that’s going to support their goals. Again, it’s all about them. Typically you want this information above the fold because as they scroll down the page further they kind of drop off. It’s really about striking the right balance of copy and imagery to simply get the user down the funnel.
When I talk about funnel, that just means getting them closer to what you want them to do and what ultimately they want. There’s a great book that was written 10 years ago, but still relevant. One of my favorite books in web usability called Don’t Make Me Think. That’s the way I think about people that use websites. Don’t make them think.
Lastly, your homepage must convey how to get in touch. At the end of the day we’re all personal people. If we’re going to do serious business with anyone, a website form is not enough to seal the deal. We’ve all had that experience where we’re on a site and we literally cannot find the phone number and it’s the most frustrating thing.
Jonathan: I hate that. It’s so annoying.
John: Don’t do this. Have your contact information upfront. You need to think about investing. Someone actually answering a phone, answering questions because that’s really going to help differentiate you. There you have it. Those are the must-haves and I think it applies to most industries.
Jonathan: Awesome. Those are great tips, John. Thank you so much for coming on and giving us those tips for the five things that your website must do.
Peter: John, what if I built my website in 1993 and maybe it’s due for an update?
Jonathan: Hold on a second. You built your website in 1993?
Peter: That’s pre-Google.
Jonathan: Ahead of the game, man.
Peter: I just made my servers.
Jonathan: Then you just left it? You built it and left it.
Peter: Just served it off an iMac in my bedroom. It works out pretty well. Yeah. I don’t know. Should I update that? Is that what you’re saying? Where do I begin?
John: It depends. You might be one of those rare breeds that you just don’t need a website and you’ve got tremendous word of mouth or that’s like a hipster thing where you’re kind of like not caring about the web and that’s your thing, but for most businesses, they really want to be where their customers are and do a better job with their site.
The Apple Watch:
Jonathan: Guys, I have a question for you. Apple watch just came out. What do you think of it? Maybe pull back a little bit, wearable tech. Your thoughts on wearable tech.
John: Wearable tech wasn’t on my radar at all and it actually was the Apple watch that made me look at other wearable technology.
Jonathan: Interesting. Okay, so Peter, your thoughts?
Peter: I feel like the industrial design guys were so happy about this kind of thing in 2002, 2004. It’s just come such a long way that it wearable tech even relevant? My iPhone’s in my pocket. It tells me everything I could possibly fathom knowing about the whole world, what does it matter that it’s in my pocket versus strapped to my wrist, versus literally in front of my eyeball? I don’t see any innovation coming from smaller, closer, nearer to my eyes.
Jonathan: You’re not a Google Glass guy? You’re not a FitBit guy?
John: Who is?
Peter: I think we’ve all proven that humans aren’t.
Jonathan: No one is a Google Glass guy. Some out there can see the value in it. Okay, maybe not Google Glass, but FitBit. They put that on their wrist and run around, walk around and at the end of the day they can see their reports on their physical activity. There is some kind of a market for wearable tech. I’m not trying to deny that.
Peter: No, absolutely. You look at the FitBit and you think here’s a way of thinking about my humanity in graph format. All day my heart’s beating. All day I’m walking up stairs. All day I’m doing things and now I can kind of get a view of that on my computer which is, at this point, we should be expecting that. That’s not even too science fiction. That’s some 2001 stuff right there. Right?
We’re way behind the curve on that just like we’re behind the curve on hover skateboards and self typing shoes. I’m not too upset of the FitBit coming out. I just don’t understand and someone help me on this, what is the Apple watch bring to the table that the iPhone doesn’t?
John: At this point that’s not evident and I think that’s where the lack of enthusiasm is, but I wouldn’t bet against not coming. Whether it’s some sort of eye glance sort of technology that’s going to make that feel like something new. I totally agree.
Today out of the gate, we were at lunch the other day and we went around the table. “Are you getting one?” No. “Are you getting one?” No.
I think the other thing we need to talk about in this conversation is is it the jewelry angle because really at the end of the day, that’s why people wear watches for the most part. It is a jewelry statement and it’s like remember the whole, when we had those bands that we not Smartbands? Now you can get electronics in those. Anyone who’s looking at jewelry, that’s a huge driver.
I also think about companies like Fossil, they must be like really shitting because it’s not a good … Anyone who’s going to spend $200 or $300 is probably going to by something that has more under the hood now.
Jonathan: Yeah, I don’t know. What I can’t figure out, so it’s a new category for Apple. It’s the Smartwatch category. They’re obviously, other companies are doing this too so it’s a proven concept in that people will buy it, but for Apple it’s like are they coming after Apple users or are they trying to get watch wearers? Do those people intersect and who’s going to be buying it?
Peter: Everyone’s an Apple user at this point. You’re either an Apple user or an Apple denier, right?
John: In the world market it’s actually not … It’s actually the minority. If it’s only good for Apple or iPhone 5 and 6, it’s really kind of a small percentage of overall users that’s worldwide because there are so many Android users worldwide. For a $400 watch, it does seem like it’s somewhat limiting.
Again, are you going to bet against Apple? Smartphones completely killed the point and shoot camera. We don’t kind of know what it’s going to do. No one was buying Smartphones for the cameras, but they’ve iterated them so well, the average person doesn’t carry a big camera anymore, a separate point and shoot, so what it this going to replace?
Peter: Well, when iPhone 1 came out, the first one, the first gen iPhone came out, I was like yeah right. My Blackberry is so great, I can type so much faster on these keyboards and frankly what does that give me? I’ve got more screen? I can touch it and move stuff around? Who cares? What do I need that for?
My exact attitude about the iWatch. I’m going to put my finger on it and my finger is covering 90% of the screen so what is that? I don’t want text appearing while I’m in a meeting right up in my face. I don’t want to send people and image of my actual heartbeat, which apparently is a feature. None of that is appealing to me, but I think John’s point is great. In three months am I going to be like, “This is a lifestyle product and if you don’t have it, then you’re not up to date.”
Jonathan: I think when it comes to these tech advances I’ve never been like a first gen, early adopter kind of a person just because, and this is true for the Apple Watch, I don’t see the value in it right now. Do I believe that third generation, fourth generation might have some value? Sure. It’s advancing at a rapid pace. There will be uses for it, but I’m just not ready for it yet.
Peter: To speculate what this could mean for a small business though, I don’t know if you guys are too young for this, but there was a thing when the iPhones first started coming out. It was called augmented reality.
The whole idea was your phone would just tell you about things that were going on around you. The problem is you’ve got your phone out, you’re looking at your phone, you’re looking at the world around you, you bump into things. You look like an idiot.
Google Glass tried a similar thing, but the problem was you looked like an idiot to begin with. Could the watch, to John’s point about Yelp, could the watch be a hot zone detector? Let’s say you’re just driving around Los Angeles and you’re not from Los Angeles and your watch says, “Hey, I think you like sushi and by the way, the best rated sushi place is literally right on the corner and you’re probably hungry because it’s noon.”
Jonathan: Yeah, that certainly presents some opportunities. I know there’s SMS developments for texting about businesses can start pinging you with texts if you’re in the area. “Hey, there’s an advertisement. Check out this restaurant. Here we are.” I definitely think that that’s a possibility.
John: Payment. Payment through these devices I think is huge right now. All the wearables are going to have that built in. That’s going to push that whole thing to the foreground quicker than we would have imagined.
Jonathan: For a small business owner, maybe there isn’t an opportunity here for you to do anything with the Apple Watch per se, but having your business ready to accept those kinds of payments.
Jonathan: Apple Pay is the main mechanism on the watch, so.
Peter: Yeah, get with the payment trends and maybe if you’ve been fighting your local Yelp scores, fighting against that kind of review site type thing, maybe it’s a good time to reconsider your strategy on that.
Jonathan: Embrace it.
Peter: Yeah. Maybe just dive back into there.
Jonathan: Some else too for people who have more of an entrepreneurial spirit is take a look at the SDK for the Apple watch, look at developing some apps, learn about it. There’s some opportunities there that may not present themselves for the iPhone. It’s totally worth it to take on some new technology and try to wrap your head around it.
Peter: Yeah, make my fingers smaller so they don’t cover up the whole screen.
Jonathan: Yeah, you have enormous fingers.
Peter: I’m too fat to dial the phone.
Jonathan: Watch-sized fingers.
Peter: It’s fine.
Jonathan: Yeah. All right, so that’s our take on the Apple Watch.
If you have a question you’d like us to answer on the show, send us an email at Bcast@Bplans.com.
The Bcast is brought to you be Palo Alto Software, makers of Bplans.com and LivePlan.