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Spring is an exciting time in general and for entrepreneurs in particular. The days are getting brighter, the weather is getting warmer and it's a time when you, as well as your employees and customers, feel motivated to set new goals and work towards them. For many industries, spring also marks the beginning of the high season and is also a natural time to evaluate the first months of the year, make the necessary adjustments to the strategy and plan for the rest of the year. There is therefore much to be gained from making investments in the spring to lay a foundation for growth. In this article, we are going to give tips on investments that lend themselves well to making in the spring.

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Premises

Spring is the perfect time to overhaul the premises of your company. This can range from simple aesthetic improvements to major renovation projects or simply finding new premises. If your premises do not meet the requirements of your company, there is a risk that your resources will not be maximized and that your company's productivity will be negatively affected. An inspiring work environment will also help foster creativity and productivity among your employees. For companies where customers stay in the premises, the premises become even more important. They are an extension of your company's brand and identity and a welcoming, inspiring and professional environment can enhance the customer experience.

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Technical tools

Another area worth reviewing is your technical tools. Developments in both hardware and software are moving at a breakneck pace, and spring is a good time to evaluate whether the tools your company uses are doing the job or not, and whether there are new solutions that can automate and streamline processes. Investing in new hardware and software can benefit if the current one still works. But if that means your business is missing out on productivity and efficiency by not upgrading, look at the opportunity cost. Because if the value you're missing out on exceeds the cost of the investment, that means your business loses out on not upgrading. One area that is particularly important to review is your company's cyber security to ensure that your systems and data are protected and that you have backup of everything.

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lager

For any company that sells products, the warehouse strategy is paramount to ensure that there are enough goods to meet customer demand, without having to be left with unsold products when the season ends. Analyze your company's data to forecast demand, identify which products are performing best, and make sure you have enough of them. That way, you can strike a balance between keeping popular products in stock while giving you room to test new products. For companies with large seasonal variations, this becomes especially important for planning ahead of the high season.

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Campaigns

Spring, as I said, is a time when motivation and optimism are generally at their peak, which makes it a great opportunity to launch marketing campaigns to take advantage of the positive winds. It can be both longer-term brand-building efforts, as well as more short-term sales drive efforts. The best thing is to do a combination of both parts to build loyalty and preference while increasing sales in the here and now.

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Expansion

If you take your eyes off campaigns, there are even more ways to grow your business that require a little more planning and consideration. If your business is stable and you want to take the next step, it's a good time to start planning to expand by broadening either your offering, your geographic presence, or both. However, expansion can also involve exploring alternative business models to complement or replace your current one, or entering into partnerships with other companies.

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Sustainability

The focus on sustainability is no longer something that only the interested are dedicated to, but it is a necessity for all modern businesses. As legislation around sustainability will cover more and more companies, there is much to be gained from being at the forefront as entrepreneurs. Investing in sustainability initiatives and working to reduce the company's climate impact does not have to mean spending resources on something that does not yield returns, rather the opposite. In many cases, this can result in your company actually being able to save money, become more efficient, and gain a competitive advantage over competitors. So take the spring to see if there is an opportunity to switch to fossil-free transport, if there are more sustainable alternatives in your production chain or if you can reduce your waste.

The creditworthiness of your company is very important, as it determines, among other things, the possibilities of obtaining loans and also plays a role in any cooperation. A start-up company always has a higher risk than an established company, so it is especially important to be careful with payments if your business is a start-up. Banks and companies also check the finances of the owners and you should therefore avoid payment notices even at the private level. The personal finances of board members can also affect the risk class your company falls into. Below we will go over more about how to increase your company's credit rating.

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What do banks and companies look at when determining creditworthiness?

There are many factors that weigh in when assessing the creditworthiness of a company and it is not only the finances of the company that are taken into account, but also that of the owners and the board of directors. Typically, banks and creditworthiness investigators look at financial statements and therefore always make sure they come in on time. They also check on the company's KPIs and whether there are any payment notes. As a rule, neither the company nor its owners should have any payment notes in order to achieve a high credit rating. The age of the company and the appearance of the board are also taken into account.

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After the first annual report, a company's credit rating may increase, therefore, startups usually have a low credit rating. If you have your own business, your finances affect the creditworthiness of the company. The higher the equity the company has, the better it is for the creditworthiness. Other aspects that determine are the company's profit and margins — a company with good profits over a long period of time gets a higher credit rating. However, keep in mind that accounting is very important. Also, be sure to have administrative control so that bills are paid on time.

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How do you increase your credit rating?

As an entrepreneur, you can increase the creditworthiness of your business in a number of ways, and the most important thing you can do is keep your business in order. You must have good insight into the company's finances and pay wages and invoices on time, as well as pay taxes, VAT and labor fees in good time. You should also review liquidity and your margins as well as make sure that you are not charging too little to be able to take care of all running costs. Also plan for the off-season within your business.

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Financing your business is also important, with a well-thought-out financing strategy, you increase the creditworthiness of the company. Funding should absolutely not be used to cover up if your company is not profitable, but it should be used to increase the profitability of the company. It may also be wise to try swapping out your financing for a cheaper alternative, or by pooling it all in one place. Last but not least, customer satisfaction is important for a company's credit rating. Satisfied customers will hire you again, which means a steady income, in addition, their good words can bring new customers.

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conclusions

Just like when it comes to your personal credit rating, it's a lot about keeping income and expenses in order. You should pay bills on time and make sure to have income that covers the current expenses. As a company, it is always wise to have a buffer at the beginning, in cases where something unforeseen should happen. Also, keep in mind that your personal finances and those of your board members can affect the company's creditworthiness, so check those you elect to your board of directors. The better the credit rating your business has, the more funding you can get to grow.

Although starting your own business is both fun and developing, any self-employed person can testify that it is not always a dance on roses. Like a living creature, a company has needs that must be met to ensure the growth of the business. And along the way to success, you will make some mistakes.

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Do not be afraid of mistakes.

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Failure is a natural part of life as an entrepreneur, especially at the beginning of your career. By making mistakes and learning from them, you can develop both yourself and your business. Therefore, it is important that you are not afraid to fail, but at the same time you should beware of making the same mistake several times.

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Although you should always see your failures from a positive point of view, there are some mistakes that are extra common among startups. By avoiding these, you, as just starting your own, can increase your chances of success faster. Below we list seven common mistakes among startups and how you can avoid them.

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Weak business idea

The most important step towards successful entrepreneurship is to have a unique and well-thought-out business idea. Unfortunately, many companies choose to invest in a business idea that does not have as much potential as they themselves think.

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Therefore, it is important that you have clear what to sell, to whom and in what way. Above all, investigate whether your idea already exists and how, if so, you can improve it to stand out. Do not forget to keep a close eye on your main competitors.

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One tip is to do a survey among family and friends before you decide to make your idea a reality. This way you can get valuable feedback and even ideas on improvements or changes.

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Starting your own for the wrong reason

In difficult times of rising unemployment and few jobs, many people are thinking of starting their own. A common misconception is that entrepreneurship is all about comforts, such as being your own boss and making money from rolling bands.

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Few are aware of the hard work that an own business requires. It is not uncommon for self-employed workers to work more hours than full-time employees, especially at the beginning. In addition, starting a profitable business takes time, which requires patience — something not many people counted on.

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If you want to start your own business, make sure you have an eye on what is actually required of you, both in the short and long term.

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Flawed economy

You will need money to be able to make money, especially in the start-up of your business. Many start-up entrepreneurs believe that the income of the company will roll in immediately, but, of course, this is not the case. It takes time to build a stable turnover.

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In other words, during the start-up phase, incomes will be small and expenses large. After all, now you need to make investments in everything from websites and equipment to premises and possibly employees.

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For this reason, it is important that you plan the company's budget carefully in advance. How much start-up capital will you need to get by during the startup? When will the company start making money? How big will the spending be?

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If you have a job at the moment, it may be a good idea to keep it, or lose it on time, while you start your business. In this way, you get financial security, which is especially important in the start-up phase because start-ups often lose money in the first few years.

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No business plan

It is not uncommon for entrepreneurs to believe that a good business idea is enough to run a business. The business idea is certainly important, but it is nothing without a thorough business plan.

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A business plan should contain a detailed description of your idea and goals of the business. It should also include information on everything from competitors and marketing strategy to budget and funding.

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With the help of the business plan, you can easily plan a strategy for developing the company in the desired direction. In addition, the plan can facilitate meetings with potential investors or in business loan negotiations with the bank.

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Learn more about business loans and how they can help your business grow Lånjakt.se.

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Weak digital profile

Digital presence is becoming increasingly important in our digitized society. Nevertheless, studies show, such as this one made by ClutchToday, only 64% of small business owners have a website. This means that many companies are actually losing customers due to a weak digital profile.

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No matter what industry you are in, a website is now a must. On the one hand, a website opens up completely new marketing options, such as search engine optimization, while it can improve your trust with potential customers.

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You should also be active on social platforms such as Instagram and Facebook, given the large audience that is there. The more active you are online, the better chance you have of reaching out to the right audience and building a strong brand.

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Fear of change

A common phenomenon among entrepreneurs is that they stay in old patterns, whether things are going well or not. In other words, few people choose to develop their business further, despite the fact that this may affect profitability.

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If the company is doing well, think about how it can do better. If the results do not meet expectations, evaluate and reflect to find opportunities for improvement. Maybe you need to change direction? Or maybe it's time to invest in external expertise?

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As an entrepreneur, you should never be afraid of change. Dare to question old patterns and find new opportunities.

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I want to do everything myself

One of the most common mistakes among self-employed and entrepreneurs is that they always try to do everything themselves. A common reason for this is because “they do it best themselves”.

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Apart from the fact that this attitude can create psychological stress - which in turn can lead to a deterioration in work performance - it can also slow down the development of the company.

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Daring to ask for help is important, partly for your own sake, but also for the company's. For example, by hiring external consultants with expertise in specific areas, you can reduce the workload effectively. At the same time, you stimulate the growth of the business because the work will get done faster.

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Also, don't be afraid to consult with people around you. This is where a wide network can be extra appreciated.

Summary

Running a business is a multifaceted process and sometimes you get it wrong. Never be afraid to fail, but make sure not to repeat past mistakes several times. If you do, it's a sign that life as a self-employed person may not be for you.

Are you thinking about investing, but are not sure what return it would bring? Or have you made an investment that did not quite bring the desired result? In both cases, it is good to keep track of what marginally diminishing returns mean, to ensure that none of the company's resources take out anyone else.

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Every company has resources to deal with. These resources are called production factors and control how much a company can produce. As an entrepreneur, it is good to have a general understanding of how they affect and are related, in order to be able to plan their investments and to ensure that the investments give the best possible results. There are, of course, a variety of factors and variables that affect a company's output, but generally speaking, it is generally said that there are two basic factors of production that apply regardless of what the company produces — labor and capital. Labor is the employees of the company and what they contribute to production, while capital is what is used in production itself, such as machinery, premises and cash. How much labor and capital are then invested in production, respectively, controls how much the company produces of a good or service.

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The benefit of adding another resource

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Adding, or removing, a unit of a factor of production will affect the quantity that the company produces. The change in the quantity of production implied by the changing factor is called marginal product. For example, the marginal product of labor is the change in the quantity of production that the increase or decrease of a worker would result; all that most often companies strive to increase their capacity, which is why one chooses to increase either the labor or capital of the company. Increasing a factor of production will in most cases lead to increased utility for the company. However, if one factor of production continues to increase, while keeping the others constant, it will in the long run lead to a slowdown in the rate of production. The result is then that the benefit, or return, of adding an additional unit of the same factor of production will be less than the previous one. That is, production yields marginally diminishing returns.

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Marginally diminishing returns are something you should consider when you intend to invest, as it can have an impact on whether or not you get the maximum benefit from the investment. This does not mean that you need to do a lot of economic analysis before each investment you make in the company. But it is good to keep in mind how an investment that adds a factor of production to your company can affect other factors. Let's take a hair salon to exemplify this. A hair salon that has four hairdressing chairs, but only one hairdresser, the marginal rate of return will be the same for each additional hired hairdresser up to the four chairs being filled. If the salon employs a fifth hairdresser, the marginal return for them will be less than for hairdressers 2—4. The fifth hairdresser will still provide some increase in production as he can do other tasks and cover for the rest when they have lunch or are sick. However, since there is no barber chair for him to use, the production increase will be less than it was when the salon employed the other hairdressers. Does the salon then continue to employ hairdressers without investing in more hairdressing chairs or a larger venue it will eventually come to a point where production actually drops. Should they, on the other hand, invest in an additional barber chair for each hairdresser hired, the marginal rate of return would be constant.

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How it can affect your investments

The reality is of course more complex than the example above, but the principle can be applied to most investment situations your company may face. When investing, it is good to have an understanding of how the company's resources interact with each other. If you plan to expand, you can expect that it will require investments in both labor and capital, to have the desired effect on the company's output. And if you feel that a recent investment has not quite yielded the result you had hoped for, it may be that the marginal product of the resource you invested in has shifted to being waning and that you need to balance up by investing in any other of the company's production factors with. Being aware of marginally diminishing returns can therefore help you plan your investments, identify the needs of your business, and subsequently make decisions that will allow you to get the maximum return on your investment.

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Does your company need help with financing?

Froda was founded in 2015 with a clear idea — to give SMEs the same opportunities to grow as large ones. With our service, we make it easy and affordable for entrepreneurs to invest in their ideas. By digitising the process, we have made it possible to help more companies with tailored financing according to their unique business and its needs. A smarter business loan, simply.

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Today we are one of Sweden's fastest growing fintech companies and have helped more than 15,000 companies grow. Froda is a credit institution covered by the State Deposit Guarantee and is supervised by Finansinspektionen (FI).

In order for businesses to grow, investment is required. These can be financed either by reinvesting the company's own resources, or by raising external capital. But how should you think as an entrepreneur when faced with the choice of whether to finance an investment with equity or external financing?

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Equity

Equity is the difference between a company's assets and liabilities. When a company generates profit, it increases its equity. In order for the company to continue to grow and hopefully generate higher profits in the future, it is often a natural choice to reinvest all or part of the profits in the business. This can be done by the company making investments, paying off debts or increasing cash flow to improve liquidity. Using the equity and current income, it is The most common way to finance investments among Swedish entrepreneurs.

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External Financing

Access to capital is a prerequisite for enabling companies to grow. However, for many small and growing companies, equity is not enough to invest, and external capital needs to be used to finance the investments. There are several different forms of external financing, but most of them are business loans The most common way to finance investments.

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Investing with equity or external financing?

Whether it is best to invest with equity or with the help of external financing may differ from company to company and from investment to investment. It is therefore important to have an understanding of how they differ, how they affect key indicators in the company and when the investment is expected to yield results. This is so that you can choose the financing that will allow your company to get the maximum return on investment.

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Solidity

When investing, the solvency of the company will increase or decrease differently depending on whether you reinvest the equity or if you use external financing. Solvency is a measure that indicates the proportion of assets financed using equity and is used to describe the long-term solvency of a company. When equity is reinvested in the company, the solvency will increase and, correspondingly, it will decrease if the investments are made with external financing.

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Therefore, when you are going to invest, it is good to make sure what solidity you have in the company. If your company has low solvency, investment using equity is preferable. On the one hand, solvency will increase, and secondly, because the company's own money may generate a better return than if it were simply lying in the company's account. However, investing with equity is relatively expensive compared to, for example, a business loan as most entrepreneurs want to generate a higher percentage return than the interest rate that the loan has. Therefore, if the company has a high level of solvency, it is preferable to finance the investment with external financing.

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Type of investment

The type of investment you intend to make can also have an impact on which financing may be preferred. Reinvesting profits in the company is, as I said, an important part of healthy entrepreneurship, but a relatively expensive way to finance investments. Investing with the company's own capital also means withdrawing the cash, which affects the short-term solvency of the company. If the investment is made in an asset that can be quickly turned over and generate income for the company, equity can therefore be a good way to finance the investment. If the investment is instead made in an asset that will be used for a longer period, it is usually better to finance it with external capital. This way you do not risk the liquidity of the company and thus the short-term solvency. However, it is not only the ability to pay the company's debts that affects whether to look at liquidity and which financing you should choose. Virtually all companies are run for profit and with the goal of generating returns for the owner. Therefore, if your company has good solvency and liquidity, financing with, for example, a business loan can allow you to both drive growth in the company, while at the same time, as an owner, you can use part of the cash to distribute part of the profits to yourself and get a return on your work.

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Invest in time

Another aspect to consider is when the investment needs to be made. Most Swedish companies are restrictive when it comes to indebtedness and choose to use their own capital and save for investments, which is not optimal. If companies save for investments, the investment risks being made too late and thus not having the desired effect. When you wait with the investment, you also miss out on the expected return while the investment is pending. This not only means that you as an owner miss out on increased profits and potential dividends, but also that the growth of the company deteriorates when the returns could have been reinvested in the meantime.

When the renovation becomes more expensive than planned, when the unexpected happens or simply when the company needs an injection to reach the next peak. Then liquidity can become a barrier to growth.

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What is liquidity and how to increase it in the company?

Liquidity is a measure of your company's short-term solvency, or availability of cash, relative to short-term liabilities, such as a supplier debt. Improved liquidity means, in short, improved solvency. For example, if the company incurs unexpected expenses that exceed its short-term solvency, liquidity problems arise.

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Common with temporary liquidity problems

In some industries, revenue varies widely depending on the season. For example, many service and tourism companies are fully booked during high season, only to have almost no customers at all a few weeks later. As a small business owner, it can be difficult to deal with these big swings. In addition, sometimes the weaknesses become deeper than budgeted for, which causes problems.

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Liquidity problems in the off-season can be doubly problematic, as this may be when you have time to invest — so that way you can grow at peak times.

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Then a loan might be the solution. Think carefully about the need before you borrow so that you are sure you can repay. Just borrow exactly what you need.

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When the unexpected happens

Small businesses are particularly vulnerable to unexpected expenses. The consequences are often greater the longer it takes to find a solution. The cafe owner whose awning falls down in the middle of peak season needs a new awning immediately to make the impact as small as possible. The restaurant owner with an oven that has broken down needs help immediately.

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If you haven't had time to build up a buffer for unexpected expenses, external financing is an opportunity that gives you quick access to cash when the unexpected happens.

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Sometimes wise to settle accounts payable with loans

Unforeseen events can set it up properly and it can get really boring when you find it difficult to pay your supplier invoices. A business loan is often a better solution than risking the company's relationships with a non-payment. If you run an otherwise well-run business, settling single accounts payable with a loan need not be a problem.

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Increase liquidity with a loan -- but consider this

If you run a small business that suddenly loses turnover or has unresolved accounts payable, you should carefully analyze what it is due to. Some things to ponder might be:

1. How are the competitors doing?
2. Does the downturn only touch you?
3. Do you have a profitability problem that can be corrected?

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Maybe you need to invest in order to reach more customers. This could be a new product, new equipment or marketing to an important customer group to increase sales. Think carefully about the need before you borrow. Are you sure this particular investment is the right one? Count on your space to repay the loan.