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Tag: Money & Finance

  • How NFTs Work — and How They Could Prove Profitable for Your Business

    How NFTs Work — and How They Could Prove Profitable for Your Business

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    Opinions expressed by Entrepreneur contributors are their own.

    2022 was an interesting year for NFTs (non-fungible tokens), to say the least. This was the year that saw public knowledge of NFTs go beyond Bitcoin and other cryptocurrencies to the field of digital collectibles, such as art and photographs.

    But while buying art and other collectibles may be getting most of the attention from the general public, they result in some of the more practical (and profitable) business applications getting overlooked. In reality, NFTs can have a variety of practical applications that help organizations achieve their existing business goals.

    First things first: How do NFTs work?

    NFTs are is cryptographic assets that are based on blockchain technology. The non-fungible aspect is important, as it gives NFTs distinctive properties that mean they cannot be replaced or replicated. They are unique, and can’t be manipulated or forged. Most often, we see NFTs in connection with digital assets, such as art, sports cards, games and other collectibles, where the blockchain provides a certificate of authenticity.

    NFTs can be bought and sold on the market, with pricing based on market demand, just like a physical product. However, the unique data that is part of the NFT makes it easy to validate ownership and verify the authenticity of the token.

    NFTs are also used to represent ownership details, memberships and more — and these varied use cases have proven key to business applications.

    Related: Here’s a Beginner’s Guide to Crypto, NFTs, and the Metaverse

    Linking digital tokens to physical benefits

    One key to generating business growth via NFTs is linking the tokens to a physical, real-world product or experience. As the report Brands in Web3 Q3 2022 by NFT Tech highlights, fashion brand Tiffany & Co. was able to turn NFTs into a set of exclusive physical goods. The company partnered with CryptoPunks to create an exclusive line of 250 “NFTiffs” pendants. Priced for 30 ETH (roughly $50,000 at the time), the unique pendants sold out in 22 minutes.

    Another example comes from the Australian Open. In 2022, the Australian Open launched a highly successful metaverse initiative of minting AO Art Ball NFTs that linked to data from live matches. This was paired with virtually hosting the Australian Open in a 3D virtual reality platform to provide an unprecedented level of access to one of tennis’s largest events.

    While the initial launch was successful in and of itself, the Australian Open’s commitment to this NFT initiative is poised to be even greater in 2023, with the announcement that holders of each Art Ball NFT will receive two complimentary seven-day Ground Passes to AO23’s finals week. Art Ball holders also gain access to additional exclusive experiences, such as streams and viewing suites through the “SuperSight” fan experience and access to other United Cup matches.

    With both Tiffany & Co. and the Australian Open, linking NFTs to real-world products or experiences proved to be a highly successful method for deepening relationships with their target audience.

    In addition, when NFTs are used in this way, they invite mass market participation, turning fans into financially-incentivized brand ambassadors who enjoy a high level of utility — and of course, can seamlessly trade their digital assets for real-world cash.

    Related: Putting the Intangible Into Your NFT Project

    Reaching new demographics

    NFTs don’t just help brands strengthen relationships with their existing customers — quite often, they can prove key to reaching a new audience entirely.

    Case in point: For quite some time, clothing brand Polo Ralph Lauren has seen its primary customer base largely concentrated among older adults, while younger demographics like millennials and Gen Z have been less interested in the clothing brand.

    In 2021 and 2022, however, Ralph Lauren made a full-fledged commitment to digital initiatives such as NFTs and the metaverse. These included launching a “phygital” fashion collection in Fortnite, as well as an exclusive digital clothing connection through the game Roblox.

    These digitally-focused efforts were a major success for the brand. As reported by Vogue Business, Polo Ralph Lauren saw its third-quarter revenue increase by 27% after the launch of its Roblox collection — with that growth largely driven by a 58% increase in the acquisition of new digital customers.

    In this case, strategic implementation of digital assets allowed Ralph Lauren to reach a younger target demographic in metaverse-style spaces where they would have the greatest appeal and potential impact.

    When done right, NFT initiatives can help revive sales and reinvigorate a brand’s image, making it more relevant and appealing in today’s competitive market.

    Using NFTs wisely for your business goals

    As these examples illustrate, the potential use cases for NFTs go well beyond selling digital art. With a strategic approach, businesses can use NFTs to find new ways to engage with younger, more tech-oriented demographics. NFT-based projects can help position your company as an innovator at the forefront of disrupting the marketplace.

    That being said, any business investment in NFTs should be done strategically. Major NFT failures in 2022 garnered a lot of media attention, and should serve as a powerful reminder for businesses as they enter this space. All investments in NFT should be done with the interests of the end customer in mind.

    When you focus on how your target audience could realistically benefit from your use of NFTs, you will be able to identify strategies that have true staying power, and that will build greater rapport between your brand and its most tech-savvy customers.

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    Lucas Miller

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  • Alec Baldwin Just Learned Something Every Business Owner Already Knows

    Alec Baldwin Just Learned Something Every Business Owner Already Knows

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    Opinions expressed by Entrepreneur contributors are their own.

    By now you’re familiar with the ongoing saga of Alec Baldwin and the tragic shooting accident of a cinematographer on the set of his film “Rust.” Earlier this month, Baldwin was charged with involuntary manslaughter in Arizona, the state where the incident occurred, and faces up to 18 months in prison if found guilty. This is an awful situation. But it’s also a reminder of the liabilities we all face as business owners. Because, as a producer of the film, Baldwin was a part owner of the enterprise. And with that great opportunity for profit also comes great responsibility.

    And these responsibilities extend to all areas of our businesses.

    For example, as a certified public accountant, I’ve signed tax returns for clients in the past. And, even though I do have both professional and legal requirements I must fulfill, in the end, a company’s tax return is the responsibility of the company’s owners. If, like most small businesses, your business is owned by yourself or maybe with a partner or two any problem, error or issue with your tax return is ultimately on you. Even if you were unaware of an omission (or a commission) you’re still responsible for it. You can’t just blame everything on your accountant. Your signature is on that return. You own it and you’re liable — both civilly and even criminally — if there’s a significant error. So read your return. Ask questions. Know what you’re signing before you sign it.

    Related: Does Your Business Put You at Risk of Lawsuits?

    The same goes for mistakes made by your employees while on the job. If an unsuspecting bookkeeper accidentally runs over a puppy on the way to make a bank deposit or pick up a package during company hours then this is going to be your problem. If a service technician makes an inappropriate comment to a customer out in the field you’re going to hear about it. If your delivery driver sideswipes a parked car that obligation is yours. If someone slips on your walkway, that’s going to be your responsibility too. This is why insurance exists. And the claims aren’t getting any smaller in this ever-growing litigious environment. So meet with your insurance advisor regularly and make sure your coverages are appropriate.

    Unfortunately, being associated with an unpopular influencer, a controversial event or a marketing campaign that goes south is also your fault. Pepsi didn’t expect the backlash it received when the company launched a campaign featuring Kendall Jenner, who offered its product to a police officer at a protest as a peace offering. Adidas came under fire when congratulating customers who ran in 2017’s Boston Marathon with the slogan, “Congrats, you survived the Boston Marathon.” Other brands have been accused of racism, colonialism and other transgressions as a result of their misguided marketing campaigns.

    But it’s not just the big brands — and their shareholders — who suffer the consequences of their actions. There are plenty of small businesses that make these mistakes. And for us, because of our size, the repercussions are more severe.

    A Dallas restaurant chain caused controversy when it implemented a surcharge for employee benefits. The owner of an Italian restaurant “sparked outrage” after a Facebook post. Another business owner was slammed on social media for trying to scare off a homeless person with a hose. There are countless other stories of small businesses that suffered the wrath of Twitter and Facebook for their actions or the actions of their employees — this includes taking a position on a controversial social issue and losing customers as a result or even being forced to shut down because of it.

    And there are countless other stories of business owners who, by trusting too much, had funds stolen by office managers, accountants, employees, financial executives and bookkeepers. Maybe they had insurance. Maybe they didn’t. But no insurance is going to cover the lost time and the anguish of such a loss, let alone the public humiliation of having to admit to the world that by your lack of internal controls you’ve been had. And then there is the countless number of small businesses — most of them unreported — that have suffered significant losses of data and face enormous lawsuits from angry customers thanks to their poor network security that resulted in breaches and ransomware attacks. You need insurance for all of this too.

    But the answer isn’t just insurance. It’s internal controls. It’s management participation. It’s care and attention to detail and scrutiny and involvement and all the other things that a business owner must do in order to minimize their potential exposure to liability. Alec Baldwin, unfortunately, didn’t check that the gun he was using in a make-believe scene contained make-believe bullets. Maybe that was an honest oversight. Maybe he should have been more diligent. Regardless, he’s the owner of the movie-making production so he’s on the hook.

    As business owners we take risks. Substantial risks. It’s what separates us from employees. An employee can walk away from a job anytime and just get another job. But the owner of a business can’t do that. We must meet obligations and are exposed to both financial and legal repercussions for the decisions we make. Let’s never forget that.

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    Gene Marks

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  • How Offering Discounts Hinders Your Business’s Growth

    How Offering Discounts Hinders Your Business’s Growth

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    Opinions expressed by Entrepreneur contributors are their own.

    In the subscription arena, and in the B2C environment in general, discounts seem to be the norm. The assumption is that discounts help incentivize purchases that wouldn’t typically happen, leading to new customers.

    The reality is completely different. Discounts, when used incorrectly, can greatly hinder growth and decrease your chances of attracting long-term, brand loyalists. Here’s why:

    Related: Don’t Offer Customers Discounts If You Want to Be Successful

    Discounts attract the wrong types of customers

    One of the fundamental issues with using discounts is that they attract the wrong type of customers to your brand. Customers who join a subscription service due to a discount are often shopping for price instead of unique and exclusive brand offerings. They’ll leave the minute they find a better deal.

    This lack of customer loyalty has far-reaching implications. Data shows that only 52% of consumers who sign up for a new retail subscription will actually keep it. Higher discounts have been linked to decreased willingness to pay renewal fees. Plus, data from QPilot found that the more discounts you offer, the more churn you’ll have.

    Instead, engage customers in long-term commitment opportunities. Research from Attest found that customers see more value in a 12-month commitment with two months free than with a shorter commitment coupled with larger monetary savings.

    Discounts devalue your brand

    The strength of the subscription-based model is in its ability to create belonging. As Jay Myers of Bold Commerce said at SubSummit, “People want to be a member of a brand, like a member of a sports team.”

    Promo codes and discounts negate this approach. According to Nancy Harhut at HBT Marketing, coupon codes lead to distracted customers, with studies showing 27% of potential buyers abandoning their carts in search of coupon codes.

    Coupon codes can also cause consumers to have post-purchase regret. When a customer pays full price for a product and later sees a promo code spot offering the same item or service for a discount, they begin to question the value of their previous purchase.

    Discounts train a consumer to think they can get your product somewhere else for less money. This ultimately makes your product or service appear replaceable.

    Instead, look to attract those who are shopping for experience and community. The strongest brands put an emphasis on the value they can provide in a customer’s journey.

    Related: 6 Good Reasons to Ditch Offering Discounts

    Discounts directly impact perceived customer value

    Offering a discount puts your name in the marketplace, but it doesn’t set you apart. In fact, the vast majority of subscription-based cancellations stem from voluntary churn, according to SUBTA’s State of Subscription Annual Report. Factors include price, perceived value and poor customer service.

    That’s why the best brands focus on identifying what their target customer wants and delivering on that value. This involves shifting to a lifecycle journey, where brands consider the experiences a customer faces as they go through life. Then, they perfect a core offering that helps in that lifecycle.

    This in-depth understanding of a customer allows you to stay engaged in a way no discount can. Rather than offering a promo code, brands with a central understanding of client value can identify value-add opportunities to engage their ideal customer on a regular basis, instigating belonging and inclusion.

    What to offer instead

    Discounts are not the only way to gain customers or increase value. Rather, consider some of these tactics in the new year:

    • Get creative with product-sourcing partnerships: Look for ways to incorporate unique, boutique items from up-and-coming brands who want exposure.

    • Clearly communicate the value of your price point: Furniture subscription company, Fernish, does just this by comparing the actual price a customer will pay for a piece with the value of the subscription.

    • Embrace the cancellation: Haroon Mokhtarzada of RocketMoney (formerly Truebill) encourages making the cancellation process as easy as possible and then surveying those cancellations to impact customer loyalty. In fact, the likelihood of re-subscription has been found to go up when it’s easy to cancel.

    • Utilize Subscribe & Save options: If your brand is a replenishment business, utilize the subscribe and save feature to upsell for a longer-term commitment and an increase in perceived value. More than 60% of consumers report that Subscribe & Save programs make their lives easier.

    Discounts downplay the power of your brand. Instead of jumping on the promo value bandwagon, look for ways to utilize customer data to drive meaningful subscriber experiences. Creating value add-ons that promote long-term commitment and a loyal customer base will ultimately impact your bottom line and make for a more confident brand.

    Related: Reasons Why Heavy Discounting Cannot Lead to Sustainable Growth

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    Chris George

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  • Money-Saving Tips Entrepreneurs Often Miss in Tax Filing Season

    Money-Saving Tips Entrepreneurs Often Miss in Tax Filing Season

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    Opinions expressed by Entrepreneur contributors are their own.

    There is one time a year that requires a detailed level of attention for a business owner, no matter the size of your business.

    When tax season comes around, entrepreneurs initiate survival mode sometime between January and April 15 and look for every way to get a few more deductions.

    Bookkeeping, tax filing, audits and deductions will assist in keeping a good relationship with the IRS, as well as supporting good habits for your business; however, because getting everything just right can be overwhelming, it is easy to miss important things and leave money on the table that would be better suited in your pocket.

    Tax season reaches beyond the immediate tax return and can have a lasting impact five or even 10 years down the road. While you can make certain deductions one year that will benefit you, as your business grows, having a different strategy is in your best interest.

    This requires experience, a little patience and a willingness to learn from the mistakes you made.

    There are three very important things every business owner should be paying attention to when you file your yearly taxes to ensure you are getting the most out of your return. These examples can also create strong business habits that will help you create a long-term operation.

    Related: 75 Items You May Be Able to Deduct from Your Taxes

    The home office deduction

    While it may be more convenient to work from home, as well as being fiscally cheaper, it may make you a target for audits.

    Since you can deduct items like the square footage of your home office or short trips to the office supply store, it is crucial that you have the documentation to verify everything you list as a deduction.

    With less obvious options like the Augusta Rule — in which you can rent your home out to business events and summit meetings — you have more options for write-offs and every purchase adds up. Nearly every purchase that you make for your business is considered tax-deductible as it relates to your business.

    Although not every person who works from home will be audited, if you were to go through a formal audit and you do not have proper documentation for your deduction claims, you can have those deductions revoked.

    If your business is growing quickly and producing high capital, you may want to consider moving your business into an office lease to keep your home and business separate.

    This will be to your advantage when you are looking for clear defining factors in listing deductions, but if that’s not your cup of tea as an entrepreneur and you like the home office as a center for operations, make sure you keep proper documentation of your home office to ensure your write-off isn’t arguable in the case of an audit.

    Related: These 6 Tax Tips Will Help Make Tax Season Easy for Your Business

    Utilize deductions in the ways that benefit you the most

    Being honest with your deductions is a good practice to have, making sure that you are not putting forth false information to save a few bucks.

    One thing that many people do not consider is overusing deductions that are available. It can be quite easy to get into a rhythm of using the same tactics every year, but this can cost you in the long run.

    Let’s say you were to buy a new vehicle every year or two for your business. It could be a worthwhile plan for the first couple of filings that will help ease some of the financial pressure on a young business.

    However, this can turn into abuse — not from a legal standpoint, but in the metric that vehicles depreciating over time will cost you more than the deduction would save.

    Working with a professional accountant to have a good roadmap to how your deductions will affect you not only this year, but in future filings, is a good thing to consider. This will help with the guidance of what you should be used as a deduction and what would be better to leave behind.

    Map your deductions out accordingly because they can save you a lot of headaches and money 10 years from now.

    Related: The IRS Hates Telling Entrepreneurs Anything About Taxes. Here’s How You Can Find Out What They’re Thinking.

    Categorize your business properly

    It is a necessary task to “list” your business regardless of where you operate. That being said, there are four options upfront as to how you list your business by definition and how your business is classified can save you or cost you money.

    The four business classifications are:

    • LLC: A limited liability company.

    • S corp: S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.

    • C corp: A C corporation is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity.

    • Sole proprietor: A person who is the exclusive owner of a business, entitled to keep all profits after tax has been paid but liable for all losses.

    With all of these options, it is imperative to either know what you are doing or work with someone who does to register your business accordingly in the state you own a business.

    Related: 14 Tax Deductions Your Small Business Might Be Overlooking

    It can be misleading as to which definition will be the best to suit your needs; however, if you do it correctly, it can create a good foundation that will benefit you.

    There can be many options to choose from when you are looking for deductions within your business, whether you are working from home or in an office space, under an LLC, sole proprietor or S corp. If you are unfamiliar with how to navigate this information, it is best to hire an accountant/bookkeeper to help guide you through.

    While there are many “deductions” you can apply to your business, being aware of the things that will benefit you now and in the long run can relieve stress when you need it most.

    Utilize every deduction you can to bring the cost of running your business down like materials, office supplies, office space, vehicles, advertising, etc., then consider what you will still be able to use in the big picture by measuring your growth against what you are saving this year.

    Documentation is one of the most important things you can do, so if you don’t have the time to be on top of it, hire a competent bookkeeper.

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    Kale Goodman

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  • What Small Businesses Can Do If the IRS Comes Knocking

    What Small Businesses Can Do If the IRS Comes Knocking

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    Opinions expressed by Entrepreneur contributors are their own.

    Disclaimer: This article is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other financial professional to determine what may be best for your individual needs.

    Although most small business returns filed every year don’t get audited, the IRS is certainly becoming more active. For instance, in November 2020, the IRS announced it would ramp up audits of small businesses by 50% in 2021. Then, in August 2022, Congress passed the Inflation Reduction Act, including $80 billion in IRS funding, with approximately $45 billion going toward enforcement — conducted by at least some of those 87,000 new agents the IRS is reportedly hiring.

    So how can you stay out of the IRS’s crosshairs? To an extent, there’s nothing you can do, as some audits are totally random. However, in most cases, audits result from actions or omissions by the taxpayer — certain of which are more likely to trigger some unwelcome mail from the IRS announcing an audit.

    Here are five of the most common small business tax audit triggers.

    Related: These Are the Top Tax Filing Mistakes Made by Small Business Owners (and How to Avoid Them)

    1. Failing to report income

    Whether it’s intentional or simply due to an oversight, failing to report income is a common trigger for an IRS audit.

    The IRS receives copies of 1099 forms sent to your business, so in many cases, it’s easy to spot a discrepancy between reported income on a tax return and the information included in tax reporting forms. If there is a discrepancy, the IRS will flag it on your return and, most likely, initiate an audit.

    In addition, as more individuals turn to side hustles and gig work to make money, the IRS is taking steps to ensure that it’s keeping tabs on what people are earning. While it has delayed implementation for tax year 2022, the IRS will soon be requiring third-party settlement organizations such as PayPal and Venmo to issue 1099-K forms to individuals being paid $600 or more via these platforms.

    Fail to report income? There’s a good chance the IRS will notice.

    2. Large deductions and excessive expenses

    Small businesses should claim all justifiable business deductions. That’s their right under our tax laws.

    However, there are no bright-line rules that define what’s “justifiable” — only a somewhat fuzzy standard that a business expense must be both ordinary and necessary.

    Because there’s ambiguity in these terms, some taxpayers take it too far and claim unreasonably large deductions and excessive expenses, leading to audits. The odds that a deduction will trigger an audit increase if such deductions or expenses are either out of line with IRS standards for similarly situated businesses and/or significantly larger than the prior year.

    It’s also important to note that certain deductions tend to draw more scrutiny than others, including the home office deduction, travel costs and vehicle use, to name a few.

    Related: Top Tax Write-Offs That Could Get You in Trouble With the IRS

    3. Large amounts of cash transactions

    If you run a “cash business,” such as a restaurant or barber shop, that fact alone makes it more likely that you’ll be audited. When a business relies mostly on cash transactions, they face an increased audit risk because the IRS may be concerned that the business is underreporting income.

    If your small business has a large number of cash transactions, there may not be much you can do to prevent an audit — but if you keep good records and disclose your income, the risks stemming from an audit will be greatly reduced.

    4. Claiming business losses year after year

    Are you running a business or trying to write off expenses for a hobby? IRS guidelines say that if you have earned a profit in at least three of five consecutive years, the presumption is that the business is being run to generate a profit. If not, it could trigger an audit, because having multiple years of losses can lead to the IRS questioning if you have a legitimate business.

    If your business is not, in fact, a hobby but continues to generate losses, make sure to keep accurate and extensive records to help prevent the reclassification of your business as a hobby.

    5. S Corp shareholder-employees earning low or no salaries

    It’s common for small business owners to establish an S Corp instead of an LLC to avoid paying self-employment tax on distributions. However, to take advantage of these tax benefits, the S Corp shareholder-employee must be paid what the IRS deems a “reasonable salary” — a paycheck comparable to what other employers would pay for similar services.

    If there’s additional profit in the business beyond the salary, those can be paid as distributions.

    The IRS is on the lookout for S Corps paying shareholder-employees unreasonably low salaries — or in some cases, no salaries at all. When compensation is misaligned relative to a similar position in a similar industry, it may trigger an audit.

    Related: What I Learned From a Two-Year IRS Audit

    What to do if you get audited by the IRS

    The idea of an audit strikes fear in most people because they immediately conjure up a vision of IRS agents forcefully knocking on the front door of their home or business, ready to rifle through their records.

    That’s not how things work, at least for most people who are subject to audits. Remember, audits are rare. And when they do happen, most are done by mail. While it’s not common, some audits take place at an IRS office (a “desk audit”) or at a home or business (a “field audit”). Regardless, if you find out you’re getting audited, don’t panic and contact an experienced tax audit lawyer, especially if there’s significant money at stake. Do this right away, because the IRS requires a timely response.

    In many instances, resolving an audit will involve providing documentation to the IRS to substantiate the figures on your return. That may end the matter, or there may be some adjustment to the amount you owe, as well as penalties and interest, that you may agree to pay.

    However, you may disagree with the conclusion reached by the IRS, in which case you’ll have 30 days to appeal the IRS’ findings. Disputes proceed with an appeal with the IRS Office of Appeals, followed by a petition to the U.S. Tax Court in the event your appeal is unsuccessful.

    While it’s important to know what to do in the event of an audit, the best way to avoid negative repercussions from an audit is to avoid one in the first place. Be aware of the most common audit triggers. Avoid them if possible. Keep good records. And if the IRS comes calling anyway, contact an experienced audit defense attorney to help you through the process.

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    Jason Carr

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  • There’s So Much More to NFTs and Web3 Than the FTX Crash

    There’s So Much More to NFTs and Web3 Than the FTX Crash

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    Opinions expressed by Entrepreneur contributors are their own.

    When was the last time you looked at a work of art online and thought, even for a second, about what file type it was? Whether the image you see is a JPEG or GIF rarely matters to anyone except for professionals in the media industry, where file types have different properties, qualities and sizes. For the average content consumer, it doesn’t matter at all.

    Now ask yourself: Why are NFTs any different?

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    Matt Cimaglia

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  • How to Ask for a Raise? 5 Scripts for the Most Common Situations

    How to Ask for a Raise? 5 Scripts for the Most Common Situations

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    Inflation’s brutal — don’t leave any money on the table.

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    Amanda Breen

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  • ETF vs. Mutual Funds: What Are the Differences?

    ETF vs. Mutual Funds: What Are the Differences?

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    Disclaimer: This article is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other financial professional to determine what may be best for your individual needs.

    When it comes to investing, there are many different options to choose from. Two of the most popular types of investments are ETFs and mutual funds. But what are the differences between these two investment options–and which is right for you?

    Here, you’ll get a full breakdown of the key differences between ETFs and mutual funds, so you can decide which type of investment is best for you.

    What are ETFs and mutual funds?

    Both types of investment products offer benefits and drawbacks, so it’s essential to understand how they work before you invest.

    ETFs (exchange-traded funds) are baskets of stocks bought and sold on an exchange.

    On the other hand, mutual funds are managed by investment professionals who buy and sell stocks according to a defined set of criteria.

    You can use ETFs and mutual funds to invest in various assets, including stocks, bonds, and commodities. They also offer an affordable path to diversification through real estate.

    However, ETFs tend to be more transparent than mutual funds, meaning you can see individual stocks in the basket. Mutual funds are also more expensive to manage than ETFs. As a result, mutual funds typically have higher fees than ETFs, including a load (a fee paid to brokers for their efforts) and management fees (paid to the investment management firm).

    When deciding which type of product to invest in, consider your financial goals and risk tolerance. An actively managed ETF may be a good choice if you want lower costs while diversifying your portfolio. However, if you’re willing to pay for a portfolio manager, an actively managed mutual fund may be a better option.

    Related: Why ETFs Are A Good Choice For A Properly Diversified Portfolio

    How are ETFs and mutual funds structured?

    ETFs and mutual funds are both structured as investment vehicles that allow investors to pool their money together to buy a basket of individual securities.

    A fund manager typically manages mutual funds, while ETFs are usually passively managed, meaning they track an underlying market index. Both types of funds can be bought and sold on stock exchanges and are typically aimed at outperforming benchmarks like the S&P 500 index.

    One key difference between ETFs and mutual funds is that ETFs trade like stocks, meaning they can be bought and sold on a stock exchange throughout the day.

    On the other hand, mutual funds are priced only once per day after the markets close. If you want to sell your fund shares in a mutual fund, you must wait until the day’s end.

    The market price of an ETF often differs from its net asset value (NAV), which is the value of the ETF shares and underlying securities calculated at the end of the trading day. Mutual funds don’t have this discrepancy, giving them a lower liability to the short-termintradayfluctuations of the stock market.

    How are ETFs and mutual funds taxed?

    When creating an investment strategy for index ETFs and mutual funds, one must consider how they are taxed. While both types of investments are subject to capital gains tax, there are some key differences to understand.

    ETFs are generally taxed at a lower rate than mutual funds, as they are not subject to the same level of turnover. In addition, ETFs tend to have a lower expense ratio than mutual funds, making them a more efficient investment.

    Expense ratios, essentially, are fees that cover administrative costs associated with portfolio management — ETFs, which track market indexes, are less work to run on the administrative side, which is why their expense ratios tend to be lower.

    Remember that you should make all investment decisions with a financial advisor. Taxes are just one factor when investing in ETFs and mutual funds.

    What are the key similarities between ETFs and mutual funds?

    ETFs and mutual funds share several similarities, and each can significantly benefit the investor.

    You can use both investment types to:

    • Diversify your portfolio
    • Access different asset classes (groups of investments with similar characteristics, subject to the same regulations; i.e., equities, currency, fixed-income, commodities, real estate)
    • Save for retirement
    • Reinvest your dividends

    Whichever type of investment you choose, research and consult with a financial advisor to ensure it’s the right move.

    What are the primary differences between ETFs and mutual funds?

    Now that you know the basics of ETFs and mutual funds, it’s time to take a closer look at the key differences between these two investment products.

    Here are seven of the most important differences to keep in mind:

    1. ETFs are bought and sold on an exchange, while mutual funds are not.
    2. Mutual funds are more expensive to manage than ETFs.
    3. ETFs typically have lower fees (such as management fees and redemption fees) than mutual funds.
    4. ETFs offer more transparency than mutual funds.
    5. Mutual fund managers make all investment decisions, while with ETFs, you can see which stocks are in the basket.
    6. Both ETFs and mutual funds are subject to capital gains tax. A capital gains tax is a tax on the profit an investor makes once an investment is sold.
    7. ETFs are generally taxed at a lower rate than mutual funds.

    There is no right or wrong answer when deciding between ETFs and mutual funds. It ultimately depends on your financial goals and risk tolerance.

    The benefits of ETFs

    For the average investor, exchange-traded funds (ETFs) offer many advantages over traditional mutual funds. ETFs are typically more transparent than mutual funds, meaning investors can see what they hold.

    Additionally, ETFs tend to be tax efficient, as they only generate capital gains when sold. This is in contrast to mutual funds, which are subject to annual capital gains taxes.

    Related: The Difference Between Direct Indexing and ETFs

    Furthermore, ETFs often have lower expense ratios than mutual funds or index funds, making them more affordable for investors. Finally, ETFs tend to be more liquid than mutual funds so you can buy and sell them more easily. And ETFs can be even more attractive for investors who prefer active management.

    The benefits of mutual funds

    Exchange Traded Funds (ETFs) have become a popular investment vehicle for many investors. But mutual funds still offer some distinct advantages that make them worth considering.

    One of the most significant advantages of mutual funds is that they offer professional management. This is particularly important in markets subject to high volatility, where having a reputable fund company making investment decisions can help minimize losses and maximize gains.

    Related: Which Mutual Fund Plan Should You Choose – Regular or Direct?

    Additionally, mutual funds typically offer a higher level of diversification than ETFs. By investing in various asset classes, mutual funds can help reduce risk and improve returns over time. And mutual funds typically have lower fees than ETFs, which can lead to better returns.

    When is it best to use an ETF or a mutual fund?

    When it comes to investing, there are many different options to choose from. ETFs and mutual funds are two of the most popular choices. So, how do you know which one is right for you?

    Generally speaking, ETFs are more efficient than mutual funds. They have lower expense ratios and are more tax-friendly. You can also trade ETFs throughout the trading day, while mutual fund trades are only executed once per day (after the markets close).

    On the other hand, mutual funds often have a longer track record than ETFs, which can make them more appealing to some investors. Not to mention mutual funds usually provide greater diversification than ETFs. Further, some investors prefer the hands-off approach of mutual funds, where they don’t have to manage their investments actively.

    Related: Mutual Funds: Thing You Should Know Before Investing

    Ultimately, your best choice will depend on your individual investment goals and preferences.

    If you’re looking for a low-cost investment that you can actively manage, an ETF may be a good option. A mutual fund may be the better choice if you want a hands-off investment with a long track record.

    Comparing costs between ETFs and mutual funds

    When comparing costs, ETFs typically have lower expense ratios than mutual funds. This is because ETFs are passively managed, so they don’t require a team of fund managers to make decisions about buying and selling stocks. However, ETFs can also incur other costs, such as brokerage fees and bid-ask spreads (the amount by which the ask price exceeds the bid price).

    On the other hand, mutual funds are actively managed, meaning they have higher expense ratios. But since mutual funds are bought and sold directly through the investment company, there are no additional transaction costs.

    So when it comes to cost comparison, it depends on the type of fees you’re looking at. If you’re focused on expense ratios, then ETFs may be the better choice. But if you’re looking at total costs — including transaction fees, operating expenses, and trading commissions — then mutual funds may be a better option.

    Related: Why You Should Invest in Mutual Funds vs. Individual Stocks

    ETF vs. mutual funds: Which is right for you?

    ETFs and mutual funds are popular investment vehicles. They both have unique benefits as well as drawbacks.

    Regarding costs, ETFs tend to be cheaper than mutual funds. However, there are some instances where it may be better to invest in a mutual fund instead of an ETF.

    Ultimately, the best way to decide whether or not an ETF or a mutual fund is right for you is to continue researching and consult a financial advisor. Both vehicles can help you achieve your investment objectives if you approach them strategically.

    For more informational articles like this one, explore Entrepreneur’s Money & Finance articles here.

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    Entrepreneur Staff

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  • What Is Gap Insurance and How Does It Work?

    What Is Gap Insurance and How Does It Work?

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    If you’re like most other entrepreneurs, you’re always seeking to protect your business (and your finances).

    One way to do that is to purchase gap insurance, a type of coverage that helps pay the difference between what you owe on your car loan and what your car is worth if it’s totaled in an accident.

    Here’s everything you need to know about how gap insurance works, how much it costs, and more.

    Gap insurance defined

    Gap insurance is a supplementary type of car insurance that covers the gap between what you owe on a financed or leased vehicle and the car’s actual market value if it’s totaled in an accident.

    This type of coverage can be valuable if the amount left on the auto loan or lease becomes more significant than the actual cash value due to fluctuations in depreciation rates.

    If your vehicle is stolen and not recovered, gap insurance can also help you compensate for the difference between what you paid and its current value at the time of theft.

    Ultimately, gap insurance can be an essential tool to help you meet your financial obligations even when your regular policy doesn’t apply.

    Remember that gap coverage only applies when conventional car insurance coverage doesn’t fully service your financial needs. Knowing how gap insurance works is key to understanding whether it makes sense for your situation.

    Moreover, gap insurance is available on some health insurance plans, but it’s more commonly known as “supplemental insurance” in that setting.

    Related: 3 Things to Know About Buying Health Insurance

    What are the benefits of gap insurance?

    Gap insurance is a valuable option for many car owners needing an extra layer of financial protection. Say, for instance, that your car is totaled in an accident and is worth $3,000 less than the remaining loan balance.

    Gap insurance can help make up the difference. It can also be beneficial when trading in a vehicle with negative equity, as it can help to offset some of those costs when rolling them over into another loan or finance agreement.

    Sometimes, car insurance companies pay out in cases where there has been a significant depreciation due to age or mechanical issues. Many collectors purchase gap insurance because even a slight devaluation can significantly harm their investment.

    Gap coverage isn’t necessary for everyone, but could offer a helpful security net by giving you the peace of mind that you’re covered in the event that anything should happen to your vehicle.

    What are some other examples of gap insurance in action?

    Gap insurance is worth considering if you finance or lease a vehicle with a high-interest loan. Say that you purchase a new car that costs $30,000 and is financed over six years at 5% interest.

    This means you’d pay $34,786.65 throughout the loan, plus taxes and fees. If you totaled the vehicle shortly after purchasing it, it’s likely that the value of the vehicle has already significantly dropped just from you driving it off the lot. Gap insurance could cover (or help cover) the remaining debt you still owe on the loan if the insurance payout is less than what you still owe.

    In another example, let’s say you’re trading in a car with negative equity. The car is worth $10,000, but you owe $15,000 on the loan.

    If you were to trade it in for a new car and roll that debt into a new loan or finance agreement, gap insurance could help cover the remaining $5,000 so that you don’t have to pay out of pocket.

    Related: Auto Insurance — Entrepreneur Small Business Encyclopedia

    Gap insurance vs. comprehensive insurance

    Gap insurance and comprehensive insurance are two different types of car insurance. Remember that gap insurance covers only the gap between what your car is worth and the amount you still owe on it; it won’t pay out to fix damages.

    On the other hand, comprehensive insurance covers damage to your car typically not related to actually driving, whether it’s from a tree branch falling on it, fire, theft, or something else (depending on your policy). It won’t pay out for any damage related to a collision with another vehicle.

    Comprehensive insurance provides full coverage when combined with collision coverage. However, insurance providers typically won’t pay out more than the car’s current market value in either case.

    This is where gap insurance comes in. Gap insurance takes your coverage one step further by filling in the deficiency between what your comprehensive policy covers and your remaining loan balance. This is why gap insurance is an optional coverage that you can add to a comprehensive or collision policy.

    Related: How This All-Digital Provider Is Modernizing Car Insurance

    How much does gap insurance cost?

    The cost of gap insurance coverage depends on your unique situation. A policy typically costs between $400 and $700 when you get it from a car dealership and $20 to $40 when it’s part of an existing car insurance policy.

    But is gap insurance worth it for your used car or new vehicle? Several factors will dictate the specific price and whether you should purchase it.

    Vehicle depreciation.

    First and foremost, what’s the average depreciated value of the car? Newer vehicles depreciate at a much faster rate than older ones. New cars typically experience the highest costs for gap insurance due to their rapid depreciation.

    The specific policy.

    Factors like coverage duration and policy type can also impact the overall cost of gap insurance. Most policies last between 12 and 72 months, but some offer up to 84 months.

    Standalone policies don’t benefit from some of the discounts associated with insurance packages, meaning they’re usually more expensive. Gap insurance costs will also consider any specific deductibles and annual premiums related to the policy.

    Related: 8 Tricks for Solopreneurs To Cut the Cost of Auto Insurance

    How to get gap insurance.

    Gap insurance is an essential form of financial protection for both car owners and lessees. Fortunately, obtaining it isn’t difficult; you can typically go through your existing auto insurance provider or purchase a standalone policy through a third-party provider.

    If you’re buying a new vehicle, most car dealers offer gap insurance policies that you can customize to meet your needs. Gap insurance often provides additional benefits, such as rental car reimbursement or payment for certain charges when your vehicle is declared a total loss because of theft or accidental damage.

    Be sure to ask about these features when shopping for a gap insurance policy so that you know what extras are included in your coverage.

    No matter where you decide to buy your policy, having gap insurance on hand can help ensure that you have enough money available when unforeseen circumstances arise and you need it most.

    Should you purchase gap insurance?

    While it’s not required, gap insurance can give you peace of mind in knowing that you’ll be covered in the event of a total loss. Here are a few tips to help you decide if gap insurance is right for you.

    Consider your car’s value.

    If you’re driving a used vehicle that isn’t worth much, gap insurance may not be necessary since the amount you owe is likely to be less than the value of your vehicle.

    However, if you’re financing a brand-new car, it’s a good idea to consider gap insurance since new cars depreciate quickly and could be totaled before they’re paid off.

    Think about your deductible.

    Your auto insurance policy will likely have a deductible, which you’ll need to pay out-of-pocket before your coverage kicks in. Gap insurance may not help much if you have a high deductible because you would need to cover a significant portion of the loss yourself.

    If your deductible is low, gap insurance could save you from paying a large sum of money to replace your totaled vehicle.

    Determine if you qualify.

    Only some qualify for gap insurance. Often, you must have collision insurance and comprehensive coverage on your vehicle to qualify, and your lender must require it. Check with your insurer or lender to find out if you are eligible.

    Weigh the cost

    Like any type of insurance, there’s a cost associated with gap insurance. The price usually depends on factors like the make and model of your car and how much coverage you want.

    Ultimately, the best way to determine your ideal gap insurance costs for a particular vehicle is to compare rates from various auto insurance companies. Doing so allows you to find the price point that best fits your budget and keep your car secure in case of an accident or other damage down the road.

    Related: Find the Best Car Insurance Rates in Your Area with ‘The Zebra’

    What can gap insurance do for you?

    Gap insurance can be a lifesaver when you experience an unexpected car accident. If your vehicle is totaled and the cost of repairs is more than the value of your car, gap insurance will cover the difference.

    It’s essential to remember that not all policies offer gap coverage, so be sure to ask your agent about your eligibility.

    The average cost for gap insurance is just $20 to $40 per year when added to an auto insurance policy, making it an affordable option considering the potential payout.

    You can get gap insurance from most major insurers or through organizations like AAA. If you purchase a gap insurance plan, research to find one that meets your needs.

    For more information on insurance and business trends, visit Entrepreneur.

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    Entrepreneur Staff

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  • We’re One Step Closer to the Era of Open Banking. Here’s Everything You Need to Know.

    We’re One Step Closer to the Era of Open Banking. Here’s Everything You Need to Know.

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    Opinions expressed by Entrepreneur contributors are their own.

    Consumers have become more aware of the security risks their data is exposed to, resulting in tougher privacy regulations that increase business costs and slow innovation. But, with new moves toward open banking on the horizon, there is a better, more secure way to share your data — without the concern that banks will use it for marketing purposes.

    Recently, the Consumer Financial Protection Bureau (CFPB) unveiled its plans to activate a dormant authority laid out more than a decade ago in the Dodd-Frank Act. Based on Director Rohit Chopra’s comments, the industry’s assumption that regulators won’t mandate banks to share customer data may not prove true, which could transform the banking industry for good.

    Are we entering the open banking era?

    On paper, open banking is simple: Create a network where consumers, banks and non-bank financial institutions can securely exchange pertinent data for creating transparency, reducing fraud and improving service delivery. In other words, provide third-party service providers with open access to consumer banking, transaction and other financial data from banks and non-bank financial institutions through the use of application programming interfaces, or APIs. However, with regulatory bodies racing to stay ahead of technology-based privacy concerns over the past decade, many thought open banking was a long way off.

    At October’s Money 20/20 conference, Chopra unveiled a process for exercising the CFPB’s authority under Section 1033 of the Dodd-Frank Consumer Financial Protection Act that could lay the foundation for open banking. While specifics have yet to be defined, the rule would obligate financial institutions to share data with consumers upon their request. At the least, this would bolster industry competition by making it easier for consumers to pack up and switch banks for reasons like bad service. It would also take power away from service providers that try to act as gatekeepers, strengthening the competitive advantage of those who provide the best rates, products and customer service.

    So, does this mean we’re entering the open banking era? For certain, it means we’re moving one step closer. Even if the CFPB doesn’t mandate data sharing, it will most likely establish standards and guidelines on how to do it. Of course, these processes take time. The CFPB plans to publish a report in the first quarter of 2023 following a public comment period. It will propose rules late next year, and Chopra said that they aim to finalize a rule and begin implementing it sometime in 2024. In other words, official change will not happen overnight, but that doesn’t mean financial institutions can afford to sit and wait.

    Related: How Open Banking Can Benefit Small Businesses

    It’s already time to leverage consumer data

    Supported by droves of startups, certain financial institutions have already begun building the foundation for open banking by utilizing technology like API-based collaboration. Now, consumers can use a non-bank financial app, like a budgeting tool, and connect it to their spending, saving and credit card accounts to reveal insights about their transactions. The banks that support this type of integration recognize it as an opportunity to improve the customer experience and even provide new services. Still, not everyone is on board just yet.

    Faced with open banking regulations, financial institutions always have the option to simply comply and do nothing more, like those who have yet to get involved in the voluntary Financial Data Exchange (FDX). It’s a valid choice, but it means staying unaware of what’s happening with customers everywhere else they bank, leading to ecosystem ignorance.

    There are other ways to view a financial institution’s role in open banking. Finding ways to share consumer data and leverage other financial institutions’ information will put a business in a far better position for developing competitive offerings, especially as the CFPB moves forward with its plans. We’ll examine each of these different roles next.

    Since the industry has already been moving toward standardization independent of regulation, like through the FDX, it’s unlikely any standards established by the CFPB will look dramatically different from the existing specifications. With that in mind, financial institutions have no excuse for not moving forward and getting involved in the innovation that’s already happening, which holds vast opportunities ahead of regulations that may catch some players off guard and vulnerable to increased competition.

    Related: How Tech is Shaping the Future of Finance

    Everyone can benefit from open banking

    The ability to connect financial institutions (FI) and third parties safely and efficiently with well-proven mechanisms is an exciting opportunity, not just for the companies that comprise the ecosystem but for individual and corporate customers. By consuming data instead of just providing it, banks can build an accurate 360-degree view of their customers, helping them recommend the right products, improve service experiences and support users’ financial goals. It allows banks to be more intelligent, creating ecosystem intelligence.

    It’s not all about sharing data, either. Sometimes it’s about sharing capabilities through Embedded Finance or Banking as a Service (BaaS) solutions. For instance, banks can allow third parties to initiate transactions from their front end, such as inside an accounting, invoicing or ride-sharing app. In turn, the third-party provider creates a more convenient customer experience while the bank acquires a new client with a substantially lower, if not free, acquisition cost. I call this ecosystem infrastructure.

    Taking this a step further and putting everything together, banks can share and consume information from other FIs, fintech and third parties, creating opportunities for business models such as marketplaces and super apps. I like to refer to this ecosystem orchestration, which allows banks to become a one-stop shop for financial services.

    Financial institutions that move in this direction while adhering to the emerging open banking standards will be ready to integrate with virtually the entire market while simultaneously solving for immediate use cases. Doing so is a win/win with endless benefits yet to be realized for consumers, corporate clients and financial institutions.

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    Leonardo Mattiazzi

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  • How Digital Payments Are Disrupting Our Entire Ecosystem

    How Digital Payments Are Disrupting Our Entire Ecosystem

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    Opinions expressed by Entrepreneur contributors are their own.

    Propelled by the shift in consumer behavior boosted by the pandemic, our adoption of contactless and digital payments has accelerated economic change in tangible ways, offering improved traceability, accessibility and security both at home and in developing countries far and wide. The market conditions have further been propelled by expanded access to mobile devices. With a majority of the world’s population having a smartphone today — 86.41% according to Statista in 2022 — this further enables the rise in digital payments globally, which is expected to compound annually at about 15% in emerging markets through 2026.

    This democratization of payments from traditional financial institutions to telecoms, merchants, fintechs, global brands and more, has enabled the explosion of the Embedded Finance model and a compound effect on customer financial interactions throughout their digital experience.

    Related: Payments Wrap: Digital Payments In 2022 And What 2023 Promises

    Building up economies and powering up new business

    One of the positive externalities of the pandemic is that people are more comfortable than ever making purchases online, whether it’s clothing, consumables or groceries. This willingness to interact in the digital space is no longer limited to the younger generations. Purchasing power is no longer relegated to millennials and Gen Z; it transcends age. It’s not uncommon to see the older generation making payments online, including my 84-year-old father.

    As a result of the pandemic, the adoption of digital habits was born out of pure necessity. Today, these habits remain sewn throughout our lives due to their sheer convenience. However, in developing countries, the rapid advancements of fintech payments have done more than make life easier — it’s directly contributed to quality of life, empowerment, human safety and policy enforcement, where the shift from cash to digital payments is still in its infancy.

    The acceleration from physical to digital payments will create new digital economies and interactions between sellers and consumers on a local and global scale.

    On a recent trip to India, I witnessed first-hand a part of the world’s digital transformation. Having last visited India two years before the pandemic, I was expecting to see little change. This time, however, I found myself standing inside a small, local flower shop that had previously accepted only cash. Today, digital payments have modernized it. Instead of promoting “cash only” signs, most shops I went into now presented me with QR codes and app-based payment options. The flower shop wasn’t any different — but now, it has a sign directing customers to pay by app.

    In a few years, India’s economy has been transformed by going cashless (a.k.a. the shift to digital), and they aren’t the only ones. Iteratively, developing countries worldwide have inched their way into digital payments, slowly transforming gray economies with vast income disparity into more transparent, traceable and manageable ecosystems. A symbiotic relationship has developed between the private and public markets, enabling competition, economic growth and choice for consumers while driving traceability and accountability for governments and regulators.

    It has also empowered new business commerce and expanded the reach for new gig workers — all through the power of your smartphone and digital payments, which have now been embedded directly into your customer experience with your brand.

    For example, in Latin America, the informal economy is one of the main sources of income for much of the population. It was estimated by the OECD (Organization for Economic Co-Operation and Development) that approximately 70% of the GDP was not in the formal payment systems, and, therefore, not controlled by the government in 2018. Now, in 2023, according to McKinsey, only 36% of POS transaction values are in cash.

    As a consumer, you have the power to search for any product or service through your mobile phone — and as a gig worker, you can have a constant cash flow through the ease of access to consumers and needs. This win-win scenario creates more of an entrepreneurial mindset for all. It can also threaten big box companies, as small business owners have easier access and less friction. Large and small brands see opportunities and challenges to connect and build a lasting direct relationship with consumers who now have digital optionality everywhere.

    Related: How Digital Payments Can Enable SMEs To Become More Competitive In The Post-Pandemic Era

    The data behind money

    With this continuously evolving scenario, a question comes to mind: How are companies navigating the ecosystem and merging payments into their businesses? The answer to that is data.

    Bringing modern payments to emerging markets creates a world of opportunity. By developing a multitude of microcosms, we can bridge the gaps between the various services people need — like doorstep grocery delivery and rideshares — and the digital solutions necessary to facilitate those instantaneous transactions through new customer experiences and payment flows.

    In the process, companies collect a wealth of data about consumers that isn’t possible to trace or understand in a primarily cash-based society. By switching to digital payments, companies gain the power to track a consumer from one merchant to another, better understanding transactional and behavioral patterns and moving into hyper-personalization of offers and products. This helps them to understand the services they’re searching for (i.e., what they ate at the last restaurant they visited and which products they are purchasing — down to the SKU and size). This data can transform marketing strategies and reimagines customers’ journey with vendors to drive new offers and loyalty programs in a direct relationship between brands and consumers through their embedded payment flows.

    Of course, alongside this data comes the pressing need for payment processors and issuers to manage and use it responsibly. Currently, the payments industry is on track to realizing the potential of new microcosms previously not possible, all while striking a proper balance of consumer consent, reporting and data protection. It’s only a matter of time that the power of the data will create increased knowledge of the consumer and our respective needs.

    Related: Business Spending Market In India Is Expected To Reach $15 Trillion: Report

    Empowering people and delivering commerce

    When used correctly, modern payment solutions do not simply create user convenience. Rather, they also improve safety, security and speed at every turn. Moreover, the data behind the payments can transform how we discover and interact with customers. For businesses (small and large), this is an opportunity to create targeted campaigns for consumers, offer services and products with ease and globally, create a consumer-friendly user environment in their platforms and ultimately grow their revenue and client base.

    How can this be done? The key to ensuring that payments continue to disrupt our ecosystem positively requires the recognition of a fundamental fact:

    The power lies with the consumer, who has more choices than ever. Today’s best financial services companies, ecommerce brands and tech startups are leading the pack as they focus on becoming better partners to their consumers, making them better suppliers.

    The explosion of optionality and digital touchpoints between consumers and brands has continued to underscore the criticality of customer experience, digital transformation and data enablement for brands and sellers. Robust engagement through the customer journey for brands will set them apart with consumers who are looking for a consistent and frictionless experience from start to finish.

    By fixing our alignment on what’s best for the people at the other end of the equation, the financial services industry has the potential to change the world as we know it — and this change is happening right in front of us today.

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    Mamta Rodrigues

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  • What to Know Before Adding Someone to Your Bank Account

    What to Know Before Adding Someone to Your Bank Account

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    Opinions expressed by Entrepreneur contributors are their own.

    If you own a small business, then you have a few bank accounts — at least I hope so. Most likely, you have a checking account or two, a few savings accounts and maybe some type of investment accounts as well. Now, when it comes to banking, and if you’re a one-man or one-woman operation, it’s just you on the account. But what about when your company gets bigger and bigger, and you have a difficult time keeping up with what’s happening in your accounts?

    This is the point when you need to add people to your accounts to ensure that everything gets paid and there are no overdrafts. Here are some ideas and suggestions that can help you navigate the ins, outs, risks and rewards of having someone on your business bank accounts.

    Related: What Should You Look For In A Business Bank Account?

    Adding someone to your business bank account

    Signer: This is when you add another owner or a high-level employee (obviously one that you trust) to help you get your business banking done on time, every time. For banking purposes, this does not mean that they own the company in any way, they are just a signer on the bank account. They will be able to write checks, make cash withdrawals, order items like stamps, new checks and their own debit cards. They can also get online access, which is often a huge help to so many business owners as this person can help with bill pay, sign up for other online services, call the bank to inquire about fees or charges that they see on the account and any other account info they need. This is a great step if the business is growing and the owner can only do banking about once a week or so, which allows the signer to handle the day-to-day.

    Downside? You better trust this person, as they have every right to write any check for any amount they want, even to themselves. They can literally clean you out by making a large cash withdrawal if they wanted to. To get the money back, the bank will not help since you were the one who added them as a signer on the account. You would have to take them to court for that matter. In the end, just be careful.

    Related: 4 Best Business Bank Accounts | Entrepreneur Guide

    Adding someone to a personal bank account

    POA: Having a Power of Attorney added to your bank account can be a big help if you will be, for example, going in for surgery and will be out of commission for a few weeks or months. Or if you plan to travel overseas for a few months. Or for that “just in case” thing that usually happens in life. By designating someone as a POA, they can act on your behalf to ensure that bills are being paid, checks are being written, the mortgage is getting paid, etc.

    For this, you’ll need to have the proper documents, which a good attorney can complete for you. Each bank is different in its requirements for a POA, but these papers will always need to be reviewed by the legal department of the bank before anyone can be actually added. Often, the paperwork is incomplete because the account owner is doing the paperwork themselves, so be sure to consult an attorney for this.

    One more thing, if the account owner passes away, the POA is immediately null and void. POA is only good for people who are living.

    POD: POD (Payable On Death), which is also referred to as a beneficiary for many banks, is also a good thing to have on your accounts. Let’s say you are getting much older or having extreme health issues, and the prognosis is not good, and the doctors are giving you only so much time left to live. It’s a smart thing to add the family member of choice to the bank account.

    And here’s why: When you pass away, and you do not have a POD on the account, most times, the bank accounts will go directly to probate court, and your family will wait a long time for the funds and jump through needless hoops. Many people really need the money, too. By having the POD on the account, they can just come to any branch with your death certificate, close the account within a few days to a few weeks and have a cashier’s check issued to them directly.

    If not, the funds can go to probate as mentioned, or the check issued will have to be issued to the Estate of “the person who just deceased.” All banks vary in their requirements as do state laws, so speak to your banker about this in detail.

    Related: 6 Best Checking Accounts of 2022 | Entrepreneur Guide

    Co-owner: This is just as it sounds and is similar to a signer on a business account, but this is for personal accounts, not business. To add a co-owner to the bank account, you must be present in the branch to do so. Adding someone by phone or online is generally never an option. Here is what a co-owner can do when you add them to the account: They can do any transaction they wish on the account, including closing the account. What they cannot do is remove the other owner without them being present. In the world of banking, the phrase is “if you’re getting a divorce, the person who gets to the bank first gets the money.”

    Pro tip: There are many ways to add someone to your bank accounts — both business and personal — and there are a lot of benefits as well as a lot of risks involved, so you’d better talk to your banker. While the government makes the regulations that each bank must follow, each bank must decide what they will do to comply with that law and what logistical steps they will take to ensure that they are reducing any risk that comes with adding people to accounts. So, be sure to talk to your banker first to see what steps you need to take to make sure everything is properly conducted.

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    John Kyle

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  • Entrepreneur Guide | Best Financial Tools and Business Ideas to Make More Money in 2023

    Entrepreneur Guide | Best Financial Tools and Business Ideas to Make More Money in 2023

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    Ask any entrepreneur what their most valuable asset is, and ten out of ten will answer the same: time.

    You can’t buy more of it and try as you might, you can’t squeeze more of it into a day. But you can save time, which is why we’re introducing Entrepreneur Guide, a one-stop shop for all of your business needs. We’ve pulled together this heavily-researched compendium to help you make the best decisions for your personal and business finances. No more hours wasted shopping around — Entrepreneur Guide has expert-vetted and time-tested resources to build and manage your wealth quickly and efficiently.

    Entrepreneur Guide resources

    Best banking products: Low-interest loans, money market, checking and savings accounts, bank bonuses, and more

    Best small business tools: Calculators and management systems

    Best side hustle ideas: Proven ways to make passive income or run a business during off hours

    Best mortgages: Most competitive rates to refinance or buy a new property

    Best investments: Expert guidance on navigating the markets

    Best loans: Personal loans for business and personal needs

    Best insurance products: Low-cost coverage for your home and business

    Related: Latest stock tips for beginner investors

    Daily updated trends and news

    Information equals power. Beyond tools and money-saving financial products, you will find helpful how-tos and articles in Entrepreneur Guide to put you on a path to success, including:

    7 Small Business Tax Deductions You Need To Know

    8 Best Passive Income Business Ideas of 2023

    8 Must-Have Social Media Marketing Tools for 2023

    You’ve got the passion to run a business, Entrepreneur Guide has the tools and resources to help you achieve breakthrough results. Check for daily updates as our team is constantly monitoring and updating to bring you the best money-saving and money-making resources out there.

    Check out Entrepreneur Guide now

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    Entrepreneur Staff

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  • Become a Better Investor in the Stock Market with This Training

    Become a Better Investor in the Stock Market with This Training

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    Disclosure: Our goal is to feature products and services that we think you’ll find interesting and useful. If you purchase them, Entrepreneur may get a small share of the revenue from the sale from our commerce partners.

    Entrepreneurs often have a lot of money tied up in their businesses, but that doesn’t mean they shouldn’t be on the lookout for good investments. After a volatile 2022, there’s a mixed outlook on the 2023 stock market, which makes now a great time to invest in your financial education. If you want to be a smarter trader in 2023, check out The Complete 2023 Stock Trading & Investing Bundle while it’s on sale.


    StackCommerce

    This bundle includes 12 courses geared toward investors of all experience levels. If you’re new to investing, you’ll learn the tools you need for fundamental stock analysis so you can analyze a stock in a few minutes to know if a company is worth investing in. You’ll learn the art of value investing, understand how to make better investment choices, and develop a stream of passive income with your stocks. In addition, you’ll be able to evaluate a company’s Price-to-Earnings (P/E) Ratio and other key ratios, develop a repeatable investment process, and learn how successful investors like Warren Buffett operate.

    Beyond the basics, there are courses covering technical analysis using candlestick patterns, options and futures trading, Forex trading, swing trading, and more. You’ll learn how to day trade successfully to maximize your profit, manage your trading risk and protect against losses, and learn to formulate robust trading strategies no matter what your investment appetite. By the end of the courses, you’ll have a more comprehensive understanding of how the stock market works and how you can manage your portfolio to maximize your returns and mitigate your risk.

    Right now, you can get The Complete 2023 Stock Trading & Investing Bundle on sale for just $39 for a limited time.

    Prices subject to change.

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  • Why the FTX Scandal Will Be Good for Crypto and NFTs

    Why the FTX Scandal Will Be Good for Crypto and NFTs

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    Opinions expressed by Entrepreneur contributors are their own.

    While navigating a tragedy, few people welcome a comment like, “It was all for the best.” Too often we hear this pep talk from compassionate friends or family, as we quietly think to ourselves, They just don’t understand what I’m going through.

    But do they? A recent investment scandal might offer some insights into why that cliché can be spot-on after all.

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    Jonny Caplan

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  • Learn Business Accounting for Less Than $50

    Learn Business Accounting for Less Than $50

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    Disclosure: Our goal is to feature products and services that we think you’ll find interesting and useful. If you purchase them, Entrepreneur may get a small share of the revenue from the sale from our commerce partners.

    Every business must keep good accounting to ensure they aren’t spending money where they don’t have to. That goes double for entrepreneurs, whose bookkeeping has to keep a sharp line between personal and business expenses. So whether you need some help keeping the books for your small business or you’re scaling and need to get better at business accounting, The Complete 2023 Business Accounting Mastery Bundle will help you out.


    StackCommerce

    This bundle includes 11 courses from SkillSuccess, one of the largest online learning providers on the web. No matter your accounting experience, you’ll get a crash course in bookkeeping, accounting, and financial analysis.

    If you’re a novice, you’ll learn how to analyze business transactions, how to prepare the trial balance, explore accounts receivable, and develop a basic understanding of accounting. In addition, you’ll get introductions to payroll accounting and cloud accounting, learn how to navigate financial reports and statements, understand bookkeeping records, and more.

    As you progress, you’ll learn to analyze financial statements more closely, explore throughput accounting and lean accounting, get familiar with programs like QuickBooks Pro and Excel, and much more. A few courses are dedicated solely to specific accounting problems businesses might face as they grow and a deep dive into advanced accounting. You’ll learn how to apply different accounting methods based on levels of control, work comprehensive acquisition problems in Excel, work consolidations in a wide range of scenarios, account for acquisitions and investments, and more as you grow your skills to be able to account for a rapidly growing business.

    Every entrepreneur should know how to do a balance sheet, but The Complete 2023 Business Accounting Mastery Bundle will take you far beyond the basics. For a limited time, you can sign up for just $49.

    Prices subject to change.

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    Entrepreneur Store

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  • 4 Things All Small Business Owners Should Know in 2023

    4 Things All Small Business Owners Should Know in 2023

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    Opinions expressed by Entrepreneur contributors are their own.

    The beginning of a new year often comes with a laundry list of goals and to-dos, which can quickly become overwhelming if you try to tackle too much, too fast. I’ve always approached resolutions by setting short and long-term goals spanning the entirety of the year — after all, we have 12 months to accomplish our goals, and there’s a reason they’re not called January Resolutions.

    Now is an important time for business owners to reflect and set a course for the year ahead, but it’s easier than ever to get bogged down worrying about the challenges facing the economy.

    I would encourage all small business owners to tackle 2023 with a splash of empathy and realism. Don’t bury your head in the sand — be mindful of the economic headwinds we’re facing, but don’t let them monopolize your attention. Instead, devote your time and energy to the challenges and operations that do fall within your control.

    Here are four trends shaping the small business landscape to be aware of — and take advantage of — as you implement your plans throughout the year:

    Related: 4 Success Tips From Small Businesses That Are Doing It Right

    1. The big picture: Business owners are prioritizing marketing and hiring amid recession concerns

    We conducted a national survey of business owners late last year, which found 78% expect a recession would impact their business initiatives. Despite this, business owners are actively investing in their businesses, with a priority on marketing and promotion, hiring and increasing wages and investing in new equipment and technologies.

    The best defense against customers tightening their wallets is a proactive offense. If your marketing efforts could use a refresh, consider these best practices:

    1. Keep it simple: A streamlined strategy that ladders up to your overall business goals will help keep you on the path to success.

    2. Identify your target audience: Begin with your end goal in mind. With whom are you communicating and what are you trying to tell them?

    3. Choose the right platform: Once you know where to find your audience, you’re ready to pick your preferred marketing channel(s). When kicking off, I’d recommend focusing more heavily on one or two specific marketing channels, at least at first.

    4. Measure your success: In the age of social media, marketing is no longer a one-way street. A successful marketing campaign is now a multi-platform, multi-interactional way to engage with your customers. Set your goals and KPIs early, and examine and reevaluate them often to see if your message is resonating with your target audience.

    2. Don’t get left behind on the latest business technology

    Over the past few years, small businesses have widely adopted new technology to make their operations and customers’ lives easier. At this point, incorporating the latest tech is no longer a nice-to-have — it’s essential to the future of your business. Even in the face of a potential recession, 68% of business owners plan to upgrade or incorporate new technology this year.

    Implementing new tech and services has the potential to be confusing, if not downright intimidating, for many of us. If you’re looking to integrate new tech but don’t know where to start, here’s what you might consider prioritizing this year:

    1. Investing in an automated payroll or people management (HR) platform to reduce complexities and streamline operational costs.

    2. Accepting new forms of cashless or peer-to-peer (P2P) payments, such as Zelle, at your business’ point of sale.

    3. Modernizing your customer relationship management (CRM) system with enhanced omnichannel capabilities that can communicate with your customers, regardless of whatever platform they might be on.

    4. Enhance your cybersecurity measures to protect yourself against hackers and the latest cyber threats. Unfortunately, small businesses are becoming increasingly popular targets for hackers and scammers.

    Related: 3 Things to Consider Before Investing in New Technology for Your Small Business

    3. Business owners are taking advantage of free educational resources

    It’s never too late to learn. Free educational resources for business owners have greatly improved and proliferated over the past few years, and many entrepreneurs (at various stages of their business journey) are seeking them out. Last year, we learned that the majority of business owners wish they were more knowledgeable about business finances — including 75% of women business owners — so if you’re looking for tips, here are some resources you can consider:

    • Educational resources like SCORE and Bank of America’s Small Business Resources site provide answers to many common questions and are great to keep handy.

    • If you’re interested in pursuing more formal education, organizations like LinkedIn and the SBA have online learning platforms. Bank of America also offers a free online program for women to earn a certificate in business from Cornell.

    • Your local small business banker can also be a key asset to your success and make your life much easier.

    4. Business ownership can be lonely — don’t go it alone

    Starting the new year with the weight of running your business on your shoulders can be beyond stressful. If only one piece of advice from this article sticks with you, I hope it’s this: Find someone to talk to who has been there before.

    Explore organizations like the National Association of Women Business Owners (NAWBO), Luminary, your local Small Business Chamber of Commerce, Entrepreneurs’ Organization, Business Networking International or similar groups. The return of in-person networking events has also created opportunities to meet other local entrepreneurs and collaborate with mentors who can support you along your journey as an independent business owner. Less formal ways of networking such as LinkedIn groups or coffee/drinks with like-minded individuals can be equally beneficial.

    Prioritize building relationships with people and communities you trust, and you’ll reap the benefits for years to come.

    Setting out to accomplish all of the goals you’re dreaming of for the year can be daunting, but by adding the above tips to your game plan, you are actively positioning your business for continued success in 2023 and beyond.

    Related: 7 Networking Groups Every Small Business Owner Should Join

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    Sharon Miller

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  • 4 Reasons Your Business Needs Cash Flow Forecasting

    4 Reasons Your Business Needs Cash Flow Forecasting

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    Opinions expressed by Entrepreneur contributors are their own.

    You might have heard that the biggest cause of business failures is cash flow issues, but to what extent is the severity of this widespread problem? To put things into perspective, more than 80% of business failures are due to a lack of cash, 20% of small businesses fail within a year, and half fail within five years.

    But it doesn’t have to be that way. In fact, many businesses can avoid cash flow problems with proper cash flow forecasting. Cashflow forecasting helps businesses predict when issues may arise and allows them to take action proactively to avoid cash flow gaps.

    That said, many businesses already operate at max bandwidth, and cash flow forecasting isn’t on business owners’ minds. It’s usually already too late when business owners are hit with a financial setback and realize they don’t have enough cash to cover it.

    Many business owners don’t realize that the scope of benefits that derives from good cash flow forecasting goes light years beyond helping the business plan its operation. If you are still thinking about why you should bother with it, here are a few reasons why you should do cash flow forecasting:

    Related: Often-Overlooked Ways Entrepreneurs Can Improve Cash Flow

    1. It helps businesses avoid cash flow gaps

    This is the most straightforward and important reason why cash flow forecasting is crucial.

    Here’s a scenario for you: John’s client promised the payment would be deposited by today, but there has been a mix-up, and the bank said John wouldn’t get the money until next week. John is expected to pay his vendors tomorrow, but without receiving the payment from his client, he doesn’t have enough money to pay. The cycle continues.

    This is the reason many businesses fail.

    A cash flow forecast helps businesses avoid this very situation. They can use a forecast to project best-case scenarios, worst-case scenarios and everything in between. They can then use that to make prudent decisions about how much money to spend, where to put it, and when to spend it.

    If they think there’s a chance cash may not come in the door, the business could decide to put off a big purchase. Or they could talk to vendors and get an extension on payables. Or they could offer customers a discount to pay their bills early. The forecast gives the business the knowledge they need to take action and avoid difficult cash flow situations.

    Related: 4 Tips for Managing Cash Flow in a Seasonal Business

    2. It helps secure loans

    Loans are an important part of running any business. Financing can help a business expand, improve its products and workflows, or cover operational costs in a crunch.

    However, obtaining financing is easier said than done, especially for businesses with little assets or no credit history. In this case, lenders look at profitability, expenses and cash flow.

    A strong cash flow forecast helps a business prove its creditworthiness to lenders. A business can use its cash flow forecast to show that it deserves a loan and is a good credit risk. Or, if your cash flow forecasting shows otherwise, maybe it’s a good time for you to assess internally and improve your cash flow position before going to a lender for a loan.

    3. It helps businesses make better decisions

    A cash flow forecast gives a business a glimpse into the future. It helps them view when cash is coming in and going out, so they can better plan for the future and make strategic decisions that align with their budgets.

    Let’s say a business is considering hiring additional staff or purchasing new equipment. A business might look into how much money they have right now, thinking they could cover the extra expense. But what if the business lost a major client a week from now? Or what if sales suddenly plummeted due to competition?

    These are the kind of things that your account balance can’t tell you and are the exact reasons businesses need cash flow forecasting. By understanding their future cash availability, businesses can make informed decisions about when and how to invest in their growth.

    Related: How to Inflation-Proof Your Small Business

    4. It helps businesses set measurable goals

    Leveraging cash flow forecasts can help businesses set measurable goals to improve cash flow tangibly and determine the path to better business outcomes.

    If a best-case scenario forecast says you can potentially grow your business revenue by 50% by improving your operation with a new equipment purchase, you now have a benchmark number.

    Or, if you plan on reducing expenses by 20% by cutting out parts of your business operation, cash flow forecasts can help you see the business and revenue impact of cutting out a project and if the financial cost reduction is in line with your decision. You can now set data-driven business goals, know what outcome to expect, and measure success.

    That’s two drastically different examples, but no matter what situation your business is in, cash flow forecasting can help a company set measurable goals.

    Forecasting for your business is easier than you think

    Here’s the thing about cash flow forecasting: It’s not new, but it used to be a challenging, labor-intensive, and time-consuming job that business owners would task their accountants with. The good news is that innovating technology makes cash flow forecasting easier than ever before. New tools now directly integrate with many cloud-accounting platforms that businesses use, making cash flow forecasting faster, more accurate, and sometimes even for free. Start looking for a solution that works with your accounting platform today, and see the wonders it can do for your business.

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    Nick Chandi

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  • 5 Bear Market Lessons From a Crypto Entrepreneur

    5 Bear Market Lessons From a Crypto Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    2022 was an important year for the crypto space. We will all remember the bankruptcies of major global companies: Luna, Celsius Network, FTX, BlockFi and others that left investors with massive losses. The bear market has dramatically affected the crypto economy and investors’ portfolios.

    Just like in 2013 and 2017, the market moves in cycles. First, we had the crypto summer, where everybody was hyped about their profits and gains. Then came the crypto autumn, and investors started to see red in their portfolios. But investors’ portfolios started bleeding when the crypto winter got underway, and even some big reliable companies went underwater.

    In this article, I want to focus on some of the most important lessons I have taken for myself and my company after living through one more winter of the crypto market.

    Related: Will Crypto Make a Comeback in 2023?

    1. Money management strategies are everything

    2022 is the year of fallen legends. Companies believed to be reliable borrowers, like Alameda Research, borrowed funds without collateral and ultimately went bankrupt due to improper money management. On top of that, other standout names in the crypto space, such as Luna, Celsius Network, FTX, and BlockFi, also went bankrupt against all market expectations.

    2022 showed that different approaches need to be used to track company assets, oversee their liquidity and provide collateral for obligations. The mistake many made was blindly placing faith in a company because of its size and reputation instead of analyzing the fundamentals.

    Related: How to Manage Your Money With Confidence

    2. Stay away from toxic assets

    The future market leaders are the companies who survived unscratched problems related to Luna, Celsius Network, FTX or BlockFi and do not hold toxic assets. These are the companies with the potential to launch new products and ideas.

    From personal experience, I can say that 2022 was when my company delved into exploring new directions. It proved that the standard earning tools on the market just recently have no future. So we chose to focus on developing new products that can fix the ongoing problems of the crypto market. I believe that doing this — answering a pain point of the sector and providing a reliable service to alleviate it — is a crucial step in maintaining your company’s viability in tumultuous market conditions.

    3. Watch out for tokenomics

    When looking at a company, all performance indicators are important. What good is it to have great management and a business model if the tokenomics are not good? People are first and foremost investing in the token itself, making tokenomics an essential piece of providing a stable development.

    Bad tokenomics often gives valuable insight into whether the company’s business model is sustainable over the long term. Look for projects with tokenomics designed to serve the investors, not the developers. Watch out for high inflation rates and other red flags, which are often signs of an unsustainable business model designed to enrich the very few.

    Related: 8 Smart Ways to Analyze Crypto Token Before Investing in It

    4. Don’t follow the hype

    This year proves that the market is often wrong. During the crypto summer, many coins and companies grew on hype. Investors hopped on the train and followed the crowd ignoring the lack of solid fundamentals and prospects of future growth. However, when the bubble popped, their portfolio suffered.

    Luna, for example. The company had $50 million in assets but still promised 20% interest payments in its own stablecoin currency. That meant $10 billion in payouts to people holding funds in its protocols. The business plan was too good to be true, but tons of people fell for it and lost everything when the stablecoin proved not to be that stable after all.

    Related: Is Crypto and NFTs a Passing Fad?

    5. Teamwork is essential

    In times of market turmoil, teamwork is more important than ever. The keyword is flexibility; the market is unpredictable, so it’s the team’s job to adapt to any changes rapidly.

    The market has very short business phases meaning that companies need to be highly flexible and able to adapt to new realities. Bear markets often make it impossible to plan too far ahead. Focus on what’s in front of you, prioritize clients’ objectives, predict what products the next phase of the market will be interested in, and prepare them in advance.

    Furthermore, the bear market can also be a great time to generate revenue and offer products that alleviate investors’ fears. Additionally, with the right money management skills, companies can alleviate clients’ anxiety by investing their funds in discounted assets.

    Stay positive. The bear market will be over soon

    The bear market is not easy, but staying optimistic is essential. Take a step back and realize that earning on the crypto market is a long-term game; that’s the wealth-building secret.

    My opinion is based on analyzing past phases, where typically, the crypto winter lasts 4-6 months, then comes the spring. It will be essential for companies to enter with a big user base, good products and opportunities to scale up their own business.

    Companies need to pay attention to the costs and build teams out of people who believe in the market more than ever. Teams should have crypto enthusiasts that understand the market and products well. Having pros on the team is essential, so do not let them slip through your fingers.

    Related: The Bear Market is A Blessing For Web3’s Future. Here’s Why.

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    Vladimir Gorbunov

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  • 6 Tips for Tech Companies During an Economic Downturn

    6 Tips for Tech Companies During an Economic Downturn

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    Opinions expressed by Entrepreneur contributors are their own.

    The technology industry has been hit hard by the economic downturn in 2021-22, with over 150,000 workers losing their jobs since June 2022. This presents a formidable challenge for companies in the technology sector. With proper guidance and focus, tech companies may avoid making costly mistakes that could harm their business in the long term. The projection is that the economic downturn will likely continue into 2023, and technology companies must be prepared.

    Nevertheless, technology companies can still make it through this challenging period with the right strategies and focus. According to Daugherty, Bolumole & Grawe (2019), one area that can offer a formidable edge in this regard is mastering sales and marketing. This article will examine sales and marketing tips that tech companies should consider in 2023.

    Related: 6 Recession-Proof Business Marketing Strategies

    1. Keep pricing and quotas reasonable

    Many companies try to raise their prices or sales quotas when they hit challenging times, but this is usually unwise. Companies need to recognize that customers feel the pinch just as much as they do, so they will expect lower prices and more reasonable quotas. Selling at a discount may be the only way to get customers to bite, so pricing should be adjusted accordingly. While low prices may hurt profits in the short term, it could be the difference between staying afloat and shutting down. Therefore, pricing must be reasonable to keep up with the game in 2023 (Holmlund et al., 2020).

    2. Put existing customers first

    When trying to bring in business during tough times, it is crucial to prioritize existing customers. These people already trust you and have done business with you. Make sure to nurture your relationships with them by offering discounts or even free upgrades or services. Additionally, focus on any unresolved issues they may have, and do your best to fix them. Smeeding, Romich & Strain (2021) propose that taking care of the existing customers could be one way to come out of the recession, as it will not only help keep existing customers happy but will also allow you to upsell or cross-sell solutions that meet their needs and ultimately help to strengthen your bond and ensure they keep coming back.

    3. Focus on solutions-oriented sales

    In a downturn, it is essential to focus on solutions that can help companies. Instead of just making a sales pitch and leaving it at that, listen to your customer’s challenges and pain points. This will allow you to offer solutions that are tailored specifically for them. It also allows for more strategic selling and an opportunity to ask questions to uncover clients’ challenges and pain points and craft solutions that will help them. This requires a more strategic approach to sales, so ensure you are well-prepared with the necessary data and insights.

    Related: How to Prepare Your Business For Economic Downturn

    4. Increase touchpoints for deeper relationships

    Sales processes now require more touchpoints to build trust and foster relationships. This means that companies must be proactive in reaching out and providing customers with the necessary information to make a decision. It also helps to follow up after each touchpoint so that customers know you are there for them and ready to help whenever needed. This means doing everything possible to offer world-class customer service, where a substantial difference is made.

    5. Leverage digital channels

    Digital platforms can help you reach a wider audience quickly, but it also pays to invest in more targeted campaigns. Social media, email and other online marketing tactics can all be used to connect with potential customers and build relationships with them. “The digital era has changed the way B2B businesses interact with customers, and leveraging digital channels is now essential for sales success,” says Sara Franklin, CMO at Salesforce. This lays bare the importance of leveraging digital channels to build relationships with customers, inform the product in the market and how it helps positively impact clients out there.

    6. Evaluate your processes

    When times are tough, you need to be able to measure and optimize the effectiveness of your sales process. Investing in a CRM system is a great way to do this, as it gives you visibility into the performance of each stage of the sales cycle. With a clear understanding of where leads are dropping off or not responding, you can make adjustments to improve the process. This will allow you to identify any inefficiencies and opportunities for improvement and ensure that your sales team is performing at its highest level. It will also give you a clearer picture of the ROI of your sales activities so that you can make more informed decisions about future investments.

    Related: 5 Entrepreneurs Share How They’re Hedging for an Economic Downturn

    Navigating the challenging times of a recession is not easy, but it can be done with the right strategies and tactics. Usually, sales teams endure most of the impact, and it is essential to be prepared and have plans in place so that you can weather the storm. First, there is a need to focus on providing solutions that meet customer needs. It is crucial to prioritize existing customers by nurturing the relationship, offering discounts or free services when possible and leveraging digital channels to reach a wider audience. By focusing on customer experience and understanding their challenges, sales teams can stay on top of the game and ensure their companies remain successful.

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    Steve Taplin

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