How to choose a bank for your ecommerce small business?

Wall Street Journal has a good set of articles in their How to Guide for Small Businesses section. Here is an article on how to choose a bank for your small business.

Most small business owners have an option of choosing between a large national bank and a small regional bank. Both have their pros and cons.

Pros of Small, Regional Banks

1. With small, regional banks, you often get better customer service and one-on-one access to the loan officer. Such banks are usually more flexible and focus more on personal relationships and the borrower’s character than just the numbers on a credit report.
2. Loan officers at smaller banks have the authority to make loan decisions. With them, the turn arounds for your decision may be faster than with a large national bank which will have to check everything with their corporate office.

Pros of Large, National Banks

1. Large national banks may be able to give you a better rate than the small regional bank. So if you are more interested in that additional basis point and less on the flexibility, large banks may be better for your business.
2. Small Business Administration (SBA) loans can be a great source of cash for small businesses. If you are planning to apply for an SBA loan, ensure that your bank will issue SBA backed loans. Large national banks are more likely to offer SBA loans than small regional banks.
3. Large banks often give you additional perks that small banks may not be able to offer. Examples include payroll, sending invoices, collecting payments and issuing credit cards. However, be aware of additional fees for these services. A recent article on the American Express Open Forum suggests that banks have dramatically increased their fees for individual and small business accounts. According to J. D. Power, 46% of all bank customers reported a problem with bank fees so far in 2009.

Analyze the pros and cons of each option, and talk to officers at both kinds of banks before you decide on a bank for your small business. It is important to build a strong relationship with the officers of the bank no matter what size the bank is.

During this process, certainly discuss the bank rates with the loan officer. Negotiate the bank fees openly. If you can afford to maintain a high balance, then use that to drive fees and rates in your favor. Sometimes moving your personal banking too into the same bank will help negotiate a better deal.

List of 18 Small Business Shopping Carts. Which one do you use?

Please help me complete this list. Please add your entries to the comments section with links to relevant reviews and I will move it to the main article.

If you would like to be notified when I update this list, please follow us on Twitter @ordoroteam

Every small business owner who is looking for a shopping cart for their ecommerce business is faced with hundreds of options. According to Practical eCommerce magazine, there are about 500 ecommerce shopping cart solutions. How do you decide which one is right for you?

This is my attempt to aggregate and list information about the majority of small business ecommerce shopping carts.

The list below is in no particular order -

1. Shopsite – One of the most popular small business shopping carts. You need either download and run the software on your own servers, or you can find a hosting provider to host your webstore. Lexiconn is one of the popular Shopsite hosting providers.
2. Shopify – A pure SaaS (hosted) small business shopping cart that focuses on ease of use and simplicity. No installation, backups or upgrades required. Easy to get started. Read a detailed review here. Shopify recently acquired StoreSync, thus extending its ease of use to the iPhone platform.
3. Miva Merchant – Hosts about 200,000 stores. A preferred shopping cart solution for many small businesses. You can either install and run it on your own, or seek a hosting provider. Recently, the company launched a hosted platform called Miva Merchant SaaS, with monthly prices for it ranging from $59.95 to $129.95. More information here.
4. ZenCart – Is an open source shopping cart solution but you need to download and install it. ZenCart’s authors claim that their software “can be installed and set-up by anyone with the most basic web site building and computer skills.”
5. Interspire - This solution includes a shopping cart, an email marketing module and a content management system. More information here.
6. MightyMerchant – A hosted shopping cart that also provides flexibility to customize according to your needs. The company also offers a web design service for small businesses that want to modify the look and feel of their webstore. More information here.
7. Volusion – Yet another hosted shopping cart solution. Monthly pricing plans from $25 to $160. More information here and here.
8. ProductCart – You need to download and run the software on your servers. License fee starting from $695. Additional services for additional fees. More information here.
9. X-Cart – Not hosted. License fees starting from $115. The company provides installation and customization services starting from $57. Used by 20,000+ live online stores worldwide. The X-Cart shopping cart can be modified by the merchant and by third party developers. More information here.
10. ShopCreator – They offer three different shopping cart packages targeted towards small to medium businesses. The Transact package charges a percentage of the shop revenues. The StartUp and Retailer packages charge flat monthly fee. All packages are fully hosted.
11. Magento – Is an open source ecommerce shopping cart platform. Hosts 30,000+ merchants. Since it is open source, there are numerous third party plugins. More information including a video walk through here.
12. Wahmcart ((Work At Home Mom Cart) – Easy, light-weight, hosted small business shopping cart. Available for $40 a month.
13. GoECart – Hosted solution. Customizable. Provides good integration with shipping services, payment gateways. More information on the shopping cart can be found here, here and here.
14. SearchFit – Hosted solution. Starting from $49 to $249 per month. Has a flexible template system that will allow you to customize your web store. The shopping cart also has a strong focus on SEO. Has functionality for email marketing and Google feeds.
15. ColdFusion Shopping Cart - You have to download and run the shopping cart software on your servers. The company offers installation service for a fee. Requires MS Access, MSSQL or MySQL database running on your servers. Integrated with shipping services, Quickbooks and payment gateways.
16. Fortune3 – You can download and run the shopping cart on your own. Or you can choose the hosting plans provided by the company. Pricing ranges between $30 an $160 a month with an additional one-time setup fee.
17. Cubecart – Authors of the cart claim that their ecommerce shopping cart is used by “over 1 million stores worldwide”. You can download and run the ecommerce software on your own. Or use the hosting plan offered by the company.
18. Network Solutions – Hosted shopping cart with price ranging from $27/month to $100/month. Additional setup fees. The company claims that their shopping cart is SEO friendly and is integrated with payment gateways. The cart also works with Google Analytics and various other third-party software. (Thanks @Ross for the suggestion)

…. I will be adding to this list over the coming days.

Are you registered on Google Product Search?

This is a no-brainer for every ecommerce merchant. Upload your product information into Google Product Search. It’s free, and will improve the chances of your product showing up during Google search.

Google Product Search lets online shoppers compare products and their prices across multiple online retailers. Some of the new features introduced in November 2009 are -

• A gallery view which displays images of the product
• A review section with review summaries
• Video product reviews from YouTube

Our 10 most popular blog posts in 2009

Following are our 10 most popular blog posts from last year – based on page views. Thank you to all our readers for the continued support.

1. On free shipping, women customers, and measurement-driven-marketing : Statistics on free shipping policies for ecommerce merchants. Article also discusses the large percentage of female online shopper population.
2. Badcustomer.com – Legitimate? Appropriate? : A review of the return fraud protection service – badcustomer.com.
3. My favorite sites for small business e-commerce advice : Title is self-explanatory
4. 4 simple steps to calculate the Cost of Money for your small business : Basic financial calculations for small business owners.
5. Differentiate through product packaging – The Pangea story : Easy marketing ideas for small businesses. And a case study of Pangea Organics.
6. 4 questions to ask while deciding inventory levels : Simple ideas on deciding inventory levels for your small business.
7. How to generate $50 million in revenues selling window blinds online? : Discussion regarding blinds.com and a few ideas you can implement right away.
8. When to use an early payment discount? : Explains terms such as “2/10 net 30″. And suggests an easy interest rate calculation to make a decision regarding early payment discounts.
9. Marketing tips from successful companies : A quote from Tony Hsieh of Zappos.
10. 4 reasons why most white papers suck! : Why you should blog instead of publishing pdf white papers.

- If you like our blog, please help promote it by retweeting the link. Thank you.

Yahoo! Stores is down this afternoon

Just yesterday I wrote about some of the leading ecommerce stores being down during the holidays.

This just in. The Yahoo! Stores has been down since about 3:00 pm PST today. For latest news go to Yahoo! Small Business System Status web page.

Update: Yahoo reported that this issue was resolved about 3 hours later.

My favorite sites for small business e-commerce advice

Here is a list of the small business e-commerce blogs that I regularly read. I plan to update this list often and not let this be a static blog post.

1. Practical Ecommerce – They regularly review shopping cart solutions. The site also has guest articles from e-commerce experts.
2. Small Business Trends – A wide collection of articles for small business in general. Not limited to ecommerce.
3. Lexiconn blog - Though this is specific to merchants who use Shopsite shopping cart, the blog offers good suggestions applicable to all small online merchants.
4. American Express Open Forum contains guest articles on small business management.
5. Wall Street Journal’s Small Business section is a good resource as well. But this one is behind the WSJ paywall.
6. Wall Street Journal’s How to Guide for Small Businesses. This one is NOT behind the pay wall.
7. ProBlogger.net – This one is a great resource if you are also promoting a blog as part of your marketing strategy.
8. Google Merchant Blog – This is a must read for every ecommerce owner. Has lots of tips on optimizing your webstore to get found in Google search.

When to use an early payment discount?

In this article I will explain the standard terminology used to describe early payment discounts. I will then present a simple approach towards deciding whether to use early payment discounts.

What does “2/10 net 30″ mean?

Early payment discounts are often described using a phrase like “2/10 net 30″. What does it mean? “2/10 net 30” means that the payment is due in 30 days, but the payment is made within 10 days then the payee will get a 2% discount.

Let us break this down in terms of measures we all can easily understand. Let us say a vendor offers you “2/10 net 30″ payment terms. Let us say that there is an outstanding invoice from that vendor for $10,000. In other words, you owe the vendor $10,000 to be paid within 30 days. But if you pay the vendor within 10 days, he is going to give you 2% discount on that $10,000 (equal to $200 in discount)

Early payment discount can be described as an annual interest rate

Once you agree with that, what is the annual effective interest rate for such a bank account. Let us see. For 20 days, you got 2%. Therefore, for 360 days, you will get 2%*(360/20) = 36% interest. In other words, a vendor that gives you a “2/10 net 30” term is giving you an opportunity to earn 36% annual interest on your cash. That sounds like a great deal, but is it really?

Should I accept an early payment discount?

Here is where the cost of money argument comes to play. As I explained in an earlier article, cost of money of your business is the average interest rate on the money supply into your business. Let us say [based on the calculations explained in the previous article]  your cost of money is 8.67%. In effect, you are borrowing money at 8.67% from your creditors, and then depositing that money at the vendor, and earning an interest rate of 36%. Does that sound like a steal to you? That is because in this case it actually is.

Should I offer an early payment discount?

Now let us reverse the roles and see. What if you are the vendor who is offering “2/10 net 30” terms to your customer? In effect, you are providing the customer with a bank account that provides 36% interest rate. Your business is already borrowing money at 8.67% from your creditors. And now you are offering to borrow money from the customers at 36%? Is that a good deal to you? If you can keep borrowing money from your creditors at 8.67%, this clearly is not a good deal for you.

But if you are running out of cash, and are unable to borrow any more money at 8.67%, then try if you can find another source to borrow money at a rate less than 36%. Offering early payment discounts should be your last resort, if you can no longer borrow money for anything less than 36%.

As explained above, before you take up an early payment discount from your vendor, or before you offer an early payment discount to your customer, think about what the cost of money for your business is.

Tips for using product photographs on your webstore

A few days ago, I wrote about using videos on your webstore.

Here is a good set of tips to using product photographs on your webstore. The key is to understand your customer and to learn what kind of images tell your story. The kind of images a jewelry store should have is very different from the kind of images an automotive parts store should have.

4 simple steps to calculate the Cost of Money for your small business

Cost of money refers to the average interest rate at which you are able to borrow money. Think of the cost of money as the rent you have to pay for using someone else’s money.

Yes, there is a cost of money even if you are using all of your own money. How? Since you are using your own money instead of putting it into a savings account, you are foregoing the 1.5% interest you could make on it. Thus, the cost of money in this case is 1.5%.

As a small business owner, you probably borrow money from several sources, e.g., bank, credit cards, friends. You probably also keep money in various places, e.g., checking account, savings account. Each of these sources has its own cost of money: A bank loan could cost you 10%, a credit card could cost you as much as 30%, and so on and so forth. So how do you come up with the combined cost of money that tells you how much interest you are paying for all of this borrowed money?

The short answer is that your cost of money is the weighted average of your borrowing and deposit interest rates. Too much jargon? Don’t worry. In the next section I will explain how to calculate your cost of money in 4 simple steps.

4 Simple Steps to Calculate the Cost of Money for Your Small Business

Let us create a spreadsheet with 4 columns.

Step 1 (Column A) - Identify all of the sources of money for your business and list them in order. These sources are often:

• Small business loans from a bank or SBA.
• Credit cards. If you use multiple credit cards, then list the amounts your have charged on each one of them separately. (Note: Do not list your credit limit, but rather your outstanding balance. If your outstanding balance changes every month, your cost of money will also change every month.)
• Friends or family who have lent you money to run your business. (Write down the amount even if they are not charging you any “interest” on the loan.)
• If your business has cash lying in a checking or saving account, list that too.

Step 2 (Column B) - Next to each source, write down the interest rate you are paying. For SBA, this rate can be easily found in your documents. If you use multiple credit cards, write down the APR of each card separately. You can find out the APR from your credit card statements, or you can call the credit card companies.

Step 3 (Column C) – Apply a + or – sign to each source.

• If your business has “borrowed” money from that source, then use a + sign. Bank loans, SBA loans, Credit cards, Friends/Family will get a + sign.
• If you business has “deposited” money into that source, then use a – sign. Your business checking account balance and your savings account balance will all have – signs.

Step 4 (Column D) – Time to find your weighted average. You can do this by simply multiplying column A with Column B, and applying the sign in Column C to get Column D. (See table below.)

Once you finish Step 4, now, add all of the rows in Column A and all of the rows in Column D. After you do that, divide the Column A total by the column D total. This amount is the cost of money for your business. Simple, huh?

Calculate cost of money in 4 steps

Cost of Money = $21,406.89 / $238,665.54 = 0.0897 = 8.97%

As you can see, the cost of money is the weighted average interest rate for the money supply into your business.

Applying cost of money as a metric

Cost of money is a very useful metric in making business decisions. For example, cost of money can be used to decide whether to offer / accept early payment discounts.

68% of top 50 Internet retailers use video content on their websites

A study from Forrester, released last month, highlights the usage of video for product marketing on e-commerce websites. 68% of the leading ecommerce websites use video.

However, only 16% of the consumers claim to watch these videos. But once they watch it, 64% say they found the video useful.

If you cannot afford to pay $499 for the Forrester report, here are some more details from the study.

One reason for the low adoption rate, the report says, is that product videos are relatively new.

Videos need to have embedded links to products, consumer reviews and other elements that reinforce the sale.

4,687 consumers were surveyed for this report.

A good resource for e-commerce related video production is video-commerce.org. – a community of e-commerce professionals, online marketers, and technologists dedicated to advancing the use of video in e-commerce.

Here is a recent article from Practical Ecommerce on producing inexpensive easy product videos for your webstore.