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The dual edged sword of your business offering gift cards

Gift cards are the go-to gift for shoppers but how can businesses really capitalize on their appeal to make it a win-win for all?

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The era of gift cards

Gift cards have become a universally utilized and popular option for gift givers around the world. These credit-card sized pieces of plastic or their digital counterparts provide both a form of captured currency, allowing the user to purchase the items of their desire from a favorite store or restaurant, and a marketing opportunity for businesses. But with an estimated $2 billion in unused gift cards in 2012, they can be a double-edged sword for consumers and businesses alike.

Judge rules in Border’s case

In May 2013, U.S. District Judge Andrew Carter, presiding over the ongoing bankruptcy of Borders declared it would be “unfair to other creditors” to allow the holders of $210.5 million in gift cards to have a claim in the bankruptcy proceedings as a creditor and that the bankruptcy was “substantially” completed.

It’s unlikely to be an accident that the bankruptcy was filed in February 2011, two months after the hectic Christmas season. For consumers who purchased gift cards from the popular book retailer in 2010, this is a bitter pill to swallow.

Circuit City serves as another example

Circuit City gift card holders faced a similar conundrum in the 2008 holiday season after Circuit City filed for Chapter 11 bankruptcy protection in November of that year.

For retailers, the double edged sword comes from both unclaimed gift cards, which some state governments will claim under an escheatment law (similar to that used to claim money from abandoned checking accounts) and the lost potential for more purchases. About 1/3 of consumers are more likely to purchase at least 20 percent over the gift card value and about 55 percent are likely to purchase up to 60 percent over the card value, which can provide additional revenues to businesses after the peak giving seasons.

Using gift cards to improve loyalty

Savvy retailers should use gift cards in a way that increases customer loyalty and experience by adding value to the shopping experience. Making gift cards easier to use, instead of harder, can reap big benefits in terms of wooing customers away from competitors.

For example, during the 2012 Christmas season, Target stores rewarded customers with a free gift card with a minimum purchase which they could then choose to apply to that shopping trip or the next one. That made it easier for Target to compete with Wal-Mart in terms of pricing and enabled Target to attract more of the holiday spending from shoppers along with grocery sales.

Charity Kountz is an award-winning fiction and nonfiction author as well as a Realtor and certified Paralegal. Her writing has been featured in Coldwell Banker, iPhone Life, Strategy magazine, Duck Soup magazine, and more.

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Business Finance

Tips on setting a more accurate freelance rate

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Setting a freelance rate can be difficult given that any industry has conflicting norms regarding an appropriate billing amount – a fact made more difficult by about a billion other factors such as experience, location, and so on. Whether you prefer to determine your rate the long-form way or you just want a calculator to point you in the correct direction, here are some tips for figuring out how much you should be charging.

Jennifer Bourn, business guru and freelancer extraordinaire, eschews the general “start with the salary you want and work backward” approach. Under this model, you would theoretically determine the amount of money you want in a year, divide that number by the number of hours you plan on working in a year, and charge whatever the quotient is (for example, $100,000 divided by 2080–which is 40 hours per week times 52 weeks in a year–is roughly $50 per hour).

The problem with this model, Bourn posits, is that it doesn’t actually get you what you want to earn. Once you take into account things like your overhead spending, vacation time, insurance, profit margin goals, and actual billable time versus the time you need to do administrative things, you’re looking at a substantially smaller figure at the end of the year.

Bourn’s solution is to start with the salary you want, add all of your expenses, multiply that result by your desired profit margin (e.g., 1.10 for a margin of 10 percent), and then divide by a realistic look at your billable hours for the year–not just the standard 2080 work days in a year (which is already problematic due to the aforementioned vacation time and potential for sick leave).

If all of that sounds like way too much effort, there are a myriad of rate calculators that you could use instead. Each of our following picks has a variety of applications:

  1. Clockify is a simple, straightforward calculator that looks at your industry, location, and experience level to generate an average hourly figure.
  2. Nation 1099starts with your desired salary and then gives you an hourly rate and a daily rate based on many of the factors espoused by Bourn.
  3. Your Rate asks for your desired annual income, your number of weekly billable hours, and your anticipated time off per year to come up with a set of rough figures for weekly, daily, and hourly rates.
  4. Freelance Rate Calculator is a Google Sheets template that takes into account your goals, expenses, billable hours, and more.
  5. All Freelance Writing is a more intensive calculator with an advanced option to determine all of your costs, goals, billable hours, time off, and so on, making it a pleasant option somewhere between Bourn’s long-form calculations and something like Clockify.

You should test your salary calculations in a variety of spaces if you have the time. This will ensure that you end up with a solid, well-corroborated result that you can quote to clients rather than having to fall back on one website’s opinion. Whichever option you choose, though, remember that you deserve to be paid what you’re worth–not just what your services are worth.

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Business Finance

How should freelancers be saving for retirement (is it even possible)?

(FINANCE) Adulting is hard, but retirement looms no matter your age – here are some ways to start squirreling money away so it’s less stressful later.

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Freelancing is a tenuous approach to employment, made all the more so by a profound lack of amenities usually offered by more stable arrangements – chief among which is a retirement fund. It can feel impossible, especially when your business suffers amidst a pandemic, so some of what follows can be ignored until the ship isn’t sinking, but don’t wait a minute longer than that – deal?

So there are several schools of thought regarding the best way to start saving and where you should put your money, but the bottom line is that, if you’re a freelancer, you should be allocating your own retirement funds. Here are some ways to do just that.

Before you can even get into the weeds of how to invest in retirement, you should have a parachute in case things go sideways. My Bank Tracker suggests starting with an emergency fund of $1,000, adding to it as you can until you have anywhere from 3 to 12 months of expenses covered.

This serves two purposes: ensuring that you’ll have the luxury of time if you need to perform an abrupt job hunt, and establishing how much you can safely put away each month without jeopardizing your business or standard of living (within reason).

Having a relatively large sum of money on hand for emergencies is always good, and if you never have to use it for the purpose for which you set it aside, it can supplement your retirement whenever you decide it’s time to cash in.

My Bank Tracker also suggests storing your emergency fund using a “high-yield” bank account, such as an online savings account, rather than sticking with traditional, low-interest savings options.

You also need to plan for taxes, which in addition to whatever your tax bracket percentage is, includes allocating 15 percent of your income to pay Social Security and Medicare. This means that you’re probably putting aside a pretty hefty sum (at least 30%) each month.

Once you’ve established your emergency fund and planned for taxes, you should have a general idea of what your wiggle room looks like vis-a-vis saving for retirement.

The actual saving part of retirement entails investment in a retirement account such as an IRA, Roth IRA, a 401(k), or a pension plan (referred to as a “defined benefit plan”).

Each of these account types has benefits and drawbacks depending on your situation.

  • A Roth IRA will allow you to contribute a certain amount each year, and you can usually set up an account quickly from a variety of online locations. The money that goes into a Roth IRA is post-tax, meaning you don’t have to pay tax on the retirement funds you pull out. Your income, however, can disqualify you from investing – if you earn above a certain threshold ($140,000 in 2021), you won’t be able to use a Roth IRA.
  • Other IRA options exist as well, each with a cap on how much you can contribute per year and varying tax requirements. For example, a traditional IRA account requires you to pay taxes when you withdraw the money, and there’s an upper limit on how much you can contribute.
  • A SEP IRA is similar, but the upper limit on investment is substantially higher – and you need to be self-employed (or an employer) to have one.

Nerd Wallet also points out that a 401(k) is a reasonable option for self-employed people who don’t employ anyone else, especially if you plan on saving “a lot in some years — say, when business is flush — and less in others.” 401(k) accounts allow you to put up to a certain amount ($58,000 in 2021) in each year pre-tax, and you pay taxes on withdrawals whenever you start pulling out money.

More eccentric retirement options exist as well. Taxable Brokerage Accounts let you invest in stocks and securities through a brokerage, and you’re able to use the money whenever you please – but you’ll have to pay taxes on your gains each year, which can become expensive in the long run.

And defined benefit plans are expensive and entail high fees, but they allow you to set up a pension with high investment opportunities as opposed to some of the lower-investment options.

Whichever option (or options – you can always invest in multiple accounts) you choose, make sure you’re saving for retirement in some capacity. And remember that these accounts represent exponential growth, meaning that the sooner you start saving, the better off you’ll be when you begin your retirement journey.

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Business Finance

Stripe makes it easier to collect money from customers

(FINANCE) Stripe didn’t reinvent the wheel, but they are outshining competitors by adding features that help small businesses.

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Payment processing is an attribute of any sales process that can make or break the customer’s experience – and, with it, your revenue stream.

While coding in a payment portal can be time-intensive and costly, payment processor company, Stripe has a simple alternative: Payment Links.

Stripe Payment Links are exactly what they sound like. Rather than linking a customer to a product and then having them check out via the usual cart process, you can send them a Payment Link for that specific product; the customer then enters their payment information in the ensuing window, and the product is theirs.

It’s a very straight-forward process that is made easier by Stripe’s no-code presentation, a choice that ProductHunt posits is an effort to go with the no-code flow we’ve seen in the last year.

And, the easier the checkout process is, the more likely a customer is to complete a transaction. It’s one of the reasons why Amazon’s “Buy Now” feature is so rewarding (and dangerous, especially at night).

By offering a customer a direct link to a product with a space to enter their card info in a hassle-free manner, Stripe has created an incredibly convenient way for them to pay – and, without the usual process of checking out involved, customers have less time to second-guess that payment.

Call it what you want (manipulative, pushy, morally grey), but if a customer doesn’t get the chance to rethink their purchase before the payment form has been filled out, chances are decent that they’ll follow through.

Certainly, there are drawbacks to this system. The link applies to individual products or services, which means that, while you can create an individual link for each item on your site, your payroll processing will categorize each of those links differently. That can be a mess to sort out at the end of the day.

But it’s a great way to ensure that customers who want something specific can get it quickly and without much ado about anything.

Putting a Payment Link in your bio after advertising a product on Instagram, sharing your link on Twitter, or even DMing links to interested customers is sure to be a productive, if shameless, endeavor.

Here is a quick rundown from Stripe:

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