Reviewed by Ebony Howard

Real estate agents get listing agreements in a variety of different ways depending on their markets. A real estate agent in an expensive area of a city such as Manhattan—trying to win the listings of New York’s elite—might entertain potential clients with dinners and outings.

Other real estate agents might make a name for themselves through online strategies and community events. Regardless of the market, building an invaluable personal network and developing expertise in a particular area or region can lead to success as a real estate agent.

Key Takeaways

• Getting listings begins with building a strong network by creating and maintaining relationships.
• Build a brand through marketing strategies, using ads, social media accounts, and newsletters to present an aesthetic listing of your homes.
• Become an expert in a particular area or region, targeting demographics with a higher amount of bought and sold homes.

Getting Listings Through a Strong Network

Getting listings first begins with building a strong network. Real estate agents are constantly creating and maintaining relationships. Many start by connecting with everyone they know, including family, friends, and acquaintances.

Agents must meet many people, discuss real estate, follow any leads, and make it known that they are in the business. Even if the people they speak with might not currently be in the market for selling or buying properties, chances are they will be later or know people who are. New agents use the methods of warm calling and cold calling to drum up leads for listings as well.

Invest in Yourself

As a real estate agent, it is important to invest in yourself. To create a brand through marketing strategies, various ads, and an online presence is essential. Like anything else in a capitalist economy, you are marketing yourself as a brand to show why people should choose you over the competition.

As a brand, you must constantly work with integrity, do what is right for your clients, and provide the best possible value. If you do this and start making a name for yourself, it will lead to another great way to get listings, and that’s through recommendations. If people are happy with the service that you provide, then they will recommend you to the people that they know.

Social Media

In today’s digital age, an online presence is crucial. It is the quickest way to reach people with the furthest scope. Creating social media accounts on different platforms, sending out newsletters via email, presenting a certain aesthetic, and listing homes you have shown previously all help display who you are, and real estate stock is out there. Social media allows people to connect with you to see the types of homes you’re selling, get to know you, and help you build brand awareness. 

Be in Touch With the Community

Creating relationships with local home developers can help you learn about new listings. Developers typically have a pulse on the real estate market since they build new or convert existing properties.

By staying in touch with them, you can also create relationships with local real estate companies. You never know what kind of information or relationships they are also looking to build and work with.

Strategic Targeting

Specific demographics buy or sell homes more frequently than others, and it is important to be aware of these individuals in your market. For example, people who inherit homes might want to sell the home as they do not wish to carry the responsibility of maintaining another piece of real estate. The home might be located in an area they do not live in or requires too much maintenance. These people may look to sell the property and cash in.

Another demographic to focus on is recently divorced couples. A divorced couple may sell their shared property and buy two different homes. Or even if they do keep the current property, one of the individuals will be looking for a new place to start a new life. It can be your role as a real estate agent to help them in this difficult time and make the transitional process much easier.

As a real estate agent, one has to constantly network and keep abreast of what is happening in their community. Knowing as many people as possible, constantly contacting the right groups, and performing valuable services all help in generating new listings.

Warning

Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report, either to the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development (HUD).

How To Get Real Estate Listings without Cold Calling?

Building contacts, networking, and developing relationships through social media, open houses, community outreach, and marketing strategies can help real estate agents get more listings and succeed in their careers.

How Does a New Realtor Get Clients?

New realtors can access new clients through networking events, social media outreach, and speaking to friends and family. Getting involved in local communities can raise awareness of your brand and that you’re available to new clients.

How Do Real Estate Agents Get More Listings?

Real estate agents get listing agreements by networking, building a brand, using social media, staying active in the community, and targeting specific demographics. 

The Bottom Line

Real estate agents get listing agreements through various methods, including entertaining potential clients with dinners, outings, and open houses. Online and social media strategies can help enhance the brand of an agent, showing recently sold listings and current listings on the market. Building a network through community events and maintaining relationships allows real estate agents to network and build contacts.

They have a tax advantage but often come with high fees

Fact checked by Vikki Velasquez
Reviewed by Marguerita Cheng

What Is a Nonqualified Variable Annuity?

Nonqualified variable annuities are tax-deferred investment vehicles with a unique tax structure. While you won’t receive a tax deduction for the money you contribute, your account grows without incurring taxes until you take money out, either through an early withdrawal or as retirement income.

A nonqualified variable annuity is a retirement pension plan that is purchased with post-tax dollars. That is, you don’t get a tax break up front, as with an individual retirement account (IRA). Your money will grow untaxed until you start taking the money out, usually as retirement income. At that point, you’ll owe income taxes on the amount withdrawn.

Key Takeaways

• A nonqualified variable annuity doesn’t entitle you to a tax deduction in the years you contribute money, as is the case with a traditional IRA or 401(k) plan.
• You won’t be taxed on the gains in your account until you withdraw money.
• At that time, the gains will be taxed as ordinary income, not capital gains.
• Any money you take out before age 59½ will be subject to a 10% early withdrawal penalty in most cases.

How a Nonqualified Variable Annuity Works

Variable annuities are sold by insurance companies. In return for the money you invest, the insurer promises to pay you a regular stream of income. Normally, the payments begin at retirement age and continue for the rest of your life.

A qualified annuity is a type of retirement account, much like a traditional individual retirement account (IRA), that typically entitles you to a tax deduction for the amount you contribute, up to Internal Revenue Service (IRS) limits.

A non-qualified annuity is not considered a retirement account for tax purposes and doesn’t earn you a deduction—even if you are using it to save for retirement.

You make contributions to a nonqualified variable annuity with after-tax dollars, like adding money to a bank account or any other investment. The insurer invests your contributions in subaccounts, which are similar to mutual funds, of your choosing.

The value of the annuity will vary according to the performance of the investments you selected. With a fixed annuity, the insurer picks the investments and promises you a predetermined return.

The Tax Benefit

Although you don’t receive any upfront tax break with a nonqualified annuity, the earnings on your subaccounts grow tax-deferred. That is the unique tax advantage of these annuities.

With other nonqualified accounts—such as a brokerage account or mutual fund—the interest, dividends, and capital gains distributions your investments generate are taxed for the year in which you receive them. That’s true whether you take the money in cash or simply reinvest it.

The earnings in your variable annuity account become taxable only when you withdraw money or receive income from the insurer in the payout phase of the annuity.

At that point, the money you receive is taxed at the same rate as your ordinary income.

Tax on Withdrawals and Income

When you receive money from a nonqualified variable annuity, only your net gain—the earnings on your investment—is taxable. The money you contributed to the annuity isn’t taxed because you made it with after-tax dollars.

As a result, a portion of each payment you receive is treated as principal (that is, a return of your investment in the contract) for tax purposes.

How is this calculated? Essentially, the nontaxable portion of each payment is determined by the ratio of your investment in the contract to the account balance. More precisely, the tax-free and taxable portions of annuity payments are figured using a special computation explained in IRS Publication 575.

The insurance company will report the total annual payouts to you and to the IRS on Form 1099-R. The form will also show your taxable amount so that you won’t have to figure it out yourself.

Taxes at Death

The variable annuity contract may provide that at your death, a person you name as a beneficiary will receive a lump-sum death benefit. Depending on the terms of the contract, when a death benefit becomes payable to a beneficiary, some taxes may be due.

Even though this is an inheritance, the beneficiary must pay income tax on the portion of the payment in excess of your remaining investment in the contract. This is the unrecovered part of your cost for the contract that remained after the payments and withdrawals you received during your lifetime.

Whether the beneficiary is your spouse or someone else also makes a difference.

Spouse Beneficiaries

A spouse inheriting a nonqualified variable annuity usually has the option to continue the contract in his or her name. This is an option, selected up front, that sves the spouse from incurring any taxes until they start making withdrawals.

However, if the spouse chooses to take a lump-sum death benefit, the earnings become immediately taxable as ordinary income.

Other Beneficiaries

For beneficiaries who are not spouses, there are usually three options, depending on the terms of the contract: take a taxable lump-sum distribution (as mentioned above), withdraw the money over a 10-year period, or take distributions based on the beneficiary’s life expectancy.

The distributions must begin within one year after the original account owner’s date of death.

Important

Variable annuities often have high fees, including surrender charges if you need to terminate the contract early. Read the contract carefully to understand the fees you may encounter.

Other Considerations

There are other issues to consider with variable annuities, whether qualified or nonqualified.

Fees

Variable annuities entail considerable costs in the form of an insurance fee, which covers any guaranteed death benefit, as well as an administrative fee.

These fees are based on a percentage of the value of the contract and apply every year. They can average about 1.25% or more annually, depending on the insurance company and other factors.

You cannot deduct these amounts as investment expenses. They become part of your cost (investment) in the contract.

Additional Taxes

High-income taxpayers must include the taxable portion of their variable annuity income in calculating their 3.8% additional net investment income tax.

Early Distributions

As with other tax-deferred accounts intended for retirement, variable annuity withdrawals of any kind—whether a single withdrawal or a stream of monthly payments—taken before age 59½ are subject to a 10% early withdrawal penalty on the taxable portion of the payment.

The penalty does not apply if you are totally and permanently disabled. It also does not apply to a beneficiary who receives payments after your death, regardless of whether you or the beneficiary are under 59½.

Surrender Charges

If you surrender the contract, which means cashing it in before you start to receive annuity payments, you may face a significant surrender charge imposed by the insurer.

The portion of the money that represents your investment in the contract is tax-free, but any additional amount is taxable as ordinary income. If you receive less money than you paid into the contract after deducting the surrender fee, you can take a loss on your taxes.

Exchanges for Other Annuity Contracts

If you have an annuity and want to replace it, there is a way to do it that saves taxes.

Instead of cashing in a variable annuity to buy one with better terms (such as lower annual fees) and paying tax at that time on any increase over your investment, you can transfer to another contract in what is called a 1035 exchange.

The exchange is tax-free as long as the annuitants are the same in both contracts.

Withholding

The insurance company will automatically withhold taxes on the taxable portion of your annuity payments based on the rate that applies to ordinary income as if you are married with three withholding allowances (even if you are single).

You can opt out of withholding by filing IRS Form W-4P.

Why Would I Invest in an Annuity?

An annuity, qualified or nonqualified, is one way you can obtain a regular stream of income when you retire. As with any investment, you put money in over a long term, or pay it in a lump sum, and let the money grow until you are ready to retire.

There are pros and cons to annuities. They are, indeed, a guaranteed stream of money, based on the amount you pay into it during your working years. They are known for their high fees, so care before signing the contract is needed.

There’s a grim reality to annuities, too. They are sold by insurance companies. You’re betting that you’ll live long enough to get full value for your investment. The company is betting you won’t.

How Do I Choose Between a Qualified and a Non-Qualified Annuity?

Qualified annuities are most often offered by employers as a company benefit. If you don’t have access to one through an employer, you can buy an annuity directly from an insurance company and fund it with money in an IRA or other qualified retirement account.

Some qualified annuities allow pre-tax income to grow over time, with no taxes due until the money is withdrawn, usually after the person retires. Because of this tax benefit, they also are subject to IRS restrictions, including limits on the amount that can be deposited each year.

What Is a Fixed Annuity Vs. a Variable Annuity?

This is one of the choices you make when you sign a contract for an annuity. A fixed annuity guarantees you a specific rate of return. This is based mostly on the amount of money you have in the account and your life expectancy. With a variable annuity, the amount of your payment is determined by the performance of the investments you choose to put your money into. Your payment will vary from month to month.

The Bottom Line

Variable annuities can be attractive from a tax perspective because you can postpone paying taxes on your investment gains until you’re ready to retire.

However, at some point, you or your beneficiaries will have to pay tax on the income earned in the contract. What’s more, the tax will be at your rate for ordinary income rather than the more favorable capital gains rate you’d pay if you made the same investments in a regular taxable account.

Before taking withdrawals from a nonqualified variable annuity—or if you inherit money from one—it is important to seek professional tax advice. A wrong move could mean a hefty tax bill.

How to get money when time is of the essence

Reviewed by Khadija Khartit
Fact checked by Yarilet Perez

Whether you are facing an onslaught of unexpected medical bills, you recently lost your job, or your home has been hit by a hurricane or other natural disaster, one thing is certain—you need cash, and you need it now.

Unfortunately, when a financial emergency occurs, the vast majority of us are caught completely unprepared.

If you find yourself in this fix, know that you are not alone. About six out of 10 American households experience at least one financial emergency a year, and about one-third of American families have no savings at all, according to the Federal Emergency Management Agency (FEMA).

Meanwhile, Federal Reserve poll data updated in 2023 revealed that 37% of adults would not be able to cover an unexpected $400 expense with cash, savings, or by using a credit card and paying it off by the next statement.

If you need quick cash to cover an urgent expense, where do you turn? Here are seven smart ways to raise money quickly without causing irreparable harm to your finances.

Key Takeaways

• Selling personal belongings online—such as clothing, electronics, or books—may help you raise cash in an emergency.
• Consider taking on an odd job such as babysitting, dog walking, or yard work to help bring in extra money.
• You may be owed unclaimed property by the state, especially if you’ve moved around a lot.
• You might consider borrowing or withdrawing funds from your retirement account; in certain cases, you can avoid paying taxes on the distribution and a 10% penalty.
• If you borrow money from friends or family, it’s best to draw up a contract formalizing the terms of the loan.

1. Liquidate Your Assets

Does the corner of your jewelry box hold your dad’s Rolex, your mom’s engagement ring, or a diamond pin you rarely wear? What about goodies tucked away in your closet—perhaps a fancy bridesmaid dress or your inherited great-aunt’s fur coat?

One online platform ready and willing to pay cash for your clothes is ThredUp. Visit their Selling Guide page to find out how the selling process works. Or, you can try selling your clothing on eBay or Facebook Marketplace.

You also may be able to make fast cash by selling recent-model electronics, such as big-screen TVs, tablets, phones, laptops, and game consoles, as well as media like DVDs, CDs, books, and games. For these, check out sites such as Decluttr, Gazelle, and uSell, and marketplace sites like Swappa.

Or, try posting your items on Facebook Marketplace, Craigslist, and X (formerly Twitter); run an ad in your local newspaper; or peddle these pieces to friends and family members.

Depending on the quality of the garments, electronics, and media you’re willing to sell, you could quickly rake in hundreds—or more—in much-needed cash.

2. Take on Odd Jobs

If you don’t have any high-value items to unload, you can try selling your services instead, either as a second job but especially if you are out of work and have time on your hands.

You might babysit and/or start up a neighborhood dog-walking service. According to ZipRecruiter, the nationwide average hourly wage for a babysitter is $18 an hour. Dog walkers can typically earn almost $17 an hour, according to Payscale.

If you’re not up for dealing with dogs or kids, you might offer to mow the grass and wash cars for people in your neighborhood, or drive an elderly neighbor to their doctor appointments.

Or, if you enjoy driving, you might sign up to be a Lyft or Uber driver. According to Indeed, Uber drivers average an hourly rate nationally of $20.

You could also grocery shop for busy friends or older adults, or offer to repair and paint a friend’s or relative’s dilapidated fence. Depending on how many jobs you take on and how much you charge for each task, you could scrape together a few hundred bucks within a single weekend.

If you can’t find enough people who need work done, try signing up for jobs through websites such as TaskRabbit, Thumbtack, or skills-based work on Upwork, Freelancer, or Fiverr.

Important

An emergency fund can provide a financial cushion to help when unexpected costs associated with, for instance, medical treatment or the loss of a job occur. Start setting money aside for your fund as soon as you can.

3. Track Down Loose Change

At first glance, this advice may seem a little absurd, but it’s not a joke. According to The Wall Street Journal, Americans lose track of as much as $68 million of coins each year. That’s a lot of money stuffed in couch cushions, piggy banks, and old paint cans across the nation.

Hunt around the house to collect all those hidden coins. Once you dig up every last cent, haul the trove to your local bank or credit union. Some banks will count change for free for their customers. Others may require you to count and roll your change on your own.

Another way to track down lost money is to visit your state’s unclaimed property website. For any state you’ve lived in, there may be funds that belong to you (e.g., a check or a forgotten bank account). The state is required to hold on to these funds, and it publishes a list of those owed money. Once you follow the instructions to claim the funds, essentially you’ve found money that you forgot or never knew you had.

4. Organize a Garage Sale

One man’s trash is another man’s treasure, as the saying goes. While garage and yard sales require a lot of work, they can bring in a decent chunk of change for some sellers.

Be sure to advertise on Craigslist, Facebook (if you have a local group), Nextdoor, your local newspaper (online as well as print), and church bulletins. Put up large, easy-to-read signs with black lettering in key locations to bring in as many people as possible.

5. Tap Your Retirement Account

For significant amounts of money, the first four options above may not suffice. That’s when it may make sense to consider your 401(k). In most years, if you’re younger than 59½, you pay a 10% penalty for withdrawing from your 401(k) funds. But when you face especially trying times, it may be worth it.

Also, there are certain exceptions for which the 10% penalty may be waived, such as when you have unreimbursed medical expenses that exceed 7.5% of your modified adjusted gross income (MAGI). You can also borrow, rather than withdraw, money from your 401(k)—a better choice if you can manage it.

If you don’t have a 401(k) but you do have an individual retirement account (IRA), this could also be a source of funds, especially if it’s a Roth IRA. With a traditional IRA, your options are more limited, but even then, there are some situations in which you can withdraw retirement money at little cost to you.

6. Part With Your Plasma

Now we’re getting to the more extreme options. Plasma is a valuable resource used for a variety of medical treatments and research. Donating plasma is similar to giving blood, according to Octapharma Plasma Inc., a company that collects plasma used to create lifesaving medicines for patients worldwide.

Once your blood is drawn, it’s cycled through special equipment that separates plasma from the other parts of your blood. Your plasma is then collected in a container, while the other parts are safely returned to your body in a process called plasmapheresis.

Reports vary as to how much you can make, and it will depend on a variety of factors. According to the Octapharma Plasma website, hermatocrit, height, and weight drive payment amounts. First-time donors receive a bonus. Returning donors receive greater payment amounts depending on the frequency of donations.

7. Borrow Money From Friends or Family

We saved this one for last because it really should be a last resort. While borrowing money from friends and relatives may be a quick fix, it can lead to some adverse and unpleasant consequences. When a loved one lends you some cash, it can put a strain on your relationship—especially if you don’t pay the person back quickly.

Unpaid loans can lead to lingering bad feelings between the lender and borrower. If you plan on borrowing money, it’s probably best to draw up a contract that states when you must begin to pay back the lender, when you will finish paying, and any interest you’ll owe on the money borrowed.

How Much Should I Have in Emergency Savings?

Different financial advisors may give different answers. Some suggest a minimum of three months of living expenses, while others err on the side of caution and recommend six to 12 months. Be mindful of how your emergency savings goals may change if you were to move from one area to another that has a higher cost of living.

Where Should I Store My Emergency Fund?

Your emergency fund should be kept someplace safe and liquid. For this reason, a savings account may be the most logical place to start. You’ll be able to withdraw your money whenever you need it (and high-yield savings accounts may offer especially attractive interest rates). Put your savings in a financial institution that you trust and an account that you understand.

What Are the Tax Implications of Selling Things I Own?

If you were to make a profit on anything you own, that gain is technically taxable income. Your tax rate would ultimately depend on the length of time you possessed the good. Keep good records (sales receipts, emails, bank statements) of what you sell, especially if you sell things for less than what you paid for them. In some cases, your losses may be able to offset your taxable gains. A tax advisor can provide insight into the tax implications.

The Bottom Line

If you find yourself cash-strapped when a financial emergency strikes, you’re not alone. The vast majority of Americans don’t have enough cash on hand to pay for unexpected expenses.

At such a time, the worst thing you can do is drive up credit card debt or take out a payday loan, which will have exorbitant interest rates.

Fortunately, there are several ways to raise money quickly without decimating your finances. Whether you choose to sell some of your belongings, take on odd jobs, or borrow money from a parent or friend, one thing is sure. As soon as you recover from your financial calamity, start building an emergency fund.

Reddit makes money by selling ads and premium membership plans

Reviewed by Charles Potters

Reddit Inc. (RDDT) is a social media website that enables users to form online communities, share ideas, photos and videos, post the latest trends and breaking news, and vote on content posted by other users. The website is known for its discussion forums, including its popular “Ask Me Anything” format.

Reddit makes money by selling advertising space and from an optional premium membership plan that allows users to turn off ads and enjoy other benefits. Reddit also earns revenue from data licensing and various products in the user economy.

Key Takeaways

• Reddit is a social media website known for its discussion forums on politics, sports, entertainment, and other topics.
• The company generates revenue through advertising and an ad-free premium membership plan.
• Reddit operates in the application-software segment of the technology industry, providing software that allows users to share media content.
• Reddit went public in early 2024, and has a market cap of around $18 billion.

Reddit’s Industry

Reddit is a social media website that provides a network of communities where users canpost news stories, images, videos, and links. A user’s standing within these communities is determined by the content they share and its evaluation by other users, as determined by their upvotes and downvotes.

Reddit also is well known for its online discussion forums on politics, entertainment, and other topics such as r/cryptocurrency, r/politics, and r/wallstreetbets. Reddit faces a long list of competitors, including Meta Platforms Inc. (META, formerly Facebook Inc.), X Corp. (formerly Twitter, Inc.), and Google parent Alphabet Inc. (GOOGL). Some lesser-known competitors include Digg, Tumblr, Quora, 9GAG, and Gizmodo Media Group.

Reddit’s Financials

Reddit earned $1.3 billion of revenue in 2024, according to the company’s annual report filed on Feb. 13, 2025. That’s an increase of more than 60% from the $804 million Reddit earned in 2023, when it was still a private company. However, the company’s net losses also increased, from $90 million in 2023 to $484 million in 2024.

Reddit had over 101 million daily active users in the last three months of 2024, an increase of 39% from the same period a year earlier. 48 million of them were in the United States, and nearly 54 million in the rest of the world.

History and Leadership

The San Francisco, California-based company was founded in 2005 by Steve Huffman and Alexis Ohanian. The two were college roommates and founded the company soon after graduating from the University of Virginia. Reddit was acquired by Condé Nast Publications in 2006 and was subsequently spun off into an independent company in 2011.

Huffman is Reddit’s current CEO and serves as one of the company’s board members. Ohanian stepped down as a board member in June 2020, and asked that he be replaced by a Black candidate. Reddit subsequently named Y Combinator CEO Michael Seibel as Ohanian’s replacement.

Recent Developments

Reddit launched an initial public offering on March 21, 2024. The initial share price was $34, setting a total value for the company at $750 billion. Reddit shares jumped after the company launched and steadily grew over the following months, eventually reaching $225 per share in early 2025.

Prices have receded since then, falling to a price of around $100 per share in April 2025. Although significantly reduced, that still gives the company a market cap of $18 billion.

Has Reddit Ever Made a Profit?

As of 2025, Reddit has not made a profit on an annual basis, which is not uncommon for a relatively young company. However, it did have its second profitable quarter in the last quarter of 2024.

What Is Reddit Worth?

Reddit’s share price was $101 as of April 12, 2025, giving it a total market capitalization of $18.3 billion.

What Are Reddit’s Revenue Streams?

Reddit’s main revenue stream is advertising sales or premium subscriptions. It also has a user economy of monetized rewards and collectible avatars, although the revenue from these is not material as of 2025.

The Bottom Line

Since its founding in 2005, Reddit has grown to reach millions of active users, bringing in revenue from ad sales as well as premium memberships and other initiatives. As a social media company, it doesn’t have the reach of competitors like Facebook or X, but it’s still one of the top 10 most-visited websites in the world.

Reviewed by Margaret James

The HARP program helped borrowers who had mortgage loan balances that exceeded their property value by allowing them to refinance their loan—ideally, at a lower rate. However, this program expired at the end of 2018.

When interest rates fall, many homeowners will refinance their mortgage to lock in a lower interest rate, which can reduce a borrower’s monthly payment or allow a homeowner to build equity more quickly.

However, homeowners who typically have trouble refinancing are those with negative equity, meaning the mortgage exceeds the property value, securing the loan as collateral. In the third quarter of 2024, nearly one million homes were in negative equity.

In the past, borrowers with underwater mortgages could take advantage of lower interest rates by refinancing through the Home Affordable Refinance Program (HARP).

Discover the benefits that HARP provided to homeowners and available options for refinancing or modifying a mortgage.

Key Takeaways

• HARP was a government program designed to help underwater homeowners refinance mortgages at more attractive interest rates.
• The program started on April 1, 2009, and ended on December 31, 2018.
• By the end of Dec. 2018, HARP refinances totaled 3,494,395 since its inception in 2009.
• An option for distressed homeowners includes the Flex Modification program from Fannie Mae and Freddie Mac.

What Is the HARP Loan Program?

HARP was a government program established in April 2009 under the Federal Housing Finance Agency (FHFA) in response to the 2007-08 financial crisis. The idea was to help homeowners refinance loans on properties that were worth less than their outstanding mortgage. Approximately 3.45 million borrowers took advantage of the program.

HARP Loan-to-Value (LTV) Requirements

HARP aimed to help borrowers with a loan-to-value ratio (LTV) greater than 80%. Typically, these borrowers have trouble securing refinancing because of a lack of home equity, preventing them from benefiting from falling interest rates.

Originally, borrowers were eligible for HARP assistance if their LTV ratio was no greater than 105%. This cap was raised to 125% in July 2009, then lifted entirely in October 2011.

HARP by the Numbers

Between the program’s inception and February 2015, approximately 3.29 million mortgages were refinanced under HARP. Of these, 2.3 million had an LTV ratio of 80% to 105%. Over 567,000 mortgages had an LTV of 105% to 125%, while 421,522 loans had ratios greater than 125%.

HARP was originally scheduled to expire at the end of 2016, but the government extended the program by two years. By the end of Dec. 2018, HARP refinances totaled 3,494,395 since its inception in 2009.

What Were the Qualifying Criteria for a HARP Loan?

Homeowners were required to meet the following criteria to qualify for HARP:

• A basic requirement was a mortgage owned or guaranteed by Freddie Mac or Fannie Mae, closed on or before May 31, 2009.
• The original loan must have had an LTV ratio of at least 80%.
• Crucially, the borrower could not be delinquent on their mortgage payments. They could have no late payments over the past six months and no more than one 30-day late payment over the preceding 12 months.
• Borrowers needed to have a 660 minimum credit score.

The program didn’t actually lend money. Instead, HARP worked with lenders to offer refinancing. Homeowners could check with their current lender or access a HARP website to see if the lender participated in the program.

What Replaced the HARP Loan Program?

Although HARP has ended, Fannie Mae and Freddie Mac offer options for financially distressed borrowers to refinance or modify their loans.

Flex Modification

Fannie Mae and Freddie Mac offer a Flex Modification program for existing loans with past-due payments of more than 60 days. These are loan modification programs that help financially distressed borrowers lower their monthly payments by 20%.

The payment reduction can result from a series of steps that include:

• Reduction of loan’s interest rate (if eligible) 
• Loan term extension, such as 40 years versus the standard 30-year mortgage loan
• Forbearance of a portion of the loan principal (borrowed amount), which represents a temporary reduction or modification to the loan balance

Not all loan modifications may achieve the 20% payment reduction goal.

Freddie Mac High LTV Refinance

Freddie Mac offers borrowers a refinance with a 95% loan-to-value ratio (LTV) for a one-unit or single-family home. Borrowers can take a cash-out refinance but must have an 80% LTV.

Warning

Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report, either to the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development (HUD).

How Did the HARP Loan Program Work?

The HARP mortgage program allowed borrowers with mortgage loan balances that exceeded their property values to refinance their loans at a lower interest rate. The government program began on April 1, 2009, and ended on December 31, 2018.

What Does It Mean When a Mortgage Is Underwater?

An underwater mortgage occurs when the loan balance exceeds the value of the home securing the loan as collateral. Borrowers can become underwater if the property value declines or the borrower withdraws too much of the home’s equity via a home equity loan, home equity line of credit (HELOC), or cash-out refinance.

What Are the Options for Financially Distressed Mortgage Loan Borrowers?

The Flex Modification program offered through Fannie Mae and Freddie Mac helps borrowers who have past-due payments of more than 60 days. The loan modification is designed to reduce the monthly mortgage payment by 20% by lowering the rate, extending the loan term, or forbearance, which temporarily reduces the loan balance.

The Bottom Line

Before HARP expired, the program helped millions of homeowners to refinance underwater mortgages. While HARP didn’t decrease the amount they owed, borrowers benefited from lower interest rates and monthly payments. Although HARP no longer exists, Fannie Mae and Freddie Mac offer programs for borrowers.

Reviewed by David Kindness
Fact checked by Michael Rosenston

What Is Other Comprehensive Income?

In corporate financial reporting and business accounting, other comprehensive income (OCI) includes revenues, expenses, gains, and losses that have yet to be realized and are excluded from net income on an income statement. OCI represents the balance between net income and comprehensive income.

A common example of OCI is a portfolio of bonds that have not yet matured and, consequently, haven’t been redeemed. Gains or losses from the changing value of the bonds cannot be fully determined until the time of their sale; the interim adjustments are thus recognized in other comprehensive income.

Key Takeaways

• In business accounting and corporate financial reporting, other comprehensive income (OCI) includes revenues, expenses, gains, and losses that have yet to be realized.
• The accounting treatment of other comprehensive income is established in the Statement of Financial Accounting Standards No. 220, entitled “Income Statement-Reporting Comprehensive Income,” which is maintained and updated by the Financial Accounting Standards Board.
• A bond portfolio is a prime example of an asset that may be considered OCI, as long as the business does not classify the underlying bonds as held-to-maturity.

Understanding Other Comprehensive Income

Corporate income can be broken down in a multitude of ways, which can mislead interested parties. To compensate for this, the Financial Accounting Standards Board (FASB) requires companies to use universal measurements to help provide investors and analysts with clear, easily accessible information on a company’s financial standing.

The Statement of Financial Accounting Standards No. 220, published by the FASB and entitled “Income Statement–Reporting Comprehensive Income,” reads that an entity shall report comprehensive income in a single continuous financial statement or in two separate but consecutive financial statements. It must also present its components in two sections: net income and other comprehensive income.

Accumulated other comprehensive income or loss is the accumulation of unrealized gains and losses attributed to line items listed on the income statement in other comprehensive income over time. For example, if Company XYZ had $1.5 million in other comprehensive income in the first quarter and $1.2 million in the second, it would have $2.7 million in accumulated other comprehensive income listed on its second quarter balance sheet in the shareholders’ equity section.

Important

An unrealized gain or loss is when a hedging transaction, investment, or pension plan has increased or decreased in value, but there has been no sales transaction. Gains and losses are “realized” when there is a sale, which makes the value increase or decrease “real.”

Common Examples of Other Comprehensive Income

Any held investment classified as available for sale, which is not intended to be held until maturity, and isn’t a loan or a receivable, may be recognized as other comprehensive income.

Other examples of OCI include:

• The previously mentioned bond portfolio is included as long as the business does not classify the bonds as held-to-maturity. Any change in the value of the available-for-sale asset may be included.
• Foreign currency transactions can create gains or losses if the balance of a company’s currency holdings fluctuates, which they frequently do. But the only companies that truly need to pay attention to foreign currency-derived other comprehensive income are large firms that deal in many different currencies.
• Pension plans can also create other comprehensive income. If the value of the plan increases, the difference between the old and new values can be recognized as comprehensive, minus any distributions to pension recipients.
• Gains and losses on derivatives instruments that are designated as, and qualify as, cash flow hedges.

Where Does OCI Go On the Balance Sheet?

OCI is part of accumulated other comprehensive income, which is recorded on the balance sheet in the shareholders’ equity section.

What Is Included in Other Comprehensive Income?

OCI consists of revenues, expenses, gains, and losses that are unrealized and are excluded from net income.

What Is the Difference Between OCI and P&L?

Other comprehensive income is revenues, gains, and losses that are not yet recognized. Profit and loss is all revenues and expenses not included in OCI.

The Bottom Line

Other comprehensive income is an income statement line item that includes unrecognized gains and losses from a business’s financial activities. They include foreign currency translation adjustments, gains and losses associated with pension plans, gains or losses on derivatives designated as cash flow hedges, and more.

Classifying unrecognized gains and losses as other comprehensive income and subtracting them from net income helps a company demonstrate its financial position with transparency.

Reviewed by Natalya Yashina
Fact checked by Suzanne Kvilhaug

Private vs. Public Company: An Overview

A private company is held in private hands. The company is owned by its founders, management, and/or a group of private investors in most cases. The public isn’t privy to its business.

A public company is one that’s sold a portion of itself to the public via an initial public offering (IPO). Shareholders have a claim to part of the company’s assets and profits. Public disclosure of business and financial activities and performance is required of public companies.

Both private and public companies can contribute to the financial health and well-being of economies and nations through their business activities, employment opportunities, and building wealth.

Key Takeaways

• A private company is usually owned by its founders, management, and/or a group of private investors.
• Information about its operations and financial performance isn’t available to the public.
• A public company has sold a portion of itself to the public via an initial public offering (IPO).
• A public company usually trades on a public stock exchange after the IPO.
• The main advantage that public companies have over private companies is their ability to tap the financial markets for capital by selling stock (equity) or bonds (debt).

Private Companies

A popular misconception is that privately held companies are small and of little interest. Many big-name companies are privately held, however, including Mars, Cargill, Fidelity Investments, and Koch Industries.

Ownership

Private companies are owned by those who establish them and those who are invited to invest in them. The public at large can’t buy shares or otherwise invest in private companies at their discretion.

Privacy

They’re not owned by the public so private companies’ executives and management don’t have to answer to stockholders or provide any company information to the public. They aren’t required to file disclosure statements with the Securities and Exchange Commission (SEC).

Capital for growth

A private company can’t use public capital markets to raise funds when it needs money. It must turn to private funding. Private companies fund their growth with profits from operations and/or by borrowing money from banks, venture capitalists, or other types of investors.

A privately held company can’t rely on getting cash by selling stocks or bonds in public markets but it may still be able to sell a limited number of shares under Regulation D without registering with the SEC. Private companies can use shares of equity to attract investors in this way.

Note

It’s been said that private companies seek to minimize the tax bite while public companies look to increase profits for shareholders.

Public Companies

A public company is usually a very large business entity and is normally listed and traded on a public exchange. These exchanges require public companies to meet certain standards to continue trading publicly. The New York Stock Exchange requires that a public company maintain a market capitalization of $15 million.

Ownership

A public company’s stock shares can be bought and sold by people outside the company after the shares trade on public stock markets. The company is therefore owned by those within the organization who possess shares of company stock and by members of the general public. Members of the public who own shares have a stake in the company as a result. Company management can be influenced by their opinions regarding the company’s business.

Public disclosure

A public company is required to disclose certain business and financial information regularly to the public. This information includes annual reports, quarterly reports, and current reports such as 10-K, 10-Q, and 8-K forms that are filed with the SEC.

Important

Public companies are required to register and file company information with the SEC as part of its mission to protect investors, maintain fair, orderly, and efficient markets, and provide access to capital by companies and entrepreneurs.

Capital for growth

A significant advantage that publicly traded companies have is their ability to tap the financial markets for needed capital for expansion through mergers and acquisitions, for internal projects that can drive profits and growth, or for other needs. They do this by selling stock (equity) or bonds (debt).

A public company might issue bonds that investors purchase. Investors make loans to the company in this way. The company will have to repay these loans with interest but it won’t have to surrender any shares of ownership in the company to the investor.

Bonds can therefore be a good option for public companies that seek to raise money, especially in a depressed stock market. A company could also raise capital by selling additional shares, however. This may relieve the burden of repaying bonds.

Key Differences

Public and private companies are distinctly different in several ways.

Company ownership

Private companies are owned by their founders, executive management, and private investors. Public companies are owned by members of the public who purchase company stock as well as personnel within companies such as founders, managers, and employees who possess shares of company stock as a result of the IPO and purchases.

Public company shareholders who aren’t involved in the company in any way other than share ownership can have an impact on the management and operations of public companies because they’re entitled to a say.

Sources of capital

Private companies normally obtain needed capital from private sources such as their shareholding owners or private investors such as venture capitalists. They can also raise funds by taking loans from financial institutions.

Public companies obtain needed capital by selling shares in the public marketplace or by issuing debt. This makes capital easier to obtain for public companies compared to private companies.

Public disclosure

Public companies are required by the SEC to regularly inform shareholders and the public of their financial activities, business activities, and business results. They must file periodic reports and other materials with the government.

Private companies aren’t required to make their company information public or register with the SEC although legislation has been introduced in the U.S. Senate to require some to do so.

Welcome and unwelcome news about public companies is regularly reported by the press and other media. Private companies typically don’t experience such publicity.

Private Company

• Normally not subject to SEC regulation

• Owned by founders and private investors

• Access to capital through owners, investors, and through private loans

• Not subject to public scrutiny

Public Company

• Must register with SEC and file regular financial reports

• Owned by those inside and outside the company who possess/buy shares

• Access to capital through public markets, such as stock and bond markets

• As shareholders, members of the public can vote and share opinions about company matters (which can also be publicized by media)

Examples of Private vs. Public Companies

The 10 largest private companies as of 2024 measured by revenue:

1. Cargill, $160 billion
2. Koch Industries, $125 billion
3. Publix Super Markets, $57.1 billion
4. Mars, $50 billion
5. H-E-B, $46.5 billion
6. Reyes Holdings, $40 billion
7. Enterprise Mobility, $38 billion
8. C&S Wholesale Grocers, $34 billion
9. Fidelity Investments, $28.2 billion
10. Southern Glazer’s Wine & Spirits, $26 billion

The 10 largest public companies as of April 2025 measured by market capitalization:

1. Apple, $2.97 trillion
2. Microsoft, $2.88 trillion
3. NVIDIA, $2.69 trillion
4. Amazon, $1.95 trillion
5. Alphabet (Google), $1.91 trillion
6. Saudi Aramco, $1.67 trillion
7. Meta Platforms (Facebook), $1.37 trillion
8. Berkshire Hathaway, $1.12 trillion
9. Broadcom, $844.5 billion
10. TSMC, $814.3 billion

Why Do Private Companies Go Public?

Private companies may go public because they want or need to raise capital and establish a source of future capital.

Can a Public Company Become Private?

Yes, provided that a shareholder vote supports such an action. The company must normally buy back or already own enough of its shares to control the voting for this move.

Is a Private or Public Company More Transparent?

Both types of companies can be transparent about what they do, their financial performance, and business results. A public company is required to regularly provide a wealth of information about itself to the SEC and the public at large, however. A private company need only be transparent with its private owners.

The Bottom Line

Private and public companies can contribute to the economic health and financial well-being of their communities, states, and nations. Both types of companies broadly operate businesses to earn revenue and make profits but they differ in ownership, public disclosure needs, government oversight, and access to capital.

Fact checked by Suzanne Kvilhaug
Reviewed by Khadija Khartit

A Roth 401(k) can be rolled over into an existing or new Roth IRA or Roth 401(k). The rules are complex, so you must ensure you understand the five-year holding period, age limitations, whether the rollover is a qualified or non-qualified distribution, and any tax implications if taxes are triggered.

Key Takeaways

• Roth accounts are funded with after-tax dollars, and they grow tax-exempt.
• A Roth 401(k) can be rolled over to a new or existing Roth IRA or Roth 401(k).
• Transferring to a Roth IRA is generally the most desirable option because it facilitates a wider range of investment options.
• It’s best to move the money into an existing Roth IRA account if you have one due to a five-year rule that governs qualified distributions.
• Moving the funds to another Roth 401(k) may provide favorable tax treatment if you plan to withdraw the transferred funds soon.

Roth Rules

Roth IRAs and 401(k)s allow you to withdraw your contributions without penalty at any time, but to withdraw earnings or pre-tax deferrals without penalty, you must have had the account open for a minimum of five years and be 59½ (called a qualified distribution).

It’s important to understand that when making a non-qualified distribution, a ratio is used to calculate how much of it is earnings, and how much is contribution. This ratio is calculated by dividing the amount you’ve contributed by the total amount in the account.

For instance, imagine you’ve contributed $40,000, and your account balance is $42,000. Your ratio is $40,000 ÷ $42,000 = 0.95. You take a $5,000 distribution, so you multiply that number by your ratio. The contribution portion of this distribution is $4,762 (rounded up), so $238 of this distribution is earnings and taxable if non-qualified.

Rollovers are generally not subject to taxes, as long as one of the following methods is used.

Your Roth 401(k) Rollover Options

Your choices for a Roth 401(k) rollover are limited to Roth accounts. For example, you can transfer the funds from the Roth 401(k) into a Roth IRA, or you can roll the old Roth 401(k) into a new Roth 401(k) if available.

There are three ways you can roll a Roth 401(k) over:

• A direct rollover: Your plan custodian can cut a check made out to the new account, which you take or send to the new account custodian without penalty.
• Trustee-to-trustee: The old account and new account custodians handle the transfer for you without penalty. This is also called a direct transfer.
• 60-day rollover: You can take the funds out of the account as a distribution to place them in a new plan. You have 60 days to complete the transfer. If you don’t deposit the funds in another qualified retirement account within that time, you’ll pay any necessary taxes and fines.

Funds held inside 401(k)s are often well-protected against some legal judgments and from creditors.

Considerations When Rolling Into a Roth IRA

Roth IRA contributions can be withdrawn tax-free and penalty-free at any time regardless of age, but the rules for distributions of earnings vary. A qualified distribution from a Roth IRA meets the five-year rule and is also made at or after age 59½, after death, as the result of a disability, or for a first-time home purchase. These qualified distributions are free of both taxes and penalties.

Withdrawals of earnings from the account will be subject to both selective income taxes and a penalty if these conditions aren’t met. Income taxes will be levied pro-rata on earnings on your contributions, and a 10% penalty may apply to part of the distribution if you take a non-qualified distribution.

Note

IRAs frequently come with more investment options than 401(k)s. Your options in a 401(k) can sometimes be limited to mutual funds or a few different exchange-traded funds (ETFs), depending on the custodian, while you generally have more choices with an IRA.

Funds rolled from a Roth 401(k) into an existing Roth IRA that meets the five-year holding period inherit the Roth IRA’s five-year clock. However, this is not true if funds from a Roth 401(k) are rolled over to a new Roth IRA.

For example, assume that you opened your Roth IRA in 2016. You worked for your employer from 2019 to 2023 and then resigned. A full distribution from your Roth 401(k) rolled into the Roth IRA meets the five-year rule for qualified distributions because the Roth IRA that you’re rolling the funds into has existed for more than five years.

Considerations When Rolling Into a Roth 401(k)

The specific distribution rules from the new account will vary by the plan if you roll your old Roth 401(k) into a new Roth 401(k). Your new employer’s human resources department should be able to assist with this.

Some basic conditions apply, however. The number of years the funds were in the old plan should count toward the five-year period for qualified distributions if you decide to roll the funds from your old Roth 401(k) over to your new Roth 401(k) through a trustee-to-trustee transfer. The first employer must contact the new employer regarding the employee contributions being rolled over and confirm the first year they were made.

The five-year period would start again if you only did a partial rollover to the new Roth 401(k). You don’t get credit for the period the funds were in your old Roth 401(k).

Important

Speak with your tax or financial advisor about what may be best for you before making a decision. You might end up leaving the Roth 401(k) in your previous employer’s plan, depending on your circumstances and that plan’s rules.

How Does a Roth 401(k) Rollover Work?

You can contact your retirement plan manager and request a rollover. They should give ou a few options for how you want it to work, such as cutting a check and sending to the new retirement account custodian, transferring the balance to the new custodian, or cutting a check to you for the funds, which you must deposit within 60 days. Additionally, you can only rollover into another Roth-type account.

Does the 5-Year Rule Apply to a Roth 401(k) Rollover?

Yes. There are special circumstances such as a disability or a hardship withdrawal (which might be taxed).

What Are the Restrictions on a Roth 401(k)?

You can only contribute up to $23,500 and total combined contributions from you and your employer cannot exceed $70,000 in 2025 ($69,000 in 2024). If you’re 50 or older, you can contribute an additional $7,500 annually in catch-up contributions.

The Bottom Line

The rules for rolling over funds to a Roth 401(k) are complicated. Be sure to fully investigate the tax and other implications before you decide how to handle these funds after you leave the company whose plan held them—it’s best to consult a tax professional or advisor before rolling over your plan to make sure you’re not triggering unnecessary tax events.

Reviewed by Pamela Rodriguez

Planning your future often requires turning to a financial adviser whom you can trust as a fiduciary for guidance on personal investing, college trusts, income tax preparation, insurance, retirement planning, or estate planning.

Most financial advisers strive to help their clients invest their money in areas that generate rich returns because they themselves tend to accrue commission on the positive returns. The more money financial advisers can make for their clients, the more money they are able to make for themselves.

However, there are certain practices that some financial advisers may partake in that can effectively cheat their clients. If you are worried that your financial advisor may be ripping you off, here are some warning signs to look for when trusting your financial adviser with your money.

Key Takeaways

• Planning your future often requires turning to a financial adviser whom you can trust as a fiduciary for guidance on personal investing, college trusts, income tax preparation, insurance, retirement planning, or estate planning.
• If you are worried that your financial advisor may be ripping you off, there are some warning signs to look for when trusting your financial adviser with your money.
• Ensure all the statements you receive from the custodian have only your name appearing on the account.
• If your financial adviser tells you of an investment that offers you a high return with low risk, and you instead notice your returns are staying pretty consistent, your investment could be tied into a Ponzi scheme, which generates returns for former investors by using the funds from newer investors.

1. Commingling Names on the Title of the Account

If your financial adviser commingles or adjoins their name, alongside yours, on the title of your investment account, it grants them unrestricted authority to use the funds at their discretion.

Ensure all the statements you receive from the custodian have only your name appearing on the account. The code of ethics for the Certified Financial Planner (CFP) Board of Standards, Inc. outlines commingling as a violation of the Securities and Exchange Commission’s (SEC) Code and Practice Standards, whereby any violation warrants disciplinary action such as potential revocation for the certificate holder to use the CFP certification marks after their name.

2. Churning on Your Account

If on your statement, you notice a large number of trades occurring or an increase in transactions on your account without any substantial increase in value, your financial adviser could be churning on your account.

A financial adviser, or specifically a broker, does this to increase their own commissions as they are usually paid whenever they buy and sell a security. A way to avoid churning on your account is to open a wrap account where a flat fee is charged periodically instead of one based on trade transactions.

3. Scamming

If your financial adviser tells you of an investment that offers you a high return with low risk, and you instead notice your returns are staying pretty consistent, your investment could be tied into a Ponzi scheme, which generates returns for former investors by using the funds from newer investors.

Moreover, Ponzi schemes are often a part of affinity fraud, which entails inflicting the scam upon members of certain groups, such as an ethnic community, religious community, or older adults. To avoid this, confirm that your investments and financial advisers and their respective firms are registered with the SEC (since the majority of Ponzi scheme investments involve unregistered firms).

Seek out financial advisors or planners with designations such as certified financial planner (CFP), chartered financial analyst (CFA), or chartered financial consultant (ChFC).

4. Embezzling

If your financial adviser insists you play a minimal role in your investments and let them deal with the “burden” of your account, since it is their job, they likely want to obtain from you a power of attorney to act on your behalf for decisions involving your investments.

This opens up great risk for the safety of your assets since your financial adviser is then able to legally trade upon your securities and move the return or the security itself into any account they choose.

To your greater detriment, your adviser could also transfer your money into their personal accounts, and although this act is illegal, it is costly and timely for you to pursue after the fact.

To avoid this happening, never grant power of attorney to your adviser. If you must, however, stipulate in a power of attorney agreement that upon granting power of attorney, your financial adviser is only permitted to trade your securities without notifying you but never permitted to draw upon returns or move assets from their original accounts.

To protect your investments, be cautious when entrusting your money to others. Always validate your financial adviser’s credentials, background, and ethics record.

What Exactly Does a Financial Advisor Do?

There are a few responsibilities that financial advisors have. They will provide investment management services, helping you find the right investments for your risk profile and devising an investment strategy; debt management services, to help you pay down your debt and avoid accumulating future debt; retirement planning; estate planning; tax planning; college savings planning, and budgeting.

How Do Financial Advisors Get Paid?

The payment structure for financial advisors can vary but they earn money either through commissions or fees. Advisors are either kept on retainer while others work per deal or hourly. Some charge per transaction or an hourly fee while others may charge a percentage of the total assets they manage for you.

Is It Worth Paying for a Financial Advisor?

Whether or not it is worth having a financial advisor will depend on the individual and is a personal decision. Financial advisors can be helpful if your financial profile is complex. For example, if you have multiple income streams, own a few houses, are expecting an inheritance, and are saving for a few kids to go to college, a financial advisor could help you manage it all.

The Bottom Line

There is always going to be inherent risk in trusting your money with another person. Financial advisors are meant to take care of your money but it doesn’t mean each and everyone will always have your best interest at heart. Pay attention to the above signs regarding your financial advisor to know if your hard-earned money is in good hands.

Here’s how to grow your business economically

Fact checked by Amanda Jackson
Reviewed by David Kindness

When you don’t have a big budget, marketing can be challenging, but there’s plenty a small business owner can do to attract and maintain a customer base. The rise in digital marketing has made it easier for small business owners to find a way to create a presence and attract buyers.

Advertising your business or product is about more than just having your company name and number on the side of your work vehicles. When you build a business, the first thing you want to secure is a customer base. Then, with a decent printer, a phone, and an internet-connected device, you can create a reasonably extensive advertising campaign without paying for digital space. Here are seven small business marketing techniques you can use to boost your business.

Key Takeaways

• Small businesses don’t have the advertising budget of larger rivals, but there are inexpensive ways to build a customer base.
• Hitting the pavement with flyers distributed door to door (where allowed) and placing posters strategically can help get the word out.
• Follow up with customers after the first round of ads to reinforce the initial message, and don’t fear cold calls—they can be effective.
• Value additions, such as discounts or freebies for repeat customers, are a big boon once the business is up and running.
• Referrals—both from customer to customer and business to business—are also important.
• Prioritize digital marketing, including traditional websites and social media.

Before You Start Marketing

Before your business starts marketing a product, it helps to think about the type of person you want to reach with your promotional materials. Once you have your ideal customer, you’ll have a wide choice of marketing methods. Most of these are low-cost or no-cost tactics (sometimes called guerrilla marketing). You may use different ones at different stages of your business cycle—or you may utilize them all at once from your business’s inception.

1. Flyers

This is the carpet-bombing method of cheap advertising. You find an area where you would like to do business and distribute flyers to all the mailboxes within reach. Your flyer should be brief and to the point, highlighting the services you offer or products you sell and providing contact information. Offering a free appraisal, coupon, or discount can help attract your first customers.

Flyers shouldn’t be mistaken for posters. Flyers are more informative, listing services or products provided, contact information, addresses, and specialties.

2. Posters

Most supermarkets, public spaces, and malls offer free bulletin board space for announcements and advertisements. This method is hit-or-miss, but you should try to make your poster visible and have removable tabs that the customers can present for a discount.

Make each location a different color to get an idea from the tabs where the most leads are generated. If one area is producing most of your leads, you can better target your campaign (flyers, ads in local media catering to those areas, etc.)

Posters should feature appealing images and catchy, memorable phrasing so viewers will recall it when they’re wondering where to go for whatever it is they need that you’re offering.

Traditional marketing methods like radio, print advertising, and billboards shouldn’t be overlooked. The more channels you use, the more exposure you have.

3. Value Additions

Value additions (or value-ads) are powerful selling points for any product or service. On the surface, value additions are very similar to coupons and free appraisals, but they aim to increase customer satisfaction and widen the gap between you and the competition.

Common value additions typically include:

• Guarantees
• Discounts for repeat customers
• Point cards
• Referral rewards

The deciding factor for a customer choosing between two similar shops might be a point card or preferred customer card. You don’t have to promise the moon to add value—instead, point out something that the customer may not realize about your product or service. It’s important to highlight the value additions when creating your advertising materials.

4. Referral Networks

Referral networks can be invaluable to a business. Referrals can be encouraged through discounts or other rewards per referral. However, referral networks also include business-to-business referrals. If you have ever found yourself saying, “We don’t do/sell that here, but X down the street does,” you might want to introduce yourself to X’s owner and talk to them about a referral quid pro quo.

When dealing with white-collar professions, this network is even stronger. For example, a lawyer might refer you to an accountant; in turn, the accountant might refer you to a financial planner, who could refer you to a broker. In each situation, the person stakes their professional reputation on the referral.

Regardless of your business type, make sure you create a referral network that has the same outlook and commitment to quality that you do.

Note

If you are too busy to take a job, throw it to your competition. You will often find the favor returned, plus it can be bad for your reputation if a customer has to wait too long for a service.

5. Follow-ups

Advertising can help attract customers, but what you do after they come in can often be a much stronger marketing tool. Follow-up questionnaires are one of the best sources of feedback on how your ad campaign is going. Questions you could ask include:

• Why did the customer choose your business?
• Where did they hear about it?
• Which other companies had they considered?
• What produced the most customer satisfaction?
• What was the least satisfying aspect?

Also, if your job involves going to the customer, make sure to slip a flyer into nearby mailboxes, as people who live in the same area often have similar needs and interests.

6. Cold Calls

Unpleasant? Important? Yes, and yes.

Cold calling—whether over the phone or door to door—is a baptism by fire for many small businesses. It forces you to sell yourself as well as your business.

Over the phone, you don’t have the benefit of a smile or face-to-face conversation—a phone is a license for some people to be as caustic and abrupt as possible (we are all guilty of this at one time or another). However, cold calling does make you think on your feet and encourages creativity and adaptability when facing potential customers. It also is a quick way to get your name out there and can drum up business.

Warm calls are an alternative to cold calls. You make calls to people you have already met or introduced yourself to through social events, email campaigns, or other activities.

7. Online Marketing

The importance of the internet in building a successful business cannot be overstated. The internet makes it possible to reach a massive audience from anywhere and generate interest in your business, potentially without spending a cent.

No company (even a local café) should be without, at the very least, a website with vital details such as location and hours. You need a point of access for everyone who searches the internet first when they want to make a buying decision.

You may also need:

• A social media presence: Facebook, Instagram, TikTok, X platform (formerly Twitter), LinkedIn, Pinterest, etc.
• A content management system (CMS): WordPress, Hubspot, Joomla, or Drupal
• Search engine optimization (SEO) skills: Optimizing your content for searches, internal and external linking, title tags, alt tags, and headings

All this digital dexterity may feel intimidating at first. However, publishing technology has evolved to the point where an open-source content management system can meet all these needs.

Important

The social media platforms that offer marketers the highest return on investment (ROI) are Facebook and Instagram, according to HubSpot.

How to Identify Your Value Proposition, Audience, and Goals

Before you begin printing and distributing your materials, it’s best to figure out who your audience is and how to make your product or services valuable to them. Then, set realistic and attainable goals for your business and marketing endeavors.

Value Proposition

A value proposition is a reason a customer should buy a product or service from you instead of the competition. Consider what your target audience needs from you rather than what your product has. These needs are usually called benefits, whereas a product’s physical properties or what it does are called features. You can still highlight features, but they should be backed up with a benefit that aligns with your audience’s needs.

Critical to selling your product or services is identifying what you offer that others do not (or that they don’t do very well). To establish your value proposition, compare what you’re offering to the competition’s product or service. Identify their features and benefits and compare them to yours, then make a note of the areas where you excel.

Your top value proposition should be unique to your offering and make it appealing to your audience. For example, imagine you have a coffee shop and bistro. It’s a trendy convenience found in many towns and cities, so you’ll have to analyze your competitors and use your imagination to discover the one thing that makes you stand out.

Say you’ve perfected bread recipes from around the world, like pão de queijo (a gluten-free Brazilian bread made from tapioca flour and cheese) or aish baladi (an Egyptian bread), and import coffee from the countries where those breads are baked and eaten. You may have a competitive advantage and an excellent value proposition—you offer products no other café in town does.

Audience

You’ll need to identify who your audience is. If you didn’t design your product or service for a specific demographic, you’ll need to do some research to determine which type of people to target. Audience is key to marketing. If you’re targeting one demographic that doesn’t have a large presence in your area, you may not be too successful unless you’re an online retailer.

You’ll need to identify who you want to sell to the most and ensure your product or service caters to them. For example, if you like the idea of a global café with bread and coffee from around the world, you’ll need a customer base to sell it to.

You could start talking to people and listening to their coffee concerns. Find out their ages and average incomes, see what they’d like, and ask what current issues they have in getting the coffee and the experience they want. Learn as much about them as possible—spending habits, needs, income levels, hobbies, or anything else that might provide insights into what might attract them.

Once you define your audience and what they need, you can figure out the message you’re going to send.

Goals

One of the best ways to accomplish something is to set a goal. However, you don’t want to set one goal—you should set an end goal and several small attainable goals that contribute to the final goal.

Set up a timeline and dates when you’d like to complete the small goals. This way, you have small steps to guide you and a way to measure your progress and success.

Marketing Channels

The internet, and the various technologies and platforms using it, gives businesses enormous marketing opportunities. Here are the top marketing channels used; it’s likely you’ve heard of or been exposed to them.

Search Engine Optimization

Search engine optimization (SEO) is top dog when it comes to marketing. It involves structuring your website and content so that it ranks as high as possible on Google search engine results pages.

Google uses a technique called web crawling that finds web pages to add to its index. When creating or adjusting your webpage or site for SEO, there are several factors to consider, such as following Google’s best practices and spam policies.

Content Marketing

Content marketing is a technique used to promote interest in your brand without explicitly promoting a product or service. You’ll find examples of this on many companies’ websites where a blog or article discusses a topic and how the company relates to it or works to help people do something. Generally, there is a call to action toward the end of the article, like “if you need help with XYZ, contact us today” or something similar.

Content marketing establishes expertise and gives potential customers a brand to remember.

Email Marketing

It’s been predicted that more than 4.85 billion people will have an email address by 2027. To gain access to this ocean of people, you’ll need an email marketing application. You can find hundreds of email marketing applications that will allow you to create email marketing campaigns.

Social Media Marketing

We’ve all seen advertisements on our social media pages that seem to target us by what we’ve been shopping for. It’s no secret that using social media increases brand exposure and generates interest, so it is in a small business’s best interest to, at a minimum, create a social media profile for itself and begin posting content.

Influencer Marketing

Influencers are people with a large viewer and follower base on their platform of choice. For instance, someone who regularly posts content on Instagram could have millions of followers. This person then becomes an influence in the lives of their followers—giving businesses another exposure outlet.

Chances are you’ve seen someone talking about a product or service on their social media platform; they’ve been sponsored by a company to talk about that business’s services. Influencers can help you generate tons of interest.

What Is Small Business Marketing?

Small business marketing is creating a campaign for your small business to generate interest and a consumer base. It involves using traditional and modern marketing techniques to develop a marketing campaign.

Which Marketing Is Best for Small Business?

The most effective marketing combines social media, networking, and traditional methods like flyers, posters, and cold calling. However, social media advertising reaches the most people the fastest.

How Can I Promote My Small Business?

Social media is the quickest method for promoting your business. For the promotion itself, you can offer discounts for referrals, promotional pricing, participate in events in your community, or anything else you can think of. Technology has created many more channels you can use, but it’s up to you to figure out how to exploit them.

The Bottom Line

More than likely, you will find that the conversion rate on marketing is very low. Even the most successful campaigns measure leads (and converted sales from those leads) in the 10% to 20% range. This helps to shatter any illusions about instant success, but it is also an opportunity for improvement. Consider that if you convert 0.5% of 1 million leads to sales, you’ve got 5,000 sales.

The more exposure you have, the more leads you can generate and convert. Ultimately, this turns into sales, profits, and growth.