Resources for Puerto Rico Small Businesses

The Places They Go When Banks Say No (NYT)

2010-01-30T13:22:00.002-05:00

IN the glory days of the digital photo frame business, when his products were still a novelty and shoppers were flush with cash, getting a bank loan to manufacture them was a cinch, Michael Levy says.
“We would say: ‘We got a $1 million order from the Sharper Image. We need financing. With a snap of the fingers, the guy drove down to my office, we’d sign a document, he’d give us the money,” Mr. Levy recalls, sitting in the Deer Park, Long Island, office of the Media Street Group that he runs with his brother, Norm.
But like many other business owners, Mr. Levy saw his prospects change drastically in 2008 as the financial crisis unfolded. The Sharper Image and several other top customers filed for bankruptcy, and Mr. Levy found himself scrambling to keep the business afloat.
His longtime bank wanted nothing to do with his company, Mr. Levy says, and several other banks spurned his loan requests, too. After a year of hand-wringing, he found an unconventional lender that was still making loans — lots of them.
It’s called Hartsko Financial Services, and it provides short-term credit to small and midsize companies that sell everything from olive oil to women’s sandals. In the last year or so, companies have been beating a path to Hartsko, and to other businesses like it — even if the loans are vastly more expensive than traditional ones from banks.
Richard Eitelberg, Hartsko’s founder and president, said his company previously fielded many loan requests from companies on the financial brink. Now, he says, Hartsko can also pick from companies with solid financials that simply can’t get a bank loan. “What we are seeing is better deals than we did in the past,” Mr. Eitelberg says. “We were viable when banks were lending. Now we are overwhelmed.”
Hartsko’s office, which is surrounded by Irish pubs in the Bayside neighborhood of Queens, is a sharp departure from the sterile cubicles and prefabricated offices of most major bank branches. At Hartsko, nine employees vie for space in three modest rooms jammed with computers, printers and fax machines.
The floor below Hartsko was occupied by a massage parlor until about a year ago, when it was closed by the vice squad, Mr. Eitelberg said. An acupuncture clinic took over the space.
Mr. Eitelberg, a burly 47-year-old sports fan who favors untucked dress shirts and open collars, decorates his office with trinkets honoring New York sports teams; a full lineup of the Mets, in miniature, adorns a shelf behind his desk. There’s also a poster of the Three Stooges in golf garb and a framed homage to Tiger Woods, which now prompts the occasional ribald joke from his employees.
Just as the credit squeeze has pushed some consumers to unconventional sources of funding like pawn shops and payday lenders, a constriction in traditional bank lending to businesses has benefited companies like Hartsko.
Small-business owners say banks routinely reject applications for loans that were readily available just two years ago. In addition, many say the limits on their credit cards have been cut as banks seek to limit their risk amid the economic turmoil. To help ease the situation, President Obama, in his State of the Union address on Wednesday, proposed giving $30 billion to community banks to make loans to small business.
Recently, the Treasury Department began tracking lending by the 22 largest bank recipients of federal bailout money, and it found a sizable decrease in small-business lending.
During a seven-month period ended in November, the banks reduced their small-business lending by $12.5 billion, an overall decline of 4.6 percent, the data show. Wells Fargo and Bank of America, the two biggest small-business lenders, cut their lending by 4.4 percent and 6.2 percent, respectively, during that time.
John Durrant, a senior vice president at Bank of America who oversees small-business loans, said that roughly half of the decline in lending to small businesses was attributable to decreased demand. In addition, he said a decline in sales and creditworthiness among small businesses had contributed to the slowdown.
Bank of America lent $16 billion to small and midsize businesses in 2009 and plans to increase its lending by $5 billion this year, he said.
Banks, of course, are now more reluctant to hand over money to small and midsize companies partly because the practice is riskier than it was just a few years ago, when consumers were spending freely. Banks are writing off record numbers of bad loans and have tightened their underwriting standards to limit their losses.
“After Chase said no, I went to Citibank. I went to Capitol One. I wasn’t going to sit around waiting,” says Mr. Levy, explaining that he needed to borrow $1 million last year for $1.5 million in purchase orders for new products, including frames with Wi-Fi access. “All of them said the same thing: ‘the underwriters, the underwriters.’ They just tightened and, boom, they just shut it off.”
WHEN small businesses face funding squeezes, Mr. Eitelberg and others like him offer an enticing, if expensive, pitch for desperate entrepreneurs.
He peddles what is known as purchase-order financing to companies that sell goods but often manufacture them in factories abroad. It is a relatively new line of business — he estimates it’s about 20 years old — and a twist on the ancient and much larger practice of factoring, in which a business sells an invoice at a discount to get its money faster, providing the factoring company with a hefty fee.
Purchase-order financing, though similar to factoring, is further up the financial food chain. Purchase orders are written guarantees from a buyer that it is committed to purchasing a product. By financing purchase orders, Mr. Eitelberg essentially pays the factory to manufacture the goods. Hartsko also pays to have the finished products shipped from the factory. Once Hartsko is paid for the merchandise, it takes its cut and hands over the rest to its customer.
There are only a half-dozen or so major purchase-order financing companies in the country, and overall numbers on their business are hard to come by. A Hartsko competitor, Edward P. King, who founded the Dallas-based King Trade Capital 17 years ago, said his business grew about 10 percent in 2009. He said he could have done two or three times as much business but was cautious, given the uncertainty of the economy.
“It was a risky year,” Mr. King says. “We could have grown an enormous amount, but I’m not sure we wouldn’t be fighting some battles right now.”
(Banks may dabble in purchase-order financing, but usually only for existing clients. One big bank that that has a separate unit for such lending, Wells Fargo, says that this business has increased, even while its traditional small-business lending has dropped.)
Mr. Eitelberg says he doesn’t care much about his customers’ credit scores or their past financial problems. He simply wants to know that they have a solid deal in the works and a purchase order to prove it. “We look for a viable transaction when we do business, not the net worth of the company or the balance sheet,” he says. “We say we look past the balance sheet.”
Mr. Eitelberg estimates that his business increased 80 percent in 2009. But his money doesn’t come cheap. It’s typically 3.5 percent for the first 30 days, and 1.25 percent for every 10 days after that, an annualized percentage north of 40 percent. Most loans, he says, are repaid within 60 days.
“For lack of a better word, it’s almost like loan sharking,” says Mr. Levy, who said his bank loans were at 6 or 7 percent annualized interest. “But, there’s a need. I had no choice. It’s the only way I was going to get the business.
“I know I paid them a lot, but without them, I would have been home watching cartoons.”
Mr. Eitelberg bristles at such comments, saying purchase-order lending is ultimately a risky business and that his fees are more than justified. He says he bases his fees on industry averages and the cost for Hartsko to borrow money from a bank.
“We’re just saying that for the period of time when you are using our bank lines and our cash to run your business that you pay us a fee for what that’s worth,” he says. “We believe it’s a rate that is fair.”
Mr. Eitelberg began Hartsko in 2004 after working for years on the financial side of the garment industry, following in the footsteps of his father, who ran a women’s swimwear company. He says he worked for several garment companies that struggled to stay afloat and had to seek purchase-order financing, often called P.O. financing. Mr. Eitelberg said he had an epiphany one day that he was in the wrong business.
“I said: ‘It’s amazing, the only person that came out of this thing was the P.O. financing company. They made a ton of money and these companies died,’ ” he recalls. “ ‘So why am I doing this. Why don’t I do that?’ ”
He started Hartsko with a loan from several investors and a $1 million credit line from a bank. He lent his first customer $200,000 to make throws and pillows, and his business has grown every year since, by networking at trade shows and word of mouth.
These days, he says, Hartsko’s customers fall into three categories: start-ups that have little or no collateral, growth companies that may be profitable but can’t get enough financing from banks, and troubled companies that nonetheless have viable purchase orders.
Last year, Hartsko lent roughly $150 million, compared with $84 million in 2008 and $60 million the year before that, he said. He estimates that the company will lend about $240 million this year. Profit, he says, was in the “high six figures” in 2009.
Mr. Eitelberg oversees Hartsko’s operation from a corner desk, with two of his employees close at hand: his father, Lenny Eitelberg, the former swimwear merchant, and Nelson Goldberg, another garment industry veteran. The three carry on a nearly constant banter about potential deals, loans that are under way and potential problems with existing clients.
“Nothing surprises us here,” Lenny says. “We’ve seen it all.”
Mr. Eitelberg says he learned the hard way about the importance of background checks for his customers. Because Hartsko finances the production of goods — rather than lending money directly to its customers — it ends up owning the inventory if a deal collapses.
So Hartsko has been stuck with auto parts, media players and women’s sandals, which Mr. Eitelberg tries to sell for whatever he can get. But 49 boxes of the sandals remain stacked outside the office door, alongside the staircase. And he says he’s still fighting to recover his biggest loan loss — $500,000 that he lent to a company that says it was making olive oil in Italy, though the shipment never arrived. He estimates that roughly 5 percent of his deals go sour.
As a result, Mr. Eitelberg now uses private detectives to help with background checks. In addition, he makes sure that merchandise is inspected before it leaves the factory.

ON a recent weekday afternoon, two of Hartsko’s customers stopped at the office to meet Mr. Eitelberg and to map out financing needs in the coming year. The customers, Erik Searles and Mark Cardinale, said they had bought a children’s clothing brand called Sprockets and were hoping to sell the clothing nationwide.
Mr. Eitelberg, who had already provided Sprockets with one loan, offered to continue financing the company until it was established enough to qualify for less expensive credit.
Like several other Hartsko customers, Mr. Searles said he was grateful, despite the cost of the loans. Instead, customers reserved their ire for the federal government and the banks, saying the billions of bailout money larded on Wall Street had done nothing to help them.
“The money isn’t going to the people who actually need it,” Mr. Cardinale says.
James LaBarber, another Hartsko customer, whose company sells vinyl flooring, says he has been a customer at Bank of America for 29 years. But he said bank officials told him that it would take 6 to 12 months to get a loan.
“Trying to get a small-business loan is like trying to get someone out of Guantánamo Bay,” Mr. LaBarber says.
Bank of America said it does not comment about specific customers.
Mr. Eitelberg, too, wonders why some of the federal bailout money hasn’t ended up in Hartsko’s coffers. Even if his rates are relatively steep, he says, he is ultimately limited by how much money he can borrow from banks and would welcome a low-interest loan from the government.
“If I had money, I could lend it,” he says.

Is It a Crime to Keep Your Business Small? (NYT)

2010-01-13T20:05:00.000-05:00

By KERMIT PATTISON

Nick Lessins and Lydia Esparza pride themselves on meeting high standards for quality, but not necessarily for catering to the demands of their customers. They are co-owners of Great Lake, a small Chicago pizza shop that has seen the mixed blessing of great reviews.
The couple wanted to start a business that reflected their values: a neighborhood shop that purchases top-quality ingredients directly from farmers, makes every pizza by hand and serves great food at affordable prices. They also wanted to make sure their business did not take over their lives. The 14-seat shop is open only four days a week and does not take reservations. Deliveries? Yeah, right.
Mr. Lessins makes every pizza by hand. “No man is slower,” wrote GQ’s food critic, Alan Richman. “He makes each as though it is his first, manipulating the dough until it appears flawless, putting on toppings one small bit after another. In the time he takes to create a pie, civilizations could rise and fall, not just crusts.” Mr. Richman declared the Great Lake Mortadella pie one of the best pizzas in America — and that is when the trouble started. The shop was mobbed, with lines stretching down the block and long waits. A condensed version of a conversation with Mr. Lessins and Ms. Esparza follows:
Q. You got a great review from GQ and your business went crazy. Are you glad you got this attention?
Mr. Lessins: Yes and no. It’s nice that we got recognized for doing something we feel is good. The problem is GQ deals on a whole other scale than what our business is capable of handling. Everyone forgot we were this small operation and couldn’t serve everyone. We never intended to serve mass quantities and have our product available 24 hours a day, seven days a week. We wanted to start a business so we could get some control in our lives.
Q. Do people get frustrated by the waits?
Mr. Lessins: We’ve had a few people get pretty flustered — “What do you mean we can’t be seated? We have to wait a couple of hours?” Like somehow we’ve violated their human rights. Why is it a crime that we’re not open seven days and we’re not seating 100 people?
Q. Many business owners would look at your sudden success with envy and say, “Seize the day, expand, add new locations, franchise.” Why not you?
Ms. Esparza: It would change our values. That is the American way — to expand without really thinking.
Mr. Lessins: We really enjoy the work that we’re doing and we don’t want to cheapen it. Consciously or unconsciously — probably both — we’re trying to create a manageable way to earn a living and still maintain our sanity. We value time as much, if not more so, than money.
Q. Are you making the kind of money you had hoped to?
Ms. Esparza: We just met with our accountant and we’re very happy, given the hours we have.
Q. People have compared you to the Soup Nazi on “Seinfeld.” Where do you think that comes from?
Ms. Esparza: That comes from American culture. The customer really isn’t always right. We believe we have the expertise to bring the best product. We don’t randomly put these ingredients together. We spend the time to test these and try them.
Q. So no substitutions? No extra anchovies?
Ms. Esparza: Substitutions are specifically for people who might have a dairy issue. Our goal is to have a very edited menu, and therefore there really are no extras. We don’t offer crushed pepper. When we put options together, they’re put together for a reason. We have such an edited menu, and it’s shocking how much people still want to manipulate it.
Q. In online reviews, some customers have complained about rudeness or arrogance. Where do you think that perception comes from?
Mr. Lessins: I think that perception of arrogance has to do with the sense of entitlement and a lack of respect for someone wanting to do their job. We’re just trying to do the job the best we can. We’re trying to provide a quality experience for everyone who comes in. In the food service business, it’s assumed that the customers have a set of God-given birthrights when they come into an establishment. It’s like they’ve been wronged in a lot of parts of their lives, and this is their chance to even the score.
Q. What does customer service mean to you?
Ms. Esparza: Great service for us is the quality of food we bring to the table.
Q. One of our “You’re the Boss” bloggers suggested that if you raised prices, you would make more money and have fewer but happier customers.
Ms. Esparza: That goes to an elite crowd and we’re not after that.
Mr. Lessins: That’s kind of using an economic tool to force an end result. We would just never do that. We want to offer things at a price we think is fair. Ultimately, we want to have it accessible to a broad range of people.
Q. Why not hire more help? Does Nick really have to make every single pizza?
Mr. Lessins: At this time, I’m the only one making the pizzas — I make the dough. I make my own mozzarella. I grind my own sausage. I order most of the products from farmers and our local suppliers, assemble it and all that. It took several years for me to come up with what I have now. It’s something that could definitely be communicated and delegated in a careful way. I haven’t yet thought seriously about doing that because I enjoy doing pretty much every step of the process myself. It’s not an ego thing — I just enjoy working with my hands and putting this whole puzzle together and creating something.
Q. What do you think of review sites like Yelp?
Mr. Lessins: Unfortunately, those sites are just being used for people to anonymously vent their own frustrations. They’re not accountable to anything or anyone. I wonder what they’re getting out of that to make the effort to sit down and write a paragraph or two trashing someone. Maybe they get some sadistic joy out of it. Our sense is that most of the people who do come into our place are fairly satisfied.
Q. Is this what you expected business ownership to be?
Mr. Lessins: I knew this was sort of a wild card — the public service component. We focused on the logistics and details of production, quality, execution and all the boring details of renting space, utilities, construction, permits and all this kind of stuff. But public service was definitely an unknown thing. We know we can’t make everyone happy.
Ms. Esparza: From my experience being a designer, once you know in your gut what you’re doing is really good, you just have to go with it. You can’t hold back because there’s going to be one person saying, “I don’t like that purple or that pink.” People are going to be people.

Detroit Entrepreneurs Opt to Look Up (NYT)

2010-01-12T06:34:00.001-05:00

By SUSAN SAULNY

DETROIT — With $6,000 and some Hollywood-style spunk, four friends opened this city’s only independent foreign movie house three months ago in an abandoned school auditorium on an unlighted stretch of the Cass Corridor near downtown.
After the unlikely hoopla of an opening night, red-carpet-style event in an area known for drugs and prostitution, exactly four customers showed up to see a film.
Since then, the Burton Theater has had a few profitable nights. But, the owners say, this adventure in entrepreneurship was never completely about making money. It was also about creating a more livable community.
“Nobody could comprehend why we’d start a theater,” said an investor, Nathan Faustyn, 25. “But when you live in Detroit, you ask, ‘What can I do for the city?’ We needed this. And we had nothing to lose. When you’re at the bottom of the economic ladder, you have nowhere to look but up.”
Despite the recession — and in some cases because of it — small businesses are budding around Detroit in one of the more surprising twists of the downturn. Some new businesses like the Burton are scratching by. Others have already grown beyond the initial scope of their business plans, juggling hundreds of customers and expanding into new sites.
Across from the Burton, for instance, Jennifer Willemsen just celebrated the first anniversary of her shop, Curl Up and Dye, a retro-themed hair salon serving 1,500 clients. Not far away, Torya Blanchard, a former French teacher, recently opened the second location of Good Girls Go to Paris, a creperie. Next door, Greg Lenhoff, also a former teacher, opened a bookstore in August called Leopold’s.
And just down the street from Leopold’s, on Woodward Avenue, Victor Both runs Breezecab, a company he started with a severance package after a layoff from Wayne State University. He uses rickshaws to ferry workers and conventioneers around downtown. “This filled a transportation void,” said Mr. Both, 34, who picked up the pedicab idea while touring Las Vegas before his layoff. “I haven’t made much money, but the experience has been priceless. I had no idea Detroit had so much love.”
It is not an uncommon instinct to start an enterprise in bad times and seize on weakened competition, lower overhead costs and perhaps more free time. Nor is it limited to Detroit. But the trend is particularly striking here, in a city that was suffering long before the rest of the nation fell into recession and where hard times, business closings and abandonment became routine generations ago.
Experts say the zeal for entrepreneurship these days in Detroit and elsewhere has precedent: according to research by Dane Stangler, a senior analyst at the Kauffman Foundation, a center for economic research in Kansas City, Mo., half the companies on the Fortune 500 list this year were founded in recession or bear markets. Further, Mr. Stangler said in an interview, company survival rates going back to 1977 show a negligible difference between companies founded in expansions and recessions.
For some of the new businesses, preparation was minimal.
“All I really needed was a garage, a cellphone and a Web site,” said Mr. Both, who started Breezecab with two leased rickshaws.
Ms. Blanchard’s creperie was more complicated. The restaurant is in the first-floor retail space of what had been an unattractive apartment complex. When the site came under new management recently, the landlord offered to gut the retail space, spending about $70,000 on improvements, Ms. Blanchard said. She put in the rest: $15,000 in equipment, a coat of red paint, an oversize blackboard for the menu, and her own collection of vintage French movie posters.
Now, Ms. Blanchard pays what she calls a “ridiculously low” rent of $1,600 a month for a 1,000-square-foot space that accommodates 45 diners at Parisian-style cafe tables near the Detroit Institute of Arts.
“This was a place to watch your back just four years ago,” said Ms. Blanchard, who founded the business with a cashed-out 401(k).
“I just wanted to do something that I loved,” she said. “And everything worked its way out.”
Michigan, which has the highest unemployment rate of any state, has been aggressive in offering support for start-up companies, particularly in Detroit. The Michigan Small Business and Technology Development Center, which offers support and counseling, counts 20 small businesses, and 400 new jobs, created last year in the three-county area around Detroit, and the center expects that tally to grow as it completes its accounting in the coming weeks. That was down from 41 new businesses in 2008, but on par with the 23 such start-ups in 2007 and 24 in 2006.
At Wayne State University’s business incubator, TechTown, housed in a former auto plant, 150 companies jostle for space — up from one when the building opened five years ago.
“I find it inspiring,” Peter Bregman, the chief executive of Bregman Partners, a New York management consulting firm, said of what is happening in Detroit. “There’s something about that feeling — ‘Maybe America abandoned us, but we’re not going to abandon us.’ ”
Analysts say the entrepreneurs have tapped into buyers’ penchants for spending locally in a bad economy, along with a longstanding void in the service industry.
Some business owners are also capitalizing on a newly energized nostalgia for the vibrant Detroit that used to be, and the more general trend toward urban living.
“This is a passion project for most people,” said Claire Nelson, owner of the Bureau of Urban Living, an accessories boutique, and one of the organizers of a loose network of local entrepreneurs that functions like a support group.
“We’ve got all this empty space in Detroit,” said Ms. Nelson, 33. “If landlords are willing to work with us, we pour our hearts and souls into the place.”
Once the Burton Theater carved out its space in the schoolhouse that closed in 2002 — a 1920s-era building that had receded into the shadows like so many empty spaces in Detroit — the city, which had let the block go dark, turned the streetlights back on. The relighting was a victory felt far beyond the Burton.
“Our business ideas are about taking ownership of where you are and what you have,” said Ms. Willemsen, 29, of Curl Up and Dye. “We want to do right by our neighbors.”
And some customers are going out of their way to support the new city businesses.
“I live in the suburbs where I used to get my hair cut until Jen opened a store,” said Dessa Cosma, a client at Curl Up and Dye. “I’d rather spend my money here. It’s a conscious decision for someone who cares about the city.”

How to Sell Your Business (NYT)

2010-01-06T20:12:00.000-05:00

By BARBARA TAYLOR

Put yourself in the buyer’s shoes.
Don’t go it alone. Assemble a team of professionals, most importantly an attorney and an accountant that you trust.
Get a professional valuation of your business.
Make sure your financial house is in order prior to sale.
Familiarize yourself with the entire selling process, from start to finish.

Read a book on selling and valuing a business.
Visit the online marketplaces: BizBuySell, BizQuest and BusinessesForSale.
Learn about business valuation: BizEquity, Business Valuation Resources, or contact a Certified Business Appraiser in your area.
Find an intermediary: International Business Brokers Association, Alliance of Merger & Acquisition Advisors, M&A Source
Plan an exit strategy: Association for Corporate Growth, Exit Planning Institute

You only sell your business once.
That thought alone may be enough to keep you up at night when you decide it’s time to cash in on your years of hard work — as if there isn’t enough pressure associated with every step of the sale of a business. But there’s much you can do to prepare for the sale, and it’s not a bad idea to start thinking about it long before the day arrives.
While every transfer of business ownership is unique, there are some important questions that sellers should ask themselves and there is a common process that is used for the sale of most small businesses. The more you prepare, the more successful the outcome is likely to be. What follows is a brief outline of the process for small, closely held companies. Many of these principles apply to larger transactions as well. (You may also be interested in this blog post: Has the Economy Closed Your Exit Door?)
First, ask yourself three questions:
Can Your Business Be Sold?
Many elements of a business make it attractive to buyers. For example, does it have a solid history of profitability, a large and loyal base of customers, a competitive advantage (intellectual property rights, long-term contracts with clients, exclusive distributorships), opportunities for growth, a desirable location and a skilled work force?
Are You Ready to Sell?
Make sure you are ready, both financially and emotionally. Think about what life will be like after the sale. What will you do — not just for money but also with your time? Many business owners suffer real remorse after handing over their business to a new owner.
Here are a few indicators that it may be time to move on:
¶It’s not fun anymore. Burnout is a very real issue for business owners, and an entirely legitimate reason to sell.
¶You’re not inclined to invest in growth. You may be comfortable with the current size and profitability of your business and have no desire to make the capital expenditures necessary to take it to the next level.
¶You feel your management skills are overmatched. It is not uncommon for business owners to build their business to a certain point and then realize they lack the skill set required to go further.
What’s Your Business Worth?
Many owners have no idea. On one end of the spectrum, for example, was a client who owned a professional services firm. She felt the firm was worth more than $1 million. After a lengthy search, a buyer paid her less than half that amount. Then there was a client who was about to sell his I.T. company to an employee for $200,000. After advertising the business for sale nationwide, he sold it for one dollar shy of $1 million.
Selling a business is both art and science, and in no other area is this more evident than the valuation. While every seller wants to achieve maximum value, setting an asking price that is too high signals to buyers that you may not be serious about selling.
While there are a number of methods used to value a business, the most common formula for smaller transactions is a multiple of seller’s discretionary earnings (S.D.E.). This type of market-based valuation involves recasting profit-and-loss statements — adding back owner’s salary, perks and nonrecurring expenses — to find the S.D.E. of the business and then using comparable data for similar businesses to arrive at an appropriate multiple.
Prepare Your Business for Sale (Now!)
Another client owned a popular sports bar and grill. He’d made repairs to some of his kitchen equipment, brought his books current and determined a reasonable asking price. He got an inquiry from a serious buyer — an industry veteran on a nationwide buying spree with his partner. The buyer liked everything about the business, and asked for data from his point-of-sale system, which my client was unable to produce quickly. By the time he assembled the information, the buyer had made an offer on a similar business in another state.
There is no way to overstate the intensity with which buyers will scrutinize your business. But here are things you can do to put your best foot forward.
First, get your books in order. Not being able to provide accurate financial statements in a timely manner can cause a deal to unravel in short order. Be sure to have the following on hand before you go to market:
¶Last three years’ profit-and-loss statements.
¶Last three years’ balance sheets.
¶Year-to-date profit-and-loss statement.
¶Current balance sheet.
¶Last three years’ full tax returns.
¶List of furniture, fixtures end equipment.
¶List of inventories.
¶Commercial property appraisal or lease agreement.
Be ready to furnish other documentation — particularly during the due diligence phase — when you will probably be asked to produce insurance policies, employment agreements, customer contracts, lists of patents issued, equipment leases and bank statements.
You will also want to spruce up your business to make it attractive to buyers. Make any needed cosmetic improvements to the premises, get rid of outdated inventory and make sure that equipment is in good working order.
Spread the Word
Not surprisingly, most savvy buyers use the Internet to research available businesses for sale. The two largest Web sites are BizBuySell.com and BizQuest.com. Some sites specialize in selling certain kinds of businesses like franchises, Internet properties or restaurants. Most of these sites charge a monthly subscription fee to advertise your business for sale.
There are two primary marketing materials that are typically used to describe your business to potential buyers. The first is a one-page document that offers highlights of the business without revealing its identity and is sometimes referred to as a “blind profile.” The second is a comprehensive selling memorandum or prospectus to be sent to serious buyers who have signed a confidentiality agreement.
Make Sure Potential Buyers Are Qualified
There’s no bigger waste of time than working with a buyer who will not be able to complete a transaction. Ideally, you will want all interested buyers to sign a confidentiality agreement before sending out anything other than the “blind profile” for your business. In addition, you should require buyers to submit some basic information:
¶Name and all contact information.
¶Previous employment and business ownership.
¶Educational background.
¶Funds available to invest and sources of financing.
¶Minimum monthly income requirement.
¶Intended timeframe for completing a transaction.
¶Reason for interest in your business.
Negotiating the Deal
After you’ve found a qualified buyer, provided a selling memorandum and had an initial meeting, it will be time to stop the flow of information and ask that an offer be presented. This can take the form of a nonbinding letter of intent or a term sheet. It should spell out the primary terms of a deal so that all parties can move forward in good faith.
My client ended up receiving three offers on her professional services firm. One was from a competitor, one was from an industry expert residing out of the country and one was from a regional firm looking to extend its geographic footprint. While that last offer was the weakest from a financial standpoint, we knew that this buyer would be able to complete a seamless transition and build her business. We decided to negotiate with the regional firm.
The asking price was $500,000. The regional firm offered a disappointing $400,000, with $50,000 down and the balance financed by the seller over five years at 6 percent interest. My client planned to stay with the firm under new ownership and was relatively certain that gross sales would increase substantially when her company became part of a regional brand. She offered a counter proposal: In lieu of financing the balance of $350,000, she asked to receive 10 percent of gross monthly sales for five years. She conservatively estimated that she would realize an additional $108,000 -- over and above the selling price of $400,000 -- at the end of the five-year period using this deal structure. Both parties accepted.
All sellers hope to get a full-price cash offer for their business. But in the real world this rarely happens. More often buyers will make a down payment and then pay some or all of the remainder in installments to either you or a lender. Don’t be dismayed by an offer that doesn’t meet your original expectations. As this case illustrates, a willingness to be creative with the terms of a transaction can go a long way toward a successful sale. Be sure to enlist an accountant and a lawyer to help you assess the tax consequences of the terms you suggest or accept.
Selling a business is largely about setting realistic expectations, avoiding surprises and just plain hanging in there. It can be an arduous journey, but one with a very tangible (and rewarding) light at the end of the tunnel. Once you’ve successfully sold your business, savor an accomplishment that not every entrepreneur gets to enjoy. Whether you’re lying on the beach, retiring by the lake or starting your next venture, you did it!

Barbara Taylor is co-owner of a business brokerage, Synergy Business Services, in Bentonville, Ark.

Entrepreneurship: No Experience Necessary (Entrepreneur.com)

2010-01-06T03:20:00.000-05:00

6 tips for starting a business with little industry experience or business know-how

By Amy Reinink | January 04, 2010

Timothy Ericson can quickly sum up what he and his business partner knew about the bike-sharing industry before launching a business in the field two years ago.
"We started from nothing," says Ericson, CEO and co-founder of CityRyde, a bike-sharing consulting firm. "We basically spent our first two years becoming experts in an industry that was totally new to us."
Today, the business is expanding with services such as software that tracks everything from usage to cyclists' carbon offsets.
Ericson, who had experience in business and information technology before founding CityRyde, is one of many entrepreneurs to start a business either with no "domain" experience--experience in the industry in which they're looking to start a business--or with strong domain experience but little entrepreneurial know-how.
Experts say entrepreneurs in both scenarios can find success by heeding the tips below.

Commit yourself to a market solution, not a pet idea.
Derek Pedersen says the impetus to create Goal Tracker, which sells record-keeping software for special-education needs, came when his business partner's mom, a speech pathologist, asked her son to create software that would help do her job. Pedersen says focusing on a specific problem, not a pet solution, helped the company find success.

Mark Loschiavo, executive director of Drexel University's Baiada Center for Entrepreneurship, says this can be a stumbling block for entrepreneurs with strong domain experience but no business experience.

"Domain experts often fall so much in love with a product they've created, they become blind to criticism or correction, and they're not flexible in terms of modifying their product in order to meet the needs of the marketplace," Loschiavo says. "They need a passionate belief that there's a problem out there that needs to be solved, and need to be flexible about the solution to it."
Choose your industry wisely.
Loschiavo says entrepreneurs should consider entry barriers beyond just startup costs.

For example, those with little business experience may want to steer clear of industries with regulatory hurdles, requirements to hire a sales force or other staff, or a need to navigate vendor relationships.

He says Web 2.0 companies may be well-suited for those with scant business experience: viral marketing using social networks like Twitter eliminates the need for direct-marketing prowess, and the online format eliminates the need for a large staff or a brick-and-mortar location.
Build street cred.
According to Loschiavo, even though he was a pro at software and technology solutions when he left IBM to start a business offering tech solutions for contractors who install audiovisual systems, "I didn't have any street credibility,"

"I wasn't embedded in the industry, and I really needed to be," he says. "If no one in the industry knew who I was, the fact that I'd been with IBM and had co-founded another tech business in a different industry didn't carry a lot of weight."

So he started by launching a retail business in the field, learning the industry's nuances and developing relationships with vendors, contractors and retailers before launching his big idea.

Similarly, Ericson spent two years meeting with and learning from bike-sharing companies around the world to determine the best industry practices, gather information for industry reports and otherwise prepare to open a bike-sharing consulting firm.

"Before we started CityRyde, there was very little general knowledge available about the industry," Ericson says. "So we went out and obtained that knowledge directly from the vendors to find out what they needed to be successful in this growing industry."
Rely on free resources.
Pedersen says he spent "hundreds" of hours reading all the available literature on his industry and hundreds more networking with other entrepreneurs.

"There were so many free networking tools in the Greenville, S.C. area, we were able to meet people who had been in the industry for many years and get great advice from them at no cost to us," Pedersen says.

Ericson says a similar networking group in Philadelphia has provided CityRyde invaluable feedback. "These are people who are not afraid to pick your idea apart," he says, "which is exactly what you need."

Loschiavo says universities can also be an affordable resource for new entrepreneurs, offering free or low-cost coursework, books or seminars.
Know when to seek outside help.
When Evan Solida founded Cerevellum in early 2009 to sell the digital rearview bicycle mirrors he'd designed, he tried to save money by using internet resources to create business plans and draft legal documents.

Solida says he ended up paying for professionals to help with both tasks, making the little money he spent online "a complete waste." Cerevellum recently received its first round of grant funding and investment dollars.

"I know this isn't what entrepreneurs starting on a shoestring budget want to hear, but a lot of stuff I was doing in the beginning trying to save money cost me both money and time in the end," Solida says.
Put your strengths to work.
Loschiavo says entrepreneurs' most important tool when branching out to an unfamiliar industry is knowledge of their strengths and how to apply them.

For example, he says, Vernon Hill started Commerce Bank based on the business principles he learned in quick-service retail.

"He didn't understand why banks were only open during business hours, so he made sure his banks were open earlier and later, when people are available," Loschiavo says. "He understood retail and customer behavior, and translated that to the banking world. Most business skills transcend multiple industries."

Ericson says he and his business partner kept their strengths in mind when they expanded CityRyde to include two software programs for bike-sharing companies.

"In the early days, to be honest, it didn't seem like our experience translated much at all," Ericson says. "But by really entrenching ourselves in the industry, we found a gap that seemed to call for exactly our skills and experience to fill."

Cesanteados reciben vales de negocio propio (Endi)

2009-12-22T11:32:00.000-05:00

Very difficult to avoid being sarcastic when news like these are published. Comes to show our incapacity to understand the economy, planning, businesses, our reality, and human dignity (among others).

Cesanteados reciben vales de negocio propio

También se beneficiaron servidores públicos que se acogieron al retiro voluntario

Por Daniel Rivera Vargas / drivera2@elnuevodia.com

El Departamento del Trabajo y Recursos Humanos y el Consejo de Desarrollo Ocupacional y Recursos Humanos anunciaron hoy la entrega de 50 vales de $5,000 para establecer negocios propios.

Estos vales son parte de las ayudas que se ofrecen a los empleados públicos cesanteados bajo la Ley 7 o que se hayan acogido al retiro voluntario.

El secretario del Trabajo, Miguel Romero, dijo que este beneficio seguirá disponible para este grupo de servidores públicos, siempre que lo soliciten antes de los 180 días después de su cesantía o retiro.

“Estamos seguros de que más personas se moverán a solicitarlos al conocer estos ejemplos de progreso”, dijo Romero.

Otras ayudas disponibles son vales de relocalización, educativos y vocacionales-técnicos.

Los beneficiados de vales de negocios propios reciben talleres y orientación para preparar su plan empresarial. Los beneficiados presentaron iniciativas que van desde la venta de helados o hotdogs, hasta fabricación de jabones artesanales y siembra de plátanos. Además, un abogado cesanteado abrirá su propia oficina legal y un maestro incursionará en el mantenimiento de áreas verdes

Estos pequeños empresarios cualifican para una ayuda adicional, en la que Trabajo paga el salario de un empleado por un año.

Siete pasos para montar tu negocio (endi)

2009-12-06T11:05:00.000-05:00

Sigue las guías para conducirte hacia el éxito empresarial

Por Marian Díaz / mdiaz1@elnuevodia.com
Es probable que usted haya pensado más de una vez en montar su propio negocio. Pero el desconocimiento de cómo hacerlo, unido a la alta estadística de negocios que fracasan en los primeros años de establecido -1 de cada 2 según la Administración Federal de Pequeños Negocios-, le hayan frenado a dar ese primer gran paso.
Afortunadamente, hay varias cosas que usted puede hacer antes de comenzar, sin arriesgar su dinero y su tiempo, y que aumentarían las probabilidades de éxito de su nueva empresa. Aunque cada iniciativa es única, y tiene sus oportunidades y riesgos, hay ciertos pasos básicos que aplican a toda actividad empresarial.
Negocios entrevistó a expertos en la creación y desarrollo de empresas y, a continuación, les presenta una guía con los pasos a seguir:

1
Identificación de la idea del negocio
“Una de las cosas que me he percatado a través de los años es que la gente busca la idea mirando hacia el lado. Se les hace más fácil mirar hacia afuera y copiar lo que al vecino le está funcionando”, dijo Anita Paniagua, consultora y coordinadora del Programa de Certificado Profesional para Emprendedores de Negocios de la Universidad de Puerto Rico en Río Piedras.
Para evitar esa mala práctica, Paniagua recomienda que el futuro empresario comience haciendo una lista de las actividades que disfruta hacer, así como de las habilidades y conocimientos que posee. El negocio que intente desarrollar tiene que convertirse en su proyecto de vida, por eso es crucial que la idea le apasione.
“Cuando esa llamita (la idea) hace click y surge ese proyecto de vida, el resto del proceso es más fácil”, expresó Paniagua.
Hay que aclarar que una idea no es lo mismo que una oportunidad de negocios. “Tener una excelente idea no es nada si no la ejecutas. La idea se convierte en una oportunidad cuando hay un mercado dispuesto a comprar lo que tú ofreces, cuando hay clientes que tienen dinero para gastar en tu producto o servicio”, señaló Francisco Uriarte, principal de ESP Group, una firma local de consultoría financiera y de negocios.
Cuando esa idea resuelve un “dolor de cabeza” a alguien -por ejemplo: reduce costos, ahorra tiempo, alivia un dolor físico, mejora el flujo de efectivo-, entonces, según Uriarte, hay una mayor oportunidad de que ese negocio tenga más éxito que uno que sólo venda productos que dan placer.

2
Diseño del modelo de negocio
Una vez identificada la oportunidad, hay que esbozar cómo ejecutarla. Entre las decisiones a tomar están cuánto tiempo se le dedicará al negocio y si se trabajará a tiempo parcial o a tiempo completo.
Hay varias formas o modelos que puede adoptar, entre ellos, establecerlo como negocio desde el hogar, franquicia, en local comercial, a través de internet, obteniendo la licencia de un producto, o como negocio multinivel.
Cada una de las opciones arriba mencionadas tiene sus pros y sus contras. Por ejemplo, en un negocio desde el hogar la inversión es menor que la de un local comercial, pero tiene la desventaja de que el tráfico de clientes estará restringido y la privacidad del hogar podría afectarse.
Para Alex Ochard, empresario y experto en internet, la web es una oportunidad de montar un negocio rápido, a un bajo costo y no requiere tener un conocimiento avanzado en computadoras. “Todo el mundo puede establecer un negocio por internet. Si sabe enviar emails, puede establecer su propia página”.
Ochard explica que, a diferencia de los modelos tradicionales de negocio donde el empresario busca atraer clientes a su empresa, en internet el cliente es el que te busca a ti.
En el caso de las franquicias y las licencias, el riesgo es menor que si se empieza el negocio desde cero. Sin embargo, la creatividad del empresario está limitada, pues hay que seguir los parámetros de la compañía matriz.
Al definir el modelo de negocios, el empresario tiene que tomar en cuenta cuánto dinero necesitará gastar para poder vender, señala Uriarte. La clave es gastar lo necesario para generar la mayor ganancia posible.
“A veces no hace falta comprar equipos y maquinaria para hacer un producto, se podrían ir $5 millones en eso. Pero con sólo $100,000 puedo buscar el producto en otro país y empezar a venderlo más rápido”, manifestó el también presidente de la junta directiva de Grupo Guayacán.

3
Preparación del Plan de Negocios
“Dedíquele el tiempo necesario a este plan”, recomienda Carlos Jiménez, dueño de la cadena de cambio de aceite y filtro Fast Lane y fundador del “Young Entrepreneurship Education System”. Es aconsejable ponerlo por escrito, pues sirve de guía para dirigir las acciones y pensamientos, y hace visualizar al empresario el futuro funcionamiento y operación del negocio.
Existen muchos formatos de planes de negocio, algunos de los cuales se consiguen a través de internet. En términos generales, todos buscan contestar el cómo, quién y cuándo se establecerá el negocio.
El cómo se refiere a los recursos financieros, ya sea ahorros, ayuda de familiares, préstamos o inversionistas. “Muchas veces no hacen falta préstamos, sino identificar una oportunidad y posibles clientes, pues la creatividad puede más que cualquier préstamo”, dice Paniagua.
Otros datos a incluir en el plan están: la localidad (quiosco, dentro de otro negocio, internet, entre otros), los recursos humanos -ya sea empleados o contratistas profesionales- y el equipo gerencial.
“Para cualquier oportunidad empresarial, el equipo gerencial es crucial. En algunos casos, es más importante, incluso, que la localización”, opinó Uriarte. El líder debe tener afinidad con el mercado que se persigue y el resto de los integrantes del equipo, una experiencia relevante combinada en operaciones, mercadeo, finanzas y en la industria que se interesa entrar.
Paniagua, por su parte, recalca que el líder no puede tener todos los sombreros, por lo que necesita un equipo al cual delegar los aspectos técnicos, según va creciendo el negocio.
“El empresario es el que tiene la visión y desarrolla oportunidades para otros. Él se concentra más en adiestrarse en nuevas técnicas y tendencias en la industria, y en identificar oportunidades para nuevos mercados y negocios”.

4
Selección de la estructura organizacional
Las tres formas básicas de estructurar la empresa son: negocio individual, sociedad y corporación. Todas tienen sus ventajas y desventajas, por lo que es conveniente que el empresario busque asesoría legal y contributiva para que le ayude a determinar la que más le conviene.
“La selección de la estructura legal o la manera de organizar el negocio es importantísimo en el desarrollo de un negocio, entre otras cosas, por el efecto que tendrá en el pago de los impuestos sobre ingresos”, señala José Juan Torres Rodríguez, abogado y contador público autorizado (CPA).
El negocio individual (conocido como DBA, por su acrónimo en inglés) es la más común de todas, ya que es la manera más sencilla de iniciar la empresa, pues no requiere procesos de incorporación y la tasa contributiva es menor que la de la corporación. Pero entre sus desventajas está que el crecimiento de la empresa es limitado, ya que dependerá de la capacidad de financiamiento del dueño.
De acuerdo al negocio y a las destrezas que posea, el empresario debe analizar si lo monta solo o busca socios. Mientras más pequeña la empresa, menos necesitará del socio. Una de las ventajas de la sociedad es que el riesgo es compartido, aunque la desventaja es que las ganancias también.
“Aquí no somos propicios a tener socios porque queremos tener el control de todo, pero así te limitas a crecer. Tú puedes tener el control de la compañía, sin ser dueño del 100% de las acciones”, señala Uriarte.
La corporación es un ente legal independiente de los dueños. La misma se registra en el Departamento de Estado, y requiere la radicación de informes financieros anuales. Como regla general, tiene dos niveles de tributación: la de la entidad legal y la de los socios cuando estos reciben la distribución de la ganancia en forma de dividendos.
Sin embargo, esta doble tributación pudiera, en algunos casos, evitarse al estructurar el negocio como una corporación de individuos, indica el CPA Torres Rodríguez. Agrega que una sociedad especial también evita la doble tributación.

5
Gestión de financiamiento
Aunque la banca atraviesa por una etapa difícil, eso no significa que no esté dispuesta a prestar. Eso sí, ahora está mucho más exigente que antes. Pero los bancos privados no son la única alternativa de financiamiento disponible.
Tradicionalmente, los ahorros personales han sido la primera fuente que utilizan los empresarios incipientes, seguido por los préstamos de familiares y amigos. Otras opciones son las tarjetas de crédito, el Banco de Desarrollo Económico, inversionistas privados, subvenciones federales, líneas de crédito comercial, y ángeles inversionistas.
El Plan de Negocios será requerido por la mayoría de las entidades que ofrecen financiamiento.

6
Diseño del mercadeo
El mercadeo es, tal vez, la parte más importante de la planificación del negocio, ya que sin clientes no hay negocio, según Daniel Nazario, consultor externo del Centro de Desarrollo y Tecnología de Pequeñas Empresas (SBDTC, por sus siglas en inglés) de la Universidad Interamericana.
Nazario recomienda que el empresario evalúe sus fortalezas y debilidades, así como las oportunidades y amenazas externas. “Eso le ayudará a enfocar en qué productos o servicios ofrecer, en vez de intentar ofrecerlos todos a la vez”. Recordó que, en mercadeo, la diferenciación es importante, así como el tener una propuesta de valor añadido.
Basado en la competencia y en la capacidad que tenga el negocio para satisfacer el mercado, se determina cuánto es el volumen de ventas que podría generar. Es aconsejable estimar las ventas para los primeros tres años (segmentadas por mes para reflejar las fluctuaciones, si alguna, de la industria).
En cuanto a la política de precios, Nazario opinó que no siempre es efectivo tener el precio más bajo. Antes de asignarlo, hay que conocer bien la estructura de costos del negocio. Agregó que, a veces, el cliente prefiere pagar más a cambio de recibir un producto de calidad superior o un servicio más completo.
Dentro del análisis, hay que establecer cuánto se quiere ganar el empresario, y basado en esa proyección asignar los recursos. Además, debe calcular cuánto es lo mínimo que tiene que vender cada mes para cubrir los costos fijos, como lo son la renta, la nómina y la factura de los servicios básicos, entre otros.
Otro aspecto del mercadeo es el nombre del negocio. Joan Lavergne, consultora certificada en negocios del SBDTC en San Germán, recomienda que, al seleccionarlo, se escoja uno que refleje lo que el negocio ofrece. Aconsejó también diseñar un logo que refuerce la imagen que la empresa quiere proyectar en el mercado. “El logo ayuda a crear la identidad del negocio y debe usarse en todo, en el papel timbrado, en las etiquetas de los productos, en el uniforme de los empleados”.
Antes de lanzar el negocio, Lavergne le sugiere al empresario que diseñe una campaña promocional para empezar a crear el factor de reconocimiento de marca. Para eso, puede hacer uso de los directorios de negocios de las entidades empresariales, los correos electrónicos, las presentaciones directas a las empresas, el auspicio de actividades, y las redes sociales, entre otras.
“Muchas de las compañías que están comenzando hoy día usan más el mercadeo directo o de relaciones. Ahí las redes sociales pueden ayudarte a llegar a grupo de personas más específicos y de una manera más económica”, dijo, por su parte, Nazario.
Para el presupuesto de mercadeo, la empresa puede asignar entre un 3% y un 10% del total de las ventas estimadas. Lavergne enfatizó en que el empresario esboce una política de servicio al cliente, ya que un buen servicio es una de las mejores estrategias de mercadeo para cualquier negocio.

7
Asesoramiento profesional
Los recursos de apoyo abundan -ya sea gratis o pagando- para ayudar en la creación y desarrollo de un negocio. Entre los profesionales que podría necesitar un empresario figuran abogados, contadores, corredor de bienes raíces, diseñadores gráficos y consultores empresariales.
Entidades como el SBDTC, la Compañía de Comercio y Exportación y el Instituto Empresarial de la Mujer de la Universidad del Sagrado Corazón ofrecen seminarios y asesoría individualizada especializada en temas empresariales.
Además, las universidades, las asociaciones empresariales, los periódicos, las agencias gubernamentales, el Censo Federal, las revistas especializadas y el internet son otras fuentes de información a consultar por todo aquel que interese lanzarse a montar su propia empresa.

Even in Recession, Some Small Businesses Grow (NYT)

2009-11-25T15:36:00.001-05:00

By ANNE FIELD

Many small businesses have found themselves treading water, at best, during the recession. But, that is not true for everyone. In fact, a significant minority of resilient companies have been able to do the seemingly impossible and increase revenue in these troubled times. According to a recent survey of 300 small-business clients conducted by SurePayroll, a payroll service based in Chicago, about 30 percent of respondents said their sales increased over the last year.
How have they done it? Turns out, in a bad economy, successful small businesses tend to be successful in their own ways. In some cases, for example, the secret lies in offering customers more bang for the buck, and in others, it is in expanding overseas. The bottom line: for each company, the solution depends on a variety of factors, like business model and the industry.
“The answers are very specific to the company’s circumstances,” said Ken Gaebler, chairman and chief executive of Gaebler Ventures, a business incubator and investment firm in Chicago. “A good entrepreneur knows which buttons need to be pressed to thrive in a tough situation and make it through to the other side.”
Take Princess Jenkins, the owner of the Brownstone, a New York City clothing and accessories boutique. Based on Harlem’s bustling 125th Street, it has two employees and sells unusual fashions for women 40 and older. Last fall, Ms. Jenkins surveyed the market and realized how difficult the next season could be. She met with her five top designers and urged them to produce the boldest fashions they were capable of — designs she knew would appeal to her customers’ flamboyant tastes. “I told them, it’s going to get really tight next year,” she said, “and I need the best you have to offer.”
They also mapped out a bigger marketing plan focused on three major events. In February, Ms. Jenkins rented a ballroom next door and staged her first fashion show, to which she invited 200 top clients. Sales from the event, she said, were “incredible.” Six months later, using decorations, curtains and designs from the show, Ms. Jenkins set up four booths — she usually books just one — during a small-business fair held as part of “Harlem week.” And, in early November, during the marathon, using three of those booths, she held another fashion show, this one with a D.J.
“The next time people come to 125th Street, they’ll remember there was something big going on there,” she said. “It’s all about building a lasting impression.” According to Ms. Jenkins, the moves have paid off with year-to-year sales up about 10 percent. She expects them to total about $350,000 for 2009.
For other companies, the secret has been tightening expenses to make prices lower. In January, Travis Harris spun off his cellphone accessories business in Ephrata, Pa., from New Covenant Software, his software development firm, founded seven years ago. For one thing, the spun-off company, which Mr. Harris named TheCellGuru.com, begun two years ago and which has four employees, had been growing much faster than the original business. Plus, the two companies had very different business models. “It was easier to handle them as separate corporations,” Mr. Harris said.
While he said he usually sold his products at about 10 percent less than competitors did, Mr. Harris decided to reduce his marketing budget and cut prices even further. He eliminated all of his paid advertising on the Web, choosing instead pay-per-click sites like Google Products, through which customers can shop by comparing prices. Mr. Harris was able to pass his savings on to customers, lowering prices by $2 to $3 an item and increasing traffic 200 percent. Year-to-year sales, according to Mr. Harris, have also grown by that amount. “We knew people were searching deeper, looking for the best prices they could find,” he said. “And when they discovered us, they’d say, ‘O.K., this is it.’ ”
At Inside Sports and Entertainment, Ety Rybak, a founder, and his partner concluded that the difficult climate called for a significant change in the type of events the 14-employee company organized. The company, based in New York and started five years ago, usually provided deluxe packages to the Super Bowl, Master’s Cup and other major events, which clients used to reward employees or curry favor with their own customers, often spending $10,000 a person. But, last fall, Mr. Rybak realized that his “clients couldn’t possibly spend the kind of money they used to spend. We had to get creative.”
Mr. Rybak decided to focus on local extravaganzas that didn’t require paying for airfare or hotels — organizing, for example, a number of large events during the openings of the new Yankee and Citi Field baseball stadiums in April. Another example: For a law firm, he put together a day at the Central Park Zoo, to which clients, employees and their families were invited. Usually, the firm held separate events for each constituency. Alan Baum, president of the company, estimates that revenue will be up about 25 percent this year, to more than $13 million.
Even before last fall’s crash, sales at Lexington International, a 12-employee maker of a laser device for treating hair loss, started heading south. “People cut down on nonessential health care items, and we really felt it,” said David Michaels, managing director of the company, which is based in Boca Raton, Fla., and was founded nine years ago. When he analyzed his company’s performance, Mr. Michaels concluded that the possibilities for domestic sales growth were slim. But he had started exporting his product, called HairMax, to Canada and Australia in 2001. Perhaps expanding to other countries was the answer.
Mr. Michaels turned to the Gold Key Service of the Commerce Department, hiring consultants who spent several months conducting industry research and visiting a handful of countries, the better to pinpoint potential distribution partners. Then, Mr. Michaels traveled to those places to meet his partners in person. At the same time, the consultants helped him understand the regulatory issues he would have to tackle in each country. Ultimately, the licensing process took three to nine months, depending on the region. The most difficult country was South Korea, which, Mr. Michaels said, has a particularly rigorous licensing procedure for medical devices.
Now, he is also selling to Russia, Brazil and Saudi Arabia, in addition to South Korea, where, Mr. Michaels said, “There are significant social advantages to having a great head of hair.” He figures that international sales have more than compensated for the decline in the United States.

How to Market Your Business With Facebook (NYT)

2009-11-16T14:58:00.002-05:00

By KERMIT PATTISON

Skip to next paragraph

Identify a short list of goals before you begin.
Show some personality in your page.
Don't shill. Use your page to engage-and trust that sales will follow.
Use Facebook data to analyze your customer demographics.

A Facebook guide for advertisers.
Advice on getting started from Mashable.
Strategies and a tutorial from All Facebook - "the unofficial Facebook resource."

Business owner, you might want to friend Facebook.
A growing number of businesses are making Facebook an indispensible part of hanging out their shingles. Small businesses are using it to find new customers, build online communities of fans and dig into gold mines of demographic information.
“You need to be where your customers are and your prospective customers are,” said Clara Shih, author of “The Facebook Era” (Pearson Education, 2009). “And with 300 million people on Facebook, and still growing, that’s increasingly where your audience is for a lot of products and services.”
Start Small
For most businesses, Facebook Pages (distinct from individual profiles and Facebook groups) are the best place to start. Pages allow businesses to collect “fans” the way celebrities, sports teams, musicians and politicians do. There are now 1.4 million Facebook Pages and they collect more than 10 million fans every day, according to the site.
Businesses can easily create a Web presence with Facebook, even if they don’t have their own Web site (most companies still should maintain a Web site to reach people who don’t use Facebook or whose employers block access to the site). Businesses can claim a vanity address so that their Facebook address reflects the business name, like www.facebook.com/Starbucks. Facebook pages can link to the company’s Web site or direct sales to e-commerce sites like Ticketmaster or Amazon.
Facebook offers an array of tools and networks, and it’s easy to wander down too many paths. Ms. Shih recommends that newcomers start by asking themselves a simple question: What is your basic objective? Is it getting more customers in the door? Building brand awareness? Creating a venue for customer support? Once you have set your goal, you can strategize accordingly.
“You can waste a lot of time on Facebook,” said Ms. Shih, founder of Hearsay Labs, a Facebook marketing software company. “But if you’re a business, you don’t have any time to waste. Figure out your objectives first, start small and do things that help you accomplish your objectives.”
Ms. Shih suggests that businesses ask friends and family to become fans of their pages so that they display a respectable crowd of supporters when they debut. Pages can grow organically by word of mouth — the average Facebook user has 130 friends on the site — or by advertising or promotion.
You can enliven your page with photos, comments and useful information. As you grow more comfortable, you can add videos or business applications. Flaunt your personality. The page of an ice cream parlor should feel different than that of a funeral parlor. “The pages that are most successful,” said Tim Kendall, the director of monetization at Facebook, “are the ones that really replicate the personality of the business.”
It’s Not All About Selling
Art Meets Commerce, a New York marketing firm, has struck up a never-ending conversation with fans. The company uses Facebook as a crucial part of its publicity campaigns for theatrical productions. Its Facebook page for the show “Rock of Ages,” for example, has more than 13,000 fans.
Staff members constantly update the page with new photos, videos and quotes from the cast. They’ve also learned what not to do: Once they posted a video of Paris Hilton plugging the show and got negative feedback from fans who professed to be sick of her.
But it’s not just about marketing — or, at least, it’s not just about selling. “You end up moving away from being an Internet marketer and go into almost customer service,” said Jim Glaub, creative director at the agency. “A lot of times people use Facebook to ask questions: What’s the student rush? How long is the show? Where’s parking? You have to answer.”
Some basic rules: Buy-buy-buy messages won’t fly. The best practitioners make Facebook less about selling and more about interacting. Engage with fans and critics. Listen to what people are saying, good and bad. You may even pick up ideas for how to improve your business. Keep content fresh. Use status updates and newsfeeds to tell fans about specials, events, contests or anything of interest.
These interactions can take a vast amount of time — the “Rock of Ages” page has 300 to 600 interactions every week — but they can also provide a big payoff. Facebook is one of the show’s top sources of new ticket sales.
Last year, Art Meets Commerce introduced a Facebook ad campaign to promote an Off Broadway run of the musical “Fela!” The campaign aimed at Facebook users with interests like theatrical shows or Afro beat. According to the company, it generated 18 million impressions, more than 5,700 clicks and $40,000 in ticket sales — all for $4,400 spent on advertising.
“We can advertise all day, but if we don’t give them what they want they will not be a fan anymore,” said Mark Seeley, a marketing associate at Art Meets Commerce. “Even though we represent the shows as marketers, we don’t want to constantly tell people to buy tickets. You talk to them like you talk to your friends on Facebook.”
Aim at Potential Customers Only
Some guys use Facebook to find single women. Chris Meyer used it to find women who are already engaged.
Mr. Meyer, a wedding photographer in Woodbury, Minn., had had little luck with traditional advertising. A full-page ad in a bridal magazine generated zero leads and a trade show yielded only four bookings, barely covering the cost of his booth. But Facebook proved a digital bonanza.
Mr. Meyer aimed at women ages 22 to 28 who listed their martial status as engaged in the Minneapolis-St. Paul metropolitan area. He estimates that he has spent about $300 on Facebook ads in the last two years and has generated more than $60,000 in business. He says about three-quarters of his clients now come to him through Facebook, either from ads or recommendations from friends.
“I’d be out of business if I didn’t have Facebook,” Mr. Meyer said. “Especially with this economy, I need to stretch each marketing dollar as much as I possibly can.”
Facebook enables small businesses to engage in targeted marketing that they only could have dreamed about a few years ago. Facebook users fill out profiles with information like hometown, employer, religious beliefs, interests, education and favorite books, movies and TV shows — all of which can help advertisers deliver messages to specific demographic slices.
As you create an ad, you can add demographic criteria and keywords and see how many Facebook users fall into your target audience and modify it accordingly to get the most bang for your buck. Advertisers can elect to pay per impression or per click, set maximum budgets and schedule the ad to run on specific dates.
Thus a coffee shop in San Francisco can display advertisements only to local people whose profiles or group affiliations suggest they like coffee. According to Mr. Kendall, Facebook’s director of monetization, ads can also aim at people based on social exchanges, like a person who sends a message to a friend, “let’s get together for coffee” or who posts a status update about just having awakened and needing some java.
“We can help you find customers before they even think about searching for you,” Mr. Kendall said. “We’re very, very well-positioned to generate demand, based on the fact that we know a tremendous amount about a user.”
The Facebook ad system provides instant feedback with metrics like the number of impressions and clicks-through. This reporting allows Mr. Meyer to improve his advertising; if one ad doesn’t generate enough hits within 24 hours, he pulls it and tries something new.
Give Away Cupcakes!
Charles Nelson has an M.B.A. and is a former investment banker who owns a growing national chain of stores. Yet this 40-year-old entrepreneur checks Facebook with the frequency of a college student. Up to 30 times a day, he logs onto the social networking site via his laptop or Blackberry.
For Mr. Nelson, this is serious business. He and his wife, Candace, own Sprinkles, a cupcake bakery that relies on social media in lieu of traditional advertising. Mr. Nelson considers Facebook marketing essential. “People are out there talking about your business everyday, whether you’re looking or not,” he said. “This gives people a place to come and speak directly to us.”
Sprinkles uses Facebook to give customers a whiff of what’s cooking. Every day it posts a password on Facebook that can be redeemed for a free cupcake. Since April, its fan base has risen tenfold to 70,000.
Mr. Nelson and his wife previously worked as investment bankers in the technology sector and were keenly aware that, even for a traditional business like a bakery, social media is a crucial ingredient. His advice: make it relevant to the customer, keep it fresh and remember that the return on investment may come slowly.
“Be patient with it,” Mr. Nelson advised. “People are not going to flock to your social media site overnight. Technology is about the network effect. It takes time for those connections to build.”

The New Rules of Angel Investing (NYT)

2009-10-28T20:22:00.002-04:00

The New Rules of Angel Investing

By KERMIT PATTISON

Angels still have wings, but they aren’t flying quite so high.

The rules of the game of angel investing have changed in the post-crisis world. The average deal size shrank by 31 percent in the first half of this year, according to a recent study by the Center for Venture Research at the University of New Hampshire. The study shows that total angel investments fell to $9.1 billion in the first half of 2009, a 27 percent decline from the same period last year, but the number of companies getting venture investments actually increased by 6 percent, to 24,500.

Angels are still financing deals, but at lower valuations and with more specific milestones. They have grown more picky and less tolerant of risk. “What you’re seeing now is a real flight to quality,” said David S. Rose, chairman of New York Angels. “If you are the real deal, you can get funded.”

What’s the real deal? Angels are looking for companies with more modest capital requirements. They seek companies that bootstrap, beat quicker paths to profitability and have proven management teams. “The most striking change is angel investors are way more discerning about where they deploy their capital,” said Bruce Cerullo, a Boston-based angel investor who specializes in health care. “Now groups like ours are looking for more fully baked ideas that are much closer to revenue generation.”

Do It Yourself

There has been a sea change in risk sensitivity; the more self-sufficiency a company demonstrates, the less risky it appears. “Bootstrap it as long as you possibly can to validate your business model and to get some traction,” Mr. Cerullo said. “The more traction you have, the more leverage you are going to have in a valuation negotiation with an angel or private equity investor.”

Entrepreneurs should find ways to finance their own growth: working without salary, moonlighting, seeking grants, running lean operations and focusing on an aspect of the business that can generate revenue.

Bear in mind that the worst of times for the economy can be the best of times for starting a company. Labor is cheap and plentiful. The costs of starting an Internet-based company have fallen sharply thanks to cheaper technology, including open-source software. “Work hard to figure out if there’s a business plan you can pursue where your capital requirements are zero,” said Ian Sobieski, founder and managing director of the Silicon Valley-based Band of Angels Fund. “The easiest way to raise money is to not absolutely have to raise money.”

Angels are looking for companies that can get to break even on the angel investment. In return, they are willing to be more patient, Mr. Rose said. In the old days, angels invested with the idea that they would finance the company at an early stage, then venture capitalists would step in with a large injection of cash that allowed it to blast off on a hockey-stick growth trajectory.

“Now we’re prepared to give up the immediate hockey stick in exchange for you being able to reliably get to break even on our cash while building value for the company,” Mr. Rose said. “The minute the market comes back, we can inject V.C. cash — and then you have the hockey stick.”

Be Realistic About Valuations

Valuations have fallen sharply — as much as 40 percent, Mr. Rose estimates. The upside is that the costs of starting a company have fallen, too.

Yet some entrepreneurs still cling to over-inflated valuations. They get hung up on achieving the highest valuation without regard to how it may undermine their long-term prospects.

“The biggest error they make, in my experience, is they focus solely on this round and take money based solely on whether they can fill out the round at the absolute highest valuation,” said John Huston, who invests with Ohio TechAngels and is chairman of the Angel Capital Association. “They do not select investors who know the market and are willing to write follow-on checks.”

Unrealistic valuations will make serious investors roll their eyes. Even if entrepreneurs can get above-market valuations, they run the risk of getting a lower valuation on a subsequent round, a phenomenon known as the “deadly down round.” Mr. Huston said inflated valuations are a sign that the company picked the wrong investor and “took money from neophytes who were only attuned to this round and the promises of grandiose success.”

Lay Out Milestones

Mr. Huston warns that entrepreneurs should beware of “one-check Willy” — the angel who finances just one round. Instead, entrepreneurs should look for angels who are willing to discuss long-term plans with milestones and follow-on investments that guide the company “from here to liquidity.”

The exit market has changed drastically because of a decline in mergers, acquisitions and initial public offerings. As a result, venture capital firms increasingly are concentrating on their existing portfolios and forcing angels to support start-ups for longer.

Many angels now expect to write checks for follow-on rounds because they can no longer count on V.C. money being available down the road. John Morris, chairman emeritus of Tech Coast Angels in Southern California, said that angels were now keeping reserves of 200 to 300 percent — up from zero a few years ago.

“That’s probably the single biggest difference in angel land,” said Mr. Morris. “Angels are learning about reserves and the need to parse out the money in a series of tranches, keeping some dry powder for the next round.”

Practice Your Pitch

Get good at pitching the same way major leaguers do: practice, practice, practice. Entrepreneurs should be ready to present a full business plan, a 20-minute PowerPoint, an executive summary and a two-minute elevator pitch (which is what gets you in the door in the first place). Rehearse with anybody who can offer good advice. Go to industry events. Many angel groups hold quick-pitch events where entrepreneurs are invited to make brief presentations.

Susan Preston, general partner of CalCEF, a clean-energy angel fund in San Francisco and author of two books on angel investing, said entrepreneurs might have to pitch to 50 or 100 investors before they got venture funds: “In tight times, only the absolute stars rise to the top to receive funding. If they want to have a chance, they’ve got to be well prepared.”

Know Where to Look

Angels often don’t advertise themselves because they don’t want to be deluged by suitors. And lists or directories have their limits (although this one from the Angel Capital Education Association can help you get started). “Look farther, network a little harder,” said Jeff Sohl, director of the Center for Venture Research. “Turn over those rocks like you should have been doing all along, rather than taking the easy route of Googling and looking at the first 10 hits. That might have worked in the go-go times of 2000, but it doesn’t even get you close now.”

Consider both lone-wolf angels and organized groups. Angels tend to focus on regional companies but increasingly are specializing in niches like medical devices, technology and clean energy.

One classic mistake is to look at angels solely as sources of cash. Ms. Preston considers money to be an angel’s third most important contribution after expertise and networking. She urges entrepreneurs to scrutinize potential investors: What expertise can they provide? How do their strengths complement your weaknesses? Who can they introduce you to?

Coached by an Angel

Murat Ozsu weathered the recent sea change in angel investing — and survived to tell about it.

Mr. Ozsu had spent more than two years bootstrapping his Long Island-based start-up, innRoad, an online platform that helps independent hotels manage guest bookings. He had moved to a smaller house, borrowed from family and friends, worked out of his son’s bedroom and spent many nights laboring into the wee hours so he could coordinate with his software development team in India. He pitched to hundreds of angels before he attracted the interest of a few investors who began coaching him. Just when he had built up a base of customers and was poised to get financing, his plans hit a major snag: the financial collapse of 2008.

Mr. Ozsu took his plan and ripped it apart. On the advice of his angels, he recalibrated for leaner times and cut his capital requirements in half. “These are all guys who have run their own companies,” he said, “and they’ve all been through this before. I’d much rather learn from other people’s mistakes. I’m going to make my own mistakes, so why make theirs?”

Ultimately, innRoad won the backing of 15 angels and a New York State investment program and raised $1.2 million — twice its goal and, surprisingly, the same amount it had planned to seek before the crisis. InnRoad recently did a second investment round of $300,000, which Mr. Ozsu said would sustain the company until it reached breakeven next summer.

Along the way, he said he learned to think like an investor — often a difficult step for entrepreneurs who have poured their souls into their companies. “Trying to raise money is not the goal,” Mr. Ozsu said. “The goal is a business plan that makes sense on its own merits. Money is just one of the tools that you need.”

Bootstrap as long as you can. Finding early ways to get revenue.
Get to break even quickly and remember that VC financing has gotten harder to obtain.
Be realistic about valuations. Be coachable.
Practice pitching and be prepared to make your case to dozens or hundreds of angels.
Look for angels who complement your strengths and can help you with more than money.

An overview of angel investing and a list of resources from Angel Capital Education Foundation.
What Entrepreneurs Should Know About Angels from the Angel Capital Education Foundation.(pdf)
A directory of angel investors from the Angel Capital Education Association.

Eleven Easy Ways to Destroy Your Company (NYT)

2009-10-28T20:11:00.001-04:00

Eleven Easy Ways to Destroy Your Company

By Jay Goltz

Businesses make hundreds or thousands of decisions every year, many of which seem inconsequential. But the smallest details can have business-changing or even business-ending consequences. Here are 11 of my favorites to watch out for:

1. The lowly extension cord. People get cold feet. They get a space heater. They plug it into a two-pronged extension cord. They forget to unplug it when they leave work. That night, while you are sleeping, your entire business burns down. Your brilliant marketing plan, your three-year projections, all of your records, your new product samples … . You get the idea. This is not something that most business owners think about, but insurance companies know that extension cords and space heaters are major fire hazards. It is good practice not to allow any extension cords in your business that aren’t three-pronged.

2. Bad receivables. Let’s assume that you are using good judgment as to which customers get credit and how much. Even so, it is very easy to get into a business-life-threatening situation because of a big customer that goes broke. Months before the bankruptcy filing, the following statements will be made to you: “I’m not going anywhere. We’ve been short on cash before, and we always come out of it. You have my personal word.” And you will respond: “We’ve been doing business together for 30 years. I’m not worried about it.” Bad things happen to good people. Good and honest intentions do not always result in getting paid. It is very painful and difficult to cut off an old customer, especially when you need the business. But many companies go broke because of bad receivables.

3. Interviewing. It is both art and science. Like a bad science experiment, it can cause explosions. Having someone who hasn’t been properly trained interview prospective employees is a recipe for disaster. There are many questions that you cannot ask without risking a nasty lawsuit that will cost plenty of time and money.

4. Hiring without doing background checks. There are some bad people out there looking for jobs. Even with a background check, there is no guarantee that you won’t have a problem, but it will certainly improve the odds.

5. Vehicles. They are rolling liabilities. Allowing someone who is not insured properly through the company to drive one can have disastrous results if there is an accident. You will be seen as having “deep pockets” — even if your pockets are empty.

6. Vehicles, again! With the demise of the full-service gas station and longer intervals between oil changes, many people are driving around on under-inflated tires, which are much less noticeable since the advent of the radial tire. Under-inflated tires are more likely to cause a blowout, which can result in very bad things. We check all of our vehicles once a month.

7. And again! Texting while driving is the new drunk driving. Do not allow it.

8. Insurance. I asked my insurance broker what the three biggest small-business insurance failings were. His response: 1) understating insurance to value; 2) not having employment-practices insurance; 3) not having business-income replacement coverage to replace lost revenue until the company is up and running again. It is no secret that the insurance companies are in a much bigger hurry to settle a claim when they are paying out money every week to replace that income.

9. The wrong accountant. Many accountants just do tax returns and are not qualified to act as an outside voice and keep an eye on the health of the company. I have seen more than one company fail because the owners didn’t know what they didn’t know.

10. Bad controls. Many companies have gone broke because of theft or embezzlement. Your accountant should help you set up these systems.

11. Bad company policies. I was just in a spa. There was a sign posted that said that tips must be paid in cash. I asked why. (Apparently, they get asked about this a lot.) The receptionist explained that the employees didn’t necessarily claim all of the tips and the company did, so there could be a discrepancy if either got audited. Not a great story. I am sure that some customers — 5 percent? 20 percent? — will either find it inconvenient to use cash or will resent supporting tax evasion. If I am right and they lose customers, the spa will undoubtedly blame the losses on competition or the economy.

An ounce of prevention is worth a pound of cure. Benjamin Franklin was a good businessman.

Can anyone add to my list?

Jay Goltz owns five small businesses in Chicago.

Real-Life Lessons in Using Google AdWords (NYT)

2009-10-23T21:55:00.001-04:00

Real-Life Lessons in Using Google AdWords

By DARREN DAHL

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Set a budget, a daily or monthly amount you’re willing to spend.
Begin by casting a narrow net, advertising in your local market and then expanding to additional markets like Google’s AdSense network.
Try to choose keyword terms that your competition has overlooked to keep per-word costs low.
Remember that good campaigns require constant adjustment.

Google’s step-by-step guide to getting started.
Google’s blog about AdWords.
AdWords for Dummies

It used to be that business owners often struggled to afford advertising for their products or services. Google AdWords has changed that by offering an inexpensive way to spread the word. But if you don’t do some careful planning, you can easily find yourself spending thousands of dollars with little to show for it.

Here are the basics: Google AdWords are keyword-driven ads that show up along the right-hand side of a Google search page under the rubric “sponsored links.” People who search for terms related to those you select — say, “widgets for sale” — will see your ad alongside the results of their search. How high up your ad appears on the list of sponsored links will depend, in part, on how much you’re willing to spend on your campaign. The more you spend and the more relevant your ad, the higher it will rank. Because AdWords is a pay-per-click service, you pay Google only when someone clicks on your ad.

When you begin your campaign, you create a text-only ad that includes a link to your Web site. Then you select the keywords that will determine which searchers see your ad. You can — and should — specify how much you want to spend, what language(s) your ad will appear in and even the geographical reach of your ad. Google also gives you the opportunity to post ads through its content network, AdSense, which will place your ad on Web sites that offer content that relates to your keywords.

Googling the term AdWords will return dozens of pages of links to experts of all kinds promising to help you construct and optimize an AdWords campaign of your own. What follows are lessons learned the hard way by business owners who’ve actually taken the plunge:

Be Sure AdWords Is the Right Choice

Brent Hollowell and Jesse Travis, co-founders of a travel accessory retailer in Baltimore called Zen Class, had high hopes when they began using AdWords to promote their Nirvana Seat Back Organizer, which slips over an airplane’s seatback tray. While they knew they might get clicks if they paid for words like “travel accessories,” they feared the cost of close to $1.50 a click would be prohibitive because not every visitor would be looking for their product. They decided to be more specific and set up an AdWords campaign using the keywords “airline seat back organizer,” which cost about 5 cents a click; anyone who searched on that phrase would see their ad along the right-hand side of their screen. The problem was that the campaign, after running for several weeks, produced very few clicks on their site. They realized that most people were unaware that seatback organizers existed and thus were unlikely to search for one.

“Given the challenge of having a product that hasn’t existed before, AdWords may not be the best tool for generating interest and sales,” Mr. Hollowell said. He and Mr. Travis have found they get better results advertising through more traditional product-placement ads and using search engine optimization (S.E.O.) techniques to improve their site’s performance on organic Google searches.

Set a Realistic Budget

About a year ago, Georgette Blau, who runs On Location Tours in New York City, set up an AdWords campaign to promote tours that were timed for the release of the “Sex in the City” movie. In doing so, she says she made a mistake: She ran the ad on the Google AdSense network but failed to understand how quickly she could run through the money she had budgeted for her campaign. An ad placed on the Google network can quickly appear on hundreds of Web sites and generate thousands of clicks. While this can be a good thing, it can also run up quite a tab. “Our ads were showing up everywhere, and we spent $600 before I could shut it off,” she said. Ms. Blau now sets realistic monthly and daily budgets for her campaigns to promote a “Sopranos” or “Gossip Girl” tour.

Focus on Local Markets

When Apple first introduced the iPhone, Matt McCormick, who runs a phone-repair business called Jet City Devices, saw an opportunity. Knowing that the iPhone’s screen was prone to damage, Mr. McCormick began bidding on keywords like “iphone repairs” and waited for business to flood in. A problem soon became apparent: while his site was swamped with traffic, very few people were actually mailing in their phones to get them repaired. But, after changing his campaign to run only on searches initiated within 50 miles of Chicago and Seattle — cities where he had physical shops where customers could drop their phones off in person — Mr. McCormick says his conversion rate jumped to 10 percent: “If you’re in business in only one or two cities, then Google’s localization feature can save you a ton of money, reduce AdWords competition, and bring great traffic.”

Narrow Your Keyword Net

Just as you might use quotation marks to limit the scope of a Google search, you can use brackets and quotes to focus your AdWords campaign. In fact, this is critical. If, for example, you select “widgets for sale” in quotes, your ad will show up anytime people search for those words — even if they search for, say, “blue or red widgets for sale.” If you use brackets to select [widgets for sale], on the other hand, only those people who search on the exact phrase will see the ad.

Catherine Wood, who runs an online designer clothing site called LaGrandeDame.com, suggests being selective about the keywords you place within those brackets or quotes. Ms. Wood said she followed Google’s guidelines when she set up her first campaigns this past April. “They tell you to try to choose the terms that will collect the most clicks,” she said. Ms. Wood began with 20 or so keywords such as “plus sized dresses” and “designer plus sized clothing” — somewhat general terms that she put in quotes. The result was that she received lots of traffic and quite a few customers. But, for the first four months she ran the campaign, she spent more than $5,000 a month, which meant she was spending more than $200 a new customer.

After learning her expensive lesson, Ms. Wood narrowed her keywords and used brackets to focus tightly on product names like [David Meister black dress] and [Anna Scholz Peacock Neru jacket] to drive very specific traffic to her site. She also learned the value of negative keywords — words you can specify (at no cost) so that people who search for them are blocked from seeing your ad. Ms. Wood, for example, stopped paying for clicks for anyone who searched for Halloween costumes.

Create Landing Pages

Ed Scanlan credits AdWords with helping build his company, Total Attorneys, a firm based in Chicago that provides outsource support to small legal practices. He suggests creating specific landing pages tied directly to the ad you’re running to maximize your chances of turning visitors into customers. Sending a visitor to your all-purpose home page can leave them feeling lost or aggravated. By contrast, if Mr. Scanlan runs a campaign based on a term like “legal case support,” people who click on the ad attached to those words land on a specific page designed just for them. These pages should ask users to take an action, like signing up for a mailing list or filling out a survey, to capture the visitor’s contact information.

Stay on Top of Your Campaign ...

David Metcalfe has used AdWords to promote XNet, a data center in Chicago. About a year ago, he noticed something strange was happening — his click-through rates were going through the roof. That sounds promising, but he was getting traffic steered to his site from a Web site in Spain — even though he had set his campaign for the Chicago area only. Mr. Metcalfe eventually got his money back from Google, but it took him six months of daily contact to do so. While this was clearly a fluke — and possibly criminal on the part of the offending site — it demonstrates two things: Pay-per-click campaigns carry risks, and the burden of monitoring them falls upon the owner of the campaign. “When you’re an entrepreneur dealing with a major corporation like Google, it can be hard to get someone to have a conversation with you,” Mr. Metcalfe said. “I was grateful I caught it when I did.”

... or Consider Outsourcing It

Monitoring an AdWords campaign requires a lot of effort. That’s why some entrepreneurs, like Rick Smith, prefer to outsource the management of their campaigns. Mr. Smith, who sells kitchen supplies online at chefsresource.com, says he originally set his AdWords campaign on autopilot. But he realized that while he was spending a good chunk of money each month, he didn’t know what kind of a return on investment he was getting. After attending an S.E.O. trade show near his home in Laguna Hills, Calif., about two years ago, Mr. Smith hired a firm to run his campaigns for him. The firm now tries new keyword combinations or ad text based on Smith’s latest inventory of cookware or knives. They update or change the ads on pretty much a weekly basis, adding in seasonal or holiday hooks when appropriate, and they monitor the results. In return for a percentage of his monthly budget, the firm sends him a weekly spreadsheet showing how much he has spent and how much revenue has been generated. “I’m spending less than I did when I did it myself,” said Mr. Smith, “and I’m getting more sales as a result.”

This article has been revised to reflect the following correction:

Correction: October 16, 2009
An earlier version of this article referred incompletely to the basis for ad placement through Google AdWords. The relevance of an ad is a factor, not just the amount spent on a campaign. In addition, the article misstated the circumstances in which one AdWords client, Georgette Blau, said she had erred in her advertising planning. She ran through the money she budgeted for a campaign more quickly than expected; she did not fail to set a budget.

Obama Announces Small-Business Lending Push (NYT)

2009-10-22T11:42:00.001-04:00

Obama Announces Small-Business Lending Push

By ROBB MANDELBAUM

After enduring months of criticism that his administration had done too little to help small businesses weather the recession, President Obama said Wednesday that “there’s still too little credit flowing to our small businesses” and unveiled initiatives he said would open the spigot.

The measures, announced by Mr. Obama at a small records storage company in Maryland, would allow smaller community banks to borrow at low rates from the Treasury Department’s Troubled Asset Relief Program. It would also raise the loan caps on several popular Small Business Administration programs.

Under the administration plan, banks with less than $1 billion in assets could borrow from the program at a lower interest rate than financial institutions are required to pay.

In exchange, banks must demonstrate how they would increase lending to small businesses and follow up with quarterly reports. According to the White House, most business loans by the community banks that are eligible for the new rules are made to small businesses.

In addition, community groups that lend to small businesses in low-income areas under a Treasury Department program will be able to borrow relief money at just 2 percent annually for eight years. In the past, banks have been leery of the such loans because the program allows the government to buy warrants for the banks’ common stock and because it requires the institutions to limit executive compensation. But the small banks probably will not have to issue warrants in that program rules contain an exception for infusions of less than $100 million. The proposal as described Wednesday caps the infusions at $20 million.

The small institutions would be subject to the same compensation rules as any other relief recipient, said Gene Sperling, senior counselor to Treasury Secretary Timothy F. Geithner, in an interview. But, he added, “for these smaller community banks, the executive bonus restrictions will usually affect only their single most highly compensated employee.”

But some community bankers remain concerned. “I think that could be a damper on community bank involvement in this program, said Cam Fine, president and chief executive of the Independent Community Bankers of America, a trade association. “Those family-owned banks are not going to want to subject themselves to compensation restrictions imposed by TARP, because it is their own personal money that is the capital of the bank.”

Changing the S.B.A. loan limits will require approval from Congress. The administration’s plans, which would raise the limit on the most popular loan to $5 million from $2 million, are identical to provisions of a bill introduced by Senator Olympia J. Snowe of Maine. She is the ranking Republican on the Senate Small Business Committee and is seen as perhaps the only Republican who may vote for a Democratic-led health care bill.

In a statement, Ms. Snowe indicated she appreciated the gesture. “These actions will help satisfy the capital needs of small businesses looking to start or expand their operations,” she said.

Unlike the S.B.A. proposals, the bailout plan can take effect at the administration’s direction.

“Our goal is to conduct a wide spread consultation with the small business and small bank community for a few weeks, and get this operational as quickly as is practical,” Mr. Sperling said.

A Guide to Assessing Franchising Opportunities (NYT)

2009-10-02T14:00:00.001-04:00

A Guide to Assessing Franchising Opportunities

By KERMIT PATTISON

Jim Denney faced a common choice: buy a franchise or start an independent company?

He was an experienced business owner in Scotia, N.Y., near Albany, who had spent a year investigating a promising franchising opportunity — a business that raised sunken concrete slabs by pumping cement slurry beneath them, a technique sometimes known as mudjacking.

The franchise brought many advantages: brand recognition, a 60-year history as a successful company, a proven business model and systems already in place for operations, training, equipment and safety — all of which would allow Mr. Denney to shorten the learning curve and grow faster.

But he and his partner had reason to be wary. They already owned another franchise business and had grown frustrated by the lack of support they received from their franchisor. How could they be sure their new franchisor would do better?

Buying a franchise demands caution — especially in the current economy. At best, franchising can ease the path to self-employment by allowing a franchisee to buy a packaged concept with a proven business model and brand recognition. At worst, it can turn the dream of business ownership into a nightmare and saddle franchisees with debt and exploitative relationships with their franchisors.

The credit crunch has made it more difficult for would-be franchisees to obtain financing. On the bright side, franchisees have more leverage in bargaining — but only if they follow proper due diligence and ask the right questions.

“In this current economic situation, be extra careful, because franchisors are even more hungry to sell franchises,” said Don Sniegowski, editor of Blue MauMau, a franchise news site. “Once they’ve got you in their sights, they’re under a lot of pressure to sell that franchise. It’s a buyer’s market, and if you’ve got money right now, you can pick and choose what you want. And you better be very choosy.”

Here are nine questions every would-be franchisee should ask:

Who Are You?

Buying a franchise requires considerable due diligence — more on that below — but before analyzing the business, aspiring franchisees should scrutinize themselves. Nick Bibby, a franchise consultant in Shreveport, La., said his first advice to clients comes from an ancient Greek aphorism: “Know thyself. Decide first if you’re made for entrepreneurship.”

Unfortunately, many people become enamored with the dream of business ownership and fail to ask simple questions that determine whether franchising is a good fit. “People don’t want their dreams shattered,” Mr. Bibby said. “People don’t want to know the truth.”

He compares this step to marriage counseling. By asking hard questions in advance, people can minimize the danger of being blinded by passion and entering a relationship doomed to failure.

What are your interests? Where can you leverage your existing skills? Are you the sort of person who likes to follow a system, or do you prefer to do things your own way? Do you want to manage people or work independently? Are you ready to pull 16-hour days, or do you need a part-time gig that allows you to keep your day job?

And of course: What kind of business is right for you? Franchise opportunities run the gamut, including retail, business-to-business services, in-home businesses, child care, education, home improvement, construction, real estate, wedding planning and fast food.

Should You Hire Experts?

Now hear this: You need help. Franchising is full of sad stories of people who sign agreements without fully understanding the implications. Often, these people lose their savings, homes and happiness. Even experienced businesspeople need to hire experts.

“A prudent businessman will start this process with a franchise dream team — a financial adviser you trust, a legal adviser you have confidence in and a business broker who’s working for you,” said Robert Purvin, chief executive of the American Association of Franchisees and Dealers. “You also need to start with a psychological adviser to identify what type of business makes sense for you.”

Mr. Sniegowski of Blue MauMau recommends that would-be franchisees hire experts in three areas: marketing, accounting and legal. Make sure you hire experts who specialize in franchising, not generalists. Many franchises, he adds, aim at people from outside the industry like recently laid-off corporate employees who might not know much about coffee or doughnuts or whatever the franchise sells.

“Don’t go to the neighborhood attorney, your brother-in-law attorney or your sister who’s an accountant,” said Mr. Sniegowski. “Go to someone who really understands franchising.”

A franchise broker may help steer you to a franchise that fits your needs. But be aware that brokers often receive commissions from franchise chains for signing up new franchisees and thus may have an incentive to steer you to certain companies.

What Is the Best Business Opportunity?

Even if you are buying a franchise, you need a business plan. Franchisors often provide information that can be inserted into your plan, but you should not rely on the franchisor to do your homework for you. You need to analyze your own market and consider enlisting professional help.

Does your business satisfy a need or a trend? How many potential customers live in your area? What is the competition? By the end of this process, you should have a business plan that is supported by hard data. This plan also is essential for obtaining financing.

Mr. Denney, the businessman in Scotia, spent six months investigating his market before satisfying himself that he had a viable business opportunity for his concrete-raising franchise. He looked at census data, information on the housing stock and talked to people throughout the industry. Mr. Denney is an investor who felt confident doing his own research; he suggests that people who lack such experience hire market research professionals.

“People spend more time evaluating whether they want a Wii or a PlayStation than buying a franchise,” Mr. Denney said. “It really is kind of scary.”

Who Is your Franchisor?

There are more than 3,000 franchises in the United States, and a vast majority are unknown to the average consumer. Mr. Bibby, the franchise consultant, puts it bluntly: “Most — I’ll say a minimum of 70 percent of all franchises — are not worth the powder it would take to blow them up.”

Investigate your potential franchisor thoroughly. This may be one of the most important business decisions you ever make, and you should treat it accordingly.

What is the business model? Is the product or service unique? Is the brand established? How is this franchise different from competitors? How will it provide lasting value? Is the business model based on royalties or does it rely on signing up more franchisees and collecting fees? Does it have hidden profit centers, like rents or annual meetings?

Does the franchisor provide support like marketing and training? Does the company have a history of litigation? How many franchisees are there and what is their failure rate? What is the background of top management? How long have they been in the business? What is their reputation, and have they had any personal bankruptcies or litigation?

“Not all franchises are created equal,” said Jim Coen, president of the Dunkin’ Donuts Independent Franchise Owners. “It’s incumbent on the franchisee to really drill down and figure out the potential to make money. Sometimes potential franchisees fall in love with the concept and find out too late the business model is not sustainable”

What Do Other Franchisees Say?

In addition to crunching numbers and enlisting professionals, you need to investigate with your eyes, ears and gut. Talk to other franchisees. Hang out in their businesses and observe. Get a job or volunteer in another franchise.

Treat these visits like an ethnographic study; you want to immerse yourself in the culture of the business. For example, you may discover that franchisees all work 16-hour days, seven days a week. If you can’t imagine yourself racking up such hours, that franchise probably is not a good fit.

Track down franchisees who have left the system and ask about their experiences. If you are fortunate enough to find a chain with a franchisee association — there are only a few hundred in the United States — make it a resource. Visit the company headquarters and meet with the people you will work with.

Use the Web. In a world of social networking, it’s not hard to find out what other people are saying about a franchise.

Can You Afford It?

By law, the franchisor should provide you with a disclosure document that specifies the initial investment. But take these estimates with a grain of salt: they may be averages, and may vary by region. Ask other franchisees how their costs compare to the franchisor’s estimates.

Reporting earnings is optional and only a fraction of franchisors do so. Again, you and your business advisors must do your own analysis.

Many first-time franchisees make the mistake of underestimating working capital requirements and buy a franchise at the upper range of their affordability. One old adage bears repeating: It will cost twice as much and take twice as long.

“It’s not uncommon at all for a store to open and still be struggling a year or two later,” said Peter Birkeland, a small-business consultant in Chicago and author of “Franchising Dreams” (University of Chicago Press, 2004). “You have to have a lot of working capital.”

The credit crunch makes financing harder to obtain. Lenders have become more wary, and home prices and investment accounts have sunk in value. Some franchise chains have come up with creative financing packages to help franchisees. Scrutinize these packages carefully with your financial advisers.

One other thought: You can sometimes buy an existing franchise for less than it would cost to open a new one. And banks are more likely to give you financing for a location that already has cash flow. Of course, an existing franchise that’s up for sale can be a nice opportunity — or a red flag.

What Are the Legal Terms?

Federal and state laws require franchisors to provide prospective franchisees with two crucial legal documents: the franchise agreement and the disclosure document, often known as the Uniform Franchise Offering Circular.

By law, you must receive the disclosure at least 14 days before signing any contract or making any payment to the franchisor. Take these documents to the lawyer — again, one who works for you and specializes in franchisees — and review them in detail.

Could You Do Better as an Independent?

Before you sign an agreement, stop to consider whether you’d be happier as an independent.

Franchising can offer many advantages, but the quality of support varies widely. Moreover, franchisees must follow procedures and pay fees and royalties. Will the franchise provide continuing value for the life of the franchise agreement? If not, consider starting an independent business.

In the 1990s, Timothy Bates, a professor at Wayne State University, studied a sample of more than 20,000 new businesses that started between 1984 and 1987; by 1991, 35 percent of franchise units had gone out of business compared with 28 percent of independents.

Can You Negotiate?

Mr. Birkeland, the small-business consultant, said that in the current economy, franchisees should be emboldened to negotiate on items like franchise fees, larger territories or deals on multiple units. “I would push hard for the bargain,” he said. “A franchisor may put on a stern face and say, ‘Take this deal or we’ll find someone else’ — I wouldn’t believe it before, and I definitely wouldn’t believe it now.”

Terms may be less negotiable with strong franchises, especially on items that might dilute the integrity of the brand and or create inequalities among franchisees. Some franchisors flatly refuse to budge from the standard template.

But it never hurts to ask. Mr. Denney suggests that aspiring franchisees ask their franchisor a simple question: Are you willing to negotiate the franchise agreement?

“If the answer is no, walk away,” he said. “No franchise agreement that I’ve ever seen is ever going to be acceptable on the first go-around. There has to be some back and forth. If it’s not negotiable, they’re going to own you.”

Mr. Denney and his partner eventually signed their agreement — but only after negotiating numerous changes and almost going independent. In the end, he believes it was a good deal for both sides, and in the first three months his franchise with Concrete Raising of America has generated substantially more business than he would have as an independent.

“Yes, franchising does offer some turn-key aspects, but there is still a huge amount of work that goes into it,” he said. “You’ve got to do that due diligence.”

How to Start a Business (NYT)

2009-09-09T00:32:00.001-04:00

How to Start a Business

By TOM TAULLI

You’ve made the huge decision to start a business. As you probably know, most efforts to start a business end in failure. Fortunately, there are things you can do to guard against wasting time and money and improve your odds. While every business is unique and comes with its own set of problems and opportunities, there are some basic steps — writing a business plan, proving the concept, raising capital, choosing a legal structure — to consider when getting started. Let’s take a look:

The Business Plan

Writing a business plan seems like a chore, but it’s critical. It doesn’t have to be formal or long — just a few pages is fine. But try to cover the basic sections, especially if you expect to make a pitch to investors or lenders. These sections should include an overview of the business, industry background, the product or service, the business model (how will you make money?), the strategy and the team. For guidance, take a look at Score’s business plan template.

Think of the process as a way to better understand the opportunity and the risks. It may even show you that the business is too tough. If that’s the case, you want to know it as soon as possible.

Try to answer the following in the business plan:

1) Who is the customer?

Try to focus on a defined market segment. In some cases, it should be easy. Perhaps you are aiming at lawyers. But if your product applies to virtually anybody, you need to narrow things. Look at Amazon. At first, the Web company focused on books. Once it built a strong business there, it moved into other categories.

So, where to start? Try to find the customer segment that is experiencing the most pain or is willing to bet on new ideas.

2) What’s happening with your market?

Immerse yourself in the market. What are the major trends? How will they help or hurt your venture? Along with doing Google searches, you should also check out trade publications and association Web sites.

If your business is in retail, look at ZoomProspector, which provides helpful information on local economic trends (population, income and demographics). Visit Yelp.com and see how many competing retail outlets you’ll be facing. Is the market too crowded?

Finally, make a list of your competitors and update it regularly.

3) What are the start-up costs?

Be realistic. Entrepreneurs often underestimate the time and expense of starting and operating a company. Put together a detailed start-up budget as well as a forecast (Score’s template offers a worksheet).

As you put things together, look for ways to minimize costs. Some ideas: shopping for used equipment on Craigslist, bartering your services, using free or inexpensive online applications like Skype (for free calling), Web.com (to setup a Web site) and VistaPrint (for printing business cards and brochures). Always ask for discounts.

At the same time, think of creative ways to increase revenue. Maybe you can mount an online marketing campaign through Google Adwords or use VerticalResponse for an e-mail newsletter.

O.K., you’ve got a plan.

Prove the Concept

Once you’re satisfied with the business plan, the next step is to test it. This means answering the question: Do customers really want to buy what you intend to sell?

It’s a brutal question, but you need to be realistic.

One idea is to talk to potential customers, but avoid your friends; instead, identify a list of likely customers and call them. The good news is that there are many free lists on the Internet. They include sites like CPAdirectory.com, Lawyers.com, Dentists.com and so on.

While the calling is not glamorous, you’ll eventually get a sense of whether there’s demand. You will also get new ideas to refine your product, and you will build valuable sales skills, which is critical for anyone starting a business.

Next, you can conduct a survey using an online service like Zoomerang, which has a panel of about two million people. You can designate groups with up to 500 attributes (industry, age, gender, income and so on). This is a quick way to get feedback on your business idea.

Or, you can set up a free Web site and try selling your product. This was the approach for Sneaky’s BBQ, which set up a blog at sneakysbbq.blogspot.com. Believing that there were few good places for authentic barbecue in San Francisco, Patrick Wachter started to cook up his recipes in his backyard and put out free ads on Craigslist. It was a hit as word-of-mouth spread, helped along by review sites like Yelp. “We can’t even eat our own barbecue anymore,” Mr. Wachter said. “It’s already spoken for by the time we pull it off the smoker.”

Here’s another example: Megan Calhoun saw that it was difficult to use online services to find other mothers. Deciding she wanted to “be fast, be cheap and see where it takes you,” she registered TwitterMoms.com, and instead of building a Web site, she used the free service Ning.com, which allows you to build your own social network. On the first night, four mothers joined, and from there, it grew and grew. Now she has 15,000 members and has attracted advertisers like Lands’ End, Children’s Place and even José Cuervo. The total cost to launch? Only $50.

Raising Capital

This is time-consuming and can distract your attention from the business. It can easily take six months to get your first investment. Investors are naturally hesitant and want to see proof that the business is viable.

That means you will probably need to bootstrap. This is not easy but it does have the advantage of allowing you to keep more control and a larger equity stake.

You can do things like: borrow against your 401(k), life insurance and house; use credit cards; and even do consulting projects.

Next, you can reach out to your friends, family and colleagues. Even though they may trust you, it’s important that you have a convincing business plan and investor contracts. To this end, check out Virgin Money. This online service provides the necessary legal documents, administers the loan payments and makes reports to credit agencies (which will help build a credit history for the business).

It’s tempting to seek financing from banks, angel groups and venture capitalists, but those sources usually look at more established businesses.

Choosing a Legal Structure

If you are bringing on investors or partners or signing contracts, it’s a good idea to set up a legal structure for your venture. Here are the main alternatives:

Sole Proprietorship: You are the sole owner. There is little red tape or expense. But there is a big downside: unlimited liability. If the business is the target of a lawsuit or owes a large debt, the owner’s personal assets are exposed to seizure.

A sole proprietorship is known as a “pass through” entity. This means that the income is taxed on your personal return.

Partnership: There is more than one owner. And as with the sole proprietorship, there is little paperwork involved and it is a pass-through entity for tax purposes. Unfortunately, partnerships also have unlimited liability exposure.

Corporation: The fees can easily range from $200 to $1,000. Even though you can use cost-effective online services to help out, such as LegalZoom, it’s still a good idea to have a lawyer review the documents and filings. You can find a qualified attorney by visiting sites like Avvo.

The main benefit is limited liability protection. This means that the business owner risks only the investment in the company.

Keep in mind that there are different flavors of corporations, which are often based on how taxes are paid. For example, a limited liability company (L.L.C.) and S-Corp are pass-through entities. On the other hand, a C-Corp is taxed — and so are the dividends. Before making a decision, consult a certified public accountant. It can be a big money saver.

Regardless of the legal structure, business owners should also think about the legal issues of the company name. It’s a good idea to find a name that is memorable and distinctive, but that is no easy task. Anders Heie, the founder of KaDonk said: “When thinking of a name, I hit my head against the wall and the sound it made was kadonk, kadonk, kadonk. Our lawyers loved it. It was unique, and had nothing to do with our product, so we grabbed all the domains and went with it.”

A lawyer can help with the process.

On to Plan B: Starting a Business (NYT)

2009-08-23T22:07:00.000-04:00

On to Plan B: Starting a Business

By MICKEY MEECE

CALL them accidental entrepreneurs, unintended entrepreneurs or forced entrepreneurs. A year and a half into the Great Recession, with the jobless rate hovering near double digits, corporate refugees like Lisa Marie Grillos of San Francisco are trying to fend for themselves.

Along with her brother Hernan Barangan, Mrs. Grillos started Hambone Designs, after her full-time contract position with Williams-Sonoma as a production manager wasn’t renewed in January. The new company makes bicycle bags that hold things like keys, wallets and cellphones.

“You have the time — why not focus your energy on something, rather than just trolling Craigslist and sitting and watching TV?” Mrs. Grillos says. “It’s really taking matters in my own hands.”

Mrs. Grillos, 34, built a Web site called hambonedesigns.com, opened a virtual shop on Etsy.com, an online marketplace, and hit San Francisco street fairs. So far, between the online marketing and the street fairs, she and her brother have sold 70 bags, which retail for $20 to $40. Each sale results in a profit.

“We have been talking about mass producing, but we’re not there yet,” Mrs. Grillos says. “It is a whole other thing, approaching stores and having the inventory.”

To help make ends meet, Mrs. Grillos also does textile design and photography projects, and it helps that her husband has a full-time job.

Others among the unemployed are taking the entrepreneurial route. The most recent Index of Entrepreneurial Activity by the Kauffman Foundation showed a slight uptick of new businesses in 2008 — a full recessionary year — over 2007. An average of 320 Americans out of 100,000 formed a business each month, Kauffman said. What’s more, it found, the patterns “provide some early evidence that ‘necessity’ entrepreneurship is increasing and ‘opportunity’ entrepreneurship is decreasing.”

Accidental or by design, entrepreneurship is on the rise again this year. LegalZoom, the online legal document service, says the number of new businesses it helped to form was up 10 percent in the first half of the year, compared with the period a year earlier.

“We were surprised,” says Brian Liu, co-founder and chairman of LegalZoom. “We expected there to be a drastic downtick.”

LegalZoom’s top five areas of incorporation, he says, are real estate, consulting, Internet (including electronic commerce), retail, and construction and contractors.

To be sure, a vast majority of corporate workers who have been laid off since December 2007 have sought another corporate job. After all, starting a business in the worst downturn in decades seems especially risky. Only two-thirds of new small businesses survive at least two years, according to the Small Business Administration. That survival rate falls to 44 percent at four years, and to 31 percent at seven.

The silver lining may be that the survival rate is about the same in expansions and recessions, says Dane Stangler, senior analyst at Kauffman.

WHILE the Internet has made the formation process quick and inexpensive — papers can be filed with LegalZoom, for example, for $149 in addition to state filing fees — the costs of owning a business add up quickly. There are state and local taxes and fees, insurance, salaries and contract pay, overhead, inventory and the like. And these days, lenders are none too generous when it comes to forking over money to new businesses.

These factors, combined with the lack of a steady paycheck, often-inadequate health insurance and the sheer emotional stress of being unemployed, may prevent many people from setting out on their own.

But research on what is known as post-traumatic growth has found that some people become more resilient when faced with adversity, says Shawn Achor, a Harvard researcher. Creativity surges, he says, as they adapt to a new situation.

“Their brain is actually learning at a faster pace than when they are not challenged,” Mr. Achor says. “As a result of this, some individuals, the accidental entrepreneurs, they are the ones who in the midst of crisis actually respond with growth.”

In a report this summer on innovation, Ernst & Young wrote, “Experience shows that entrepreneurs should not give up on start-ups in a down economy.”

Many companies with billion-dollar market capitalizations were started during a recession, the report said, including Starbucks, Intuit and PetSmart.

Research from Kauffman in June found that more than half of the companies on the Fortune 500 list in 2009 and nearly half of the companies on the Inc. magazine 2008 list were founded during a recession or bear market.

Lynn Zuckerman Gray, 60, hopes to be one of the success stories of this recession. She lost her job at Lehman Brothers almost a year ago, when the firm collapsed. A former chief administrative officer of its global real estate group, she found herself competing with a rising number of job seekers for a dwindling pool of jobs.

Ms. Gray ended up participating in a New York City program, offered in conjunction with the Kauffman Foundation, called FastTrac NewVenture. The program, for employees displaced by the financial crisis, sent Ms. Gray in a direction she never thought she would go: starting an on-campus recruiting company called Campus Scout.

“I guess I had an entrepreneur simmering inside me because I’ve always been very creative,” she says.

The cost has been hundreds of dollars here and there, she says. Still, the reality of her financial situation is daunting. Her severance pay from Lehman ended this month, and she is now eating into her savings. So far, her new venture, Campus Scout, is in start-up mode and does not have any clients.

She says she is going to try to get part-time work, teach university classes and do some freelance writing to generate cash flow so she can keep her business going for at least two years.

IT’S not just ex-corporate workers who have started businesses out of necessity. In February, Jackie Burke, 68, a retired schoolteacher, and her daughter, Jackie McAlister, 38, a schoolteacher on maternity leave, formed the Cup and Saucer Cookie Company in Ocean City, N.J.

“I never in my lifetime thought of owning a business,” Ms. McAlister said, “the economy has forced us to be creative.” And fast-acting. Stocks nosedived in the fall, and so did her mother’s retirement account.

“Mom was crying, and she said, ‘Maybe I can go to Borders to see if they are hiring.’ I said, I’m not going to watch my retired 68-year-old mom, with two knee replacements, go work at Borders. This is not going to happen.”

Instead, Ms. McAlister and her mother brainstormed about starting an Internet business. A claim to fame they both had was making cookies, she said. She did research in January, filed incorporation papers on LegalZoom in February, started a Web site using GoDaddy.com, and by March sold their first cookies.

“It sounds like a crazy idea, but it was out of total necessity,” Ms. McAlister said. “We had to do something.”

Their Internet business is slow, helped mainly through her Facebook friends and local news coverage, she said. They sell about $200 worth on the Internet each month and about $100 at a local cafe each month. They are near to breaking even, Ms. McAlister said.

Even when she returns to school in the fall, she said, they will keep it going. “The experience has been totally worth it,” she said, and has had the added benefit of distracting them from things out of their control, like the stock market.

Entrepreneurs like the McAlisters, Ms. Gray and Mrs. Grillos have been helped by a growing number of companies that cater to the needs of new businesses.

Recently, Mrs. Grillos attended a networking event in San Francisco organized by Outright.com, which offers bookkeeping software, and Network Solutions, a company that helps small businesses start and market on the Web. The companies had specialists on hand to talk about accounting, tax, legal and other issues facing new business owners.

Kevin Reeth, chief executive of Outright, says, “We realized these people, who have had careers and worked for other people most of their professional life, are not at all prepared to go out and become a business owner.”

The companies jointly started a Web site, unintentionalentrepreneur.com, as a resource and embarked on a five-city tour in partnership with local chambers of commerce and Score, the national group of volunteer mentors. Last week, the tour ended in Manhattan, but the hope is that the networking will continue, Mr. Reeth says.

ANOTHER company that is tailoring its services to very small and new businesses is InfoStreet, a maker of Web-based small-business management software. Michael Hart, 53, of Nashville, says InfoStreet recently had the backbone of NewTerraLiving.com, his new online marketplace for eco-friendly goods, up and running very quickly, and at a very affordable cost.

Mr. Hart started his business after he left an electronic publishing company a year ago. He has been living off his savings and now has booked sales on his site. “The significantly lower costs associated with building the technology infrastructure as well as the phenomenon of social network marketing allowed me to jump in,” he says.

So, will all of these new ventures become viable entities, or are they simply résumé builders and time fillers for people temporarily out of work? For Mr. Hart, it is definitely not a path to a cubicle. “If successful, I don’t see myself returning to corporate America,” he says. “If I’m not successful, I would definitely start another company — if my wife doesn’t kill me.”

Mrs. Grillos acknowledges that she is still job-hunting. “It would be great if this became my full-time job and grew that big,” she says of Hambone Designs. “Even if I found one, I would still have this on the side.”

Martha E. Mangelsdorf, author of “Strategies for Successful Career Change,” says job seekers should be careful about spreading their energy too thinly. “Starting an ambitious business is such a consuming endeavor, I think it would be hard to do that and look for a job at the same time,” Ms. Mangelsdorf says.

“You should try to be clear if you’re starting a business that that’s really what you want to do, as opposed to you’re only doing it because you can’t find work elsewhere,” she says.

No matter what, those who become accidental entrepreneurs have a leg up on the competition, according to Mr. Reeth of Outright. “The process of going into business is going to make anybody who tried it better, smarter and more capable,” he says.

“Whether it ultimately ends a successful journey in terms of staying in business and this is what you do or you go back and get another job,” he adds, “the skills they will have to develop are going to serve them very well.”

Wipe Out Shopping Cart Abandonment (Entrepreneur.com)

2009-08-19T13:03:00.001-04:00

Wipe Out Shopping Cart Abandonment

These tips will help you turn clicks into cash.

By Eddie Davis | August 07, 2009

URL: http://www.entrepreneur.com/ebusiness/buildingawebsite/article202928.html

Imagine you owned a store where half your customers left their purchases on the checkout counter. That, in effect, is happening all too often to online merchants. Potential customers go shopping on their site, like what they see, and put merchandise in the shopping cart. But somewhere during the checkout process, they "abandon" their cart and depart the site, sometimes never to return.

What went wrong? As an online merchant, knowing the answers can make a big difference in how well you convert a customer's clicks into an actual sale.

Studies have demonstrated that the single biggest cause of cart abandonment is an unexpectedly high transaction cost--typically a high shipping cost--that is only revealed at checkout. A customer believes a transaction is going to be about $75, steps up to the virtual counter, arranges payment, only to learn that the actual total is $100. We shouldn't be surprised if that shopper "walks off" in a huff. Indeed, shopping cart abandonment is often a sign of deeper troubles for the merchant. It's not just an indicator of a lost sale, but also of a troubled relationship. If customers have a sense of being baited and switched, their overall confidence in the merchant gets undermined.

The problem is aggravated by the high variability of shipping costs. During a recent online shopping excursion for a stationary bicycle, I found that shipping fees ranged from "free" to $150. That's a huge difference. And yet in many cases, the total "out-the-door" cost wasn't apparent until deep in the checkout process.

What can merchants do? First of all, you should keep shipping costs in line with customer expectations. A small, lightweight item like a pair of socks, a garden trowel or camera battery shouldn't cost $17 to ship. And adding one of these items to an existing purchase shouldn't cost $17 more. Some merchants have taken the mystery out of checkout by offering free shipping across their product lines. But if you can't afford that, at least give shoppers an early, clear indication of the actual cost. And while this might sound obvious, the same advice also applies to good news: Tell customers about special discounts, coupons and other incentives up front, not at checkout. The guiding principle: When it comes to payment, online shoppers don't like surprises.

Security and comparison shopping
Cart abandonment happens for other reasons as well. Sometimes customers are uneasy about handing over their personal information, including credit card numbers, to an unknown merchant. You can remove that concern by offering multiple options for electronic payment, including services that allow payment without disclosing financial information to the merchant.

Some customers don't click on the purchase button because, at the last minute, they want to assure themselves they are getting the best possible deal. The temptation is understandable. E-commerce has matured since its early days, and customers are the beneficiaries. More sites are competing for their business, and customers can use "shopping engines" to compare price and merchant reputations at a glance. The obvious advice: Keep your prices competitive and your service exemplary so that new customers keep coming back. In looking for the ultimate bargain, some customers depart to seek out discount coupons. If your competition is trumping you with this tactic, perhaps you should follow suit.

Sometimes, the barrier to purchase is not cost, but an unanswered question. "How long do I have for a return?" "Can I see the manual?" "Do you have it in green?" "Can I include a Valentine's card?" No merchant can anticipate every question, nor will every customer locate every snippet of information on your site. So don't hide behind your website. Provide a telephone number, an e-mail address, or both--and respond to queries promptly and personally, taking the time to hear the actual question.

Finally, some shoppers abandon their carts simply because they cannot figure out how the checkout process works. If your customers are hunting for the "purchase" button, it's time for a site redesign--preferably with something simpler.

I don't want to paint too grim a picture. Most people who enter checkout hit the purchase button. Your goal with these measures is simply to increase that percentage. Moreover, an abandoned cart is not the same as abandoned hope--a surprising number of shoppers will return and make a purchase later on. You should welcome them back like lost friends. Keep their merchandise in their cart. Offer them discounts. If they do make a purchase, take extra care to make sure they are happy. In other words, you'll make the most sales when everything clicks.

Eddie Davis is the senior director of merchant services at PayPal and is responsible for providing PayPal's payment processing services to thousands of small and medium-sized online retailers. Davis joined PayPal in 2005 with a background in merchant sales and acquisitions.

These tips will help you turn clicks into cash.

By Eddie Davis | August 07, 2009

URL: http://www.entrepreneur.com/ebusiness/buildingawebsite/article202928.html

4 Ways to Gain Customer Loyalty (Entrepreneur.com)

2009-08-19T13:01:00.001-04:00

4 Ways to Gain Customer Loyalty

Stand out on the cheap with superior customer service.

By Ray Silverstein | August 10, 2009

URL: http://www.entrepreneur.com/management/leadership/leadershipcolumnistraysilverstein/article202956.html

I recently dined at a very old, very famous restaurant in Chicago. I’ve been pondering the subject of customer service ever since.

This restaurant--let’s call it The Old Gray Mare--was once the gold standard of American seafood restaurants. It was celebrated for its outstanding menu, classic decor and responsive service. When you made a reservation there, you could count on having an exceptional evening.

This time around, it was anything but. Thank goodness I had a lively dining companion; otherwise the evening would have been a total disaster. The decor was outdated, the food was average and the wait service was slow and unresponsive. The Old Gray Mare--she ain’t what she used to be.

This is a perfect example of what not to do in business. Don’t take your customer or market position for granted. Don’t let your service capabilities slide. Don’t coast on your reputation while allowing your brand to deteriorate. Inevitably, it will catch up with you.

Evaluate Your Business
What is your customer experience like? Are you “wowing” key customers with personalized service? With so much business occurring online, wows aren’t easy to come by these days. To make your company top of mind, you must find ways to build vibrant personal customer relationships, even in the digital age.

It’s not enough to provide decent service--that’s expected. Poor service certainly will get you noticed--but with negative results. Case in point: you won’t find me at The Old Gray Mare ever again.

Your brand is only as good as your last touch with the customer. While small businesses don’t have the marketing dollars to create major brand awareness, they do have the ability to craft a brand in their target market by providing service excellence. That’s how you achieve top of mind. That’s how you earn last look on proposals.

4 Ways to Gain Customer Loyalty

Ensure you have the right people. If you’ve been tolerating an unenthusiastic service representative, get them out of that role ASAP. They’re hurting your business. Remember, there is plenty of talent to choose from right now.
Offer a customer service refresher course. Get your employees focused on your customers. Put incentives in place and recognize above-and-beyond service.
Review your workflow. Look at your processes from your customers’ point of view. Are you inconveniencing customers because of systems limitations?
Listen to customer complaints. Fix problems fast and bend over backwards to make things right. Customers can do you a huge favor when they offer valid, eye-opening feedback, even if it’s not what you want to hear.

The current business environment is difficult, but now is the time to enhance your customer relationships. When things improve, you’ll reap the harvest. Providing great customer service is not expensive, in fact, it’s cheaper since it spares you the labor of making corrections, issuing credits, mending fences, etc. But, most importantly, you’ll keep your customers coming back.

We are always eager to land new business, but now’s the time to focus on retaining existing customers, too.

Ray Silverstein is the president of PRO: President’s Resource Organization,a network of advisory boards for small business owners. He recently took his own advice and expanded his business to include The PRO Alliance, the peer group experience, minus the peer group. Silverstein is also the author of The Best Secrets of Great Small Businesses.

Small-Business Stimulus Loans Off to Slow Start (NYT)

2009-08-17T10:59:00.000-04:00

Small-Business Stimulus Loans Off to Slow Start

By ROBB MANDELBAUM

Small-business owners hoping for some assistance of the sort given to the nation’s biggest banks applauded when the Small Business Administration unveiled a lending program in May.

Washington officials and some lenders predicted that the program, providing emergency bridge loans as part of the economic stimulus package, would save jobs and provide a lifeline for vulnerable businesses. Many in the banking industry expected it to be fully subscribed in months.

But the program is off to a slow start, and many banks, including some of the largest, appear reluctant to take part.

With $255 million, the program is prepared to make about 10,000 loans of up to $35,000 each. As of Monday, the agency reported that only 1,127 loans, totaling $36.8 million, had been extended.

While the agency maintains that the program is on track, some in the banking industry say the banks are moving slowly because they have little incentive. “There’s not a lot of profit motive in a $35,000 loan stretched over six years,” said Paul Merski, chief economist for the Independent Community Bankers of America, a trade association.

Bob Seiwert, of the Center for Commercial Lending and Business Banking at the American Bankers Association, says “stringent underwriting standards” will require as much work as larger loans, making these even less economical.

Alex Cooper, a counselor at the Pima Community College Small Business Development Center in Tucson, says he has helped nearly 30 clients apply for the loans. None has received one.

“It’s a disappointment,” said Mr. Cooper. “I thought the banks would be more interested in the community and try to help small businesses.”

Under the program, known as America’s Recovery Capital, a business owner applies to a bank for a loan and, if approved, can use the proceeds to retire existing debt. The borrower pays no interest on the new loan.

Instead, the Small Business Administration pays the bank two percentage points over the prime rate. After a one-year deferral, the borrower repays the loan over five years. The agency will repay the lender in case of default.

At the current rate, the program could have loans available through September 2010, when it is set to expire. “We like the fact, actually, that they will be spread out over time,” said Karen G. Mills, head of the Small Business Administration. “We have no doubt that we will make 10,000 loans.”

Not surprisingly, small-business owners are less pleased with the slow pace. Among the frustrated applicants is Mark Rusin, a client of Mr. Cooper’s whose restaurant business has fallen precipitously in the last year.

Mr. Rusin bought a franchise location of Uno Chicago Grill north of Tucson in April 2007 for $3.2 million. He dropped the franchise agreement because of fees and restyled the restaurant as the Loop Taste of Chicago.

Then came the recession. As the snowbirds left for points north this spring, sales tumbled. June revenue was $72,000, down 28 percent from a year earlier. “I’m bleeding out to the tune of 10 grand a month right now,” Mr. Rusin said. One of the new loans, he said, would see him through the next couple of months.

Part of the problem for borrowers like Mr. Rusin may be that Congress restricted loan eligibility to companies that are simultaneously struggling yet viable. That means the business must face an “immediate financial hardship,” meaning a 20 percent reduction in a critical operating number, such as revenue.

But the company, which has to have been in business at least two years, also has to have shown positive cash flow, if not an actual profit, in one of the last two years. It also must do a two-year cash-flow projection to show it can repay all its obligations.

The effort required to verify all of this probably explains why those banks that are participating in the program are lending primarily to existing clients. “From a financial perspective, it really is a loan that makes sense for an existing customer,” Mr. Merski said. “You’re not going to have to put out a lot of resources to do a very costly underwriting. You know the business.”

Mr. Rusin was fortunate in that the lender holding a first position on his commercial mortgage, M & I Bank of Milwaukee, is participating in the program. He hoped to use the loan to pay his vendors. But soon after he submitted his application, Mr. Rusin said, the bank told him he could use the loan only to pay down the earlier debt owed to the bank.

M & I ultimately denied Mr. Rusin’s application. The bank, he says, told him that was because his business had failed to show a profit in either of the previous two years, despite the more forgiving guidelines of the program.

M & I Bank declined to comment on this, citing privacy laws and its corporate policy.

“The guidelines are just that, a guideline,” said Mike Stamler of the Small Business Administration. The agency and the banks, he says, have the flexibility to deny an applicant that meets the guidelines — or approve one that does not, as long as the loan is deemed “reasonable.”

It would appear that banks like M & I are using that flexibility more to deny than to approve loans. For example, Wells Fargo, one of the largest Small Business Administration lenders, has received 700 to 800 completed applications, said Tom Burke, the senior vice president overseeing small-business loans at Wells Fargo, but has approved only “several dozen.” (As of Monday, the agency said it had in turn blessed only three of them.)

“What we’re seeing,” Mr. Burke said, “is a lot of people who are incredibly leveraged, and it’s very difficult for them to pay back their existing debt, much less take a new one.”

Mr. Seiwert of the American Bankers Association and Mr. Merski of the independent bankers group say banks are lending conservatively because they fear the agency will renege on its guarantee.

“While the loan is 100 percent guaranteed, it’s only 100 percent guaranteed if you follow all of the underwriting guidelines, and some of those guidelines are very fuzzy,” Mr. Seiwert said. “If you miss one, you put your whole loan at risk.”

Ms. Mills of the small-business agency acknowledged that there had been tension over guarantees but said that issue had largely been resolved. The agency, she added, honors its guarantee in “95 percent of the cases, and we’re fairly quick about our turnaround as well.”

The leaders of the small-business committees in Congress do not criticize the banks. Mary L. Landrieu, Democrat of Louisiana and chairwoman of the Senate committee, said through a spokeswoman that she understood their reluctance to lend to struggling firms.

Nydia M. Velázquez, Democrat of New York and chairwoman of the House committee, accused the small-business agency of failing to establish the program within the 15 days that Congress demanded and of failing to reach out to banks. But Ms. Velázquez, who has claimed some credit for inserting the lending provision into the stimulus bill, said through a spokesman that she expected additional lenders to participate “as they learn more about the program’s incentives.”

Ms. Mills of the agency agrees that more banks will sign up. But she defends the time spent establishing the program. The new loans “have a much higher risk profile than what the S.B.A. usually does,” she said. “So we have taken great care to be good stewards of the taxpayers’ money.”

Mr. Rusin, for his part, remains optimistic. He persuaded one of his lenders to defer payments on a loan, saving himself more than $50,000 in the short term. Even before getting the deferral, Mr. Rusin insisted that once construction near his restaurant was out of the way and the recession was over, “I should be in pretty good shape here.”

As if on cue, a couple finishing an early dinner headed toward the door. “You’ve done a wonderful job here,” the man said. “It was the taste of Chicago.”

5 Questions to Ask Your Web Developer (Entrepreneur.com)

2009-08-13T13:10:00.006-04:00

A very relevant article considering that most websites in PR are poorly designed and do not meet industry standards. For example, Banco Popular's website lacks the industry's generally accepted usability standards.

5 Questions to Ask Your Web Developer

If you want your site to work--and keep working--consider these factors before you build it.

By Jennifer Shaheen | July 30, 2009

URL: http://www.entrepreneur.com/ebusiness/buildingawebsite/article202862.html

Building a website can be a lot like putting together a jigsaw puzzle--sometimes the picture looks good, but when you look closely, pieces are in the wrong places. A website might function, but as soon as you make a change or an update, the picture falls apart.

How do you avoid hiring a designer or developer that builds a website like this? Here are some questions you can ask and some feedback to help you understand their answers.

1. What web standards do they follow?
This is a great question that will fluster someone who doesn’t have standards. What are web standards? This is the way of designing and coding a website that allows the website to grow with technology and the web visitor. This means using clean code and technologies like:

CSS (Cascading Style Sheets): a simple mechanism for adding style like fonts, colors, and spacing to web pages
XHTML (Extensible Hypertext Markup Language): a markup language that has the same depth of expression as HTML, but also conforms to XML syntax
ECMA Scripts: the standard version of JavaScript used on most web browsers.

You don’t have to know how to write the languages; you just have to know what the standards are to understand the answer.

A simple way to help you connect to this question is to remember that people online don't all use the same web browser or operating system. Designing and developing to standards gives your website the ability to look and function the way it should on different platforms.

2. Do they design for SEO best practices?
It’s no secret today that everyone wants a website that can be found on search engines. Implementing search engine optimization may not be what you want your designer or developer to do for you; however, how your site is designed or coded can affect your strategy when you are ready. When you interview developers, this is a great question to ask and see if the person you’re interviewing is familiar with how to code to meet SEO standards. Here are a few items that affect SEO best practices:

CSS (Cascading Style Sheets): Designing a website to meet SEO best practices means using style sheets to cut down on the amount of code on your web page. Search engines like text, not code.
Script files: When you use dynamic items on your site like image galleries or mouse-over menus, usually these are created through JavaScript. To follow proper SEO standards, script files should be created for pages instead of having the script on your web page.
Web page content: Your text or content should be on the page as much as possible this can even include your website navigation. There are ways to make text visually appealing without having the designer put it inside an image. Images that contain words are not picked up as content by search engines.

If SEO is a strategy you are considering down the line, it's a good idea to make sure your site will be built with this strategy in mind.

3. How do they plan for change or growth?
One of the most stressful lessons learned is that the website you built yesterday will not allow you to grow tomorrow. Being told you have to start over is one of those statements every business owner can't bear to hear. Before you begin, ask the question, “Does the technology you’re using allow me to grow or add additional functions?” You may even want to take this further and think about tools you’d want to add down the line. You can also ask designers or developers to provide you with a brief list of tools they have already integrated with sites like yours. This allows you not only the opportunity to see if they are knowledgeable, but also whether they're supportive in providing you with ideas.

4. How do they test their work?
As I mentioned above, not all of your consumers use the same technology. But to ensure things are operating the way they should or displaying correctly, web developer need to test their work. This issue might seem trivial, but you’d be surprised how many firms only test for one web browser. I recommend you ask specifically what web browsers and versions they test for during the development process. If you’re building an online community, social or e-commerce website, testing is an important part of your success. Secure payment gateways need to be tested in a real environment. Be sure to get the specifics of what your firm considers to be part of a test phase and what it's being held accountable for after the website has gone live.

5. How do they handle support requests?
After a website has officially launched inevitably there will be a problem--it’s technology; it happens. The question you want to know before you put pen to contract is how does your new firm handle support or bugs--technical hiccups with the website? Every firm will approach this differently, so pay close attention to how it phrase its response and commitment.

Building a website depending on the functions you need can be a lot like putting a puzzle together. The key to success is finding the right firm who understands the pieces that need to come together for your business.

Jennifer Shaheen, the e-marketing and Technology Therapist, has more 10 years experience working with small- to mid-sized businesses on their e-marketing and web development needs. You can learn more about her by visiting her web site, TechnologyTherapy.com

5 Steps to Building a Successful Niche Business (NYT)

2009-08-06T18:46:00.002-04:00

5 Steps to Building a Successful Niche Business

A simple service can win big in a small market.

By Scott Gerber | August 03, 2009

URL: http://www.entrepreneur.com/startingabusiness/youngentrepreneurscolumnistscottgerber/article202900.html

From aquatic sporting goods for dogs to Michelle Obama-inspired fashion websites, niche products and services have the potential to generate big bucks if they capture the hearts, minds and wallets of a dedicated consumer base. Unlike conglomerates that target the masses, niche businesses cater to highly defined markets that are often over-looked, underserved or disenfranchised by larger competitors. With an abundance of available outlets, resources and online platforms, identifying and reaching a target audience has never been easier for small business owners. Are you ready to become the big fish in a small pond? Is your passion unique enough to turn a profit? Here are 5 steps to make your niche business a hit.

Create a Simple Service
A simple service is a singular offering that focuses on the needs of a narrowly defined customer base. Whether you yearn to be the premier manufacturer of dog lingerie or the industry-leading producer of edible Christmas tree ornaments, make sure you can easily answer these questions: Who needs your service? What’s uniquely useful about that service? What makes your service better than your competition? Fine-tune your brand name, website, and marketing tactics to focus solely on selling your unique specialization and expertise. Remember: Focus. Focus. Focus.

Real World Example: In 2004, my partners and I launched a typical "do everything" video production company. After years of under-performing, I transformed the company into a single product specialist. While the vast majority of video production companies still tout their large service rosters, Sizzle it! has carved out a niche as the only company that specializes in sizzle reels--stylized 3-to-5 minute product videos commonly used by PR and marketing professionals. Result; Sizzle It! has emerged as a go-to company for sizzle reels and benefits from top keyword visibility on all major search engines.

Craft Your Niche Marketplace
The key to your simple service’s success is to capitalize on a niche marketplace that you feel is being underserved. A niche marketplace is a small, specialized market segment within a larger, viable commercial industry. When identifying the niche marketplace you wish to enter, consider the following questions: Who lives in your marketplace? Why have they been underserved? How can you better serve them? How can you unite them? In short, why is your simple service the solution to their problem? Compile the data you collect to produce a detailed profile of your target customer. Using the data from your customer profile, join or create online groups, feeds and networks that are relevant to your simple service. Connect with your niche marketplace’s key decision makers, enthusiasts, and influencers using social networks such as Facebook, Ning, Twitter and MeetUp.

Real World Example: There are thousands of T-shirt stores both online and offline, but few have truly established or engaged a niche marketplace. Threadless is a user-generated T-Shirt and apparel website that determines its product line based on the results of online design competitions. Winning artists receive recognition, cash prizes and their designs sold on Threadless gear. The company has united a niche marketplace of trendsetting hipsters, artists and design aficionados seeking wearable art. Result: the company sells over 1 million shirts per year.

Become the Niche’s Leading Authority
As the creator of your simple service, you offer your niche marketplace valuable insight and advice. However, simply proclaiming you are an expert will get you nowhere. Shamelessly self-promoting your service will also lead to a dead end. Authenticity builds credibility. Relate to your constituents. Tell the story behind the founding of your simple service. What problems did you encounter? How did you solve them? Once you’ve perfected your message, disseminate relevant content through "expert real estate" such as blogs, forums, press releases, speaking engagements, newsletters, web videos and podcasts. Remember, no one knows your marketplace better than you.

Real World Example: Joy Berry is a best-selling author of children's books and, according to Scholastic, the inventor of self-help books for kids. For over 30 years, Joy’s advice and media products have focused on helping parents to raise responsible kids by teaching them the living skills their children need to know at various developmental stages. Result: Joy Berry has connected to a worldwide audience and sold an astonishing 85 million books.

Be Specific, Distinctive and Relevant
Seize every opportunity to point out why your service is a better fit for your niche marketplace than competitive offerings. Take a good look at all of the components that make up your simple service, from concept to manufacturing and distribution. What makes you stand out? What do you offer that competitors don’t? Why are you more relevant to your niche marketplace? Use the answers to these questions as ammunition against the competition. While a competitor may tout their “multi-service one-stop-shop”, your niche marketplace prefers a specialist. Your competitor may be a low-cost leader, but your niche marketplace appreciates high quality craftsmanship.

Real World Example: While major corporations have dominated the print yearbook industry for decades, Yearbook Innovation, a school memory product provider in Staten Island, N.Y., believed cash-strapped schools were ready for a change. Yearbook Innovation differentiated its yearbook products by offering more hands-on customer service and production services than competitors, eliminating penalties and late fees, and slashing 20 percent--off a school’s previous yearbook contract--all without a loss in product quality. Result: the company has begun to take away market share from entrenched competitors in their local area.

Copy, Paste, and Repeat
Keep hammering your message home. Expand on your successes. Find innovative ways to grow your niche marketplace. Locate new avenues, channels and “expert real estate” to showcase your simple service, its competitive advantages and your expertise. You know what’s worked; now increase your exposure. Copy, paste, and repeat.

Real World Example: Google began as a simple service that could only dream of being in the same league as companies such as Yahoo and Microsoft. Today, Google has become the undisputed online advertising titan by consistently developing, acquiring and partnering with high trafficked online destinations that expand its AdWords program. Result: Google generates billions of dollars per year in revenue.

Are you a young entrepreneur with a unique venture? Email us about it at youngentrepreneurcolumn@gmail.com

Scott D. Gerber is Entrepreneur.com's Young Entrepreneur columnist and CEO of Gerber Entertainment, a brand development and venture management company that specializes in the entertainment, Internet, media and marketing industries. For information on speaking engagements, media appearances or Gerber Entertainment's portfolio of businesses visit www.GerberEntertainment.com.

A Small-Business Guide to Intellectual Property (NYT)

2009-08-05T18:28:00.001-04:00

A Small-Business Guide to Intellectual Property

By DARREN DAHL

Skip to next paragraph

From Mark Blaxill and Ralph Eckhardt, founders of 3LP Advisors, an intellectual property consulting company in Boston, and co-authors of a guide to I.P., "The Invisible Edge" (Portfolio, 2009).

Securing your intellectual property involves more than patents. Trademarks, trade dress and even Web site addresses are all part of I.P.
Think strategically when it comes to international rights. Start with countries where you might sell.
Don't sit on unused I.P. Use it to open additional revenue streams or bring about new partnerships through licensing.

The U.S. Patent and Trademark Office , for more information about I.P. for small business.
The World Intellectual Property Organization , for more about international I.P. rights.
An easy-to-use online global directory for I.P. resources.
Use Google's patent site to perform your patent search. You can also search here and here.
Patently-O by Dennis Crouch is one of the most popular blogs on the subject of I.P. law.

The two most precious resources for any small-business owner are time and money. That’s why when the subject of intellectual property comes up, many owners run in the other direction. They see images of expensive lawyers and use that as an excuse to ignore the topic, reasoning that it is a problem for big companies to worry about.

The trouble is, with the rise of competition through the Internet and on the global market, understanding intellectual property is more critical than ever for small-business owners. Let’s explore some of the common fallacies:

1. For small-business owners, it’s not worth the time or effort to secure intellectual property rights.

Daniel Lubetzky, chief executive of New York City-based Kind Snacks, had high hopes when he and his company attended the Natural Products Expo West in Anaheim, Calif., in March. And who could blame him, since his Kind Plus bars had been named the best new product at the Natural Products Expo East last October?

But it didn’t take long before Mr. Lubetzky knew something had gone wrong: He kept hearing how one of his competitors had copied the packaging, look and feel of his bars.

Fortunately for Mr. Lubetzky, he had secured crucial components of intellectual property like trademarks, trade dress (the look and feel of a product) and Web addresses after founding his company. Unlike a patent, which can cost up to $25,000 to secure, trademarks and Web addresses can be obtained relatively cheaply and without the aid of a lawyer.

With the legal documentation to back up his intellectual property rights, Mr. Lubetzky sent the offending company a cease-and-desist letter, which achieved the desired result. “Too many entrepreneurs forget there is more to I.P. than just patents,” said Mr. Lubetzky, who happens to be a lawyer.

2. Once I get a trademark, my brand is safe.

It may be. But consider what happened to Tracey Deschaine, who runs a restaurant called Dixie Picnic in Ocean City, N.J.

When Ms. Deschaine opened her business in 2006, she secured trademarks on her business name and logo and on the name of her signature item, “upcakes,” which are upside-down frosted cupcakes. The problem, she says, was that even though she had obtained the trademarks, someone monitoring the activity on the United States Patent and Trademark Office’s Web site had spotted her application and secured upcakes.com as the Web address, or U.R.L., before she could.

“I had no idea that even though I have a trademark, someone else could just go register the U.R.L.,” she said. “I wish I had planned ahead and bought the site before I did that.”

3. Having a patent gives me the right to produce something.

This is a very fundamental misunderstanding. Actually, what a patent does is give you the right to prevent someone else from producing what your patent covers. “Having a strong I.P. position helps ensure that other people pay you for your innovation like they would a toll on a road,” Mr. Kocher said.

But even if you do have a patent, there’s no guarantee that someone won’t try to get around it. There’s also no guarantee that you will win if you fight that person. But if you have your I.P. ducks in a row and a commitment to do whatever you can to defend those rights, you do have a fighting chance — even in a fight against a much larger company.

Consider the example of Cryptography Research, a 20-employee technology firm in San Francisco that specializes in data security. Beginning in 2004, the company made the decision to pursue litigation against the credit card giant Visa, which Cryptography asserted was infringing on its patents covering smart cards. To pursue the case against Visa, however, Cryptography’s founder, Paul Kocher, knew he needed a serious war chest in addition to his patent portfolio.

That’s why he decided to sell off another piece of his business, patents covering technology that protects Blu-ray discs from piracy, to Macrovision, which is now known as Rovi, in 2007 for $45 million. “All of a sudden we became a formidable opponent for someone who thought we couldn’t fight,” Mr. Kocher said. In the end, the gamble paid off, as the two companies settled out of court, with Visa’s agreeing to license the technology from Cryptography.

4. If I have a patent or trademark in the United States, I don’t need to worry about the rest of the world.

It depends on your business model. Intellectual property rights, which also include country-specific U.R.L.’s, need to be obtained country by country, some of which protect them better than others. The cost can vary, too.

In Japan, for example, it is notoriously expensive to acquire patents. In addition, the annual fees required to maintain the patents there are often prohibitively expensive for small businesses, said Gary Johnson, chief executive of Blue Spark Technologies, a manufacturer based in West Lake, Ohio, that makes small, flexible batteries used in things like radio frequency identification tags.

“What we have done is to develop a strategy to go after I.P. protection in a limited number of countries that we think we are most likely to sell or manufacture in, like the U.S. and China,” he said. “A lot of the choice comes down to what your business plan tells you.” To decide what your international I.P. strategy should be, consult a lawyer and conduct some cost-benefit analysis to see if expanding your I.P. rights makes sense.

5. People who collect patents but don’t actually make anything are “patent trolls,” parasites who can make money only by filing lawsuits against real businesses.

The term “patent troll” was coined in the wake of the epic lawsuit fought between NTP, a small holding company, and Research in Motion, which makes the hugely popular BlackBerry. The focal point of the dispute was a patent for wireless e-mail delivery held by NTP — something that R.I.M. eventually would pay millions of dollars to license. But what most people remember about the story is the lawsuits and the notion that NTP was somehow in the wrong for trying to enforce its patent, mostly because it didn’t make any products itself.

But consider that many inventors never set out to build a company, only to partner with someone who would bring their products to life. Thomas Edison, for instance, received more than 1,000 patents — many of which he licensed to other companies. “He created what we might consider the first innovation factory,” says Mark Blaxill a co-founder of 3LP Advisors, an intellectual property consulting company based in Boston.

A more recent example is Trident Design, a company founded by an inventor, Chris Hawker, which patented and then licensed the design for the PowerSquid. Like Edison, Mr. Hawker’s company invents products, builds an intellectual-property wall around them and then licenses them to other companies.

The PowerSquid is now manufactured by a division of Phillips Electronics and sold by a spinoff of Trident called Flexity. “Our entire business model is leveraging our I.P.,” Mr. Hawker said.

Michael Milken Backs New Business Advice Site (NYT)

2009-07-30T14:52:00.001-04:00

Michael Milken Backs New Business Advice Site

By Brad Stone

As Forbes, Fortune, Business Week and other management magazines wither away, another business media start-up with an unusual pedigree is moving to fill the void.

Fred Prouser/Reuters Michael R. Milken

Bizmore, which goes live on Wednesday, aims to be a sort of Yahoo Answers for executives at small and medium-size companies. Users pose business questions — like “Is search engine optimization right for you?” or “How do I increase online sales?” — and others weigh in with answers and vote the best responses to the top. (You can get a quick taste of Bizmore’s advice on its Twitter feed.)

Bizmore will round out that user-generated content with contributions from freelance writers on evergreen topics like how chief executives should plan their succession strategies. It has also secured the (unpaid) contributions of management gurus like Jeffrey Pfeffer, a Stanford University business school professor ,who hope to sell a few more books in the process of answering questions like “What is the single biggest and costliest mistake you have seen execs and C.E.O.’s make time and again?”

The ideas behind Bizmore are not new, of course. Other companies, including LinkedIn and The Wall Street Journal, offer similar Q&A features.

What’s most interesting about the San Francisco start-up is its backer: the financier Michael R. Milken.

The company is a subsidiary of Vistage International, an executive coaching and networking organization with about 15,000 members who pay up to $13,000 a year to attend meetings, hobnob with fellow execs and get one-on-one leadership counseling.

Vistage, based in San Diego, is partly owned by Mr. Milken, the philanthropist and former junk bond king. Mr. Milken sits on Vistage’s board and was instrumental in the founding and financing of Bizmore, the companies say. (So far, Vistage has committed about $10 million in seed financing.)

Rafael Pastor, chief executive of Vistage and a former executive vice president at News Corporation, said Bizmore’s opportunity is to provide “instantaneous information that is very tailored to a specific question or need, which some of those old media organizations couldn’t do even when they were at their height.”

The start-up, based in San Francisco, is being run by Alice Hill, the former editorial director of CNet Networks, and Jeffrey Davis, a former senior editor at Time Warner’s now defunct Business 2.0 magazine who ran BNet, a business advice site owned by CNet. The site currently runs ads from Google but plans to expand its ad inventory and also at some point charge for setting up private networks for companies, affinity groups and organizations like Vistage itself.

Should You Buy a Prepackaged Website? (Entrepreneur.com)

2009-07-04T15:47:00.000-04:00

Should You Buy a Prepackaged Website?

It's a great way to get started quickly, but consider these factors.

By Jennifer Shaheen | June 23, 2009

The small-business website seems to be one of the simplest things to launch today. Everywhere you turn, companies are giving you what appears to be the perfect website for a startup. It's like walking into Ikea and buying a bookshelf: All you need to do is put it together. Seems simple enough, but before you buy an off-the-shelf website, understand what you're buying and what you need for your business.

Take a moment to sketch out what you need from your website. Today's websites are more than just online brochures, and the first thing to do is outline what you need from your website. Here are few features you may want to think about when creating your list of needs:

Content Control
We all want to control content on our websites and be able to add and edit text. How flexible do you need the text control to be on your website? Do you have special features in mind for working with your website content? Are you concerned about the number of pages? Will you be starting with five pages today, but grow the site to 15 or 20 pages in the next few months?

Design and Layout
Do you have an idea about how you want your website to look and work? Do you want your website to have a navigation bar at the top of your webpage, the side or both? Are you hoping to have some pages with a layout that is in one color and a separate section in another color? Some template services only allow one theme, so this is an important question.

Online Forms
Do you need your website to collect information through online forms? Will you need more than one form on your website? Where will you want these forms? For example, will you want the web from to be apart of the design like a price quote or only on the contact page?

Audio/Video
Will your website be providing audio or video? Do you have the know-how to code these items for the web, or do you need your website application to help with this service? Do you know how large your average file size on your video will be? Some applications limit uploads over certain sizes.

Sales
Are you planning to sell online? How many products? Do you want your website to have all the tools needed to collect credit cards securely? Do you want to show two or three views of your product? Do you want exact shipping costs calculated based on your products' weights? Will you need your website to provide the orders to a third-party fulfillment company or distribution center?

There are many questions here, and many more you should ask yourself. By taking the time to outline your needs now, you can know what you're shopping for in a website application provider. Think of it like making a grocery list before you go food shopping: If you don't have it on the list you may forget it, and then get distracted by the other things on the shelf. Buying off the shelf means knowing what tools you need that application to provide. This outline will also prepare you to review set-up costs and monthly budget.

When you use an existing application, you're essentially borrowing it. The design and function doesn't belong to you. You provide the images, video and content but the application is licensed to your business.

Evaluating Web Applications
Now that you have your list, you can go shopping find the prepackaged tools that fit your needs. Start by reviewing magazine articles, blogs and support pages. These resources will provide you with expert reviews, customer feedback and a realistic expectation about support. Most applications provide a test drive, but until you really use something you never know what it's missing. The support pages or knowledge bases on web applications will tell you about issues, past bugs and open items. Another great place to start understanding the application you may be interested in are the customer forums. Not all applications offer this type of community, but those that do are giving you a great place to look around and see what they and other customers do to support one another. Remember: A website uses technology and with new browsers and upgrades things can change. Be aware of how they handle change.

Read the Fine Print
It's not really fine print: The terms of service agreement on every website application tool is open and available for review at any time. Take a few moments to read through this agreement because you'll have to check that box before you work with the company. Outlined on the service agreement page are the acceptable use policies, fees, licensing agreement and copyrights. It will also outline the company's policies regarding protection against fraud.

Once you've found an application that meets most of your needs, recognize that a web application will never be perfect. Buying off the shelf means cost-effective, and with this decision you're telling yourself that's the priority. Perfect means custom, and that's a different journey with a different budget. When you're starting out or growing, "compromise" is a word every business owner comes to know. When buying a website in a box, you'll find the right solution for your budget if you understand it's a compromise that will lead you to a successful tomorrow.

7 Essential Startup Steps (Entrepreneur.com)

2009-07-04T15:37:00.000-04:00

7 Essential Startup Steps

Make sure you’ve covered all your bases before you launch.

By Rich Mintzer | June 05, 2009

Yes, there are thousands of businesses you could start, with more emerging daily thanks to new technology and good old-fashioned ingenuity. Yet despite the vast universe of possibilities, there are a few essential steps you need to take before starting a business, any business.

Do your market research: Just because you build it or sell it doesn't necessarily mean anyone will buy it. The first essential step is to research your potential market. Who needs what you are offering? Is there space for your product or service in the market or is the market saturated? Is the market national? Is it a niche? Can you define your ideal customers? These are all questions that need to be answered before you even consider starting a business. Too many entrepreneurs have found out the hard way that there was not enough market share for them to capture. Others have realized that their target market audience was far too limited to make their business work.
Show yourself the money: You can't start a business without capital. Determine what you have, what you will need and how you will go about getting it. If you plan to seek investor funding or financing, start writing a business plan and practice your pitch. Research the costs associated with your business. Know how much money you'll need and decide where it could come from.
Hire a good business attorney: You don't necessarily need to have an attorney on a retainer, but you'll want to hire an attorney experienced with new businesses to help you get started. Your attorney can advise you about such things as drafting contracts, reviewing your lease and determining the right business structure. "A good attorney will know what it is that you are trying to do and help you structure your business in a way that will be beneficial to you," says Chris Talis, senior partner at Hedgerow Mergers Acquisitions in Teaneck, N.J. The best way to find a good attorney is by referral or through networking.
Hire a good accountant: An accountant will work in conjunction with your attorney and be instrumental in determining the best form of ownership. He can also help you establish bookkeeping and other record keeping procedures that can keep you on track for years. Most important, a good accountant will help with tax planning. "You will also want an accountant who understands the state laws, since every state has its own little intricacies, such as sales tax issues," Talis says, adding that it's important for your accountant to be familiar with startup ventures.
Decide on a business structure: Your choices include sole proprietorship, partnership, corporation, "S" corporation or limited liability corporation (LLC). Personal liability, taxes, paperwork and regulations vary greatly among the different legal business structures. Your attorney and accountant will play a key role in assisting you in this important decision.
Decide on a business name: It may seem obvious and simple, but the name is how your business will be known to the world. The right name says a lot about your company. Make a list of potential names and narrow the list down to the one that best describes your company in a few words, while being catchy, easy to remember, easy to pronounce and easy to spell. You should also consider how it will translate to a web domain name. You'll also need to do research to see if there are a) similar business names and b) similar domain names.
Get all necessary licenses and permits: Along with a business license, you may need to get additional licenses depending on the type of business and local laws. Many professionals, such as contractors and real estate agents, need to be licensed in the states in which they work. Additionally, you may need licenses to manufacture and/or sell specific products such as liquor, firearms or even lottery tickets. Research all licenses applicable in your county and your state. It's also extremely important to know the zoning laws before you open a business. Don't assume the zoning laws don’t apply to you. You can get information on zoning from your local county clerk’s office.

There are definitely other important steps to getting a business off the ground, such as finding a technical expert and launching a website (a must in today's competitive market). However, if you've taken the seven steps above, you will find yourself in a confident, business-ready position.

How to Research a Low-Cost Franchise (Entrepreneur.com)

2009-06-13T04:37:00.001-04:00

How to Research a Low-Cost Franchise

Does that franchise concept really deliver? Here’s how to find out.

By Carol Tice | Entrepreneur's StartUps - June 2009

URL: http://www.entrepreneur.com/magazine/entrepreneursstartupsmagazine/2009/june/202004.html

Markus Romero didn’t like crunching numbers or sitting behind a desk; he was busy managing nightclubs and operating mobile tanning salons in Las Vegas. But after he discovered Instant Tax Service, his attitude changed.

He was so intrigued by Instant Tax’s model of targeting low-income tax filers that he took a job as a trainer for a large Instant Tax franchisee. Romero, 36, also grilled other franchisees about their first-year expenses and profits. He found the calculations easy, and he liked helping people get quick refunds. He was impressed that the franchisor offered a first-year buyback program--a strong indication that Instant Tax was confident in its model.

In April, Romero became an area developer for Instant Tax in Albuquerque, New Mexico. He opened his first franchise for just $34,000 and plans to spend the tax off-season helping others open Instant Tax units. His advice to people investigating franchise offers: “Go out, get your hands dirty and see if it’s for you.”

With banks tightfisted on lending right now, low-cost franchises are attracting a lot of interest, and there are hundreds of them to choose from in every imaginable business sector, from automotive to technology. (About 25 percent of Entrepreneur’s Franchise 500^® companies have starting costs less than $50,000.)

You’ll need to do some sleuthing to find out whether a particular low-cost franchise is really a good business opportunity and if it suits your own interests and skills. Many would-be franchisees skimp on research, making an emotional purchase because they personally use a service or like a product.

Particularly if the franchisor is fairly new, you’ll want to dig deeper to learn about the success of the franchisor’s concept. Street Smart Franchising co-author Joseph Mathews says, “Find out what their motivation is for franchising. A lot of companies don’t have strong businesses, so they get into franchising because the economics aren’t good enough for them to expand the normal way.”

Don’t get dazzled by a franchisor presentation; ask hard questions of both franchisees and the franchisor before signing on, says Mark Siebert, CEO of consulting firm The iFranchise Group. “There’s a level of financial analysis that often doesn’t happen,” he says. “You should assess the risk and possible return.”

A key issue to research is how many franchisees have failed over the years. Talk to franchisees and see if they’re enthusiastic about how they’re treated by the franchisor, Siebert says.

It’s also critical to understand what you’ll be doing on a daily basis as a franchise operator. Many low-cost franchises, particularly homebased ones, are heavily sales-oriented. Siebert recommends you “ask yourself, ‘Am I comfortable selling? Can I sell this product or these services?’”

Elements of Success
When she looked into the Merle Norman franchise, April Walter decided she definitely could sell the 77-year-old beauty chain’s products, which have a long-standing, loyal clientele. Though she had used the products herself, Walter, 36, didn’t just automatically sign up; she compared several franchise concepts before concluding it was the best fit for her market and her skills as a former HR executive. She opened her Merle Norman Studio in a new regional mall in Macon, Georgia, last October for about $60,000 and projects first-year sales of $170,000.

She was impressed by what Merle Norman had to offer, including three full weeks of training and a franchise fee of $0. The company helped Walter negotiate her lease and design the studio layout. “Merle Norman had three things I was looking for: low startup cost, a strong support system and longevity,” she says.

Walter interviewed several franchisees before signing up and was comforted to learn the average tenure was more than 10 years. From frank conversations with franchisees, she learned what the costs would likely be and how long it could take to become profitable. Based on her research, she estimated it would take six months to a year to see a profit. But even in the down economy, she says she was close to breaking even after just four months, thanks in part to her highly trafficked location.

Strength in Numbers
Thorough research is more important than ever in a sluggish economy, says John Reynolds, president of the International Franchise Association Educational Foundation. It’ll be hard work to land customers when consumers are skittish about purchasing, so you’ll want a strong organization that supports your efforts as a franchisee.

“The basics are even more important now,” he says. “If it’s a small franchise, talk to every single franchisee. This is like becoming part of a family, and you want to know everything about them.”

One good way to find out if a franchise offer is a strong one is to compare the offer with those of other franchisors in the same business segment. When Romero looked into tax-preparation franchises, he discovered some of the big names didn’t have any franchises available. Others didn’t do TV advertising, preferring guerrilla tactics such as sandwich-board ads. Instant Tax supported franchisees with a strong national advertising program that included TV and radio ads, and a national 800 number that would refer prospective customers in his area back to his store.

Once customers come, he says, they usually return the following year and tell friends. Franchisees told him to expect annual growth of 20 percent to 30 percent, but Romero says he’s already seeing growth rates that are even higher. His own enthusiasm for the concept is also helping drive repeat business. “I found I like solving problems, putting out fires and creating wealth,” he says. “I do that with every client.”

Business writer Carol Tice is a regular contributor to Entrepreneur, The Seattle Times and other major publications.

100 Franchises to Start for Less Than $50,000
It’s a common misconception that franchising just makes rich folks richer. They say it takes money to make money, but the following 100 low-cost franchise opportunities offer a proven system, brand recognition, training and support for less than $50,000 in startup capital.

Here are the top low-cost franchises, listed in order of their rankings in Entrepreneur’s 2009 Franchise 500^®. Whether you want to start a cleaning business or tutor the children in your neighborhood, these franchises can make you a business owner without costing a king’s ransom.

This list is not intended to endorse any particular franchise company; it’s just meant to get you started. You should only buy a franchise after conducting your own extensive research. Be sure to read the Franchise Disclosure Document carefully, contact existing and former franchisees, and consult an accountant and attorney. --Emily Weisburg

Listing compiled by Tracy Stapp

Click here to view the complete low-cost franchise listing.

101 Best Franchises to Run From Home (Entrepreneur.com)

2009-06-13T04:24:00.001-04:00

101 Best Franchises to Run From Home

Make a living in your skivvies? Believe it.

By Emily Weisburg | Entrepreneur Magazine - June 2009

URL: http://www.entrepreneur.com/magazine/entrepreneur/2009/june/201848.html

Laid off? Looking for a new kind of challenge? A homebased franchise might be in your future. The opportunities listed here provide a proven business model, and there’s no need to worry about real estate costs--whether you want to offer pet services or start an advertising business. And even better, most of the following run-from-home franchises can be purchased for less than $50,000.

The top 101 homebased franchises are listed by their 2009 Entrepreneur’s Franchise 500® rank. This listing is not intended to endorse any particular franchise; it’s just meant to give you a push in the right direction. You should only purchase a franchise after carefully reading the Franchise Disclosure Document, contacting current and former franchisees, and talking to a lawyer and an accountant. For more, go to entrepreneur.com/franzone/guide.

Listing compiled by Tracy Stapp

Click here for the 2009 Home-Based Franchise listing

In Pitching to Angel Investors, Preparation Tops Zeal (NYT)

2009-06-11T13:59:00.000-04:00

In Pitching to Angel Investors, Preparation Tops Zeal
By BRENT BOWERS

FOR entrepreneurs hoping to land start-up capital from angel investors, here’s what two recent studies found: Don’t get carried away when you pitch your product because the investors may lose interest faster than you can say “almost unlimited market.”

And one misstep — like stammering a vague reply instead of saying you do not know the answer — can also kill a deal, the authors of the studies say.

Angel investors are generally wealthy people seeking promising start-ups that are too small to attract the attention of venture capitalists. The estimated 260,500 active angels in the United States are the largest source of seed and start-up capital for entrepreneurs (not counting their own savings or money from family and friends), according to Jeffrey Sohl, the director of the Center for Venture Research at the University of New Hampshire.

Even last year, as the recession gathered force, these angels spent $19.2 billion on more than 55,000 ventures, he said, though that was down from $26 billion in 2007. The average investment for each deal last year was $346,500.

By contrast, venture capitalists made only 440 investments in start-ups last year, putting the bulk of their money in later stages of a company’s growth in deals that averaged $7.5 million, Mr. Sohl said. “Angels provide the seed and start-up funding that turns acorns into trees like Starbucks, FedEx, Amazon and Google,” Mr. Sohl said.

Typically, entrepreneurs make their initial pitch to angels in an informal session. If their idea is judged to have promise, they may be invited to give a PowerPoint presentation followed by a question-and-answer session.

With time at a premium, it is imperative for entrepreneurs to come prepared to both meetings with solid arguments about their product’s marketability and with evidence of their commitment to their company in the form of sweat equity and their own investment, experts say.

But enthusiasm is a different matter, according to a study that was presented last week at an entrepreneurship conference at Babson College outside Boston.

“That is the trickiest part,” said Richard Sudek, an angel investor and assistant professor of entrepreneurship at Chapman University in Orange, Calif., and one of the three authors of that study. “We like you to show some excitement, but don’t force it. Being authentic is much more important. There is such a thing as quiet passion. Anything that comes across as slickness is a negative.”

Cheryl Mitteness, a doctoral candidate in entrepreneurial studies at the University of Louisville and one of Mr. Sudek’s co-authors, was even more emphatic. “Show your passion,” she said, “but don’t try to be somebody that you’re not. Angels are very leery of too much enthusiasm.”

Another research paper, by Xiao-Ping Chen and Suresh Kotha of the University of Washington and Xin Yao of Wichita State University and published in The Academy of Management Journal in February, came to much the same conclusion. The effects of perceived passion, defined as cues like facial expressions, tone of voice and hand gestures, “were statistically insignificant,” the article said.

Ms. Chen, a professor at her university’s business school, called the findings “surprising,” especially since she and her colleagues often rely on such signals in their hiring decisions. “You can show your passion through preparedness, how well you’ve thought out your business plan,” she said. “But the style of your presentation doesn’t matter.”

What angels are looking for, authors of both reports said, is evidence of a market opportunity with growth potential, a strong management team and an exit strategy, including a list of possible acquirers, since the eventual sale of the companies they invest in is how they make money.

“Also, angels put a high value on trustworthiness,” said Mr. Sudek of Chapman, a former entrepreneur himself and the chairman-elect of Tech Coast Angels, the largest angel group in the United States. “If you don’t know the answer to a question, say so, and promise to get back to them. Don’t fake it.”

In fact, acknowledging gaps in your knowledge and other weaknesses, and letting angels know you need their help, can add to your credibility, he said.

Here are some other tips from the researchers:

¶Memorize an “elevator pitch” for your product and its potential in 90 seconds or less. It will bolster your confidence, and you can recycle it to win over customers, vendors and employees.

¶Consider hiring a speech coach, but only one familiar with angel investors’ thinking.

¶Attend “pitching contests” that many business schools and angel groups sponsor.

¶In presentations, be upbeat but realistic in your profit and revenue projections. Better yet, draw up optimistic, middle-ground and pessimistic projections to show how carefully you have thought them through.

Ted Ray, founder of Ted’s Tinctures Inc. in Mountain View, Calif., has some advice for fellow entrepreneurs, even though he is only now starting a quest for $500,000 in angel financing.

First, he said, have a product on the market. “Nothing speaks more loudly than revenue coming in,” he said. His two-year-old company, which makes an herbal remedy called FlyRight Jet Lag Formula, had sales last year of $25,000 and is on track to increase that by tenfold this year.

Second, do not ask other people for money unless you have spent your own. He has put $105,000 of his savings into his firm and raised $185,000 from family and friends.

Third, the business plan you show to potential investors should be concise. He suggested using software on Angelsoft.net.

Fourth, seek angels with a record of investing in your field — in his case, consumer products.

And finally, he says, explore every angle. “If an angel says no, ask him for the names of four other angels who might say yes,” Mr. Ray said. “My goal is to get 100 introductions to get 10 meetings to get three presentations to close one deal.”

How to Win a Business Plan Competition (NYT)

2009-06-10T16:03:00.002-04:00

How to Win a Business Plan Competition
By LORA KOLODNY

These days, business plan competitions yield prizes worth more than ever.

The Wharton Business Plan Competition, for example, awards $20,000 in cash and $10,000 in legal services to its top entrant. Harvard Business School’s traditional track competition awards $25,000 in cash and $25,000 in business services to its winner. M.I.T.’s Clean Energy Prize includes $200,000 in cash. And Rice University offers a whopping $225,000 prize to its first-place winner, including $125,000 in equity investment, $20,000 in cash and more than $80,000 in services.

Still, it’s really not about the money, says Cliff Holekamp, a senior lecturer in entrepreneurship at Washington University’s Olin Business School, which hosts multiple competitions, including the recently introduced Social Entrepreneurship and Innovation Competition, a do-good variation with a $150,000 prize pool. “The value of participation,” says Mr. Holekamp, “is not found in funding but in a process that brings you mentorship, support, structure and access to the resources and people that will help perfect your business model.”

As impressive as the cash awards sound, Saad Khan, who has served as a competition judge and is an investor with CMEA Capital in Mountain View, Calif., says the amounts are “fairly small in the context of starting a business.” A better reason to compete, he says, is “to get feedback in real time and to get noticed by alumni who have done well, local VCs and other investors in that community.”

There are even worthy competitions that offer no prize money. In 2006, for example, Ryan MacCauley won the Launch Award at the University of North Carolina’s Kenan-Flagler Business School with a plan for the Class Watch, a company he now runs with his brothers John and Kevin. “What wasn’t going to help us quit our day jobs and launch was a $20,000 check,” says Mr. MacCauley, “but winning gave us confidence.”

It also helped them secure a deal with an angel investor. The Class Watch, which sells customizable, college commemorative timepieces, began generating revenue in the second quarter of 2008 and hopes to hit $3 million in sales within a year.

Pick the Right Competition

Since their advent in 1984, when the University of Texas at Austin held its first “Moot Corp,” business plan competitions have proliferated within academia and beyond. More than 50 American colleges and universities host them. So do corporations, nonprofits and government economic development offices.

Hosts include Wal-Mart, Amazon.com, the states of Michigan and Nevada, the cities of Anaheim, Calif., and Pittsburgh, the Brooklyn Public Library, China’s government-controlled television network CCTV2, and Al Gore, in partnership with the Indian Institute of Foreign Trade.

Some remain invitational but most have loosened their eligibility terms to foster interdisciplinary, international and intercollegiate collaboration (in other words, you don’t have to attend most business schools to enter their competitions).

Competition within the competitions can be fierce, however. And that’s why Cindy Boyd, who is chief executive of the Houston-based consultancy Sentigy and a frequent judge at competitions hosted by Rice University and the Entrepreneurs’ Organization, recommends that would-be entrants conduct extensive online research via the Web sites of the host organizations. Even more important, she suggests contacting past participants — judges, winners, and losers — to ask what worked and what didn’t.

Don’t submit an application, says Ms. Boyd, unless the advice you get sounds do-able for your team.

Give Yourself Time to Prepare

After selecting an appropriate competition, George Abe, a faculty director at U.C.L.A.’s Anderson School, says most teams should take at least a year to hone their business plans. “The earlier the prep begins,” says Mr. Abe, who has seven years of judging experience, “the better the plan is. You can get away with three months minimum if you have a product or service crystal clear in your mind. But you cannot be figuring out a market and competitive story in 60 days.”

Business plan competitions require an initial submission, sometimes called the “intent to compete” entry. Normally, it consists of a two-to-three-page executive summary explaining all elements of the business: product, market, competition, finances and operations. If it isn’t well written and succinct, a team won’t make it through the door.

“Students spend too much time describing the hammer and not enough time talking about the nails,” Mr. Abe says. “They have to be able to explain their product or service quickly so a judge not knowledgeable in the field can basically get it. What every judge knows is how to question students about markets, competition and finances. Those are the nails.” The bottom line: you need more than a cool idea; you have to show how the idea will make money.

Judges are often impressed by serious market research: the results of customer surveys, for example, or of pilot sales programs. That may have been what gave a team from the London Business School the edge in Columbia Business School’s first Odyssey competition this year.

The team’s plan, says a team spokesman, Vivek Makhija, was for “a renewable energy company using a combination of original and licensed technology to offer power generation at a micro level to households in India.” As yet unnamed, the company worked with an alumni mentor who is deeply involved in market research to develop comprehensive reports on rural Indian consumers’ access to and use of electricity.

Make Sure Your Teammates Know Their Roles

NIR Diagnostics wanted to commercialize technology that can prevent amputations and fatalities caused by chronic wounds. These sores may appear to be healing on the surface even though they’re actually deteriorating and infected underneath.

Clearly defined roles were essential, according to the team leader, Armen Karamanian, the interim chief executive. “We came together around common goals and complimentary skill sets,” Mr. Karamanian says. “We didn’t want to wind up with a great, life-saving idea — and lawsuits over this, that or money.” Have an honest discussion over what your team wants to accomplish beyond the academic exercise, such as how you want to start the business and who will do what, he suggests.

NIR Diagnostics won the 2009 Wharton Business Plan Competition and believes it can miniaturize, manufacture and sell by 2012 a device (based on technology created at Drexel University) that bounces lasers through layers of a chronic wound to give doctors a more complete reading of its healing progress.

The company, recently renamed Lumina Diagnostics, is now seeking a $15 million investment over several years to gain F.D.A. approvals and refine its technology..

Puerto Rico a nivel de depresión económica

2009-06-01T16:36:00.003-04:00

I'm still wondering why is the local government still behaving as business as usual and pursuing economic policies that fly in the face of common economic sense.

Puerto Rico a nivel de depresión económica

lunes, 23 de febrero de 2009

Rebecca Banuchi / Prensa Asociada

Al completarse casi el tercer año de recesión, Puerto Rico se coloca actualmente a nivel de una depresión económica, afirmó hoy, lunes, el presidente designado de la Junta de Planificación (JP), Héctor Morales Vargas.

El funcionario precisó que la JP todavía se encuentra evaluando diversas medidas para sacar al país de la actual crisis económica y fiscal, que incluye una reducción sustancial de la nómina gubernamental y la imposición de nuevos arbitrios.

"Una vez estamos tres años en un estado de recesión, donde el crecimiento económico es negativo, no hay otra manera de llamarlo que una depresión (económica)", afirmó Morales Vargas en una conferencia de prensa junto a la senadora novoprogresista Norma Burgos.

Durante la rueda de prensa se anunció el inicio de una investigación para evaluar si la pasada administración de la Junta de Planificación sobreestimó las proyecciones económicas, lo que pudo haber redundado en que se inflaran a su vez los estimados de recaudos del gobierno.

"Una de las razones principales para encontrarnos en esta grave situación (económica) ha sido la sobreestimación de los ingresos del gobierno por los cuatro años anteriores. Esto permitió al pasado gobierno justificar presupuestos cada año mayores y un aumento desmedido de la nómina gubernamental", sostuvo la legisladora.

Según el titular de Planificación, para el presente año fiscal 2008-20009, la JP del pasado gobierno proyectó un crecimiento económico positivo de 2.1%, pero ese cálculo tuvo que ser ajustado por esta administración, que estimó un decrecimiento de 3.4%.

Morales Vargas detalló que mientras para este año fiscal, que termina el 30 de junio, se proyectó ese 3.4% de decrecimiento, para el año fiscal 2010 se estima uno de 2%.

Sin embargo, el funcionario se mostró confiado en que con las medidas de corte de gastos del gobierno y de nuevos impuestos que se implanten, la economía de Puerto Rico saldrá de la depresión para el año 2011.

Reading for Hard Times (NYT)

2009-05-30T08:11:00.000-04:00

Reading for Hard Times

By PAUL B. BROWN

As the recession continues, small businesses and entrepreneurs can use all the ideas, suggestions and tips they can get.

The nation’s publishers are trying to oblige. Here are some nuggets worth considering, from a crop of books that have just gone on sale.

‘ILLUSION OF CONTROL’ Depending on your perspective, this will — or won’t — make you feel better, as you go about trying to put out 23 small fires during the day.

“We suffer from an ‘illusion of control,’ that fools us into thinking the future is more predictable and less uncertain than it really is,” write Spyros Makridakis, Robin M. Hogarth and Anil Gaba, the authors of “Dance With Chance” (Oneworld Publications).

In other words, the world is a lot more random than we would like to believe.

The main message from the authors — a retired professor of decision science, a cognitive psychologist and a statistician — is that you need to accept that there are many things beyond your control and work to recognize what can and cannot be predicted.

Only when you know what you have a true chance of influencing can you “realistically manage the uncertainty we confront in our daily lives and avoid falling victims to the vagaries of chance,” the authors say.

Or, to put it another way: Concentrate on the things you can control and let everything else happen as it may.

WHAT WORKS “We’re badly in needs of rules of thumb that work, that make sense, that can guide us through and past these turbulent times,” writes Alan M. Webber, co-founder of Fast Company.

He provides 52 of these rules, gleaned from observation and interviewing people for decades, in “Rules of Thumb” (HarperBusiness).

These are among our favorites:

¶“When the going gets tough, the tough relax. Any time you approach a task with fear, you are at least a double loser. First, you color the work with it and increase the chances of failure.”

¶“Change is a math formula. Change happens when the cost of the status quo is greater than the risk of change.” Until the risk of not changing outweighs the danger of trying something new, the odds are everything is going to stay just as it is.

¶“The difference between a crisis and an opportunity is when you learn about it.” If you wait too long, a problem really does become a crisis. The idea is to spot the potential concern while there is still something positive that can be done about it.

BE NICE Most managers understand that the harder employees work, the better the company’s performance, Henry Paul and Ross Reck write in “Instant Turnaround!” (William Morrow) “What managers don’t get is that the better they treat their employees, the harder they’ll work.”

This business parable stresses such advice as “be real; be appreciative; be interested; be nice” when dealing with the people who work for you.

The payoff from all this, the authors contend, is that your behavior will get people excited about coming to work and giving it their best efforts. That, they contend, is “the best bargain on the planet” since it costs nothing and requires only a minimum of effort.

LAST CALL Implicit in these books is the assumption that you, and your employees, want to improve performance.

Why would anyone want to do that, ask the comedian Jeff Foxworthy, and Brian Hartt, a comedy writer, in “How to Really Stink at Work” (Villard).

If you are successful, there will be more work to be done, and the authors say they don’t see the point of that. “Shouldn’t you want to work less?” they ask. “Isn’t that what life is all about?”

To make sure you don’t succeed, they offer a number of tips. This one is representative: “Try putting up one of those motion-activated wall hangers — like that loud laughing skull they sell at Halloween that goes off when you walk past it. It will keep people from wanting to come and talk to you about anything.”

To Get a Business Loan, Know How the Bank Thinks (NYT)

2009-05-29T15:45:00.000-04:00

To Get a Business Loan, Know How the Bank Thinks

By SCOTT MEDINTZ

To hear some small-business owners talk, getting a loan remains all but impossible. And yet, many bankers claim that their small-business loan volume is up significantly. So, is the small-business credit crisis over or not?

At first blush, the evidence seems contradictory. On one hand, many national banks have drastically cut back small-business lending. In addition, Advanta, a major issuer of small-business credit cards, declared on May 12 that it was closing customer accounts to new charges.

On the other hand, the Federal Reserve’s April survey of lending practices showed credit conditions have loosened. The Small Business Administration says the weekly volume of loans to small businesses is up more than 25 percent since March. And community banks, those smallish, old-fashioned institutions that make up the vast majority of the country’s 8,300 banks, say that they are ready to take back customers from the national lenders.

Much of the confusion has its roots in contrasting banking strategies. Big national banks are much more likely to have been drawn into the morass of securitized loans, credit-default swaps and the like, which has forced them to preserve capital by curtailing lending.

The smaller banks, meanwhile, have traditionally made their livings off of loans that they carry on their own balance sheets to individuals and small businesses. For them, despite the economic crisis, the current situation is more or less business as usual.

Indeed, a May survey of 1,500 small businesses by Barlow Research Associates found that companies that applied to small banks for loans in the past year were three times as likely to get credit as those who applied to large banks.

Nick Sarillo, owner of two Chicago-area pizza restaurants called Nick’s Pizza & Pub, says he recently found himself on the wrong side of that divide when he sought to borrow $2.3 million to open a third location.

In late 2007, he was engaged in the loan review process with LaSalle Bank — historically a popular regional lender for Chicago-area small businesses — when LaSalle was acquired by Bank of America, the financial giant.

Bank of America told Mr. Sarillo it wanted 20 percent down, twice what LaSalle had been requesting. Then, he said, after two months of slow sales last year at his restaurant in Elgin, Bank of America doubled the required down-payment again, forcing him to postpone the deal.

Now, he said, he is shifting his business to the First Community Bank in Elgin. A spokeswoman for Bank of America said the bank does not comment on individual customers. But she said, “We continue to develop small business relationships and are committed to the small business customer and space.”

Bankers say that some of the confusion in the marketplace has been caused by ill-founded complaints by small-business owners. Consider that most small companies are not looking for loans: the Barlow survey found that 70 percent of small businesses had not applied for any credit in the past year. That, said Bob Seiwert, head of the American Banker Association’s Center for Commercial Lending and Business Banking, is because fewer businesses see opportunities to grow in a down economy — and the businesses that do come looking for loans tend to be financially vulnerable and thus most likely to be turned down for sound banking reasons.

“The fact is, a lot of borrowers just aren’t creditworthy,” said Sherrill Stockton, senior vice president of Sonoma Bank, which is part of Sterling Savings Bank in Spokane, Wash. “But it’s human nature, if you get turned down, to go around saying that there are no loans available.”

Bankers say that small-business owners looking for a loan should start by knowing which business measures — debt-to-equity ratio, for example, or net margins — lenders focus on when evaluating loan applications in their industry. Bankers say would-be borrowers should demonstrate exactly how they plan to use the money and why the plan makes sense.

This month, for instance, Chandan Patel borrowed $3.7 million from Sonoma Bank to buy her second hotel property, a Comfort Suites hotel in Castro Valley, Calif. She said she had demonstrated to her banker that she would be able to increase the property’s average daily rate, a critical yardstick in the hotel industry, by raising room prices while improving customer service and adding amenities. It helped that she was able to point to a track record of maintaining an unusually high daily rate at her other property.

Both bankers and borrowers say the human side of lending requires as much attention as the technical aspects. Small-business owners should cultivate a relationship with a local banker — ideally, long before they need a loan — and treat that relationship as a long-term partnership.

Bob Davis, chief executive of Virtual Driver Interactive, which makes driving simulators, benefited from a personal banking relationship when he was looking to buy his California business from his former employer late last year in the early days of the financial crisis. For tax reasons, the deal had to happen in just 90 days, or it would not happen at all. And because the business had been part of a larger operation, its financial performance was difficult to demonstrate. “It wasn’t an easy sell,” Mr. Davis said.

He happened to meet Greg Patton, the chief executive of Sierra Vista Bank in Folsom, Calif., at a local golf course, and Mr. Patton invited him to spend a couple of hours talking about the business. “No numbers, no spreadsheets, let’s just talk,” Mr. Patton told him.

After the talk, Mr. Patton became an advocate for the deal, Mr. Davis said. He asked for a set of financials and a two-year projection for the business. More important, though, he coached Mr. Davis through the loan review process. More than once during the process, issues came up that could have scuttled the deal. Each time, Mr. Davis says, huddled with his bankers and found a solution. The $900,000 loan went through in February, just ahead of the deadline.

Still, business loan applicants should expect to be closely scrutinized, especially by smaller community banks that have generally eschewed the formula-based lending practices many national banks adopted in recent years.

But Ranjit Kushwaha, who recently borrowed in the high six figures to buy the building in Monterey, Calif., that houses his Indian Summer Restaurant, was glad to see his bank being careful. “They made me jump through all kinds of hoops,” he said. “They’re very cautious — but that’s good. Otherwise, we’d all end up with the same problems again.”

A Service Born of Necessity (Entrepreneur.com)

2009-05-22T13:37:00.001-04:00

A Service Born of Necessity

This referral service does all the work for families looking for a baby-sitter.

By Kevin Manahan | Entrepreneur Magazine - May 2009

URL: http://www.entrepreneur.com/magazine/entrepreneur/2009/may/201166.html

Adrienne Kallweit (above) wasn’t expecting to find anything unusual when she considered hiring her son’s preschool teacher as a baby sitter. But when Kallweit, a licensed private investigator, ran a background check on the teacher, she found a number of items that weighed heavily against the teacher’s personal character. “I was shocked at what I found,” says Kallweit, 34. Later, on family trips, she and her husband, David, 40, faced the same dilemma when they couldn’t find reliable sitters at their destinations.

Seeing the need for safe child care, the Kallweits co-founded SeekingSitters in 2004. The baby-sitter referral service does all the work for families looking for baby sitters: Families sign up online and are matched with a local sitter. Registered families can use the website to make preferences, provide feedback and search sitter profiles. But the service takes the process a step further by performing background screenings on applying sitters via its in-house investigation company, Hide and Seek. Among other assessments, prospective sitters undergo personal character evaluations, reference checks and an in-person interview before they’re approved. Families are screened as well for criminal and sex offender history and personal identity verification. “There are just too many risks,” Adrienne says, “and we really take pride in that we screen our members [in addition to our sitters].”

A couple of years after launching the business, the Kallweits decided to expand nationally. The benefits of franchising were a natural fit with the vision they had for the business; franchisees can get to know their community on a local level and get involved with the members and families in their area. Since franchising in 2006, the Tulsa, Oklahoma-based business has grown to 23 locations in nine states, with systemwide sales of $2.1 million last year. The franchisees, all parents themselves, enjoy the flexible lifestyle SeekingSitters allows them. And despite the poor economy, Adrienne says they hope to expand to 10 more states in the next year. “The fact that we provide a safe and reliable service really keeps us thriving, even through tough economic times,” she says. “Our service is really needed.”

Business Sales Decline in Tough Economy (Entrepreneur.com)

2009-05-22T13:32:00.000-04:00

Business Sales Decline in Tough Economy

Experts say you shouldn’t wait for conditions to improve to try to sell your biz.

By Mike Handelsman | April 27, 2009

URL: http://www.entrepreneur.com/money/buyingandsellingabusinessmikehandelsman/article201430.html

In the midst of possibly the worst economic downturn of our time, it’s safe to say that small business owners across the country are looking for answers on how tough times are affecting the value of their businesses. Should owners hold onto their companies until conditions improve or list them for sale now?

Business owners struggling with this decision need to consider what is happening specifically in the small business economy. A report by BizBuySell.com tracking the health of small business revealed -- as one might expect -- a decline in business-for-sale transactions and valuations. Additionally, the number of closed transactions reported in the first quarter decreased by 36 percent as compared to the same time period in 2008.

The value metrics for businesses are also dropping. By dividing the selling price of a business by its annual revenue or cash flow, we can determine how small businesses are faring in the current economic environment. Revenue multiples for closed transactions dropped 5.5 percent to .69 in the first quarter of 2009, while cash flow multiples fell 3.8 percent to 2.69. Finally, the median business sale price for closed transactions decreased 17.3 percent to $165,500.

It makes sense that valuation multiples are going down. Buyers are hesitant to pay typical asking prices for a business because of less certainty that the business will bring in adequate revenues and cash flows in the future.

Buyers are also facing difficulty accessing the capital necessary for business purchases. Traditional avenues of securing capital such as SBA-backed loans have become more limited, and with recent stock market declines, fewer buyers have the funds necessary to buy without a loan. This means fewer buyers are able to bid on most businesses, creating less upward pricing pressure.

That is not to say that buyers aren’t out there. Economic conditions have made it more difficult to close deals; however, business brokers are reporting a record number of buyer inquiries as a result of the huge number of corporate layoffs over the last six to nine months. Slow closing deals notwithstanding, people are looking at entrepreneurship as an alternative to the traditional job search. Selling prices are expected to continue to decline, which could mean that in the near future, credit will slowly become more available to aspiring buyers. This should improve market conditions for small business transactions over the next few quarters.

How can you best reach buyers if you’re thinking of selling a small business in this economy? Here are a few tips to keep in mind:

Seller financing is key. Providing seller financing shows you are confident enough in the financial capabilities of the business that you believe the new owner will be able to pay you back with interest.

Get your business in top shape. To get in front of select buyers and give yourself the best chance to close the deal, you must make sure your business is in the best shape possible. Get your books organized. Invest in that renovation you’ve been meaning to do for months. Ask others what they love about your business and include the information in your listing. It’s essential that qualified buyers know exactly why they should contact you. Be truthful, but be sure to mention everything that’s great about your business.

If you're serious about selling, don't put it off for better times. If your business is currently on the market or you plan to put it up for sale soon, don’t hesitate with the idea that better times are around the corner. There is no guarantee that the economy will get better in the near future. In fact, many believe it has a long way to go. If you wait too long and times get even worse, you’ll probably wish you listed the business for sale sooner and got a better price.

Recession-Proof Franchises (Entrepreneur.com)

2009-05-22T12:58:00.001-04:00

Recession-Proof Franchises

They're out there, and ready for you to take the reins.

By Jeff Elgin | April 23, 2009

URL: http://www.entrepreneur.com/franchises/buyingafranchisecoachjeffelgin/article201394.html

It's no secret that people are losing their jobs-it's an epidemic. These talented people are simply victims of our current economic circumstances. Jobseekers won't find many attractive employment options in the market today, and this may be the situation for quite some time.

As an alternative, many people are looking into buying their own franchise. In tough times like these, it's essential to focus on franchises that produce good results in bad market conditions. Though no business is truly and absolutely recession-proof, a number of industries seem to thrive--and you should focus your research efforts on them. Here are some helpful examples of industries to look into:

People will buy, whether times are good or bad. What do people consider a necessity rather than a luxury? Businesses that provide necessities will thrive during a recession. One example: haircuts. Regardless of the economy, hair grows and has to be clipped. Another example is tax preparation: Everyone needs to file a tax return each year, and many people find the process too complicated to do themselves. Last is child care; Quality providers in this space always seem to be operating at near-capacity.

Low-cost businesses. Consumers tend to downgrade their spending patterns during a recession. This dynamic benefits fast-food companies such as McDonald's, at the expense of more upscale and expensive restaurants. Decreased spending patterns also benefit companies that sell used items (such as clothes, games, sports equipment, CDs, etc.), as an alternative to buying new items from a full-priced retailer.

Businesses paid for by third parties. When a pipe bursts and floods your basement, it has to be fixed immediately by a professional. This dynamic also applies to automotive repair shops: Cars get damaged in accidents in every type of economic climate, and they need to be fixed. In both cases, repair costs are covered by insurance so franchises offering such services tend to be more immune to recessionary times.

Products or services with a rapidly growing demand. Follow a demographic or sociological trend that supports strongly increasing demand, and the business will do very well even in tough times. A great example of this in today's market is the senior care industry. Baby boomers are getting older, and a host of senior-care franchises are growing rapidly and doing very well. Outplacement agencies, offering services designed to assist the unemployed are also expanding from growing demand.

Services that offer a chance to "escape" from the everyday grind. These businesses typically offer entertainment options to their customers, in the form of movies, games, treats, gifts or other indulgences. Beware, though: Decreased consumer spending habits can easily harm this category of business. So it's important to study past and present industry fluctuations before making an investment decision.

Children and pet services. The interesting thing about these services is that they violate some of the factors listed above. Good times or bad, people will spend large amounts of money providing for their kids or pets. These expenditures can be items that many would consider luxuries, breaking the cycle of leaning toward low-cost providers. Child-related franchises include supplemental education opportunities, featuring core learning as well as enrichment classes for art, music and sports. In the pet sector, groomers and sellers of boutique accessories will flourish, even during economic recessions.

It's pretty easy to distinguish unsuccessful businesses and franchises from successful ones in tough times, because the answer is often intuitively obvious. You hear about and see their failures on TV and in the newspaper. Stay away from them. You may find it helpful to consider a consultant from a company like FranChoice to steer you in the right direction. These seasoned professionals in the franchise market have a good grasp on which industries and companies are faring the best. They cannot make the decisions for you, but their services are free and often save you time by helping you narrow your search.

Regardless of how you research potential franchises, it's still essential for you to complete a thorough process of due diligence. The process of buying a franchise needs to include calling existing franchisees to verify or disprove the information you're receiving before making a final decision on any one franchise opportunity. Take all the time you need to ensure that you find a franchise that thrives during tough times, and you'll be one of the few who are happy with the economy in the upcoming recovery period.

Business Sales Decline in Tough Economy (Entrepreneur.com)

2009-05-22T12:55:00.001-04:00

Business Sales Decline in Tough Economy

Experts say you shouldn’t wait for conditions to improve to try to sell your biz.

By Mike Handelsman | April 27, 2009

URL: http://www.entrepreneur.com/money/buyingandsellingabusinessmikehandelsman/article201430.html

Seller financing is key. Providing seller financing shows you are confident enough in the financial capabilities of the business that you believe the new owner will be able to pay you back with interest.

Get your business in top shape. To get in front of select buyers and give yourself the best chance to close the deal, you must make sure your business is in the best shape possible. Get your books organized. Invest in that renovation you’ve been meaning to do for months. Ask others what they love about your business and include the information in your listing. It’s essential that qualified buyers know exactly why they should contact you. Be truthful, but be sure to mention everything that’s great about your business.

If you're serious about selling, don't put it off for better times. If your business is currently on the market or you plan to put it up for sale soon, don’t hesitate with the idea that better times are around the corner. There is no guarantee that the economy will get better in the near future. In fact, many believe it has a long way to go. If you wait too long and times get even worse, you’ll probably wish you listed the business for sale sooner and got a better price.

Recession-Proof Franchises (Entrepreneur.com)

2009-05-22T12:54:00.001-04:00

Recession-Proof Franchises

They're out there, and ready for you to take the reins.

By Jeff Elgin | April 23, 2009

URL: http://www.entrepreneur.com/franchises/buyingafranchisecoachjeffelgin/article201394.html

Jeff Elgin is the "Buying a Franchise" coach at Entrepreneur.com and has 25 years of experience in franchising, both as a franchisee and a senior franchise company executive. He's currently the CEO of FranChoice Inc., a company that provides free consulting to consumers looking for a franchise that best matches their needs.

Showing Off Your Solutions in a White Paper (NYT)

2009-05-22T12:41:00.001-04:00

Showing Off Your Solutions in a White Paper

By PAUL B. BROWN

Blogging is no longer a quick way to show how smart you are, not when it seems that every entrepreneur and his 14-year-old niece have a blog.

Writing a book would be a terrific way to show the quality of your thinking, but who has the time?

But a number of experts say there is a middle ground for showing off the quality of your ideas: write a white paper, a document that offers a specific solution to a problem or argues a position.

“White papers are an often-forgotten way for companies to share their stories — about their people, products, services, marketplace, mission and more,” said Roy G. Miller, president of RGM Communications, a marketing communications and public relations firm in Wylie, Tex. “A well-structured, well-written white paper can help you define and differentiate, and build a base of loyal customers.”

The following tips and ideas can help you decide if the approach is right for you.

WHITE PAPERS 101 You can find instructions for writing a white paper online. This site covers all the basics, from focusing on your target audience (“usually it will be a very specific demographic, such as midlevel engineers, amateur Web designers, or some other such group”) to the types of examples to use.

WHITE PAPERS 102 Even knowing what to write, you may be baffled about how to write it. Klariti.com, a technical writing consulting firm based in Ireland, offers a template to follow.

The firm also points out, slightly self-servingly, that since this is primarily a marketing document, you want to make sure it is gracefully written (and the company could do that for you).

CHECK THE ARCHIVES There are a number of Web sites, like LearningTree.com, that offer free white papers on various topics and a equal number of sites, like NetworkWorld.com, that offer white papers of a technical nature. They usually require that potential readers provide an e-mail address, in exchange for getting the papers free.

Before you start typing, you may want to check to see if a white paper similar to the one you plan to create has been written .

STRESS THE BENEFITS Sure, the white paper is intended to be a subtle way of advertising your product or service offering. But customers are not necessarily interested in a commercial pitch, subtle though it may be. They want to know how what you are writing about can benefit them.

In other words, you want to underscore in your paper the benefits it can provide to your readers, says Michael A. Stelzner.

He offers these three tips in explaining those benefits:

¶“Ask what problems your solution solves: Let’s assume you are targeting writers and have determined that time management is a major problem for writers. If you have a solution for writers, a unique benefit might be: cuts the writing process in half or increases writer productivity.”

¶Stress what makes your argument unique. What are people going to read that they can’t get elsewhere?

¶What’s in it for the reader? “Benefits can often be taken to the next level by simply asking yourself, ‘Why does this matter?’ Simply take your existing list of benefits and go down the list and ask the question. For example, my above ‘cuts the writing process in half’ benefit could be expanded to ‘Allows writers to take on more projects without working extra hours.’ ”

LAST CALL As with any other research paper, the language in a white paper can sometimes be vague.

Netfunny.com supplies a tongue-in-check simultaneous translation for some of the common phrases you may read.

If, for example, someone writes, “It has long been known that” the writer means, “I haven’t bothered to look up.”

When you see “typical results are shown,” you should think “the best results are.”

And if you read a phrase like “it is suggested that” or “it is believed that,” you should mentally substitute, “I think.”

Why Small Businesses Still Can’t Borrow Money (NYT)

2009-05-22T12:24:00.000-04:00

Why Small Businesses Still Can’t Borrow Money

By DARREN DAHL

Despite billions of dollars of bailout and stimulus money, the credit squeeze that kicked off our current economic crisis shows few signs of abating. Generally speaking, banks still aren’t lending, and small businesses are still struggling to find ways to finance their operations. To get a better feel for how business owners are coping, Darren Dahl recently spoke with Doug Tatum, co-founder and chairman emeritus of Tatum, an Atlanta-based consulting and executive search firm that specializes in helping growing companies with finance issues. In recent years, Mr. Tatum, the author of “No Man’s Land: What to Do When Your Company Is Too Big to Be Small and Too Small to Be Big” (Portfolio, 2007), has spent considerable time on Capitol Hill pitching a tax-deferral plan of his design that has had the support of two United States senators, John Kerry and Olympia J. Snowe, who have long been active in small-business issues.

Q. What’s your advice for businesses looking to borrow money these days?

A. Quit trying. The credit markets are tougher than I’ve ever seen them, aside from the Carter years.

Q. But it takes money to make money, right?

A. Entrepreneurs have a limited amount of bandwidth, and they have to quit wasting their time chasing the impossible. They need to think about how they can change their business model to become profitable. That’s where the capital to grow will come from. I just spent some time with a health care consulting company that pulls in $6 million in [annual] revenue with plans to grow to $10 million. They are just bobbing, weaving and growing despite how hard it is out there.

Q. Why hasn’t the government been able to open up the credit markets?

A. Banks have become cautious about what they have on their balance sheets. They still don’t know what their portfolios are worth. That means they’re waiting for the next shoe to drop, which could be the commercial markets. I talked to the C.E.O. of a community bank who told me that they have the regulators telling them when and where they can lend money. So while you might have politicians saying, ’Lend, lend, lend,’ the regulators are holding the banks back.

Q. What else should the government be doing?

A. Congress needs to be temporary, targeted and timely — three issues in a piece of legislation I supported called the “Bridge Act,” which stands for Business Retained Income During Growth and Expansion. The idea is to allow entrepreneurs to defer paying up to $250,000 in income taxes so they can reinvest that money in growing their business.

Q. Where does the legislation stand?

A. Good question. Nobody seems to know. We had a lot of support four years ago. But I don’t understand the politics behind it. Now that we’re in a crisis, we need it more than ever.

Q. What would the plan cost taxpayers?

A. Nothing. When the plan was scored when it was in committee, it showed that there would be no cost to the Treasury over 10 years. It would be a net positive to the economy. This would put $4 billion in the hands of entrepreneurs to reinvest in their companies.

Q. Clearly, though, the legislation would cost the government revenue in the early years. Is that why it hasn’t passed?

A. The Bridge Act doesn’t get the support it needs because too much time and effort is spent on the extremes, either on big business or on small businesses like a dry cleaner. But neither is where jobs get created. Dr. Don Walls, an economist at Harvard, has done research that shows that 50 percent of new employment in the country comes from companies with between 20 and 200 employees. Companies with fewer than 20 employees add only 12 percent of new jobs while companies with 2,500 or more employees add only 3 percent. But policy makers don’t talk about that middle majority. You have all the focus on saving large corporate America, the too big to fail, or looking after the kinds of small businesses represented by the N.F.I.B. The businesses in the middle don’t have lobbyists. That’s why I spend so much of my time on Capitol Hill trying to raise awareness of this problem.

Q. Has the Small Business Administration played a useful role in helping companies or banks through the credit crisis?

A. Based on my interactions with companies and the capital markets, I don’t see the S.B.A. as a factor.

Q. Why do you think that is?

A. I don’t have any data, but my instincts tell me it’s because the S.B.A. lends to smaller companies like Laundromats rather than growth companies.

Q. You also advocate on behalf of private equity groups, correct?

A. I’m on the board of the Association for Corporate Growth, which represents about 3,500 middle-market private equity firms. These are the firms that are providing the capital to those growing firms. But there’s a misperception on Capitol Hill about them. When people think about private equity, they think of the big boys like Blackstone and K.K.R. They think that everyone is like Stephen Schwarzman and hires Rod Stewart to show up at their birthday party. The truth is there has been a sea change in the way that companies get funded. Private equity funds far more companies than the public markets these days because the cost of capital is now cheaper through private equity than through an I.P.O. And companies with between 20 and 250 employees are where all the action is. That’s why it’s so important for the government to be wary of any taxes or regulations that could disrupt the ability of these firms to fund growth companies.

Q. Do you expect the economic crisis to produce other sea changes?

A. After the recession that came after the dot-com boom, I came across some additional research done by Dr. Walls at Harvard. He found that there was a spike in the number of start-up companies founded in that time — more than 2.5 times the historical average. I’m betting that there will be a huge number of companies that get started over the next few years. There are far too many talented and educated people out there that don’t want to watch Oprah all day. Innovation happens on the cliff’s edge.

This interview was conducted and condensed by Darren Dahl.

A Place Recession Doesn’t Visit: Military Contracts (NYT)

2009-03-26T00:22:00.001-04:00

A Place Recession Doesn’t Visit: Military Contracts

By KATE MURPHY

Like so many small businesses in this weak economy, Kaos Worldwide, a sports apparel company just outside Houston, has been struggling. But it has managed to survive while its competitors have folded because it won a five-year, $1.5 million contract last year to supply sports bras to the United States military.

“Without the military contract, we might not still be here,” said Bert Emanuel, who founded the business with his wife, Terri, after a knee injury in 2001 forced him to retire from an 11-year career as a professional football player. Their company sells temperature-regulating and moisture-wicking base layers like T-shirts, shorts, leggings and bras.

While it may seem that only large corporations like Halliburton and Lockheed Martin would have a shot at lucrative military contracts, the Defense Department actually awards more than half, or $55 billion, to small businesses. And the Obama administration’s $787 billion stimulus plan promises to make even more money available.

“Small businesses play an important role in the economy and the military,” said Joseph E. Misanin, deputy director of small-business programs at the Defense Department. “They have an agility and flexibility that gives them an advantage over bigger companies.”

Although the regulatory hurdles to becoming a military vendor can be daunting and frustrating, small-business owners who persevere say it is tremendously profitable and even essential to their survival. With the United States currently in the midst of two wars and tending to a multitude of other security concerns, they say the military is a recession-proof customer that has insulated them from the current economic downturn.

Beth Harshfield, the owner of Exhibit Arts, an advertising and marketing company in Wichita, Kan., said she started bidding on military contracts six years ago because “I got tired of the local economy kicking the legs out from under us.” Now 80 percent of her business is with the military. Her company creates trade-show booths for Army recruiters and acts as a staffing agency for military bases.

“Once you’re established and you perform well, there is unlimited potential,” Ms. Harshfield said. “But getting set up to work for the government is a confusing and lengthy process.”

First, small businesses have to be certified to work for the government, which is a cumbersome process. It means getting listed on the Central Contractor Registration database. This is required of all current and potential military contractors. Applications can be made online and require a company’s tax identification number.

Once in the database, small businesses get a Commercial and Government Entity code; a Marketing Partner Identification Number and Trading Partner Identification Number. These are all essential for finding, bidding on and getting paid for military contracts.

Helping small businesses make sense of the credentialing process are regional procurement technical assistance centers. There are 93 of these federally financed offices nationwide, run by former military procurement officers.

“The first meeting takes a few hours when we learn about the business to see if it even has a product that’s possible to sell to the military,” said Debbie Smith, procurement specialist at the assistance center in New London, Conn.

If the answer is yes, then the center guides the small-business owner through the registration process and enters him or her into a central database that patrols the federal system for bid solicitations that fit their profile. Small businesses can also look through the listings on www.fedbizopps.gov for opportunities.

But getting that first contract is difficult, said Ms. Harshfield of Exhibit Arts. “They want you to have experience working with the military,” she said. “They aren’t as interested in your commercial experience. So it’s really hard to break in.” It took two years, she said, for her company to get the military to accept one of its bids.

Mr. Emanuel said he was lucky that, through personal connections, a general in Iraq had learned of his product. The general ordered 10,000 bras for his female soldiers by credit card in 2005. So when Mr. Emanuel bid on the five-year contract that he eventually won last year, he was able to point to that experience.

Rather than bidding on contracts, some small businesses try to get their products listed on the General Services Administration schedule, which is essentially a giant e-mall where military procurement officers can buy items online with a standard credit card. If the company’s product is consumer-oriented, it is eligible for listing on the Army and Air Force Exchange Service, an online, tax-free store for active-duty military and their families.

Kathline Springer, director of business development at Rust Bullet in Reno, Nev., said it took two years of paperwork and lobbying various officials to get her company’s rust-retardant coating listed in 2005 on the General Services Administration schedule. Still, she said, “it was worth it” because the military is now Rust Bullet’s biggest customer. “I don’t have to worry if they are going to pay their bills.”

Another option is to get a so-called National Stock Number, which gets a product in the Defense Department’s database of items approved for military use. Mark Ewald, owner of Groove Tech in Waterbury, Vt., got a stock number in 2000 for his company’s industrial-strength bungee cord.

“I get most of my orders through word of mouth,” he said. “One military unit will get my product and tell another unit who wants to get it.” The unit’s procurement officer then uses the stock number to place an order. The military now accounts for more than half of Groove Tech’s business, he said.

To expand his military sales, Mr. Ewald said he had begun making marketing calls this year to military bases and National Guard units. “Most of the work is finding out who the supply sergeant is and how to reach him,” he said. Adding to his frustration, he said, is that military personnel are mobile, so contacts change frequently.

Rick Horn, who is with the assistance center in Las Vegas, said: “There are incredible opportunities for small businesses if they can get themselves plugged into the system and adapt to the changing environment.

“It’s certainly more complicated than dealing with a commercial entity. But the way the economy is these days, the government still has money and the private sector doesn’t.”

25 Common Characteristics of Successful Entrepreneurs (Entrepreneur.com)

2009-03-20T16:18:00.000-04:00

25 Common Characteristics of Successful Entrepreneurs

Do you have what it takes to get through the recession? Here are the traits that get home based business owners through the hard times.

By James Stephenson | March 13, 2009

URL: http://www.entrepreneur.com/homebasedbiz/article200730.html

This article has been excerpted from the Ultimate Home Based Business Handbook, by James Stephenson, available from Entrepreneur Press.

Regardless of your definition of success, there are, oddly enough, a great number of common characteristics that are shared by successful businesspeople. You can place a check beside each characteristic that you feel that you possess. This way, you can see how you stack up. Even if you don't have all of these characteristics, don't fret. Most can be learned with practice and by developing a winning attitude, especially if you set goals and apply yourself, through strategic planning, to reach those goals in incremental and measurable stages.

The Home Business Musts
Like any activity you pursue, there are certain musts that are required to be successful in a chosen activity. To legally operate a vehicle on public roadways, one must have a driver's license; to excel in sports, one must train and practice; to retire comfortably, one must become an informed investor and actively invest for retirement. If your goal is success in business, then the formula is no different. There are certain musts that have to be fully developed, implemented and managed for your business to succeed. There are many business musts, but this article contains I believe to be some of the more important musts that are required to start, operate and grow a profitable home business.

1. Do what you enjoy.
What you get out of your business in the form of personal satisfaction, financial gain, stability and enjoyment will be the sum of what you put into your business. So if you don't enjoy what you're doing, in all likelihood it's safe to assume that will be reflected in the success of your business--or subsequent lack of success. In fact, if you don't enjoy what you're doing, chances are you won't succeed.

2. Take what you do seriously.
You cannot expect to be effective and successful in business unless you truly believe in your business and in the goods and services that you sell. Far too many home business owners fail to take their own businesses seriously enough, getting easily sidetracked and not staying motivated and keeping their noses to the grindstone. They also fall prey to naysayers who don't take them seriously because they don't work from an office building, office park, storefront, or factory. Little do these skeptics, who rain on the home business owner's parade, know is that the number of people working from home, and making very good annual incomes, has grown by leaps and bounds in recent years.

3. Plan everything.
Planning every aspect of your home business is not only a must, but also builds habits that every home business owner should develop, implement, and maintain. The act of business planning is so important because it requires you to analyze each business situation, research and compile data, and make conclusions based mainly on the facts as revealed through the research. Business planning also serves a second function, which is having your goals and how you will achieve them, on paper. You can use the plan that you create both as map to take you from point A to Z and as a yardstick to measure the success of each individual plan or segment within the plan.

4. Manage money wisely.
The lifeblood of any business enterprise is cash flow. You need it to buy inventory, pay for services, promote and market your business, repair and replace tools and equipment, and pay yourself so that you can continue to work. Therefore, all home business owners must become wise money managers to ensure that the cash keeps flowing and the bills get paid. There are two aspects to wise money management.

The money you receive from clients in exchange for your goods and services you provide (income)
The money you spend on inventory, supplies, wages and other items required to keep your business operating. (expenses)

5. Ask for the sale.
A home business entrepreneur must always remember that marketing, advertising, or promotional activities are completely worthless, regardless of how clever, expensive, or perfectly targeted they are, unless one simple thing is accomplished--ask for the sale. This is not to say that being a great salesperson, advertising copywriting whiz or a public relations specialist isn't a tremendous asset to your business. However, all of these skills will be for naught if you do not actively ask people to buy what you are selling.

6. Remember it's all about the customer.
Your home business is not about the products or services that you sell. Your home business is not about the prices that you charge for your goods and services. Your home business is not about your competition and how to beat them. Your business is all about your customers, or clients, period. After all, your customers are the people that will ultimately decide if your business goes boom or bust. Everything you do in business must be customer focused, including your policies, warranties, payment options, operating hours, presentations, advertising and promotional campaigns and website. In addition, you must know who your customers are inside out and upside down.

7. Become a shameless self-promoter (without becoming obnoxious).
One of the greatest myths about personal or business success is that eventually your business, personal abilities, products or services will get discovered and be embraced by the masses that will beat a path to your door to buy what you are selling. But how can this happen if no one knows who you are, what you sell and why they should be buying?

Self-promotion is one of the most beneficial, yet most underutilized, marketing tools that the majority of home business owners have at their immediate disposal.

8. Project a positive business image.
You have but a passing moment to make a positive and memorable impression on people with whom you intend to do business. Home business owners must go out of their way and make a conscious effort to always project the most professional business image possible. The majority of home business owners do not have the advantage of elaborate offices or elegant storefronts and showrooms to wow prospects and impress customers. Instead, they must rely on imagination, creativity and attention to the smallest detail when creating and maintaining a professional image for their home business.

9. Get to know your customers.
One of the biggest features and often the most significant competitive edge the home based entrepreneur has over the larger competitors is the he can offer personalized attention. Call it high-tech backlash if you will, but customers are sick and tired of hearing that their information is somewhere in the computer and must be retrieved, or told to push a dozen digits to finally get to the right department only to end up with voice mail--from which they never receive a return phone call.

The home business owner can actually answer phone calls, get to know customers, provide personal attention and win over repeat business by doing so. It's a researched fact that most business (80 percent) will come from repeat customers rather than new customers. Therefore, along with trying to draw newcomers, the more you can do to woo your regular customers, the better off you will be in the long run and personalized attention is very much appreciated and remembered in the modern high tech world.

10. Level the playing field with technology.
You should avoid getting overly caught up in the high-tech world, but you should also know how to take advantage of using it. One of the most amazing aspects of the internet is that a one or two person business operating from a basement can have a superior website to a $50 million company, and nobody knows the difference. Make sure you're keeping up with the high-tech world as it suits your needs.. The best technology is that which helps you, not that which impresses your neighbors.

11. Build a top-notch business team.
No one person can build a successful business alone. It's a task that requires a team that is as committed as you to the business and its success. Your business team may include family members, friends, suppliers, business alliances, employees, sub-contractors, industry and business associations, local government and the community. Of course the most important team members will be your customers or clients. Any or all may have a say in how your business will function and a stake in your business future.

12. Become known as an expert.
When you have a problem that needs to be solved, do you seek just anyone's advice or do you seek an expert in the field to help solve your particular problem? Obviously, you want the most accurate information and assistance that you can get. You naturally seek an expert to help solve your problem. You call a plumber when the hot water tank leaks, a real estate agent when it's time to sell your home or a dentist when you have a toothache. Therefore, it only stands to reason that the more you become known for your expertise in your business, the more people will seek you out to tap into your expertise, creating more selling and referral opportunities. In effect, becoming known as an expert is another style of prospecting for new business, just in reverse. Instead of finding new and qualified people to sell to, these people seek you out for your expertise.

13. Create a competitive advantage.
A home business must have a clearly defined unique selling proposition. This is nothing more than a fancy way of asking the vital question, "Why will people choose to do business with you or purchase your product or service instead of doing business with a competitor and buying his product or service?" In other words, what one aspect or combination of aspects is going to separate your business from your competition? Will it be better service, a longer warranty, better selection, longer business hours, more flexible payment options, lowest price, personalized service, better customer service, better return and exchange policies or a combination of several of these?

14. Invest in yourself.
Top entrepreneurs buy and read business and marketing books, magazines, reports, journals, newsletters, websites and industry publications, knowing that these resources will improve their understanding of business and marketing functions and skills. They join business associations and clubs, and they network with other skilled business people to learn their secrets of success and help define their own goals and objectives. Top entrepreneurs attend business and marketing seminars, workshops and training courses, even if they have already mastered the subject matter of the event. They do this because they know that education is an ongoing process. There are usually ways to do things better, in less time, with less effort. In short, top entrepreneurs never stop investing in the most powerful, effective and best business and marketing tool at their immediate disposal--themselves.

15. Be accessible.
We're living in a time when we all expect our fast food lunch at the drive-thru window to be ready in mere minutes, our dry cleaning to be ready for pick-up on the same day, our money to be available at the cash machine and our pizza delivered in 30 minutes or it's free. You see the pattern developing--you must make it as easy as you can for people to do business with you, regardless of the home business you operate.

You must remain cognizant of the fact that few people will work hard, go out of their way, or be inconvenienced just for the privilege of giving you their hard-earned money. The shoe is always on the other foot. Making it easy for people to do business with you means that you must be accessible and knowledgeable about your products and services. You must be able to provide customers with what they want, when they want it.

16. Build a rock-solid reputation.
A good reputation is unquestionably one of the home business owner's most tangible and marketable assets. You can't simply buy a good reputation; it's something that you earn by honoring your promises. If you promise to have the merchandise in the customer's hands by Wednesday, you have no excuse not to have it there. If you offer to repair something, you need to make good on your offer. Consistency in what you offer is the other key factor. If you cannot come through with the same level of service (and products) for clients on a regular basis, they have no reason to trust you . . . and without trust, you won't have a good reputation.

17. Sell benefits.
Pushing product features is for inexperienced or wannabe entrepreneurs. Selling the benefits associated with owning and using the products and services you carry is what sales professionals worldwide focus on to create buying excitement and to sell, sell more, and sell more frequently to their customers. Your advertising, sales presentations, printed marketing materials, product packaging, website, newsletters, trade show exhibit and signage are vital. Every time and every medium used to communicate with your target audience must always be selling the benefits associated with owning your product or using your service.

18. Get involved.
Always go out of your way to get involved in the community that supports your business. You can do this in many ways, such as pitching in to help local charities or the food bank, becoming involved in organizing community events, and getting involved in local politics. You can join associations and clubs that concentrate on programs and policies designed to improve the local community. It's a fact that people like to do business with people they know, like and respect, and with people who do things to help them as members of the community.

19. Grab attention.
Small-business owners cannot waste time, money and energy on promotional activities aimed at building awareness solely through long-term, repeated exposure. If you do, chances are you will go broke long before this goal is accomplished. Instead, every promotional activity you engage in, must put money back in your pocket so that you can continue to grab more attention and grow your business.

20. Master the art of negotiations.
The ability to negotiate effectively is unquestionably a skill that every home business owner must make every effort to master. It's perhaps second in importance only to asking for the sale in terms of home business musts. In business, negotiation skills are used daily. Always remember that mastering the art of negotiation means that your skills are so finely tuned that you can always orchestrate a win-win situation. These win-win arrangements mean that everyone involved feels they have won, which is really the basis for building long-term and profitable business relationships.

21. Design Your workspace for success.
Carefully plan and design your home office workspace to ensure maximum personal performance and productivity and, if necessary, to project professionalism for visiting clients. If at all possible, resist the temptation to turn a corner of the living room or your bedroom into your office. Ideally, you'll want a separate room with a door that closes to keep business activities in and family members out, at least during prime business and revenue generating hours of the day. A den, spare bedroom, basement or converted garage are all ideal candidates for your new home office. If this is not possible, you'll have to find a means of converting a room with a partition or simply find hours to do the bulk of your work when nobody else is home.

22. Get and stay organized.
The key to staying organized is not about which type of file you have or whether you keep a stack or two of papers on your desk, but it's about managing your business. It's about having systems in place to do things. Therefore, you wan to establish a routine by which you can accomplish as much as possible in a given workday, whether that's three hours for a part-time business or seven or nine hours as a full-timer. In fact, you should develop systems and routines for just about every single business activity. Small things such as creating a to-do list at the end of each business day, or for the week, will help keep you on top of important tasks to tackle. Creating a single calendar to work from, not multiple sets for individual tasks or jobs, will also ensure that jobs are completed on schedule and appointments kept. Incorporating family and personal activities into your work calendar is also critical so that you work and plan from a single calendar.

23. Take time off.
The temptation to work around the clock is very real for some home business owners. After all, you don't have a manager telling you it's time to go home because they can't afford the overtime pay. Every person working from home must take time to establish a regular work schedule that includes time to stretch your legs and take lunch breaks, plus some days off and scheduled vacations. Create the schedule as soon as you have made the commitment to start a home business. Of course, your schedule will have to be flexible. You should, therefore, not fill every possible hour in the day. Give yourself a backup hour or two. All work and no play makes you burn out very fast and grumpy customer service is not what people want.

24. Limit the number of hats you wear.
It's difficult for most business owners not to take a hands-on approach. They try to do as much as possible and tackle as many tasks as possible in their business. The ability to multitask, in fact, is a common trait shared by successful entrepreneurs. However, once in a while you have to stand back and look beyond today to determine what's in the best interest of your business and yourself over the long run. Most highly successful entrepreneurs will tell you that from the time they started out, they knew what they were good at and what tasks to delegate to others.

25. Follow-up constantly.
Constant contact, follow-up, and follow-through with customers, prospects, and business alliances should be the mantra of every home business owner, new or established. Constant and consistent follow-up enables you to turn prospects into customers, increase the value of each sale and buying frequency from existing customers, and build stronger business relationships with suppliers and your core business team. Follow-up is especially important with your existing customer base, as the real work begins after the sale. It's easy to sell one product or service, but it takes work to retain customers and keep them coming back.

James Stephenson is an experienced home based consultant with more than 15 years of business and marketing experience. He is the author of several popular books, including Entrepreneur magazine’s Ultimate Startup Directory and Ultimate Small Business Marketing Guide, both available from Entrepreneur Press.

Weary of Looking for Work, Some Create Their Own (NYT)

2009-03-17T13:29:00.000-04:00

Weary of Looking for Work, Some Create Their Own

By MATT RICHTEL and JENNA WORTHAM

SAN FRANCISCO — Alex Andon, 24, a graduate of Duke University in biology, was laid off from a biotech company last May. For months he sought new work. Then, frustrated with the hunt, he turned to jellyfish.

In an apartment he shares here with six roommates, Mr. Andon started a business in September building jellyfish aquariums, capitalizing on new technology that helps the fragile creatures survive in captivity. He has sold three tanks, one for $25,000 to a restaurant, and is starting a Web site to sell desktop versions for $350.

“I keep getting stung,” he said. And his crowded home office is filled with beakers and test tubes of jellyfish food. “But it beats looking for work. I hate looking for work.”

Plenty of other laid-off workers across the country, burned out by a merciless job market, are building business plans instead of sending out résumés. For these people, recession has become the mother of invention.

Economists say that when the economy takes a dive, it is common for people to turn to their inner entrepreneur to try to make their own work. But they say that it takes months for that mentality to sink in, and that this is about the time in the economic cycle when it really starts to happen — when the formerly employed realize that traditional job searches are not working, and that they are running out of time and money.

Mark V. Cannice, executive director of the entrepreneurship program at the University of San Francisco, calls the phenomenon “forced entrepreneurship.”

“If there is a silver lining, the large-scale downsizing from major companies will release a lot of new entrepreneurial talent and ideas — scientists, engineers, business folks now looking to do other things,” Mr. Cannice said. “It’s a Darwinian unleashing of talent into the entrepreneurial ecosystem.”

Even in prosperous times, entrepreneurs have a daunting failure rate. But those who succeed could play a big role in turning the economy around because tiny companies are actually big employers. In 2008, 3.8 million companies had fewer than 10 workers, and they employed 12.4 million people, or roughly 11 percent of the private sector work force, according to the Bureau of Labor Statistics.

Economists say there are some peculiarities to this wave of downturn start-ups. Chiefly, the Internet has given people an extraordinary tool not just to market their ideas but also to find business partners and suppliers, and to do all kinds of functions on the cheap: keeping the books, interacting with customers, even turning a small idea into a big idea.

The goal for many entrepreneurs nowadays is not to create a company that will someday make billions but to come up with an idea that will produce revenue quickly, said Jerome S. Engel, director for the center for entrepreneurship at the Berkeley Haas School of Business. Mr. Engel said many people will focus on serving immediate needs for individuals and businesses.

“It’s a very painful thing,” he said of the pressure people feel to find new ways to make money. “But it’s a healthy thing.”

Mr. Engel noted that the dot-com bust helped propel a pack of hardy companies. One of those, in fact, was Google. While it was started in the late 1990s, the company succeeded during the bust in part because it was highly focused and did not need much capital, Mr. Engel said.

Ryan Kuder, 35, understands the notion of scaled-down start-up fervor — and the worry and exhilaration that goes along with it. He was laid off in February 2008 from Yahoo, where he was a senior marketing manager. He job-hunted for a bit, then decided to start an Internet company that would let people do social networking at the neighborhood level.

Mr. Kuder and his business partner toiled until November, when he realized his big dreams had run headlong into reality. He needed money to pay the mortgage and buy health insurance for his family.

They transformed the company into a new one called Koombea that designs and builds Web sites for businesses. Koombea has grown to nine people, most of them in Colombia, where the cost of living allows them to do Web design relatively inexpensively.

Mr. Kuder and his wife agreed that he would give up working for Koombea at the end of January if he did not hit certain revenue goals. They narrowly missed the target. For a few days, Mr. Kuder sent out résumés. He found no work, so he is back investing himself full time in Koombea — and says he is feeling transformed.

“My sleeves are rolled up, and I’m dirtier than I’ve ever been before,” he said. “It’s incredibly nerve-wracking. I wake up nauseous everyday. But it’s probably easier right now to find a problem, solve it and charge people than it is to find a job.”

Monica Zamiska, 25, said it was “traumatizing” when she was laid off in January from her first postcollege job as a junior account executive with the public relations firm Ogilvy & Mather. After meeting with five recruiters, she began to realize how barren the job market was. “You can only send out so many résumés,” Ms. Zamiska said.

So she turned her full attention to a pet project called the Confoodant, a Web site with restaurant reviews written by a by-invitation-only network of food enthusiasts. Her main financial obligation is her rent, but with her savings and four weeks of severance pay, she is confident that she can devote at least six months to getting the project off the ground.

“I love working,” Ms. Zamiska said. “So I made work for myself.”

The surge of interest in entrepreneurship can be seen in the demand for related workshops and networking events. Monica Doss, director of FastTrac, an organization that offers training to aspiring entrepreneurs, said she expected participation to double this year from the 10,000 people it had last year.

“People are thinking, ‘These jobs aren’t going to come back in three years. I’ve got to find something else to do,’ ” Ms. Doss said.

Mr. Andon, for one, seems to have found his niche. He said he recently received an order for a large jellyfish tank that should sell for tens of thousands of dollars.

His entrepreneurial fever seems to be catching: at least four of his roommates are starting companies. Two of those — Erin Kitchell, 28, and her brother Andrew, 25 — are making laminated, fold-out language guides for travelers. In the next few days they plan to print their first 8,000 copies and start trying to sell them.

Ms. Kitchell took a voluntary buyout in June from Wachovia, sensing a layoff would come anyway, and is not sanguine about finding good work.

“This is as good a time as any to try something entrepreneurial,” she said. “There is not a lot of opportunity right now in finance.”

Matt Richtel reported from San Francisco, and Jenna Wortham from New York.

Obama Offers $15 Billion to Help Small Businesses (NYT)

2009-03-16T14:25:00.000-04:00

Obama Offers $15 Billion to Help Small Businesses

By THE ASSOCIATED PRESS

WASHINGTON (AP) — President Obama is unveiling a $15 billion package to help small businesses.

Speaking to small business owners in the East Room, President Obama and the Treasury secretary Timothy F. Geithner described their plan to reduce lending fees, ease the tax burden and increase bank liquidity to get credit rolling.

Mr. Obama called small businesses the heart of the American economy. He said they have created roughly 70 percent of new jobs in the last decade.

The administration also said the 21 largest banks receiving government money must report monthly on how much lending they do to small businesses.

Mr. Geithner said when small businesses prosper, the nation prospers.

All other banks getting taxpayer help are being asked to report quarterly on small business loans. Even banks that are not taking government funds are being told by the administration to “make an extra effort” to increase small business lending.

The announcement was part of a broad package aimed at increasing the credit available to struggling small business owners. The White House figures that making billions in federal loans available to small businesses was one way to address misgivings over the widely unpopular bailout program, which has sent hundreds of billions to large financial institutions like Bank of America, Citigroup Inc. and JPMorgan Chase with few strings attached.

The rescue program has appeared to do little so far to loosen credit, the lifeblood of the American economy.

The measures includes $730 million from the stimulus plan to immediately reduce small-business lending fees and to increase the government guarantee on some Small Business Administration loans to 90 percent. The government also is taking aggressive steps to boost bank liquidity with up to $15 billion aimed at unfreezing the secondary credit market.

Often primary bank lenders will seek to sell the S.B.A. loans in the secondary market, allowing them to use the proceeds of the sale to make new loans to other small business owners, but skittish investors have been staying away. Under the administration’s initiative, the government will step in to buy these loans to help unlock the frozen credit market, using money from the recently passed bailout package in the range of $10 billion to $20 billion, one official briefed on the plan said.

While the S.B.A. typically guarantees $20 billion in loans annually, new lending this year is on track to fall below $10 billion, according to the administration.

The reporting requirements for financial institutions receiving government bailout funds are the first, the White House said.

The plan comes amid Republican efforts to cast doubt about Obama’s ambitious budget, in particular the proposal to raise taxes, starting in 2011, on individuals earning more than $200,000 and on households earning more than $250,000. Those provisions also hit small businesses.

Mr. Geithner also ordered the Internal Revenue Service to issue a series of new rules for temporary but significant tax breaks, meaning that small businesses: that earn up to $15 million will be allowed to claim losses for the past five years in the current tax year; may write off up to $250,000 in investments this year; can reduce estimated tax payments to 90 percent of the previous year’s filing; are allowed to take larger depreciation deductions within the first year of property purchases; and will see 75 percent of capital gains excluded for those who invest in small businesses.

Business Opportunities Abound, Even in Bad Times (NYT)

2009-02-22T23:31:00.000-05:00

Business Opportunities Abound, Even in Bad Times

By BRENT BOWERS

JOB losses, falling property values, more people without health insurance. With the current state of the economy so bleak, those are the issues getting a lot of attention. But they are not the whole picture.

Some entrepreneurs are actually doing well in part because times are hard. This is a story about four of them.

One, Craig Brandman, founder of Medilinq, a provider of medical discounts for low-income people, predicted in a recent interview that his company would increase the number of its participants by more than sixfold this year, to 200,000 from 30,000 at the end of 2008.

Another is Peter George, the 49-year-old chief executive and part owner of Fidelis Security Systems in Boston, whose company provides protection against data breaches. Mr. George said sales rose 55 percent last year.

And Charles L. Burckmyer and Scott Noll, co-founders of Knob Hill Partners in Boston, are in the enviable position of sitting on about $500,000 in cash and looking for a company to buy at a favorable price in a weak market.

•

Dr. Brandman, a 60-year-old cardiologist who founded Medilinq in Houston in March 2004, described the company’s target customers as the working poor and the self-employed who are both uninsured and ineligible for Medicaid. They pay $24.95 a month for steep discounts on medical bills that the company has negotiated and that, he said, “are competitive with those offered by the Aetnas and the Cignas of the world.” Health care providers support his product, he said, because the company makes sure most bills are paid within 10 days, in contrast to the industry average of 75 days, and because it eliminates the paperwork that can eat up 25 percent of their revenue. “Medilinq is a sort of a Costco and PayPal mode for health care,” Dr. Brandman said.

As the number of people without access to health care grows and as billing headaches become more acute, he added: “We’re looking at having a big year this year. Economic hard times are a good opportunity for us.”

•

Mr. George, of Fidelis Security Systems, said that in the past, companies’ loss of digital assets like design documents and marketing plans was generally inadvertent, as the data slipped through holes in the computer system.

But in a recession, he said, there is an increased chance that disgruntled or laid-off employees might purposely disseminate intellectual property to potential rivals.

“The big threat to computer systems until now has been hackers from the outside,” he said. “Data leakage by insiders is the next big threat, and we can stop it in its tracks.”

Fidelis’s orders jumped 99 percent last year, he said. In 2009, “our operating projection is to grow faster.” Fidelis also hopes to add to its work force in the second half of this year. It doubled last year to 50.

Skeptics might suppose that the recession would temper Mr. George’s ambitions. But he says he joined the company last March just as it was completing $22 million in venture capital financing. The timing, he said, was fortuitous — or “plain dumb luck.” That nest egg should tide the company over for the next couple of years, eliminating the need to go out again with cup in hand when options for financing are limited, he said.

A partnership with International Business Machines, which markets his products, helps as well, he said. But however slow the nation’s economic recovery might be, he said, he predicts substantial growth for Fidelis.

There were 19 major data breaches in the United States in January alone, costing companies hundreds of millions of dollars, he said, and the market to protect against such breaches is expected to grow to $1.2 billion in 2011, from $500 million this year.

“My ambition is to build this into a $50 million to $100 million company within three years,” he said.

•

Mr. Burckmyer and Mr. Noll, both 32 years old and with entrepreneurial and sales backgrounds, set up Knob Hill Partners last summer and persuaded a dozen investors to provide them with a total of $500,000 in operating capital to look for promising businesses whose owners were interested in selling. They are searching especially for companies with strong growth potential and price tags of $10 million to $30 million in energy efficiency, specialty software or information technology. Once they locate a company, they said, their investors are prepared to contribute the funds for them to acquire it and manage it.

With prices falling, the recession is a good time to be shopping for a business. But Mr. Burckmyer and Mr. Noll say they have a competitive advantage over others who are prowling the market with the intention of re-engineering a company and flipping it after two or three years.

Typically, owners who have nurtured their ventures for decades “want to protect continuity,” Mr. Burckmyer said. “Their workers are like family to them.” Unlike the bargain hunters, he said, he and Mr. Noll promise to stay in their new management roles for the long haul and to avoid layoffs if possible.

He cited inconclusive talks the two men held with the owner of an electronics equipment recycling company. “He wanted somebody who was committed to sticking around,” he said. “Once people understand what we’re doing, we get a better reception.”

Knob Hill Partners is known as a “search fund.” Such funds have been around for a quarter-century, but because they have consistently produced double-digit returns, they are gaining popularity with wealthy people in this recession as an alternative to stocks, bonds, real estate and other traditional investments.

Mr. Burckmyer and Mr. Noll closed their fund in December when they got enough funds to conduct their search. Once they find a company they want — and what their investors, who are savvy business people and their de facto consultants, also want — they will be able to go back to their investors and get the resources to quickly seal a deal.

Nobody enjoys witnessing the pain that the recession is inflicting on ordinary people, Mr. Burckmyer said. Still, the troubled economy offers openings for entrepreneurs with sharp eyes and sharp elbows.

“We’re now in what I humbly concede to be an enviable position of going out to find a business to buy as pricing multiples fall through the floor,” he said.

Stimulus Law Aids Small Business, but Benefits Are Not Easy to Find (NYT)

2009-02-22T23:30:00.000-05:00

Stimulus Law Aids Small Business, but Benefits Are Not Easy to Find

By MICKEY MEECE

THE $787 billion recovery package that President Obama signed into law on Tuesday has a little something for most small-business owners, though some complained that the law’s benefits were not easy to figure out.

“Who has time to read it?” said Michael J. Fredrich, president of MCM Composites, a maker of highly engineered composite molding parts in Manitowoc, Wis.

Ethan Siegel, chief executive of Orb Audio, a maker of home theater speakers and systems, said his initial impression was that “there is nothing in here for me as a small-business owner.”

But Mr. Siegel said that as he started to dig deeper, he found a provision that would increase loan guarantees for Small Business Administration lenders. That, he said, would make it easier for Orb, whose main office is in New York, to secure a line of credit. “With a line of credit we can do a lot more with the same amount of capital,” he said, “which is exactly the purpose of the stimulus package.”

Several other items also caught his eye, including one that offers a tax credit for businesses that hire disadvantaged workers like veterans and “disconnected youth,” those who are not in school or working. That credit could be a tipping point between hiring and not, he said. “This is especially true since we build the speakers in the U.S.A., and the people with production skills can fall into these groups.”

Business owners and their tax advisers are finding that a little detective work is needed to reap the full benefits of the law, which includes tax relief for businesses and individuals, as well as spending provisions.

Todd Flemming, chief executive of the Advantor Systems Corporation, a military contractor, for example, said he found spending allocated to military construction. His company, based in Orlando, Fla., makes and installs high-security systems at military installations worldwide. “That’s spending that would be stimulative for us,” he said.

Not everyone will be served directly, said Leonard Steinberg, who owns Steinberg Enterprises, a tax, financial and business advisory company in West Windsor, N.J. His clients, including mom and pop retailers, limited liability companies and S corporations — corporations that elect to have their income pass through to the shareholders — “won’t see the benefits of the stimulus,” he said.

Even so, tax specialists say, those companies may be aided indirectly by the tax relief for individuals, which will give workers more money to spend and will help certain taxpayers avoid the alternative minimum tax.

At the same time, some of the tax provisions for businesses, while they mean well, may not help in the way intended, said Barbara Weltman, a tax specialist and author of “J. K. Lasser’s Small Business Taxes 2009.”

She cited one provision that allows businesses to deduct up to $250,000 for capital investments. “That sounds great,” Ms. Weltman said, “but you can’t benefit from it unless you are profitable.” She added that many businesses were having trouble securing financing, but, if that should free up, the incentive was there.

Another provision gives companies a 50 percent bonus deduction on capital investments made in 2009 that normally would be deducted over many years. “Again, that only benefits those who are making capital investments,” Ms. Weltman said. “So many people are struggling to pay bills that they cannot go out and make purchases.”

One tax measure she likes is the ability of companies to use losses from 2008 to offset profits in earlier years — any full year that is more than two but less than six years ago — and obtain an immediate refund. It is only for 2008, she pointed out, and for companies with annual revenue of up to $15 million.

Mr. Fredrich said he had looked for a silver lining in the law but had yet to find one. “We certainly will have a loss to carry back, but we could do that before the bill passed,” he said. “It does not even move the needle. If you have no revenue, nothing else matters.”

He said he had hoped in vain for a reduction in the highest personal tax rate, a change that would have allowed him to put the money back into his business.

Now that the bill has been signed, he said he had not had time to read all 1,000 pages, but he was not optimistic about finding help for his company, which had its last production day of the week on Wednesday.

Weekly orders at MCM used to generate $100,000 to $180,000, Mr. Fredrich said. Last week, the company took in $32,000, and this week $19,000. “We expect it to be worse,” he said. “You just have to gut it out.”

This article has been revised to reflect the following correction:

Correction: February 21, 2009
The Practically Speaking column on Friday, about benefits for small businesses in the federal stimulus package, described incorrectly a provision that gives companies a 50 percent bonus deduction on capital investments. That provision was extended to investments made in 2009; it is not just for investments made in 2008. The article also misstated the production schedule of MCM Composites, whose president commented on the legislation. Wednesday was its last production day of the week, not the month.

Sales Tips for a Tough Economy (NYT)

2009-01-21T09:10:00.001-05:00

Sales Tips for a Tough Economy

By PAUL B. BROWN

There is no shortage of advice about how to increase sales in this tough economy. The problem is that many of the ideas are not new — concentrate on filling a specific niche; let the big companies be the generalists — or are overly specific. (Does handing out free portable computer memory sticks with your company’s name on them really work, if you are not a technology company?)

Still, if you search long enough, there are nuggets worth considering.

MORE EFFECTIVE ADS Writing on the Web site of Peak Consulting, which specializes in statistical analysis and economic forecasting, Bob Leduc suggests a three-part approach to increasing your advertising’s impact.

First, he said: “Always include a powerful offer in your advertising. Offer free information related to your product or service to generate inquiries or Web site traffic. Then, make the most compelling discount or bonus offer you can afford to convert these inquiring prospects into paying customers.”

To convert these prospects, he said you should do everything you can to capture the contact information of the people who respond to your ads and follow up with them, since “most prospects won’t buy the first time they hear or see your sales message.”

Finally, he suggested, “Remove the obstacle of risk.” The major reason why people don’t buy something they want or need, he says, is that they do not want to take the chance of getting something different than they expect and maybe even losing money. “You can eliminate this risk by guaranteeing satisfaction,” he said. “If you sell products, offer a liberal money back guarantee. If you provide a service, offer to continue working without additional charge until the promised result is achieved.”

CUSTOMERS AS SALESPEOPLE Word of mouth is a great way to goose sales. But you don’t have to sit back and wait for people to spread the word about how wonderful you are, argues James Yuille, a marketer.

“Make your customers get excited about your business and they will tell their friends,” he said. “Send them ‘thank you’ letters or cards after they buy. Give them a free vacation certificate, a coupon, etc. when they refer others to you.”

ASK FOR THE ORDER Many entrepreneurs have a hard time asking for the order — saying to the customer words to the effect of, “Should I write up the sale now?”

Duane Marx, writing on Relationship Marketing.com, recommends that you a) not have that reluctance and, b) certainly don’t build it into your Web site, if you are selling products there.

“Have a few places where your prospects can order your products,” Mr. Marx said. “You always want to make it easy for them to buy. By having more order links on your sales page. they’ll be able to buy whenever the urge strikes them.” .

CHARGE MORE One “easy” way to increase revenue is by charging more.

If you think you can’t raise your prices in this economy, think again, suggests Charlie Cook at Marketing for Succcess.com.

That is especially true if what you are basically selling is your time.

“Most service professionals think that they’re already charging as much as they can, because prospects and clients often balk at their existing prices,” he wrote. “But nine times out of 10 when prospects complain about price, it’s not the total cost that’s the problem. The problem is that the price is presented out of context, so prospects don’t understand the value of your services. Without understanding the value you provide, a very reasonable price is going to seem high and become a barrier to sales.”

LAST CALL Words matter, especially when it comes to selling. For a humorous example of things not being exactly what they seem, visit Workjoke.com where they point out what salespeople really mean when they use a specific term.

Here are some of our favorites, quoted verbatim:

¶ New: Different color from previous design.

¶ All new: Parts not interchangeable with previous design.

¶ Unmatched: Almost as good as the competition.

¶ Years of development: We finally got one that works.

¶ Advanced design: The advertising agency doesn’t understand it.

Boost Business with Thank You ECard (Wired.com)

2009-01-06T15:40:00.000-05:00

Boost Business with Thank You ECard

From Wired How-To Wiki

Saying "Thank You" is a big secret of dealing with people. Yet, it is often overlooked or forgotten. Though, it's one of the first things we teach our children to say as parents. We were probably taught this as well, I know I was. So why do we, as adults, forget to do it so often in business? "Thank you" works marketing magic because everyone wants to feel important.

Don't on the pretext that you're too busy or believe it isn't necessary. It's very easy to do, and also effective. Just send out personalized Thank You eCards to your customers and express your gratitude for choosing you or your service. You will become renowned for your professional courtesy and acumen.

Thank you eCards can do more than just ensure customer satisfaction and build brand loyalty. A customized thank you eCard can strengthen name recognition, brand message and brand identity. It is really an economical and effective way for your business.

Making customized Thank You cards is a dying art. Unlike writing a thank you note for a gift, a business thank you card must be professional but have a personalized, appreciative tone to it at the same time. Then the problem come down to how to make such professional yet personalized thank you eCard.

Employ some 3rd party company customize thank you eCard for your company is a good stratagem, especially in the short term. If you want to design kinds of eCard for different people, this way will very wasteful in this downturn economy. Take E-Marketing Associates (EMA) for example, you must cost as little as $279 to create a custom Holiday eCard, if you want to create five customized eCard, you should cost $1395. In fact, you have some better solution, through PowerPoint.

As we know, PowerPoint is a power tool to create professional presentation. Music, videos, pictures, and personalized greetings can be very easily inserted to your presentation. Also, the slide transitions and animations in PowerPoint will enhance your presentation. In detail, you could add:

- Company name/logo (strength brand recognition)

- Company's group photos (increase kindness feeling to customers)

- Warmly voice greetings from all your company staff (impress customers with the harmonious and friendly culture)

- Personalized greeting messages (Keep sincerity in mind at first and then writing the greetings from heart, not for the sake of flattery)

- Slide transitions and animations (catch others'eyeballs, and make your company like a pro in anything)

Then convert your presentation to Flash eCard is very easy with some other third party tools, like PPT2Flash. After converting, you could send the thank you eCard to your customers via email or uploading to your company website. Each customer has a different level of satisfaction with your products and services. However, all customers who view the elaborated thank you eCard you design will satisfied that they're important to you. This can determine whether you'll continue a relationship with them and get referrals.

Click to view the demo made by PowerPoint and PPT2Flash

It may be difficult to measure exactly how sending thank you eCard affects your business, but it does make a difference. The results may not be immediate and remember don't expect anything. Just trust that 'what comes around goes around' and what you give out comes back to you in some way.

Who can you thank today? Just make a thank you eCard and deliver to them.

Finding New Business Ideas

2008-12-29T21:49:00.001-05:00

Finding New Business Ideas

By KELLY SPORS

Q: What opportunities do you see out there for new entrepreneurs? Where can someone turn for new business ideas?

—A.C., Florham Park, N.J.

A: Ideas are everywhere. It's execution of good ideas -- not the ideas themselves -- that makes for successful businesses.

GOT A QUESTION?

Email your questions about starting a business. Please include your name, city and state. If you don't want your name used in our column, please indicate that. Due to volume of mail received, we regret that we cannot answer every question.

For an archive of past Small Talk columns, visit WSJ.com/SmallBusiness.

That said, uncovering real opportunities and fleshing them out requires some foresight and research. Aspiring entrepreneurs should generally stick with industries or subjects they are already well-versed in, since they'll then be in the best position to spot opportunities and take advantage of them, says Bo Fishback, vice president of entrepreneurship for the Ewing Marion Kauffman Foundation, a Kansas City, Mo., entrepreneurial research organization.

"If you don't have a unique skill set in a space," he says, "it's going to be very hard for you to just jump in and compete with everyone else who does."

The best ideas, Mr. Fishback adds, are those that solve vexing problems -- and often spring from firsthand experiences. Of course, some trends, such as the aging baby-boomer population or the boom in online social networking, naturally present lots of opportunities for entrepreneurs.

Mr. Fishback recommends identifying the "smartest" people you can find in any industry you're considering starting a business in and speaking with them extensively about the industry and the issues they face. These people will not only feed you ideas, but can also act as a sounding board for any ideas you have. Closely monitoring the news, blogs and industry Web sites also can help sprout ideas.

The Internet offers plenty of resources as well. Social-networking sites for entrepreneurs, such as ClubENetwork.com, Vator.tv, Entrepreneur.Meetup.com and PartnerUp.com, allow people to swap business ideas and provide feedback to each other.

Other sites like ideablob.com, run by credit-card firm Advanta Corp., let users pitch business ideas and have their ideas voted on by other community members -- with the chance to win cash prizes.

Three Ways to Build Innovation Into a Day's Work (WSJ)

2008-12-29T21:45:00.001-05:00

Three Ways to Build Innovation Into a Day's Work

By SIMONA COVEL

Game-changing ideas may abound at your workplace – in the minds of your employees. The hard part is figuring out how to tap into those ideas and make creativity part of the daily routine.

But regularly harnessing your staff's brainpower can provide an important edge to small businesses competing against larger competitors with bigger budgets and deeper resources.

Here are three ways small companies have figured out how to make the most of employee contributions.

1. Awards and Recognition

Allison De Meulder wanted to hear new ideas from employees at her online custom-invitation store. Her staff of 24 rarely made suggestions, but she had a feeling they had more to offer than they were letting on. "People don't always feel comfortable coming into my office," she says.

Ms. De Meulder, who is president of Tampa, Fla.-based Invitation Consultants Inc., bought a white mailbox and installed it in a central spot in the office.

Employees are encouraged to drop in new ideas and lift the red mailbox flag. Once a quarter, Ms. De Meulder and her husband, Olivier De Meulder, the company's vice president, select a winner from as many as 30 ideas. They host a catered lunch and read the top three aloud. The winner is awarded $500 cash and a sculpture resembling a glass-encased electric-blue light bulb.

"I really wanted to do something to motivate people," Ms. De Meulder says. "People are motivated by recognition."

A recent winning entry came from a graphic designer, who pointed out that free photo touch-ups on wedding and graduation announcements can consume a lot of time and energy. The new idea: Charge a few dollars for labor-intensive work, such as removing objects from a background. As a result, Ms. De Meulder says, the company made an extra "couple thousand dollars" during the recent graduation season.

Another recent winner: A vendor-relations manager suggested that brides shopping for wedding invitations should be able to save favorites and send a poll to family and friends, who can vote for their choice. That poll could be landing in the inboxes of other future brides who will need their own invitations one day. Attached to each poll is a coupon code to help drive new business.

Not every idea works. One winning suggestion proposed drop-down menus for customers searching for invitations, a tool that proved too unwieldy to implement. Despite spending fruitless time on that project, Ms. De Meulder says, "I don't give guidelines. I want free-flowing creativity."

2. Required Suggestions

When Talia Mashiach co-founded Eved Services Inc. four years ago, she instituted weekly company-wide think-tank meetings. As her event-services company grew – it now has 27 employees, most scattered at several hotels around Chicago -- meeting weekly proved impossible. Last year, it moved to a monthly meeting. There, each of the company's five teams – grouped by hotel client, plus a support-staff team– is required to present three new ideas. Some ideas are embraced on the spot; others are studied by executives in the following weeks.

Among the ideas adopted: Instead of staff working at hotels wearing their own choice of business attire, they all now wear a black suit with a black or white shirt, along with a lapel pin bearing the company logo.

"It's been a game-changer," Ms. Mashiach says. "Hotel clients talk about it. They say it creates a professional image."

Last year, an employee suggested reaching out to third-party meeting planners who work with corporate clients. Eved had been concentrating on hotels, but now works with 10 such event planners. Ms. Mashiach estimates those connections will bring as much as 25% of its anticipated $10 million revenue this year.

With the constant flow of ideas, Ms. Mashiach says she has to be careful not to discourage people when their suggestions aren't implemented – and to encourage them to keep trying. Some employees may approach her to complain that an idea wasn't adopted, "which is something we watch carefully," she says. "If they don't get the sense you're listening, it won't last," she says.

Those who see their ideas implemented are rewarded with stars, which also are awarded for other performance-related accomplishments. Each year, the top three star earners are rewarded with lunch with the executive team.

3. Online Document Sharing

The test-prep and subject tutors at C2 Educational Systems Inc. rely on stacks and stacks of books and manuals. A few years ago, when they discovered a teaching tool, or a mistake in a book, they'd fire off emails to the Duluth, Ga., company's headquarters, where curriculum staff struggled to stay on top of the suggestions.

"When we had five centers, it was doable," says C2 chief executive David Kim. Today, C2 Education has 110 centers and 440 tutors. "As we grew, it was harder to keep track."

Three years ago, Mr. Kim began posting teaching materials in Google Docs – a free online service that allows people to create, share and jointly edit documents. He and other employees encouraged tutors around the country log in to the tool to check for new resources and share their thoughts about books, classroom activities and teaching tips. Tutors can also post new materials they've found useful.

C2 tutors can log on and add teaching suggestions and other comments from anywhere. Google tracks changes and saves previous versions of the document.

While some of the updates are nuts-and-bolts suggestions -- better ways to teach fractions, for example -- others have the potential to invigorate the business. At the prompting of a tutor who said parents wanted their children to learn persuasive-writing skills, the company posted a teaching document to its Google Docs page. Tutors downloaded it over and over again, and continually made updates and suggestions. One suggestion: Start a formal debate class.

In May, the company rolled out the debate classes at 24 C2 centers. Parents pay $45 and up per hour for their children to attend. The classes are now bringing in about 10% of C2's revenues.

"Parents thought it was a huge benefit to their children, to further those debate-and-writing skills," says Mr. Kim.

Mr. Kim would like to move from Google Docs to a more sophisticated proprietary system, but so far he hasn't found the time or the money. Another potential problem: The more-innovative suggestions tapered off recently, and the majority of new posts are errors in test-prep books and other routine comments.

"We'd like to get some of that rah-rah spirit back," he says. He's considering compensating employees for the best new ideas.

What Business Owners Should Know About Patenting (WSJ)

2008-12-29T21:35:00.001-05:00

What Business Owners Should Know About Patenting

By STUART WEINBERG

Thomas Edison once said, "To invent, you need a good imagination and a pile of junk." He might have added a third ingredient: a patent. Without one, inventors can't sell, license or protect their creations. Edison understood that very well: He held 1,093 patents, still a record for an American.

For many small businesses, knowing when and how to obtain patents can be confusing. So, too, can be knowing what to claim in the patent and when to sue over infringement and --when not to.

To help clarify these matters, we spoke to James McDonough, an intellectual-property attorney at Fish & Richardson P.C. who specializes in advising start-ups and small companies on intellectual-property strategy and technology commercialization. Mr. McDonough talks about the current climate for patents and looks at the perils companies face and what steps they should take to protect themselves.

WSJ: Is it more difficult to obtain patents than it was five or 10 years ago?
Mr. McDonough: It is getting harder to a certain degree. The [U.S. Patent and Trademark Office] appears to be rejecting claims at a greater rate the first time through. I think that reflects a backlash in response to some of the problems we've seen with the issuance of poor-quality patents and how they are being misused by patent trolls [a derogatory term for a company whose only business is to buy patents to collect license fees or court-awarded-infringement damages].

WSJ: What does it cost and how long does it take to secure a patent?

Mr. McDonough: It's hard to say with certainty how long it will take, but, depending on the technology that's being patented, it can take anywhere from two to five years for a patent to issue. As far as costs, expect to spend anywhere from $10,000 to as high as $30,000 for highly complex technologies. Patentability searches account for up to a thousand of that, application fees can add up to another couple thousand, and the rest is attorney fees for patentability opinions, initial patent drafting, and [Patent and Trademark Office] action responses and appeals.

WSJ: Who doesn't really need to hire an attorney? Who really should and at what point?

Mr. McDonough: The only time I would not advise an inventor to seek counsel from an attorney is if the act of patent drafting is itself a hobby to the inventor and he has no intention of selling the invention. If there is even a remote chance that the inventor will commercialize the technology, he should get an experienced attorney involved as early as possible in the process.

WSJ: Where do most companies go wrong when they're trying to get a patent?
Mr. McDonough: First, a small company may want to start patenting without thinking through its long-term [intellectual-property] management strategy. Before patenting, you should work with a skilled intellectual-property attorney to develop a plan for building your IP portfolio. A common problem we see is a portfolio that is driven purely by research. A good IP portfolio should be designed in a way that accurately covers the business objectives of the company while protecting the technologies around which the company is built and exploiting niches of the technology field that are not yet patented.

WSJ: What's another mistake companies often make?
Mr. McDonough: An inventor may want to apply for a patent at the wrong time. For instance, it may be too early if the invention is not yet developed to a point that it can be sufficiently described in the patent. It is too late if, for example, the inventor publicly used or sold the invention more than a year ago. If it is too early, an attorney might advise the inventor to spend more time researching and developing the invention before patenting, but if it is too late, the invention may no longer be protectable.

WSJ: I've heard some inventors may claim too little or too much in the patent.
Mr. McDonough: Often, an inventor's instinct is to describe his invention by describing its specific parts, which can result in inadvertently limiting the scope of the patent. As a general rule of thumb, the claims should include all possible versions of the invention, which can be accomplished by using broad, functional language in the patent. The inventor and attorney will work together to refine the scope of the patent to ensure it is as broad as possible while still being able to withstand a lawsuit.

WSJ: Is patent infringement more common than it was five or 10 years ago?
Mr. McDonough: I don't know if there's more infringement, I just think that there's more patenting going on. Also, the value of a lot of large companies nowadays is based on their IP.…So now you're seeing companies actively seeking to protect their assets.

WSJ: If a small company believes a large company is infringing on its patents, should it sue?
Mr. McDonough: That's a difficult choice for a small company. It's become a little easier lately because a lot of law firms out there will take on a plaintiff-side patent case on a contingency-fee basis if they think it's a good case. But generally it's pretty difficult to bring an infringement suit against a really large company because of the amount of resources available to large companies as compared to small companies. It is generally accepted in the industry, that a patent-infringement suit can cost $2 million to $4 million in legal fees. So, it's often not ideal for a small company to try to sue a really large company.

WSJ: What are some alternatives to suing for infringement?
Mr. McDonough: You might approach the larger company and offer a license, or attempt to establish a partnership. If a company doesn't have the means to sue now, it might choose to temporarily ignore the infringement and try to get its product to market first to generate sales. Sometimes you have no choice but to bring an infringement suit.

The Unwritten Rules of Social Networking (Entrepreneur.com)

2008-12-10T14:26:00.000-05:00

The Unwritten Rules of Social Networking

Is your social networking strategy actually costing you customers? Use these strategies to get it right.

By Francine Kizner | December 03, 2008

URL: http://www.entrepreneur.com/marketing/onlinemarketing/article198998.html

Drumming up a fan base on MySpace, LinkedIn, Facebook or Twitter isn't as simple as sending out friend requests. To find followers, you need to create threads and promote products on social sites. To do so, there are a few unwritten rules of etiquette you should know. Master the etiquette so you can stop sending Super Pokes and start winning over your connected consumers.

Be Patient
It's hard to feel competitive when you're comparing your 50 friends to someone's 5,000, but if you take it slow as you build your social content, you'll fare better in the long run. Don't request friends blindly.

"In most cases, there is no viable mass adding strategy for companies," says Joel Postman, principal of Socialized, a social media consultancy for businesses. "To start off, follow a few people, get referrals and create a network that's useful to you as a businessperson."

Also resist the urge to ask all your contacts to join your network. Tom Lewis, vice president of marketing for imaging toolkits and applications provider Atalasoft, imported his Gmail contacts into Facebook and then asked them all to friend him, sending messages to professional contacts as well as people he didn't know very well. Big mistake. He issued a mea culpa message afterward, calling it a "definite mistake." A better idea is to announce social networks on your site, in your newsletter, or in an e-mail signature, and let contacts come to you.

Be Inclusive
Just because you shouldn't be sending out friend requests to everyone in your address book doesn't mean you should be shy about connecting with networkers that come to you. Don't take a chance on alienating potential customers.

"So long as it's not a spam request from a porn site or get-rich-quick scheme, I will friend anyone who appears to be a real person," Postman says. "For a business, you have to accept every live person because you run the risk of offending a customer."

Be on Message
Once connected, keep your connections' sensibilities in mind. One evening, Brooke Webb, marketing and PR director at Vicinity Manufacturing, started posting to Twitter after a failed client dinner and a few cocktails. She says, "I tweeted several messages that compared my clients and their cities to the adventures of Dante in The Inferno. You know, seventh-circle-of-hell references, and so on."

Even worse, her Twitter account posted to her LinkedIn so all her professional contacts could see what she had written. Webb has since learned to keep her Twittering professional, using it for her company's customer service and encouraging clients to reach out to her directly. She also posts about social media and has some much tamer personal posts.

Your online presence is a very visible part of your brand, so make sure what you say and do online reflects your company's culture. If you're comfortable joking around or sharing details about your personal life, go for it, but as a general rule, Postman says to ask yourself "How would I behave I weren't online?"

Though there's a delete button for a social slip-up, you may never be able to completely fix a misguided communiqué. Last summer, SocialMedian CEO Jason Goldberg Twittered about raising angel investment for his company, possibly running afoul of securities regulations. He tried deleting the Tweet, but in moments, it was captured, published and lambasted on TechCrunch and other blogs.

Be Transparent
When filling out your profile, don't copy and paste your white paper--a few sentences will do. Show some personality by sharing information under your interests, but if you're more comfortable keeping things strictly business, relate everything back to your core message. Also, don't add any Facebook applications your contacts need to add to see--they look unprofessional and can annoy your network. Take charge of your online persona by posting a profile image. If your account is under your name, use a headshot; if your account is your business name, opt for a logo. If you've hired a community manager to handle your accounts, give some information on your site about that person, as well. And always include two-way links, from your social site to your website and vice versa, to help people quickly find and vet you.

Be Tactful
To get some business out of your social networks, it's best not to immediately send new friends offers to download an e-book or to sign up for a newsletter. Be more subtle. Work your promotion into your everyday conversations by telling people about upcoming conferences, responding to questions in your field, or pointing out new and relevant blog posts.

As a general rule, try to match the way your contacts interact with you. Respond to a wall post with a wall post and a message with a message. Most other communication should be done via more passive Twitter or status updates. Postman says, "What works is being genuine, not being a hype machine."

Be Alert
To improve your brand standing, search for complaints or problems about your business, and respond in a helpful way, without necessarily adding the person as a contact. For example, Comcast has a ComcastCares account on Twitter that responds to complaints and provides customer service right in the platform. By empowering a community manager to listen and respond to complaints, you're taking a big step toward winning over customers.

Small Stores Find Ways to Drum Up Traffic (NYT)

2008-12-09T13:10:00.001-05:00

Small Stores Find Ways to Drum Up Traffic

By KRISTINA SHEVORY

The owner of a futon store outside San Francisco started running comedy shows. A comic book shop in Florida held art shows. And a lingerie shop in New Mexico is planning a men’s night later this month.

Small businesses are always searching for ways to differentiate themselves. But with fewer people out buying, some of the businesses are doing whatever they think will draw in customers.

“This is a buyer’s strike,” said Eric G. Flamholtz, a professor emeritus of management at the Anderson School of Management at the University of California, Los Angeles. “People are holding back and not spending any money. So you have to give them a reason to come.”

Holding special events also can be far less expensive than regular advertising. And in a slowing economy, advertising and marketing budgets typically get trimmed. A recent National Small Business Association survey of its members found that 49 percent planned to start new advertising or marketing this year, down from 54 percent in 2007.

“They’re trying to market with little or no extra money,” said Molly Brogan, the association’s vice president of public affairs. “People are doing more on the Internet, any free thing they can.”

Deborah Reese, who owns a lingerie shop in Albuquerque, said she opted not to increase her advertising budget this year for the first time since she opened the shop, Seventh Goddess, four years ago. Instead, she said, she developed a new Facebook page and is encouraging employee blogs. She is also planning an array of events, like a recent “Sex and the City” pajama party in which customers sat on pillows for manicures and facials. Men’s night is coming up later this month, where employees model the store’s offerings and offer “man food.” And there will be an erotic poetry reading on Valentine’s Day.

“Events are cheap publicity,” Ms. Reese said. “People who ordinarily wouldn’t come, come. You just have to spring for the munchies and drinks.”

The parties are also good for sales. Ms. Reese sold dozens of pajamas at her “Sex and the City” event and hundreds of pairs of underwear and bras at a men’s night last December. She said she always offered discounts at the special events and a portion of her sales went to local charities.

Nor are the special events just for young businesses. Even well-established businesses, like Mary’s Futons in San Rafael, Calif., have been feeling the pinch. Fewer people are buying new futons, and more futons are being brought in for repairs. Mary Hughes, the owner, said she thought a comedy show would be the perfect thing to do because “everyone loves comedy and I wanted to meet women.” A theatrical producer was less than convinced.

“ ‘Lady, are you crazy?’ ” Lisa Geduldig, the producer of Kung Pao Kosher Comedy in San Francisco remembers telling Ms. Hughes. “ ‘I don’t do little futon stores; I do professional venues.’ ”

But after Ms. Hughes cornered her and begged her to do one show, she finally agreed. The first, “An Evening of Lie-Down Comedy,” was held in March and did so well, they added a second. When that one sold out, they added another. That, too, sold out. Proceeds from the tickets go back to the comedians and Ms. Geduldig. If more than 100 people attend, Ms. Hughes gets a small percentage of the ticket sales.

“I get the publicity and that’s worth more than the money,” Ms. Hughes said, though in a later interview she said she was taking over management of the shows.

One recent Sunday night, a hundred people milled around the futon store, nibbling on cake and catching up on gossip. A window display had been turned into a stage, 30 futons were turned to face it and salespeople were doing sound checks. Raffle tickets for a water fountain and beanbag chair were being sold at the door and a line of people snaked away from a sales counter doing service as a concession stand.

Ms. Geduldig threaded through the crowd to the stage, clambered on top and welcomed everyone to the show. “This is a futon shop,” she said. “Feel free to fall asleep.”

Everyone laughed. The show had begun.

But for every successful event, there are others that do not work out. Ms. Hughes thought she could draw 100 people to her store for a holiday sing-a-long last December. Only a few people came. At Seventh Goddess, Ms. Reese assumed a poetry writing workshop on Valentine’s Day would fill her store. Two people showed up.

Mr. Flamholtz, who is also a business consultant, said store owners should be cautious about getting into the events business. “The problem is that business owners want to diversify, but they’ll diversify into something they don’t know anything about,” he said. “They have to add products and services that make sense around their core.”

Outside events can quickly become a second business, and are rarely as simple as they appear, said Martin Lehman, a counselor and marketing director for Counselors to America’s Small Business, or Score, in New York. If a business owner wants artists to perform or exhibit their work, the business has to provide an incentive and make sure the event does not erode its brand, Mr. Lehman said. Ms. Reese noted that there were snacks to buy, bloggers to contact, community calendars to update and fliers to hand out.

Kimberly Smith-Johnson, who owned a comic book store, turned to her customers and local artists for help in putting on monthly art shows. As a former drama teacher, she turned them into her stagehands. They handed out fliers and blogged about her store.

“Events have been the best marketing tool, but they have to be genuine,” said Ms. Smith-Johnson, whose business was Comics & Classics in Jacksonville Beach, Fla. “It has to be about the artist and the event, not about bottom-line sales. People will pick up on the tone if it’s not.”

The events could not save her business, and Ms. Smith-Johnson and her husband, Percy, closed the store a few weeks ago. Even though many of their comic books were inexpensive, the Johnsons could not overcome one basic problem: they opened a new store right before the economic downturn.

“We got loved to death, but people just weren’t purchasing enough to keep us going,” said Ms. Smith-Johnson, who starts a new job as an eighth-grade teacher on Monday. “We ran out of capital. Between the banks, credit cards and people not spending, we got squeezed in the middle.”

Ms. Hughes, on the other hand, seems to have hit the right note with the comedy shows. At the September show, futons were crammed with four people each, many of them laughing. One woman yelled out, “This is the hardest I’ve laughed in a long time.”

Some said they could not believe where they were. “This is a store I’d never come into and here I am,” said Grace Flannery, from Novato, Calif. “I’m looking around at these futons and they’re a lot nicer than I thought.”

Other customers seemed to agree. After some of the shows, audience members have returned to buy the exact futon they sat on.

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