Keep Your Customers Reading

8 tips for developing e-newsletters that have interesting and relevant content for readers

By Gail Goodman | July 17, 2008

URL: http://www.entrepreneur.com/marketing/onlinemarketing/emailmarketingcolumnistgailfgoodman/article195750.html

E-mail newsletters are one of the best ways to stay connected with your customers, clients and prospects. They allow you to showcase your expertise in a way that helps build awareness and confidence in your company. And great content will prompt your readers to take action--visit your website, make an inquiry, book an appointment, request a proposal or come in to shop.

Creating a successful newsletter program requires that you include interesting and relevant content in each issue. Sure, it's easy to write about your business--new clients, new products, recent awards--but a "me-newsletter" is not one that's going to get your readers to open, read and take action. Here are 8 content ideas that will help make your newsletters relevant and compelling:

1. Share your expertise. You are an expert in your field, and a newsletter gives you the chance to show it by giving your readers valuable nuggets of information that they can take action on. When you consider what topics to cover, think of the questions that you are frequently asked. What are the areas your clients and potential clients are most interested in? In what areas do they need and value your expert advice? Giving them a little bit of free advice every month will build their trust in you and make you the obvious choice when they're in need of what you offer.
   
2. Hold a Q&A session. In keeping with the idea of answering questions, feature a Q&A section in your newsletter. Invite your readers to submit their questions, and in each issue choose one or two to answer. I know of at least one successful newsletter that is based solely on this format.
   
3. Tell a story of success. Do you know any inspiring customer or client stories? They can be testimonials that are focused on how your business helped a company or person or simply a profile of a customer and his or her business. Either way, true-to-life stories make your newsletter multi-dimensional, making it more interesting and relatable, and serving to increase your credibility.
   
4. Conduct an interview. While you're the expert of your newsletter, it can also be good to bring in some other expert voices from time to time. Highlight other professionals who offer products or services that are complementary to yours, and cover topics that your readers care about. This type of content helps show that you're connected and understand the "big picture."
   
5. Feature fun facts. Inject a little fun into your newsletter. You might include some little-known, yet interesting facts that are relevant to your type of business or offer a riddle or trivia question that you invite readers to solve or answer. Include the answer and the winner in the next issue of your newsletter.
   
6. Take an in-depth look at a product or service. Take a deeper look at a product or service you offer. Show how it could be useful to the reader by outlining the benefits and give any other information that could convince them of its value. Remember to stand in their shoes. And ask yourself the question, "What would they want to know?"
   
7. Springboard off of current events (news items, holidays, etc.). Events that are common to all of your readers' lives provide a great starting place for your content. This could be a topic that the media is actively covering, like a downturn in the economy, or it could be a holiday, such as Thanksgiving. Look for creative ways to tie these events in with a topic in your field.
   
8. Ask your readers. Last, but not least: If you want help knowing what content to include, ask the people reading it. An online survey is the perfect way to get feedback in a format that is easy to process and act on. Give options of types of content (articles, success stories, etc.) and topics that you are planning to cover. See how respondents rate this information and use their feedback to shape future plans. Also, give them the opportunity to present their ideas. They may suggest a great topic that you hadn't considered.

How can you know if your content is connecting with your readers? Besides asking the question, take a close look at your newsletter statistics. How many people opened and, more importantly, what did they click on? A link that got 30 clicks vs. one that received 300 is very telling.

By creating a relevant and interesting newsletter, you'll find one of your most valued and successful marketing tools.

Gail F. Goodman is the "E-Mail Marketing" coach at Entrepreneur.com and is CEO of Constant Contact, a web-based e-mail marketing service for small businesses. She's also a recognized small-business expert and speaker.

Advertising in Digital Media

These 3 hot trends can give you a competitive edge on the web and beyond.

By Robert J. Shimonski | July 17, 2008

URL: http://www.entrepreneur.com/advertising/adsbytype/article195738.html

As entrepreneurs, we have to either adopt--or adapt to--new methods of advertising to reach potential clients and customers. With so many of them connected to the internet with their mobile phones and/or laptop computers, it's no wonder that digital media advertising (DMA) is the new hot button for any seasoned or newbie entrepreneur.

Now potential customers can be reached 24 hours a day on many different devices all connected at once, and any customer can find your services through your digital portfolio, ringtone or podcast, or an online video tutorial. Beyond the internet, these media find their way to any medium that will support them.

These are three top trends in DMA:

Media Rich Websites
Since digital media is so easy to capture, manipulate and work with, it's no wonder that many businesses are deploying online commercials, podcasts and videos for YouTube and MySpace. If your current website harkens to a traditional bulletin board, you may want to design something new.

By embracing Web 2.0, you will find yourself in an expanded internet full of online collaboration and communication 24 hours a day. To have no downloadable samples of your product or samples to stream is to miss out on potential sales.

For example, when Chris Basile of SubSonic Recording Academy in New York came up with a new way to stream educational audio and video education tutorials from his newly deployed media-rich website, traffic increased by 400 percent within 60 days. Due to this increase, Basile closed new deals and contracts that helped increase his sales by more than 75 percent within that same time period. By putting a simple online video in a newsletter and blasting it out to his subscribers and letting them know that a podcast library was no longer available, each page got hundreds of new hits each week.

This is what makes social networking sites so popular: They are set up to function with almost all digital media methods and types, and they provide news and networking for all ages. If your company's website doesn't provide digital media interactivity, you may lose popularity quickly. If you can't make your own video look professional, outsource to a production facility. With globalization, it's easy to find facilities worldwide to make your vision a reality without breaking the bank.

Create many types of files for a large amount of digital video players, as well as many compression rates to match user download mediums and speeds. Audio can be recorded once, edited a few times and used for many different outlets. Ringtones, commercials, podcasts and audio books are but a handful of options as well as for commercials on terrestrial and online radio shows.

Success Tip: Make sure you get a .mobi and set up a mobile version of your site and mobile versions of your media.

Digital Portfolios
Gone are the days of the outdated paper business card. Even if printed on the best stock, a business card pales in comparison to a DVD or CD-ROM with your information on it.

Imagine a customer at a tradeshow looking for a production facility to make a commercial for online and TV airing. What would make more of an impression: a traditional business card or a digital portfolio? If your DVD when inserted opened a website, examples to view, video, audio and contact information ready to drag and drop into your contacts, your chances are much better than someone who just hands out a business card.

When Joan Babcock of GlobalArt Ltd. wanted to stand out, she put all of her art examples and services on a DVD, added some great packaging and handed out the DVD with a business card at trade shows, sales meetings and any chance she could get to show off her talents. After Babcock created her digital media-based portfolio, the world opened up for her. In six months, her sales increased and she can now support herself full-time on her business efforts alone.

Babcock realized that by teaming up a standard business card with a transportable DVD, she could engage a potential client almost immediately as her information was readily available. Many times, people have access to their laptops, but not necessarily the internet. Having information that could be handed out and discussed immediately gave life to GlobalArt Ltd and helped make it the success it is today.

Success Tip: Just like with business cards, don't forget the outside packaging of the DVD case or sleeve. This branding will draw the potential client to want to view the contents within.

Digital Signage
Whether in your offices or on the road on the side of a truck, taking your message to the masses has becomes so much easier. Digital media can be combined into a program that creates a sign in your store, outside it or on the road. Depending on your line of business, you can always take advantage of advertising on the road or within your store or store window. With digital signage, you can send your message from your fleet of vehicles or your own car, or these signs can be placed inside your facility or in a store window. Digital signage is helpful for menus, news, running lists of services and so on. Depending on the quality (and cost) of the digital sign, you can incorporate all other forms of digital media into the sign's cast.

For example, when Alysa Marsh of Fresh Free Fruit Inc. wanted to sell fruit smoothies and yogurt health drinks, she found that long lines at her counter could be put to better use than just looking around at her stock. Marsh deployed a digital sign and had a production house create a multimedia presentation that would run all day in her store and give her customers stock information and news along with health tips. From another 'digital sign' placed at the exit, she was able to run her TV commercial so that users realized that it existed and identified with it more when they saw it at home. With very little cost upfront and with very little time and effort, Marsh found that with an investment of less than $1,000, she was able to increase her sales and recoup her initial investment within two months.

Success Tip: Digitally enhance any graphic with tools such as Photoshop, Gimp or Creative Suite. Kiosks can be set up in your company lounge area for both employee and customer help, and for advertising. You can use audio, video and still images together in the kiosk or digital sign.

Robert Shimonski is a digital media expert who has helped build and develop media packages for thousands of companies worldwide, including Microsoft, Elsevier, Wiley and Syngress. He helps startup companies break into Web 2.0 and currently resides in New York.

Bartering Expands in the Internet Age

By JAMES FLANIGAN

Thomas Daley had been helping friends swap sports tickets for golf course green fees and concert tickets as a sideline. But on the advice of a friend, he set up an online trading site, Joe Barter L.L.C., two years ago where college students could trade textbooks, small companies could trade equipment and accountants, and plumbers, business consultants and others could advertise their services.

“I was told our site should be for the average Joe, so Joe Barter, get it?” said Mr. Daley, 36.

The company is still struggling to make its mark, he acknowledged in an interview, though he said he hoped an upgrade for the Web site, scheduled for August, along with a stepped-up marketing effort would significantly expand the membership.

The site has 2,500 individual members, who pay nothing to join the network, and 400 business-to-business members who pay fees for consultations and referrals in connection with transactions. Last year, the company’s revenue totaled about $80,000.

Whatever its prospects for success, Joe Barter is tapping into one of the largest “little” industries of small companies in America, the barter or trade exchange business. It is a business for “the little guys,” said Robert Meyer, a onetime pitcher for the New York Yankees who since 1979 has published Barter News, a magazine and online site that reports on more than 500 trade exchanges in the United States.

Mr. Meyer said about 450,000 companies do business in bartering’s many networks of retailers, services and manufacturers.

The barter business has developed broadly since 1982, he said, when federal law regularized the tax reporting of barter transactions by requiring them to be denominated in dollars for the Internal Revenue Service. More recently, the Internet has spurred the growth of barter.

Still, Mr. Meyer said, “the largest barter companies are relatively small, about $14 million each in revenue per year.” And the commercial barter business pales beside the decade-old development of eBay. Last year, that company took in more revenue from commissions — $7.7 billion — than the whole barter industry handled in transactions.

And the classified ad site Craigslist reaches 450 cities in 50 countries and receives 30 million new advertisements a month.

But one of the biggest advantages of bartering, said Steven White, chief executive of the Itex Corporation of Bellevue, Wash., one of the biggest barter companies, is “that it conserves cash for a small business and it brings in customers.”

The company, a trade exchange that has 24,000 small-business members who pay registration fees and commissions on transactions, illustrates how the business works with a hypothetical example.

A dentist provides dental work for a lawyer or accountant who also belongs to the Itex network and thus earns value, denominated in special barter dollars, in her account. She may then use those barter dollars to pay a decorator to work on her offices.

“In a small business, you have to pay cash for your mortgage and insurance and other necessities,” Mr. White said. “But barter helps you conserve that scarce resource.”

Now 50, Mr. White has led Itex since 2003, but he said he has been in the barter business since 1982, when he founded Cascade Trade Association, a company he eventually sold in 2000.

With Itex, he said, he is intent on expanding the trading network by working through brokers and 90 Itex franchises and by acquiring other barter companies.

In the last four years, Itex has grown by about a third to $14.1 million in fees and commissions in 2007. Its exchange processed $270 million in business transactions in 2007. “Distribution is the key to the business, expanding the member network so we can offer more services,” Mr. White said.

The barter business is growing, but slowly. In 2007, the total value of commercial barter transactions reached $6.5 billion, up slightly from the previous year, said Krista Vardabash, investor relations director for International Monetary Systems Ltd. of New Berlin, Wis., also one of the biggest bartering businesses.

The company has been growing much faster than that, reaching $14.2 million in revenue last year on $110 million in transactions, up from $3.9 million in revenue five years ago. Acquisitions of other trading sites have propelled some of that growth.

Donald F. Mardak, 71, founded what is now International Monetary Systems in 1985 after building a chain of piano and organ retail stores in Milwaukee and other cities. In 1989, he raised $8 million in a public stock offering, and he has driven the company’s expansion by acquiring barter exchanges in 16 states. The company now has 18,000 business members.

“The idea for the barter business hit me when I traded one of my Baldwin pianos for a Mercury Cougar,” Mr. Mardak said in an interview. “The two were comparably priced, but I had paid wholesale for the piano and got retail value for it. So there is leverage in the barter business, and that is one of its attractions.”

Mr. Mardak said he, too, planned to continue expanding. “Some of our employees are brokers,” Mr. Mardak said. “We tell them to drum up business. Trading doesn’t happen unless you make it happen.”

He dismisses the idea that trading Web sites like eBay are competition for International Monetary Systems. EBay is “more of an exchange for liquidating, not trading,” Mr. Mardak said. As for smaller companies, like Joe Barter and other exchanges that have fewer business members, he said, “They’re only swap sites; they have no supplier network.”

Mr. Daley of Joe Barter says he thinks the spread of Internet commerce supports his business vision. He plans to avoid using special barter dollars in transactions, relying on Internet trading enhanced by new technology. “I want to keep it simple,” he said. His company is intended to earn its way through business referral fees and online advertising.

“The evolving technology works for us,” Mr. Daley said. “We can target more specific groups; I’m going to hire people to market across the country.”

The barter industry is also aware of evolution. “The Internet is a two-edged sword,” Ms. Vardabash of International Monetary Systems said. “It facilitates spreading the trading community, but it also brings in competitors of every stripe.”

This column about small-business trends in California and the West appears on the third Thursday of every month. E-mail: jamesflanigan@nytimes.com.

The Utilization of Women-Owned Small Businesses in Federal Contracting Study

(find study here)

In its procurement efforts, the federal government actively seeks to foster participation by small and disadvantaged businesses. In December 2000, Congress sought to increase procurement from women-owned small businesses (WOSBs) by enacting Section 8(m) of the Small Business Act, 15 U.S.C. Section 637(m), which defines WOSBs as businesses that qualify as “small” according to Small Business Administration (SBA) size standards, are majority-owned by women, and are certified as economically disadvantaged. However, WOSBs need not be economically disadvantaged to qualify for procurement preferences in contracts of up to $3 million ($5 million in manufacturing contracts) in industries where they are found to be “substantially underrepresented.”

This study was undertaken in response to a request by the SBA for the RAND Corporation to provide different measures of WOSB representation in federal contracting, by industry. The work was funded by the SBA and completed under the auspices of the RAND Labor and Population program and the Kauffman-RAND Institute for Entrepreneurship Public Policy.

RAND Labor and Population has built an international reputation for conducting objective, high-quality, empirical research to support and improve policies and organizations around the world. Its work focuses on labor markets, social welfare policy, demographic behavior, immigration, international development, and issues related to aging and retirement, with a common aim of understanding how policy and social and economic forces affect individual decisionmaking and the well-being of children, adults, and families.

Love Your Idea (Don’t Want to Finance It)

By BRENT BOWERS

AT age 62, Patrick Brooks believes he has identified the biggest winner yet of his entrepreneurial career: licensing rights to a Savile Row trademark, “Henry Milbourne & Son — established 1769.”

The magic of that brand name, he says, should give a major boost to his fledgling effort to sell luxury men’s apparel, made in Britain, over the Internet.

But while potential investors had only good things to say about his planned venture, few are willing to invest in it.

“Henry Milbourne has a great plan to combine the old-school industry of custom-tailored shirts with the modern Internet model,” said Michael Hammond, founder and chief executive of Copana Partners, a New York investment firm.

“Keep working this strategy; it has great potential,” said Marvin Wilcher, acquisition strategies consultant for Solar Capital in Benicia, Calif.

Still, neither Mr. Hammond nor Mr. Wilcher planned to provide money for Mr. Brooks’s venture, Henry Milbourne & Son Ltd. of Arcadia, Calif. (The Web site, http://henrymilbourne.com, is still in the works.)

Mr. Brooks said he had contacted about 500 angel investors and angel-investor groups and 40 venture capital firms and boutique investment bankers over the last year to raise the $2.5 million he thinks he needs. But only nine have put up any money, including his former wife. The total he has raised so far is $475,000.

To some extent, Mr. Brooks is snared in the Catch-22 paradox that bedevils many entrepreneurs who have come up with a promising product and marketing plan: investors are reluctant to open their wallets until they see a functioning business. But it is difficult to create a functioning business until the investors open their wallets.

In addition, he may be looking in the wrong places. Some of the investors he has contacted get involved only in deals worth at least $5 million.

“We have everything in place,” Mr. Brooks said. “We have the premises rented; the Web site under construction; the logo done; the marketing plan set up.” Even the boxes for the $365 custom shirts, $235 ready-to-wear shirts and $108 hand-made silk neckties, all British-made, have been designed, he said. (He plans to branch out from those core products to silk underwear, cashmere hosiery, toiletries, cufflinks and leather goods, and to fragrances made by the supplier to Truefitt & Hill, barbers to the British royal family.)

Moreover, he has invested $600,000 of his own money, including $300,000 for the Henry Milbourne & Son trademark rights, and has spent two years trying to put the company together, paying himself no salary.

Mr. Brooks, a native of St. Vincent in the West Indies, said his African heritage might also be an impediment. The issue is not racism, he said, but the fact that he does not have a network of well-heeled friends and acquaintances that he can tap.

Luke Visconti, co-founder of DiversityInc magazine, which covers diversity in the workplace, said aspiring black entrepreneurs are at a clear disadvantage. “There are almost no black-run venture firms and very few black angel investors,” Mr. Visconti said. “Successful black entrepreneurs are scarce, and they are getting hit on every day.”

As for family and friends, a traditional first stop for start-ups, Mr. Visconti said the average wealth of black households in the United States is one-tenth that of white households.

“The circle of wealth that black people can tap into is minuscule compared with what is available to well-connected white people,” he said.

Mr. Visconti added that the slowing economy might also be cutting into the funds available for a start-up.

Mr. Brooks conceded that investors were more cautious than they were a year ago, but he said he believed that there were still plenty of deep pockets in search of opportunities.

The real problem, potential investors he has contacted say, is that he needs to narrow his hunt for money.

Mr. Hammond of Copana Partners, for example, said the deal was too small for his firm. “Unfortunately, start-ups like Henry Milbourne often find themselves in no man’s land when looking for capital between $1 million and $5 million,” he said. “The capital requested is too small to attract big institutional investors.” On the other hand, it can be difficult to raise even $1 million from acquaintances or angel investors, he said.

Paul Azous, managing member of the A.Z.O. Group, a consulting firm in Seattle, said, “That much money for a start-up without a track record — I’ve never seen it happen.”

These investors did have some words of advice. Mr. Hammond urged Mr. Brooks to “better the odds by creating a proof of concept,” notably by developing a “full-blown professional-looking home page to communicate to investors his exact brand image, layout, style and Web site.” He also suggested that Mr. Brooks take a quick test of his products’ appeal by standing outside an office building and handing out fliers, then going inside and making pitches door to door. “Prove to investors that demand exists,” he said.

Mr. Azous encouraged Mr. Brooks to open a store, seek investors who specialize in retailing and, above all, be persistent. “It’s a marathon, not a sprint,” he said.

Mr. Brooks accepted some of the advice, like aiming at investors more carefully. But he rejected other parts, like going after tiny investments or peddling high-end apparel on the street.

He remains confident that he can meet his goal of raising $2.5 million by summer. Realizing he needs to jump-start the process, he has hired several professionals over the last month, including lawyers with connections to high-wealth individuals, to scout around for him. “Three or four good investors would take care of it,” he said.

In his favor, he has the entrepreneurial gene. As a child growing up in St. Vincent, he made money photographing villagers with his Kodak Brownie 127. In 1989, he started Bio-Dental Technologies with $16,000 in savings and built it into a $33 million distributor of dental products before selling it to Zila for $35 million in 1994, making a seven-figure profit for himself.

His other big money-making adventure was engineering reverse mergers, in which he created public companies, combined them with privately held firms that wanted to go public without dealing with a lot of regulatory problems, and cashed out. He completed eight such transactions, he said, grossing about $2 million.

He said he continued to make progress in his latest venture. Late last week, he said, two investors who previously were not interested in his company took a new look at it, and one wrote a check for $75,000, while the other seems close to making a commitment. He renewed talks with a third investor this week.

“We hope to be operational in about three months,” Mr. Brooks said. “This is a company whose time has come.”

The Goal Is to Do the Right Thing

By PAUL SULLIVAN

TERRACYCLE’S fertilizer is priced the same as its competitors’. It is on the same store shelves, from Home Depot to Wal-Mart. But comparisons stop there.

The company prides itself on making a product that its co-founder, Tom Szaky, calls “green to the extreme”: its base ingredient is made by feeding trash to worms and collecting their nutrient-rich wastes, a process that he perfected using dining-hall refuse as a student at Princeton University.

The product is packaged in used soda bottles, which instead of being recycled — requiring melting the plastic — are cleaned and relabeled. TerraCycle’s other products are likewise “upcycled” — a compost from an old wine barrel, a handbag from drink pouches and a bird feeder that is an upside-down two-liter soda bottle. This month, OfficeMax announced it would begin carrying TerraCycle’s eco-binders and drink-pouch pencil cases.

“We became the world’s first company to make everything out of trash,” Mr. Szaky said, although he is proudest of his competitive pricing, which will push sales from just under $4 million in 2007 to an estimated $8.5 million this year. “Every American wants to do the right thing for the environment, but few are willing to pay even a penny more for something that’s green.”

Mr. Szaky’s emphasis on being profitable and consumer-friendly, as well as green, is what Andrea C. Levine, director of the National Advertising Division of the Council of Better Business Bureaus, calls “Green II.” In the early 1990s, she worked in the New York State attorney general’s office policing bogus claims of ecofriendliness during Green I.

“There were people selling plastic forks saying they were environmentally friendly because you didn’t have to wash them,” she said. Nowadays, businesses are held to higher standards because consumers are more skeptical of claims and more aware of threats like climate change.

“Environmental claims are kind of like nutritional claims,” Ms. Levine said. “Consumers can’t evaluate them themselves.”

The building industry has established a ratings system as part of its Leadership in Energy and Environmental Design program, which awards points based on green criteria. The Organic Materials Review Institute issues rulings on whether a product can call itself organic. But there are few definite rules for what a company needs to do to call itself green.

Ms. Levine sees small businesses making legitimate efforts to provide information about their green efforts. “Consumers understand today that not washing plastic forks is not a serious environmental move,” she said. The absence of a standard criteria by which companies can compare claims, however, complicates the issue for businesses and their customers.

Companies like PlanetTran and Dropps are trying to give an ecosheen to such historically ungreen industries as airport livery service and detergent.

PlanetTran has a fleet of Toyota Prius hybrids in Boston and San Francisco that average 50 miles a gallon of gasoline — compared with under 20 for Town Cars — while Dropps puts its concentrated detergent in premeasured packages that dissolve in water.

Dropps takes pains to show how using its product helps the environment. Its detergent is biodegradable and phosphate-free. But the Philadelphia-based company tests credulity with a claim that the soap could eliminate the consumption of 6.2 million gallons of diesel fuel and save 502 million gallons of water if it were used in the 25 billion loads of laundry done in the United States annually with liquid detergent. Its spokeswoman acknowledges that based on its sales, Dropps accounts for only 2 million to 4 million loads a year.

PlanetTran takes a different tack, since taking public transportation would be greener than driving a hybrid car. Its founder, Seth Riney, views the service as an improvement over the public’s taking poorly maintained taxis, less expensive than using conventional limousine services and a tool for companies that want to reduce their carbon footprint. Its first large corporate account was Genzyme, a Boston biotechnology company with a green ethos.

“It’s one thing to have a green business,” Mr. Riney said. “It’s another thing to help other companies to be green.” Even TerraCycle is as ungreen as its competitors in one regard: it ships its products to stores in diesel-powered trucks. Mr. Szaky makes no apologies for this.

“The most sustainable concept is, ‘Don’t buy, use as few things as possible,’ ” he said. “But that’s never going to happen. We’re trying to change consumer behavior in the world’s biggest retailers.”

Farshad Sayan has been changing his company’s behavior so that his customers do not have to change theirs.

An Iranian immigrant, he has been in the dry-cleaning business around Boston since he was a college student in the 1970s. In the late ’90s, he decided to sell his chain of stores. With the deal set to close, he learned that the ground beneath one shop was contaminated with perchloroethylene, a common dry-cleaning solvent known as perc, which has been linked to increased risks of cancer.

Several hundred thousand dollars later, the soil was clean, but the deal had collapsed. After that, Mr. Sayan dedicated himself to becoming the greenest businessman he could possibly be.

Today, he operates Clevergreen Cleaners, a small chain of green dry cleaners.

The dry-cleaning machine sprays clothes with DF-2000, said by some to be a more ecofriendly solvent, instead of soaking them in perc. The process is better for delicate clothes, and the solvent can be reused.

His washing machines are designed to use a minimum amount of water, while the steam used in the pressing machines heats the dryers on its way up from the boiler. There are no incandescent lights.

Yet Mr. Sayan has not let striving to be green hurt his reputation as a conscientious cleaner. “We didn’t want to produce a mediocre product,” Mr. Sayan said. “We wanted to be green but the best.”

This highlights a quirk in Green II. It is about providing something to American consumers that is ready and affordable, but not changing their lifestyles too much.

“No one wants to drive 40 miles per hour all the time, so they buy a Prius so they can drive the way they were driving and save fuel,” said Jonathan Propper, founder of Dropps. “You’ve got to give people the tools. With Dropps, they won’t have to buy all that plastic.”

Those fighting for a radical solution are still marginalized. Greasecar can convert a diesel-powered car into a zero-carbon emissions vehicle for around $1,000 — and do the same for a commercial truck for about $10,000. But the company’s high-water mark for sales was just over $2 million in 2006, when consumers were shocked by rising gasoline prices. Now that people have become accustomed to paying more at the pump, Greasecar’s sales have slowed. One reason is the need for a commitment: Greasecar engines run on waste oil from restaurants, which owners must process themselves.

Raising Rates Without Losing Clients

By BRENT BOWERS

With the economy in the doldrums, the question that consultants, freelancers and other solo service providers have long puzzled over — How to raise prices without losing customers — just got harder to answer.

After all, a client who is also struggling is not likely to sympathize with someone else’s financial woes.

Ruth Deming, who quit her job as a psychotherapist to start the New Directions Support Group in Philadelphia for victims of depression and bipolar disorder, contacted me recently to voice her frustration about the low return on her labors. “We draw 60 people per meeting and charge $3 per person,” she said. “Any ideas on how this penniless do-gooder can make more money?”

At about the same time, I received another e-mail appeal from a reader, who did not give his name or respond to subsequent e-mail queries. But I found his question timely. “I’m at a critical point in my one-person consulting business, three years in, becoming ‘the guy’ that my clients turn to when they need to learn as much as they can about a competitor, a potential acquisition and the like,” he said. “My quandary: having offered below-market (but fair) rates for my first few years to build my client base, I’m now a bit uncertain as to how I can/should raise my hourly rates closer to industry norms without alienating my existing base, all of whom have given me very positive feedback about the quality of my service. Are there any delicate yet firm ways to navigate this stage of my business’ growth?”

And finally, Caryn Leschen, a San Francisco graphic designer, copywriter and illustrator, who charges $75 an hour, told me that she has developed strategies to deal with sticker shock, ranging from hand-holding to breaking up the cost of a project into small pieces.

Ms. Deming, who is 62 years old and describes herself as a cured manic depressive, has been juggling quite a few entrepreneurial balls. In addition to running her support group, which meets twice a month, she teaches bread-making classes, holds an occasional seminar (including one at a local hospital on the “joy of intimacy”), does counseling, writes freelance newspaper articles, drives women to doctors’ appointments and works as a poll inspector during elections. But all those undertakings do not add up to a lot of money. Even with the Social Security checks she now receives, she has trouble making ends meet.

To her question about how to make more money at New Directions, my amateur advice was to raise the fee to $5 from $3. Though a 67 percent increase, it would be from such a small base that few participants would be likely to object, I reasoned, and parting with a $5 bill would barely be more onerous that counting out three singles. Yet, her income might well go up by $240 a month.

Ms. Deming agreed to give it a try. But perhaps, I mused after learning that she had started the company in 1985, she needed to think a little bit harder about her finances.

I called Marc S. Jacobs, founder of the New Business Directions consulting firm in Blue Bell, Pa., who had recently done pro-bono work advising Ms. Deming on how to improve her business model. I asked him what steps he would recommend to solo entrepreneurs who want to raises their rates.

There is a simple formula to calculate a minimum hourly rate, he said, but it cannot be done in a vacuum. It is imperative, he said, for these entrepreneurs to write a business plan first that states clearly what they want to do, how they intend to do it, and foresees revenues, expenses and profits for the first several years.

Once they have done that, Mr. Jacobs said, they should add up weekly living costs and business outlays and divide by 20, which is the number of billable hours to shoot for. “Now you have what you need to charge per hour, and you can compare that to the marketplace rate,” he said.

Entrepreneurs who are just getting started will probably have to charge less than seasoned competitors, he said. So much the better if savings can subsidize their initial efforts and give them breathing room to expand the business.

What about my recommendation to Ms. Deming to raise her fee to $5? Mr. Jacobs was skeptical that it would solve the problem. “Moving it up by $2 would be helpful, but it’s not going to change her ability to make this happen as a business venture,” he said.

As for the consultant who wanted to know how to augment his rates without alienating existing customers, Mr. Jacobs’s counsel was to be gentle.

First, he said, increase them for new clients only, and use the exercise to explore how high you can push the rates.

Then, he said, the consultant should inform existing customers in person — not in writing — that he plans to raise rates by 5 to 10 percent. “Have a conversation as part of a regular visit,” he said. “Make it casual. Tell them why you’re doing it. Say something like ‘I hope we can work out an agreement.’ ”

Some customers will say there is no way they can afford to pay more, he said. In that case, the consultant have to decide whether to let them go.

Ms. Leschen, the San Francisco graphic designer and illustrator, has been gradually raising her hourly rate to $75 from $40 in 1996, when she started doing Web work.

It is never easy to ask for more money, she said, and she tries to be flexible, charging as little as $60 to nonprofits and up to $100 to some advertising agencies.

Ms. Leschen, 49, said she has had to fight her natural inclination to please customers with bargain prices. For a given job, she said, “I think in my head, ‘Say $500,’ when I know I should really say, ‘$1,000,’ and then I hear ‘$700’ coming out of my mouth.”

One of her tricks for forcing herself to give higher numbers, she said, is to stop thinking in dollars and “pretend it’s a different money system; pretend it’s lire,” a reference to the Italian currency that was trading at 2,150 to the dollar before it was replaced by the euro.

Another way she tries to soften the blow to customers with tight budgets is to break down an undertaking into “pieces,” she said. Rather than quoting a price of $5,000 for a project, for example, she will offer to do the first step, creating a company logo, for $1,200, and go from there.

As she designs the logo, she says, customers are invariably asking her for additional work, and she cheerfully complies with their requests. The result is that they rarely complain if her final bill is at the high end of her original estimate.

Finally, after working with someone with technology know-how this year to start a venture to create Web sites called the Site Kiosk, she has found that having a partner can give her the willpower to be a tough negotiator. If her collaborator runs a job estimate by her, “I’ll say no, not $500, it should be $800,” she said.

Ms. Deming, meanwhile, informed her support group last Thursday about her rate increases, and that day collected about $110 more than her recent average. “There wasn’t even a whimper of objection,” she said. “I should have done this sooner.”

Don’t Be Afraid to Delegate

By PAUL B. BROWN

It’s a tautology, of course. If you insist on doing everything yourself, your business will never grow beyond what you can personally handle.

People who run small businesses know this, but as Beth Schneider, president of Process Prodigy, which “helps business owners leverage the best business practices,” points out on Entrepreneur.com there’s “something in us that fights against asking for help.” She added: “It’s almost like there’s some rite of passage in being able to do it all ourselves. But the reality is, you can’t do it all and focus on your strengths without stretching yourself in too many directions.”

And that means small-business owners need to delegate, if they wish to grow, a concept, she concedes, that can be difficult to accept.

“Delegation is about handing over authority, and for many small business owners, that’s a scary concept because you don’t know what will happen when you give up control,” she writes.

WHY NOT? Michele Hanson-O’Reggio, writing on solo-e.com, a Web site for business owners with no employees, agrees that fear is a major reason that entrepreneurs do not delegate.

By delegating, business owners are taking a risk because they do not know if the person to whom they are delegating will be up to the task. But, she says, entrepreneurs need to get past their fears, because “risks are necessary for business growth.”

What else keeps entrepreneurs from delegating? She lists these four other factors:

1. Worried the work will not be as good. They worry that the person they delegate to may get the job done but not as well as if they had done it themselves.

2. Clueless. “You may simply not be aware of the tasks that can be delegated because you have not invested time to examine your activities and learn about help that you can access.”

3. Egomaniacal.

4. “Confusing action with productivity. You may feel that if you delegate, there will be nothing left for you to do. Nothing could be farther from the truth!”

HOW TO DELEGATE If you want to delegate, Jeffrey Moses, writing on the Web site of the National Federal of Independent Business, a small business advocacy organization, suggests starting by acknowledging you “are not the only person who can do things exactly right.”

Then, since you are unlikely to turn into a hands-off manager overnight, “establish written descriptions of the tasks you are delegating, and be sure that your employees understand every detail,” he says. “Descriptions of tasks should include: methods, goals, means of accomplishment (finances, employees, equipment, etc.), quality of work done, means to define that quality and timelines for completion of each stage of work.”

And, for peace of mind, do not begin by delegating large or vital projects.

“Take things one step at a time by starting with smaller, less important tasks,” he writes. “As your experience with delegating progresses, you’ll feel more comfortable assigning larger projects, and you’ll be better at the delegation process.”

IF YOU DON’T The inability to delegate can literally lead to a life of regret, as an Inc. interview with Alfred Peet, founder of Peet’s Coffee & Tea, makes clear.

“I always had good personnel. I paid more than the going rate,” he told Jill Hecht Maxwell. “But I worked too hard, because I couldn’t delegate. I wanted to oversee everything. I said, ‘I know exactly where I want to go, but I can’t explain every thought, every idea I have for the future of this company.’ Many people left. I was burnt out, so I had to sell. Do you know what it’s like when you’ve given so much, and there’s nothing left?”

LAST CALL Here’s something to ponder when you are trapped with a screaming infant on a plane that is taking you to a meeting with a big prospect:

According to a poll conducted by Maritz Research, nearly three of four airline travelers (73 percent) believe that there should be “family sections” on planes.

You Can Call for I.T. Help Without Hiring a Whole Crew

By KEN BELSON

SMALL-BUSINESS owners often juggle tasks from accounting to finding customers to keeping existing ones happy. But the one task many busy managers avoid is taking care of computers, networks and other technology. Installing software, setting up broadband connections and backing up servers can be time-consuming and complicated.

Yet because many small companies often do not have specialists in information technology on staff, when critical technology fails business can grind to a halt.

“It’s hard to keep up to date on security, business continuity and compliance with credit-card rules,” said Rick Ruiz, who runs I.B.M.’s global technology services group. “A large company can weather a computer glitch, but a smaller company can be put in a bad situation.”

This is why some I.T. specialists are expanding their operations to help small companies with limited resources. Big players like I.B.M. are providing off-site servers and keeping them safe from viruses and other threats. Technology providers, including Geek Squad, which is affiliated with Best Buy, are moving beyond helping consumers to focus more on small businesses.

For instance, when Tamika Tatum, general manager of Yardley’s Salon & Spa in San Antonio, helped open the 10,000-square-foot salon five months ago, she hired Geek Squad to install the three computers and software she had bought at Best Buy. Several months later, she called Geek Squad again to connect those three computers to three others that she had purchased for the back office.

“Management is just me and the owners, just when they can get free,” Ms. Tatum said. “I don’t have time to be an I.T. person.”

Geek Squad charges the same for business and residential services — setting up a basic two-computer network, for example, costs $159 — but the company expects small-business owners to call more often for help, so that should increase sales.

“They’re much less likely to let a minor problem persist,” said Jeffrey Severts, a vice president of Best Buy. “If their technology is failing, they’re losing money and will move as quickly as possible to move to back it up.”

Mr. Severts and executives at other retailers that provide office supplies are expecting the number of small businesses to grow as more boomers retire and start the kind of companies that begin in living rooms or garages with off-the-shelf equipment and cheap broadband lines.

The challenge for Geek Squad and other technology providers affiliated with retailers, like Circuit City’s Firedog, is to figure out which customers are buying goods for personal use and which will use them in their offices, whether at home or elsewhere. The line, it seems, is often blurred.

In February, Geek Squad sales agents, who have concentrated almost exclusively on consumers, started asking customers in Best Buy stores whether the laptop computers or wireless routers they were buying were for home or business use.

Amy Wright, a collision repair consultant who works from her home in Willoughby Hills, Ohio, had Geek Squad set up her computer and digital camera and the wireless Internet connection in her home office, as well as the Sony video recorder her husband uses. When it came time to upgrade her computers, printers and monitors, she spent about $2,800 at Best Buy.

“You can call them for help, but you don’t have to have them on a full-time basis,” Ms. Wright said of Geek Squad.

Small companies are also relying on I.T. specialists, sometimes several time zones away, who provide remote support, like monitoring the security of servers.

Keith Dion, the owner of Press Any Key, a technology provider in Brookfield, Conn., is the de facto I.T. staff for the Warm Company, a quilt maker of 50 employees with an office in Lynnwood, Wash., and warehouses in North Carolina, Washington and Vermont.

From the East Coast, Mr. Dion keeps track of the workstations at these locations and makes sure that the bar-code system is working and the company’s data is properly stored. When something goes wrong, he and Erica Johnson, the assistant vice president of Warm Company’s operations in Lynnwood, discuss the problem, sometimes using Webcams.

By having Mr. Dion handle the company’s technology remotely, Ms. Johnson has been able to cut costs. In 2007, it spent 0.53 percent of its revenue on technology, down from 0.97 percent two years earlier in 2005, she said.

“We have ideas, but we don’t know how to implement them,” said Ms. Johnson, who is working with Mr. Dion to digitize more office functions to save paper. “We don’t have time to learn it all.”

Professional Background Screening a Small Price to Pay

By BRENT BOWERS

The candidate for chief financial officer at a fast-growing computer hardware company was forthright about his own money troubles.

He had resigned his previous position to care for his wife, who had been badly injured in a car crash, he told his interviewers, and after the insurance company refused to pay her medical bills, he had no choice but to declare bankruptcy.

He got the job. Six months later, when the company brought in a team of accountants for a surprise audit, he announced he had accepted a position elsewhere. By the time the accountants found out that $3 million was missing, he had vanished.

That was when the company hired Ken Springer, 54, the president of Corporate Resolutions, a business investigations concern, to find out how the fugitive executive had taken the money.

Mr. Springer, a former white-collar crime specialist at the Federal Bureau of Investigation, started Corporate Resolutions in 1991 in New York, and has expanded it to 25 employees and offices in London, Boston and Miami, with a fifth planned for Hong Kong in October.

Most of his clients are private equity lenders and hedge funds that ask him to conduct management background checks at companies they are looking at, and to look into suspicions of wrongdoing at companies they hold stakes in.

There is plenty of wrongdoing out there. Employee theft alone exceeds $400 billion annually, according to Automatic Data Processing, the nation’s largest provider of payroll services. With the economy in the doldrums, the problem may well get worse.

After spending nearly three decades investigating larceny in the workplace, Mr. Springer has some suggestions, especially for smaller companies, which are particularly vulnerable.

Few face greater risks than start-ups. Mr. Springer cited a technology company that grew from 50 to 500 employees in nine months and recruited a seasoned project manager to handle its physical expansion. The manager hired an acquaintance as his sole contractor and in collusion with him signed off on fraudulent invoices. The company managed to get back $1 million of the $3 million they stole.

Mr. Springer’s primary recommendation is to screen all potential employees, starting with their résumés. If you detect a single lie, he says, throw the résumé in the wastebasket.

Be wary, too, of claims that are difficult to verify, gaps in applicants’ job histories and vague descriptions of what they did.

If, for example, the computer hardware company tried to contact the three references listed by the candidate for chief financial officer, it would have learned that one was dead, one did not exist and the third had a low opinion of the candidate. Everything the man said about his wife was true, though — except that her accident occurred three years after his bankruptcy filing, not shortly before it.

Once hired, the executive began his scheme almost immediately, buying a large number of computers, returning most of them and depositing the refund checks in an account that he had opened with the same name as the company’s except that it had L.L.C. at the end instead of Inc.

Mr. Springer suggests that after authenticating the facts in a job candidate’s résumé, a background check should be done.

Payroll companies and other concerns often offer basic screening for $100 to $400, Mr. Springer said. Automatic Data Processing, for example, offers the service on a Web page that flashes statistics like “One out of every 20 job applicants screened last year had a criminal record” and “Nearly 1,000 workers are murdered and 1.5 million are assaulted in the workplace each year.”

Mr. Springer also mentioned HireRight and National Applicant Screening. Searching the Web with the words “employment screening,” “pre-employment screening” and “employee background check” yields hundreds of leads.

If you are unable to verify important information, you may have to turn to detective operations like Mr. Springer’s, Huhn & Associates or the risk consulting giant Kroll Inc. (Because smaller companies often need to farm out work where they lack a physical presence, collaboration among them is common.)

His company’s fees are generally $2,000 to $5,000 a person for management background checks and $25,000 to $50,000 for corporate investigations. He expects strong growth for his company and the industry, largely because more companies will need investigative services in an increasingly global economy. He sees Asia and Latin America as the hottest markets.

Even the lowliest worker can create havoc. Mr. Springer recounted the case of a cashier at a home supply store who gave away $225,000 in merchandise over three years to a contractor in exchange for kickbacks. Corporate Resolutions caught them, and they agreed to repay the owner.

Another factor in the growth in his business, Mr. Springer said, is the sputtering economy. As layoffs increase, so does employee theft, he said. And as loan defaults rise, so does the need for banks to track down the assets of borrowers.

Here are more tips from Mr. Springer to preventing wrongdoing:

¶Require job applicants to sign an agreement that allows you to do background checks and drug tests on them at any time during their employment.

¶Make it clear that you plan to conduct such investigations. The troublemakers and other bad eggs will probably walk away.

¶Make sure current employees know that everything on the company computer is company property, and that you have the right — and intention — to monitor their use and their e-mail messages. Follow through on that surveillance.

¶Switch people’s responsibilities to prevent fraud. “One of the most common forms of employee theft is when the product is being loaded on a truck,” Mr. Springer said. “You’ve got to have cameras, you’ve got to keep changing people’s assignments.”

¶Do random checks, like following trucks carrying your merchandise. If the driver makes an unauthorized stop at a warehouse or home, he is probably about to unload some of it.

¶Look for red flags, for example, employees who never take a day off, a sign that they may be covering up a fraud.

¶Put somebody in charge of security, whether your own employee or an outside company’s.

¶Buy fidelity insurance to cover theft by employees and vendors, which on average represents 5 percent of a company’s revenue.

¶Never let the chief financial officer write checks or open mail.

¶Set up a whistle-blower hot line for employees to report illegal or unethical behavior. The Sarbanes-Oxley Act of 2002, aimed at cleaning up corporate accounting, requires this at public companies, but privately held firms ought to follow suit. (Corporate Resolutions, for instance, provides the service for $2,200 a year.) Now is a good time to take the step, Mr. Springer said, because as the economy has weakened, anonymous allegations of malfeasance are on the rise.

¶Act on anonymous tips. At a company in South Florida that Mr. Springer worked for, a whistle-blower accused the chief executive of stealing, but the board of directors ignored the warning because it was negotiating with a prospective buyer. The tipster went to a local newspaper, and the deal fell through.

¶Expect some allegations to be false. Mr. Springer once investigated the background of an executive who was the target of a sexual harassment complaint, but found no evidence of inappropriate behavior. Finally, he tracked down the accuser’s college roommate. “Do you mean,” the woman asked, “that she has filed another lawsuit?”

Six Months Later, Start-Ups Find Their Goals Are Elusive

By BRENT BOWERS

IT has not been an easy six months.

This column profiled three new small businesses at the end of last year and the start of this year — Sweet Bites Bakery and Café in West Acton, Mass., started by Caitlin Adler; Tina Ericson’s Mamaisms Gear, in Wilmington, N.C.; and Jeff Takle’s RentingYourHome.com in Somerville, Mass. — with the promise to report on their progress after six months and again after one year.

None met all their goals, but Ms. Adler came the closest. She has built her cafe to $8,000 in revenue a week, up from $7,000 six months ago. But that is still $3,000 shy of her projections. She also expects to begin making a profit this summer, an impressive achievement for a new restaurant.

Ms. Ericson, by contrast, has scaled back her ambitions to create a Web clothing store that doubles as a portal to an Internet center for women. She instead has spent most of her time making cold calls to boutique shops to sell her “Mama says” T-shirts.

And Mr. Takle, just back from a trip to India to recruit low-cost legal talent for his property management software company, says that while he remains hopeful, his venture is foundering. “It’s getting dangerously close to needing investors just to survive, which is a bad place to be,” he said.

Ms. Adler has made improvements, like installing a commercial dishwasher, which saves on labor costs. She expects by August to be able to start paying herself a salary and her parents interest on tens of thousands of dollars in loans. She also said that she might make her father, a senior manager at the Boston Consulting Group who spent Mother’s Day washing dishes in her kitchen, an equal partner in the venture.

But she has not toned down her ambitions. In July, she plans to reintroduce a line of wholesale gourmet brownies (like her trademarked Triple Chocolate Peanut Butter Orgasmatron) that she suspended last year because they were slow sellers at trade fairs. She is negotiating with a distributor to market them throughout the Northeast.

While she is just getting her Web site, sweet-bites.com, up and running this week, she views it as a vehicle to sell her brownies and T-shirts and, sometime in the future, other items like coffee mugs with the Sweet Bites logo. She says she is still optimistic that she can increase sales to $11,000 a week by December.

So far, she does limited catering, potentially a big moneymaker, because Sweet Bites does not yet have a walk-in refrigerator. “It’s crazy, I know,” she said.

The long hours — she has taken only one day off this year — and the stress have taken an emotional toll. “It’s been a crash course for me on running a business,” she said.

Ms. Ericson, whose venture sells T-shirts stamped with “Mama says” slogans like “quit whining” (which she speculates that grateful mothers just point to when their children get on their nerves), says that things are going “very, very well.”

But not necessarily as expected. When she started Mamaisms Gear (mamaismsgear.com) in December, she said she would be selling her T-shirts, other clothing like Hot Mama pajamas and a line of reusable containers on her Web site while creating an Internet community for women.

Instead, she has given up everything but the T-shirts. And after discovering the difficulties of selling them on the Internet, she is marketing them to stores. So far, they are in 10 locations.

Ms. Ericson also dropped a separate plan to start a consulting firm for the financial sector because of bad chemistry among some of the potential partners.

“This has been very much a learning process,” she said. “The lessons are: Keep it simple, and don’t overreach.” She says she has also learned to keep her political and business interests separate, after realizing that links to left-wing blogs on her site might alienate potential customers.

Still, she is undaunted. Sales in the first half of this year are approaching $30,000, and she thinks she can make her $100,000 target for 2008 and become profitable by December. Meantime, she has accepted a full-time job with a six-figure salary, working out of her home as vice president for business development of a publishing company in Florida.

Like Ms. Ericson, Mr. Takle is trying to look on the bright side of his company’s state, while not understating the challenges he faces. Reached in India by e-mail, he gave a frank assessment of RentingYourHome.com, which sells software that helps landlords manage their properties.

“I’d say things have gotten much more difficult in the last six months,” he wrote. “While there are a lot of positive developments, some of the fundamentals are in serious jeopardy. I chose to try double duty and run the company while at the same time go back for an M.B.A. to learn more about fund-raising, financials and how to take the company to the next level.”

He continued: “Unfortunately, cash waits for no one. Sales have lagged behind projections, and retention of current customers, while improving over last year, isn’t where it could be to make the company ‘bankable.’”

Still, he said he had reasons for hope. The company recorded a 17 percent growth in revenue in the first half of this year, enough to cover operational expenses. It expanded its reach to 42 states from 35, it negotiated a partnership with a Web design and marketing company, and it found a source of inexpensive, high-quality legal research in India.

“We’re still on track for building a self-sustaining, profitable company,” Mr. Takle said.

But his setbacks have stung. His slowness in raising investment capital scared away a seasoned executive whom he was trying to recruit. Worse, his co-founder left the business.

So what do the experts think? John Foley, the restaurant adviser for AllBusiness.com, gave Ms. Adler the same passing grade he did six months ago — and sounded the same warning notes. Her plan to sell brownies and open an online store is like starting a second business, with all its attendant headaches, he said. On the other hand, if she threw all her energies into her new wholesale business and used the cafe primarily as a promotional tool for it, “that might work.”

Whatever happens, Mr. Foley added, “she’ll have gained a better business education than she could at the Culinary Institute of America and the Harvard Business School combined.”

Neal Thornberry, an author and associate professor of business management at Babson College in Massachusetts, was dubious about the prospects for Ms. Ericson’s T-shirt enterprise. “She’s a typical start-up entrepreneur — her enthusiasm clouds her judgment,” he said. “She’s gone from a business to customer product company to a business-to-business distribution company, a huge shift.”

He predicted that she would come to a “crisis point” before the end of the year, forcing her to decide whether to continue.

Finally, Janet Portman, a lawyer and an expert in landlord-tenant law at Nolo, a provider of legal information for consumers and small businesses, said her doubts about the viability of Mr. Takle’s business model remain.

“His jaunt to India to look for legal assistance is further evidence of his failure to understand the complexities of the legal world he was wading into,” Ms. Portman said.

Entrepreneurs are used to hearing from skeptics, and like most, Ms. Adler, Ms. Ericson and Mr. Takle all vow to push ahead. Ms. Adler, for one, says she has no choice. “Being boss isn’t always fun,” she said. “But I could never work for somebody else.”

After Selling the Company, Remorse

By ABBY ELLIN

Christopher A. Baker had two goals when he started his company, MailCode, in 1989: to build a successful business and to sell it one day. He achieved both.

But what he had not taken into consideration were the challenges he would face as he stopped being the head of a small start-up and became a cog in the wheel of a major corporation. In his case, it was Pitney Bowes, the producer of postal meters and other mailing equipment, that acquired MailCode, a maker of large automated postal sorting machines, in 2001 for more than $20 million.

As part of the deal, Mr. Baker, now 41, continued to run MailCode for 18 months out of his hometown, West Lafayette, Ind. Then he moved to the Pitney Bowes headquarters in Stamford, Conn.

Although he said he was thrilled with the sale, he worried about what lay ahead — especially since he decided to take a position with the new owner. “Any time you sell you have mixed emotions,” said Mr. Baker, who was until recently the president of Pitney Bowes Group 1 Software, in Lanham, Md. “You’re about to get a huge payday, but you have no idea what the future holds for you.”

Most entrepreneurs share the same vision: to sell their darling for big money and watch it flourish in its next incarnation. According to Mitchell Schlimer, the founder and chief executive of the Let’s Talk Business Network, a support community for chief executives and entrepreneurs in the New York area, about 90 percent of small business owners who sell their companies remain with the acquiring company, at least for a few years.

“They often don’t stay longer than that because most entrepreneurs are not good soldiers,” Mr. Schlimer said. “Not to say that some can’t be, but most entrepreneurs are all about the initial journey — that’s where their strengths are, making something from nothing and all the creativity that goes along with it.”

Indeed, like stepfamilies trying to blend together, the transition from single household to Brady Bunch is often harder than most entrepreneurs anticipate. Either the former owners have trouble giving up control, or they find the new office culture radically different from what they were used to, or they simply cannot bear to see what the new owners are doing to their creations. It can be wrenching even in the best of circumstances.

“It’s like giving up a child,” said Tova Borgnine, the founder and chief executive of the Tova Corporation, a cosmetics and fragrance company now owned by the televised home shopping company QVC. In March 1977, Ms. Borgnine, who is married to the actor Ernest Borgnine, started a mail-order company in Los Angeles selling a perfume called Tova Signature.

By 1987, she had 65 skincare products and 80 employees. In 1990, she began selling her wares on QVC, and 12 years later QVC bought the Tova brand for a seven-figure sum. Tova Signature is QVC’s top-selling perfume.

It was, she said, an accomplishment she was proud of, but still an adjustment. “In a massive corporate structure you have bureaucracy that you must be able to get through,” said Ms. Borgnine, who divides her time between Beverly Hills and Malvern, Pa., near QVC’s headquarters. “All of the products are the same as when I created my company; I’m in on every strategy meeting, but now there’s a collective voice. That’s a luxury, but you’ve also got to be able to let go.”

Jerry L. Mills, the founder and chief executive of B2B CFO, with headquarters in Phoenix that offers business advisory services, has helped hundreds of clients through the business acquisition process. Most wrestle with the fact that they still have the responsibility, but not the authority. “They make decisions that are sometimes reversed by their boss. It’s embarrassing,” Mr. Mills said.

It can also be upsetting, especially when the new owners drive the business into the ground and the founder has to watch. In 1995, for example, Christopher J. Asterino, the co-owner of Asterino Associates, a medical billing management firm in Albany, sold his 10-year-old company for more than $1 million and moved to Scottsdale, Ariz., to be vice president for acquisitions for the new owner, National Medical Financial Services.

He had a terrible time of it. For starters, he said he found the relationship with his new boss “weird.”

“The person who became my boss was the man I was negotiating with when I was selling my company,” said Mr. Asterino, 46. “You’re trying to maximize the value of your company when you’re selling it — and then when the transaction closes, that individual is your boss. It was very difficult.”

Mr. Asterino said he was disappointed at how the new owners ran the business and dealt with clients. Eventually, he said, he could no longer bear to watch it and left the business in 2000, and started another medical billing firm, Asterino & Associates. “The great lesson that came out of that five-year period was how not to do it,” he said. “It was a very expensive lesson to learn.”

Mr. Baker, who is currently taking a leave of absence from Pitney Bowes, also has a failed merger under his belt. In 1996, he sold MailCode to Postal Soft, a privately held company in La Crosse, Wis.

At first it seemed ideal, but soon the new owner ran into financial difficulties. “They needed us to stop spending on R&D and focus all of our energies on existing products,” he said. He refused, and bought the company back a year later for the same price for which he had sold it. Three years later, he sold it to Pitney Bowes, where he is happy, although he, too, had an adjustment period.

“The culture shift wasn’t hard, but every one of my peers wondered why I wasn’t on the beach drinking a Mai Tai,” he said. “They knew I had the money in the bank. I wasn’t one of them. I had to work as hard as everyone else. If an entrepreneur joins a company with an open mind to learning, there’s an incredibly valuable experience there with powerful rewards. But if you don’t have that mindset, you won’t make it a year.”

As for Mr. Asterino, he has no intention of selling until he is ready to retire. “It would take an extraordinary unique set of circumstances to allow me to change my quality of life, my entrepreneurial business thinking and my ability to make decisions based off of relationships and not profits,” he said.

Small Business Is Latest Focus in Health Fight

By REED ABELSON

As the number of people without health insurance continues to rise, many states and Congress have begun to focus on one of the biggest causes: the growing number of small business owners and their workers who are unable to afford coverage.

The states are taking a variety of approaches. To help ease the burden of insurance premiums that have roughly doubled since 2000, some, like Arizona, are extending tax credits to small employers that provide medical coverage.

Others, including New Mexico and Montana, are exploring ways to let small businesses band together to amass the purchasing power of big employers. Massachusetts plans to let small businesses benefit from its state-supervised insurance program. And some states, like Colorado, have passed tougher laws governing what insurers can charge small companies.

“States are being aggressive experimenters, and those lessons learned are going to be invaluable to us in looking at national health reform,” said Michelle Dimarob, manager of legislative affairs for the National Federation of Independent Business.

Congress, meanwhile, is considering legislation that, among other steps, would make it significantly easier for small businesses to organize insurance-buying pools. Despite bipartisan backing in both the House and Senate, it is uncertain whether the bills can be passed in this, an election year. But proponents say the legislation would almost certainly be reintroduced next term.

Because smaller businesses cannot spread the costs and risks of an individual’s high medical bills over a large work force the way a big company can, they often must settle for less-generous coverage that leaves workers with substantial out-of-pocket medical expenses. Many small employers simply choose not to provide health benefits, which can cost more than $12,000 a year for a family of four.

Of the 47 million uninsured people in this country, at least 20 million are employed by small businesses or work for themselves — a figure that has increased by an average of more than 500,000 a year since 2000. That is why, even as the presidential candidates John McCain and Barack Obama are floating ideas for making insurance easier to obtain by individuals, there are also efforts under way to address the needs of small businesses.

“Half of the uninsured people in our state are working for small business,” said Nancy Wyman, the state comptroller for Connecticut.

Despite broad interest in the issue, though, making significant changes at the state level can be difficult, politically and practically, as Connecticut’s recent experience shows.

In June, the state’s Republican governor, M. Jodi Rell, vetoed a measure passed by the Democratic-led legislature that was meant to help small employers by letting them join a state-run insurance-purchasing pool.

Big insurers lobbied heavily against the move, arguing that it would do nothing to stem the rising health costs that are reflected in high premiums.

“This debate continues to focus on the premiums rather than health care costs,” said David R. Fusco, the president of Anthem Blue Cross and Blue Shield in Connecticut, the state’s largest insurer for small businesses. “We have to look at the issue of the underlying cost.”

Connecticut Democratic legislators have vowed to try again next year.

Massachusetts, in its widely watched effort to overhaul health insurance, has focused so far on making affordable coverage available to individuals. But later this year the state plans to expand the program to small employers, letting them participate in the state-supervised marketplace set up to give individuals group purchasing power.

Nationally, the percentage of businesses with fewer than 200 employees that offer insurance fell to 59 percent last year, down from 66 percent as recently as 2002, according to the Henry J. Kaiser Family Foundation. And less than half of the smallest companies, those with under 10 employees, were providing coverage last year.

Not only does the cost of insurance tend to be a bigger burden for a smaller business, but Jon R. Gabel, a health policy researcher at the National Opinion Research Center at the University of Chicago, estimates that small firms pay 18 percent more for the same insurance than big companies.

And employers that do continue to provide health benefits are tending to ask workers to pay more of the overall premiums. So even when small business owners offer coverage, their employees may not be able to afford to sign up.

Louis Lista runs the Pond House Cafe in Hartford, where he employs about 50 people, depending on the time of year. Some of his workers are dishwashers, making just $10 or $11 an hour. Although Mr. Lista pays half of the cost of coverage, his employees must nonetheless come up with as much as $150 a month for their share of health insurance. Some choose to go without.

“When they’re sick, they go to the emergency room,” Mr. Lista said. One of his waitresses who has chosen not to take insurance, for example, recently ran up $15,000 in medical bills from an emergency room visit. “She doesn’t have the money to pay for it,” he added.

In Connecticut, Governor Rell has said that despite her veto she wants to work with legislators to address the concerns of small business. Legislators had sought a way for small businesses to join with the state’s 200,000 employees to spread their risks and take advantage of the state’s negotiating clout with insurers.

Even before the governor’s recent veto, Connecticut had already taken significant steps meant to help small employers provide affordable health coverage. It was among the first, for example, to pass laws intended to limit the large annual jumps in premiums that tend to plague small businesses.

“Connecticut was one of the first states to do it right,” said Gary Claxton, who researches health insurance for the Kaiser Family Foundation.

But even Connecticut has yet to find a way to reduce the potential risk to a small company or insurer if even a single employee develops a serious illness and runs up tens or hundreds of thousands of dollars in medical bills.

And small businesses in Connecticut and elsewhere still complain of the shock of sharply higher rates when, for example, they replace a 25-year-old man with a 35-year-old woman — insurers know that women tend to go to the doctor more frequently — or when a worker celebrates a milestone birthday.

In Virginia, a florist shop in Culpeper that covers three people had its premiums raised by more than 50 percent last year, after the owner turned 60. The business, which pays the full premium for employees, now spends nearly $1,800 a month on health insurance, up from $1,100, and it elected not to seek a reduction in rates by cutting benefits.

Cutting benefits is “not fair to your employees,” said Carol Inskeep, the shop’s manager. Many small business owners say it is hard to understand how their insurers are pricing the premiums. “The last few years have been puzzling,” said Thomas Massingham, a florist in Dover, N.H., who employs three people and pays half of the cost of their coverage.

Mr. Massingham has seen premiums go up by about 50 percent in some years, only to fall drastically after New Hampshire in 2006 began forbidding insurers from using the health of a company’s employees to set premiums and put stricter limits on rate increases. Even so, this year he was faced with a rate jump of nearly 40 percent, to about $600 an employee a month, to keep the same coverage.

By switching the type of plan and raising everyone’s annual maximum out-of-pocket expenses to $2,000, up from $1,500 last year, he limited the premium increase to 15 percent. He and his employees will split the $500 monthly premium per person.

State laws now typically make it impossible for businesses to cross state lines to create their own purchasing pools, and small companies have had little success to date in being able to band together in sufficient numbers within state borders.

But the federal legislation would let businesses form such purchasing pools more easily, even across state lines. The legislation would also prevent insurers in any state from basing their premiums on the health status of employees — a prohibition now on the books in only a minority of states. The legislation would also offer tax credits to businesses that provide coverage insurance to their employees.

The Senate version of the bill, introduced in April and supported by Democrats Dick Durbin of Illinois and Blanche Lincoln of Arkansas and Republicans Olympia J. Snowe of Maine and Norm Coleman of Minnesota, would give states the ability to regulate the insurance plans offered through the pools, to prevent them from being abused. A similar House version was introduced this month.

The bipartisan legislation is supported by a number of small business groups, including the National Federation of Independent Business, as well as consumer groups.

The states, meanwhile, will continue experimenting with their own efforts, according to Richard Cauchi, who follows state health initiatives for the National Conference of State Legislatures. “There’s certainly momentum and growing interest on the state level,” he said.

In Connecticut, Ms. Wyman, a Democrat who supported the measure the governor recently vetoed, continues to push for creation of some sort of state-directed purchasing pool. But she recognizes the challenges ahead. “This is not an easy problem to solve,” she said. “We know it.”

Bitter Brew

Bitter Brew
I opened a charming neighborhood coffee shop. Then it destroyed my life.
By Michael Idov

You know that charming little cafe on New York's Lower East Side that just closed after a mere six months in business—where coffee was served on silver trays with a glass of water and a little chocolate cookie? The one that, as you calmly and correctly observed, was doomed from its inception because it was too precious and too offbeat? The one you still kind of fell for, the way one falls for a tubercular maiden? Yeah, that one was mine.

The scary part is that you think you can do better.

I never realized how ubiquitous the dream of opening a small coffeehouse was until I fell under its spell myself. Friends' eyes misted over when my wife and I would excitedly recite our concept ("Vienna roast from Vienna! It's lighter and sweeter than bitter Italian espresso—no need to drown it in milk!"). It seemed that just about every boho-professional couple had indulged in this fantasy at some point or another.

The dream of running a small cafe has nothing to do with the excitement of entrepreneurship or the joys of being one's own boss—none of us would ever consider opening a Laundromat or a stationery store, and even the most delusional can see that an independent bookshop is a bad idea these days. The small cafe connects to the fantasy of throwing a perpetual dinner party, and it cuts deeper—all the way to Barbie tea sets—than any other capitalist urge. To a couple in the throes of the cafe dream, money is almost an afterthought. Which is good, because they're going to lose a lot of it.

The failure of a small cafe is not a question of competence. It is a sad given. The logistics of a food establishment that seats between 20 and 25 people (which roughly corresponds to the definition of "cozy") are such that the place will stay afloat—barely—as long as its owners spend all of their time on the job. There is a golden rule, long cherished by restaurateurs, for determining whether a business is viable. Rent should take up no more than 25 percent of your revenue, another 25 percent should go toward payroll, and 35 percent should go toward the product. The remaining 15 percent is what you take home. There's an even more elegant version of that rule: Make your rent in four days to be profitable, a week to break even. If you haven't hit the latter mark in a month, close.

A place that seats 25 will have to employ at least two people for every shift: someone to work the front and someone for the kitchen (assuming you find a guy who will both uncomplainingly wash dishes and reliably whip up pretty crepes; if you've found that guy, you're already in better shape than most NYC restaurateurs. You're also, most likely, already in trouble with immigration services). Budgeting $15 for the payroll for every hour your charming cafe is open (let's say 10 hours a day) relieves you of $4,500 a month. That gives you another $4,500 a month for rent and $6,300 to stock up on product. It also means that to come up with the total needed $18K of revenue per month, you will need to sell that product at an average of a 300 percent markup.

Pastries, for instance, are a monetary black hole unless you bake them yourself. We started out by engaging a pedigreed gentleman baker with Le Bernardin on his résumé. Hercule, as I'll call him, embodied every French stereotype in existence: He was jovial, enthusiastic, rude, snooty, manic-depressive, brilliant, and utterly unreliable. His croissants were buttery, flaky, not too big, and $1.25 wholesale. We sold them for $2 and threw away roughly 50 percent—in other words, we were making a negative quarter on each croissant. After a couple of months of this, we downgraded to a more Americanized version of the croissant (vast and pillowy). The new croissants ran 90 cents each and made us feel vaguely dirty. We sold them for the same $2. Ironically, their elephantine size meant that every time someone ordered a croissant with cheese, we had to load it up with twice as much Gruyère.

Coffee was a different story—thanks to the trail blazed by Starbucks, the world of coffee retail is now a rogue's playground of jaw-dropping markups. An espresso that required about 18 cents worth of beans (and we used very good beans) was sold for $2.50 with nary an eyebrow raised on either side of the counter. A dab of milk froth or a splash of hot water transformed the drink into a macchiato or an Americano, respectively, and raised the price to $3. The house brew too cold to be sold for $1 a cup was chilled further and reborn at $2.50 a cup as iced coffee, a drink whose appeal I do not even pretend to grasp.

But how much of it could we sell? Discarding food as a self-canceling expense at best, the coffee needed to account for all of our profit. We needed to sell roughly $500 of it a day. This kind of money is only achievable through solid foot traffic, but, of course, our cafe was too cozy and charming to pop in for a cup to go. The average coffee-to-stay customer nursed his mocha (i.e., his $5 ticket) for upward of 30 minutes. Don't get me started on people with laptops.

There was, of course, one way to make the cafe viable: It was written into the Golden Rule itself. My wife Lily and I could work there, full-time, save on the payroll, and gerrymander the rest of the budget to allow for lower sales. Guess what, dear dreamers? The psychological gap between working in a cafe because it's fun and romantic and doing the exact same thing because you have to is enormous. Within weeks, Lily and I—previously ensconced in an enviably stress-free marriage—were at each other's throats. I hesitate to say which was worse: working the same shift or alternating. Each option presented its own small tortures. Two highly educated professionals with artistic aspirations have just put themselves—or, as we saw it, each other—on $8-per-hour jobs slinging coffee. After four more months, we grew suspicious of each other's motives, obsessively kept track of each other's contributions to the cause ("You worked three days last week!"), and generally waltzed on the edge of divorce. The marriage appears to have been saved by a well-timed bankruptcy.

Looking back, we (incredibly) should have heeded the advice of bad-boy chef Anthony Bourdain, who wrote our epitaph in Kitchen Confidential: "The most dangerous species of owner ... is the one who gets into the business for love."

Michael Idov regularly contributes reviews and features to Pitchfork, Kirkus Reviews and other publications. You can reach him at michaelidov@yahoo.com.