How to Make a Powerful First Impression (Entrepreneur.com)

How to Make a Powerful First Impression

Learn the art of presence and small talk from communications experts who swear you can do it even if you don't think you can.

By Robert Jones | November 17, 2008

URL: http://www.entrepreneur.com/startingabusiness/selfassessment/article198622.html

If it's true that time is money, then it's small wonder business owners find they can never truly clock out. Wherever they go and whomever they meet, entrepreneurs are walking billboards for their companies.

In a tough economy, where advertising budgets are cut to the bone, that kind of person-to-person marketing is more important than ever. But if you're a billboard, how can you be sure you're communicating the right message? How do you get people to notice you without offending, boring or confusing them?

Body language
Lillian Bjorseth, a communications consultant and author of Breakthrough Networking, says people decide many things about you within 10 seconds of seeing you--usually before you even open your mouth. That's why entrepreneurs should always be conscious of their aura, she says.

"The aura is the area around you that you create by what you wear, how you act, how you look," she says. "It all goes together to make one impression. You could wear a very expensive suit, but if you stand slumped over with your head down, you won't give a confident aura."

Though every person's aura is complex and unique, Bjorseth says entrepreneurs can focus on a few simple, non-verbal priorities to appear confident and in control. First, don't slip into a room "all smiles." Instead, "claim your space" in the room by planting your feet six inches to eight inches apart, one slightly ahead of the other--a stance that will make you feel grounded and confident.

After you've established eye contact, Bjorseth says a smile will create an upbeat, positive environment. Maintain eye contact 85 percent of the time during a conversation, she recommends. Doing so will make you seem trustworthy and it will demonstrate that you're interested in what the other person has to say.

To avoid a fumbling introduction, Bjorseth says every entrepreneur should have in mind a "verbal business card"--a quick, 30-word summary of who you are and what you can do. Focus on benefits for the other person rather than job titles or even company names, she recommends. "You want to make sure people remember you as opposed to others who do the same thing you do."

Conversation
When it's time to move beyond the handshake stage, simple conversational skills are the key to a successful first meeting, says Rosalie Maggio, bestselling author of How to Say It and The Art of Talking to Anyone.

"Prepare in advance, then just try to forget yourself," she says. "Being too self-conscious is the quickest way to shoot yourself in the foot. Remember that it's about the other person--that's the best possible way to make a positive first impression."

To help shift focus to the other person, Maggio says a bit of small talk is appropriate in almost every setting. When meeting someone new, the conversation should resemble a tennis match, with each participant taking a quick swing before sending it back to the other person. Too many Americans confuse their sports metaphors, treating a conversation "more like golf, where you just keep hitting your own ball over and over again . . . If you've talked for more than a minute, it's too long."

From formal pitches to impromptu meetings at a trade show, no two conversations will ever be the same. But Maggio says one element is critical no matter what the setting: the ability to show appreciation.

"In every conversation, include at least one appreciative remark," she says. Praise the other person's business acumen, charity work, or even her taste in shoes. As long as the appreciation is brief, sincere, and specific, the feeling will be remembered long after the words are forgotten."

Voice
Beyond body language and conversational skills, the actual tone of your voice is an important part of the impression you create, says Sandra McKnight, owner of Voice Power Studios in Santa Fe, N.M.

"In face-to-face conversation, the other person first sees you, then hears the tone of your voice, and only then listens to your words. It can create a negative impression very easily if you're not in control of the way you speak."

Entrepreneurs who speak in monotone will be perceived as uninspiring, while those who speak too quietly will come across as uncertain. But the most common problem, McKnight says, is speed-talking, which dilutes the message and makes the speaker sound anxious.

"Bright people have a tendency to talk fast because their minds move fast," she says. "But it's not about data dumping. It's about communicating so that you're understood."

To ensure that you're speaking at the right pace, McKnight suggests reading aloud from a book for 60 seconds. When time is up, go back and count the words in the selection you just read. The ideal speaking pace, she says, is about 145 words per minute--but don't forget that you probably speak even faster than you read.

The keys to creating a positive first impression aren't secrets that are hidden away and accessible only through visits to an oracle or a high-priced seminar. Body language, conversation and voice are three of the most important aspects of a first impression. The bad news is too many people think they lack skill in these areas. The good news is that most anyone can practice each of them and master their first impression.

Avoid Legal Time Bombs (Entrepreneur.com)

Avoid Legal Time Bombs

Learn whether your business is vulnerable to getting sued. Find the holes in your business, and stop lawsuits before they start.

By Patrick A. Fraioli Jr. | November 06, 2008

URL: http://www.entrepreneur.com/management/legalcenter/article198352.html

If you own a business in the U.S. long enough, there's a strong likelihood that your business will be sued. When that happens, it will cost you a fortune to defend that lawsuit. And that's if you win.

So as a business owner, it's your responsibility to do something about it before it happens to you. For example, if you were afraid of a fire in your home, you'd ask a fire fighter for fire prevention tips. If you were worried about having a heart attack, you'd consult your doctor about preventive medicine. So it's only rational that if you're living in fear of being sued (and losing), you should ask a lawyer how you can improve the odds that you'll not only win, but also avoid a suit entirely. It's called "litigation avoidance" or "preventive lawyering."

An experienced litigator who focuses on litigation avoidance can help you find the "legal time bombs" that may be ticking in your business. A few examples follow:

Employment law is hot, particularly "wage and hour" suits, involving how employees are classified, what they're required to do, and how and when they're required to do it. It's a business nightmare. The traditional mainstays of employment litigation include wrongful termination, discrimination in hiring and/or firing and sexual harassment. This has all become big business for plaintiffs' lawyers, and thus every business in America is a potential target. Have experienced counsel audit your employment practices and advise you if and where there are ticking time bombs.

Intellectual Property (IP) is another hot area. Businesses can profit from having an IP attorney audit business practices for two reasons: to find out if you may be infringing someone else's IP and also whether you may have some IP you don't even know about (eg., a trademark). It's especially important to follow strict procedures to protect any trade secrets you own, so that when a former employee tries to misappropriate them, you can stop him cold. But you can do so only if you've prepared for that fire before it starts.

Contracts Management--Every business has contracts, and they contain obligations. Often, those obligations can make you a fiduciary, such as where you are holding and distributing money for others, as happens in businesses that employ subcontractors. Fiduciaries are required to act with the highest degree of loyalty and care. But often, particularly when a business is growing rapidly, employees with knowledge of these obligations will leave. Unless you have specific procedures in place to ensure the transition of this knowledge, new employees may default on the firm's obligations. Serious trouble can follow.

Electronically Stored Information (ESI) is everywhere. Every modern business should have a document retention policy. If you don't, or you don't follow the one you have, you may become the butt of those "smoking gun" stories that are passed around, ironically, on the internet. The consequences can be grave. A lawyer can help entrepreneurs decide what kind of documentation policy is ideal for them.

Fraud is rampant in American business. More than $650 billion (or 5 percent of GDP) is lost annually to employee fraud and abuse, with nearly one in four frauds causing loss in excess of $1 million. Your business isn't immune, and fraud is rarely discovered by someone going over a compliance checklist. Know what to look for and how to implement internal controls to prevent fraud.

There are as many potential ticking, legal time bombs as there are businesses in this country. Look for yours and find them before a potential plaintiff does.

NOTE: Nothing contained herein may be considered legal advice or counsel of any kind.

Patrick A. Fraioli, Jr. is a partner in the Los Angeles law firm of Moldo Davidson Fraioli Seror & Sestanovich LLP and chair of the firm's litigation department. He advises companies on legal issues, emphasizing preventive lawyering and litigation avoidance strategies.

Connect the Branding Dots (Entrepreneur.com)

Connect the Branding Dots

Logos, websites and marketing materials have to work together to create a positive impression--and put money in your pocket.

By John Williams | November 10, 2008

URL: http://www.entrepreneur.com/marketing/branding/imageandbrandingcolumnistjohnwilliams/article198380.html

The look and feel of your logo and website can put lots of money in your pocket, but the way the dots connect may surprise you.

Start with the idea that your potential customers don't really know you. They don't know if you're well-established or fly-by-night. They don't know if you're honest or if you treat your customers well. They don't know if you're a solid professional.

People pick up clues from the way your logo, brochure and website look. It's human nature. Think about going to the office or to a party: You can tell at a glance if a new arrival is someone you'll want to get to know by his or her dress and body language. In an instant, you've formed your first impression.

This human habit evolved to let your human ancestors stay alive long enough to bear children. If you could tell predator from prey at a glance, you were more likely to eat and not be eaten. Today, this well-honed at-a-glance sense is used less for physical survival than for making purchase decisions.

Visual branding is about harnessing this at-a-glance sense to boost your business success. It’s about using your business’s “dress and body language” to attract more customers. Think of an amateurish, overly complicated website for a used car lot as opposed to a clean-looking one that still gets the message across. What does each website tell you about the business? At a glance, you know where would you rather shop and which business you're more likely to trust.

Trust means your future customers believe you're likely to be honest and competent, and will deliver a good experience. Sometimes trust comes from friends telling friends they had a great experience. But most of your future customers won’t have word-of-mouth to rely on. They have to decide on their own whom to trust. That’s the mission of your logo, website or brochure, to create your business dress and body language--your visual branding.

Now take it a step further. Gaining your potential customers' trust and belief can also be called credibility. The more credibility you build, the more likely they will buy from you. The word “credibility” comes from credo, Latin for "I believe." Not coincidentally, the word "credit" also comes from credo. You can obtain lots of credit when lenders believe in you and your ability to repay. That’s not all. The money in your wallet is backed by “the full faith and credit” of the U.S. government. If it wasn't for this belief, greenbacks wouldn't be worth the high-tech paper they're printed on. So our entire economy--and your business in particular--are built on a foundation of credibility. That's how important visual branding is, and your expression of it in your logo, website and brochures.

Here are a few basics to help your business look credible:

1. Go for simplicity and lack of clutter. (Think Apple, the master of simplicity in branding.)
   
2. Create or demand a clean, well-balanced graphic design.
   
3. Use one or two basic colors that go well together, not a hodgepodge.
   
4. Choose one font and stick with it. You can express almost anything by using variations within a single font family: size, weight (boldness), italics, etc. If you really must, choose a second font for major headlines. But first try it with one font.
   
5. Coordinate a single look--design, colors, etc.--across everything you do, including your logo, website, brochures, ads and signage.

Give your business the dress and body language that will tip off your future customers so they can believe in you. Harness their highly evolved, at-a-glance sense to build instant credibility. Credibility equals credit, and that can put lots of money in your wallet.

John Williams is founder of LogoYes.com, the world’s first and largest DIY logo website. In his 25 years in advertising, he has created brand standards for Fortune 100 companies like Mitsubishi and won numerous international awards for his design work.

The Cash-Strapped Turn to Barter (NYT)

The Cash-Strapped Turn to Barter

By MICKEY MEECE

CAUGHT in the credit vise of 2008 that is threatening their livelihoods, small-business owners are turning in droves to an age-old source of commerce: the exchange of goods and services, or barter, to hold on to their precious cash.

New money is not flowing to Main Street. Since October 2007, there has been a decline of almost 30 percent in loans approved for small businesses, the Small Business Administration reported.

Companies short on cash are often forced to let workers go, and in October alone companies with 50 or fewer workers eliminated 25,000 jobs, according to the ADP Small Business Report.

“During recent history, we have seen these businesses adding jobs while larger-size businesses shed them,” said Joel Prakken, chairman of Macroeconomic Advisers, which prepares the report. This is the first decline in small-business employment reported by ADP since November 2002, he said, and the largest percentage decline since the economy was emerging from recession in early 2002.

In response, barter exchanges are working hard to sign up participants. The exchanges range from publicly traded entities like International Monetary Systems and the Itex Corporation to smaller operations like U-Exchange.com. Many are reporting double-digit increases in membership, as well as a bump in transactions.

At Itex, for example, registrations jumped 36 percent in October, said Steven White, the chairman and chief executive. The exchange, founded in 1982, has more than 24,000 member businesses.

Bartering has grown with the times and is now much more than “I’ll take yours, if you take mine.” Often, these days, multiple parties meet through online exchanges and amass credit that can be used for future transactions (more like “you take mine and I’ll take someone else’s later.”) Drawing on the reach of the Internet, many exchanges include participants from around the world.

What makes barter so appealing during an economic crisis? Barter specialists point to three attributes. First, a member business can find new customers and use excess capacity. Second, a satisfied barter partner often refers cash-paying customers to the small business. And third, the participants can conserve hard-to-come-by cash.

Ken and Angela Lineberger, owners of the Wine Tailor winery and retail store in Rancho Cucamonga, Calif., said sales would be flat this year had they not been active in the Itex exchange. Thanks to bartering, overall sales are up 8 percent, Mr. Lineberger said.

These are customers who wouldn’t normally seek out their wine, Mr. Lineberger said. “We just had a couple drive over 100 miles to buy six cases of our wine because they’re Itex members,” he said.

Itex customers pay the full retail price, he added; they are not discount buyers. The Linebergers use Itex dollars they accumulate in sales to pay for pest control, electrical work, accounting and legal services. “It’s nice to move those over to Itex,” he said, because it frees cash. They also use it for vacations and other personal transactions.

For tax purposes, barter is treated like ordinary sales, and its value must be reported. The barter exchanges record all transactions and report them to the Internal Revenue Service. Of course, informal bartering among small companies and independent contractors has gone on for decades, and some report the revenue and pay taxes, while others prefer to operate within the underground economy.

Bartering is estimated to generate more than $3 billion through exchanges in the United States, said Robert B. Meyer, who edits BarterNews.com, a trade publication. That does not include corporations that barter directly, he said. Official tallies are hard to come by, he said, because there are more than 250 exchanges and the systems are decentralized.

Hundreds of exchanges are available online, some national and some regional. Some charge membership fees and annual fees, while others do not. Often, there are transaction fees of up to 6 percent.

Small-business owners should do the normal due diligence when looking for an exchange, said David Wallach, president of the International Reciprocal Trade Association’s global board. For references, check with people or businesses in your area that use an exchange, and before entering into a transaction, vet your potential partner with the Better Business Bureau. The association, a nonprofit group that promotes barter and trade, has a test for businesses, “Is Barter for You?,” on its Web site (irta.com).

Chris Keogh, who runs his own construction firm, Jade Stone Construction, in Pearl River, N.Y., just completed his first barter transaction through International Monetary Systems (imsbarter.com).

“The construction business has always been feast or famine,” said Mr. Keogh, 47, a native of Dublin who has been in the New York region for 22 years. During a recent bad stretch, Mr. Keogh was scrambling to drum up new customers through advertising, Craigslist and even roadside signs. I.M.S. Barter saw the Craigslist post and contacted him. After he researched the company, Mr. Keogh said, he decided to give it a try, agreeing to paint a house for $5,000 — $1,000 in cash and $4,000 in I.M.S. trade dollars.

Mr. Dalsimer subsequently referred Mr. Keogh to two new customers. One of them will provide Mr. Keogh’s next project, painting a two-bedroom apartment in Somers, N.Y., in another part-cash, part-barter arrangement.

“You have to be careful how much you trade,” he said, because you don’t want your business to become dominated by bartering. And each side of a transaction carries that 6 percent fee, cutting into profit. Experts recommend that a business use barter for no more than 5 to 15 percent of sales to avoid crowding out cash business.

Many barter exchanges offer credit to members who have been turned away by lenders in the real economy; in its recent credit-line review in October, International Monetary Systems issued $2.7 million in trade credit to its network of 18,000 businesses, adding to an existing $55 million in established credit lines, said Krista Vardabash, its director of marketing.

“We base our credit on the products and services that the member businesses have to offer, not on their cash accounts or how they look on paper,” said Donald Mardak, the chief executive.

To be sure, bartering is not mainstream, said John C. Moore, a founder of U-Exchange.com. Still, traffic at the site, which is run by Mr. Moore and his co-founder, Barb Di Renzo, has spiked 70 percent this fall, he said, with an influx of participants from Spain, South Africa, Britain and the United States.

One new member at U-Exchange is R House Construction, owned by Rich Rowley of Tacoma, Wash. In a recent post on U-Exchange, he offered new home construction, remodeling, home repairs, real estate work orders, home maintenance and commercial improvements. In exchange, Mr. Rowley is looking for vacations, real estate, homes, land, dining, medical care, dental care, a boat, a motor home, groceries, gas, entertainment, a ski pass and tickets to Mariners baseball games or Seahawks football games.

So far he has had no takers, but he said he remained optimistic. “We have to learn to adapt to the changing landscape,” Mr. Rowley said. “Part of that is bartering. The exciting thing is this is another part of the puzzle that gets us to where we’re going.”

His wife, Kathy Robinson, came up with the idea of bartering as their business dropped off, said Mr. Rowley, who usually builds two houses a year and sells them. This year, he sold only one house; the other remains empty.

Even if the U-Exchange post does not work out, Mr. Rowley said, he has arranged privately to do renovation work on a vacation home in Ocean Shores, west of Seattle, while he and his wife stay in another beach home. “We really like to travel,” he said. “We don’t want to be denied that just because the economy is going south.”

Can I Operate my Business as a Non-Profit? (Entrepreneur.com)

Can I Operate my Business as a Non-Profit?

Probably not, but it's important to understand exactly what one is.

By Jeffrey Steinberger | November 04, 2008

URL: http://www.entrepreneur.com/management/legalcenter/legalissuescolumnistjeffreysteinberger/article198326.html

People own and operate various business entities. Some organizations operate as non-profits. What is a nonprofit? Can you conduct your business as a nonprofit?

The answer is that a business organization cannot be operated as a non-profit, although some non-profits may look like businesses. Generally, the purpose of a business entity is to benefit the owners or principals of the business by earning them a financial profit. A for-profit business organization can take any of the common legal forms, such as corporations, limited liability companies, partnerships and joint ventures. Thus, a for-profit corporation exists to financially benefit its stockholders by the payment of dividends, and an unincorporated entity, such as a partnership, exists to financially benefit its members by the distribution of income.

Rather than earning a profit for its owners, a non-profit is an organization that has no owners and that has as its purpose the promotion, advancement and achievement of a specific mission. Like a business, a non-profit can take the form of a corporation or an unincorporated group of persons banded together to achieve their mission. The missions of non-profits can be as varied as the human experience. For example, non-profits are formed to advance local, national or international missions such as charitable work, disease prevention, humanitarian relief and environment goals. Non-profits also can be as simple as a group of concerned citizens who want to fund a neighborhood watch or parents who have bake sales, car washes, or pancake breakfasts to earn money to finance their children's little league teams or scout troops. In each of these cases, the mission is not to enrich the operators of the charities or the involved parents, but to accomplish a mission.

A properly organized and operated non-profit that serves the public interest may be exempt from state and federal income taxes. To ensure eligibility for non-profit status and tax exemption and to avoid abuse, state and federal accountability rules must be followed, including reporting requirements and control by a disinterested or independent board of directors.

If a non-profit wants to receive tax-deductible contributions, the mission must be broad enough to benefit the general public. If the purpose is charitable but only a limited number of people are helped, the non-profit may be exempt from income taxes, but not be able to receive tax-deductible charitable contributions. For example, non-profits called "mutual benefit" organizations can benefit their members, such as condominium associations or social clubs. Other non-profits may benefit businesses or residents of certain geographical areas, such as chambers of commerce and professional associations (e.g., the American Medical Association). Since these non-profits benefit individuals to a large extent instead of benefiting society at large, they may be exempt from income taxes, but donations are not likely to be charitable deductions.

Non-profit does not necessarily mean free labor. While many nonprofits are driven by self-sacrificing volunteers, there is no legal reason why suitable offices may not be maintained or why officers and employees may not receive substantial salaries and the usual employee benefits, so long as the compensation is reasonable and appropriate given the mission, the activities of the non-profit and the efforts of the employees on behalf of the organization.

Serving the public good and advancing worthy causes has rewards for the individual and for society. Bear in mind, however, that non-profits are governed by federal and state laws, rules and regulations. The latter vary from state to state. Altruism must be tempered by prudence, and it is always prudent to seek and rely upon knowledgeable tax and legal advisers when undertaking any substantial activity.

Jeffrey Steinberger is a veteran trial attorney and the founder and senior partner of The Law Offices of Jeffrey W. Steinberger, a Professional Corporation in Beverly Hills, California. He is also a renowned celebrity attorney, TV legal commentator and analyst, federally appointed SEC arbitrator and professor of law.

Avoid Legal Time Bombs (Entrepreneur.com)

Avoid Legal Time Bombs

Learn whether your business is vulnerable to getting sued. Find the holes in your business, and stop lawsuits before they start.

By Patrick A. Fraioli Jr. | November 06, 2008

URL: http://www.entrepreneur.com/management/legalcenter/article198352.html

If you own a business in the U.S. long enough, there's a strong likelihood that your business will be sued. When that happens, it will cost you a fortune to defend that lawsuit. And that's if you win.

So as a business owner, it's your responsibility to do something about it before it happens to you. For example, if you were afraid of a fire in your home, you'd ask a fire fighter for fire prevention tips. If you were worried about having a heart attack, you'd consult your doctor about preventive medicine. So it's only rational that if you're living in fear of being sued (and losing), you should ask a lawyer how you can improve the odds that you'll not only win, but also avoid a suit entirely. It's called "litigation avoidance" or "preventive lawyering."

An experienced litigator who focuses on litigation avoidance can help you find the "legal time bombs" that may be ticking in your business. A few examples follow:

Employment law is hot, particularly "wage and hour" suits, involving how employees are classified, what they're required to do, and how and when they're required to do it. It's a business nightmare. The traditional mainstays of employment litigation include wrongful termination, discrimination in hiring and/or firing and sexual harassment. This has all become big business for plaintiffs' lawyers, and thus every business in America is a potential target. Have experienced counsel audit your employment practices and advise you if and where there are ticking time bombs.

Intellectual Property (IP) is another hot area. Businesses can profit from having an IP attorney audit business practices for two reasons: to find out if you may be infringing someone else's IP and also whether you may have some IP you don't even know about (eg., a trademark). It's especially important to follow strict procedures to protect any trade secrets you own, so that when a former employee tries to misappropriate them, you can stop him cold. But you can do so only if you've prepared for that fire before it starts.

Contracts Management--Every business has contracts, and they contain obligations. Often, those obligations can make you a fiduciary, such as where you are holding and distributing money for others, as happens in businesses that employ subcontractors. Fiduciaries are required to act with the highest degree of loyalty and care. But often, particularly when a business is growing rapidly, employees with knowledge of these obligations will leave. Unless you have specific procedures in place to ensure the transition of this knowledge, new employees may default on the firm's obligations. Serious trouble can follow.

Electronically Stored Information (ESI) is everywhere. Every modern business should have a document retention policy. If you don't, or you don't follow the one you have, you may become the butt of those "smoking gun" stories that are passed around, ironically, on the internet. The consequences can be grave. A lawyer can help entrepreneurs decide what kind of documentation policy is ideal for them.

Fraud is rampant in American business. More than $650 billion (or 5 percent of GDP) is lost annually to employee fraud and abuse, with nearly one in four frauds causing loss in excess of $1 million. Your business isn't immune, and fraud is rarely discovered by someone going over a compliance checklist. Know what to look for and how to implement internal controls to prevent fraud.

There are as many potential ticking, legal time bombs as there are businesses in this country. Look for yours and find them before a potential plaintiff does.

NOTE: Nothing contained herein may be considered legal advice or counsel of any kind.

Patrick A. Fraioli, Jr. is a partner in the Los Angeles law firm of Moldo Davidson Fraioli Seror & Sestanovich LLP and chair of the firm's litigation department. He advises companies on legal issues, emphasizing preventive lawyering and litigation avoidance strategies.

Can You Buy a Big Franchise? (Entrepreneur.com)

Can You Buy a Big Franchise?

Can a small fish survive in a big pond? Yes--even in this economy, big franchises are seeking single-unit franchisees just like you.

By Janean Chun | October 31, 2008

URL: http://www.entrepreneur.com/franchises/franchisecolumnistjaneanchun/article198292.html

Once you realize the appeal of joining a big franchise, the next logical question is: "Is it possible for me?" Even if you're extremely interested in buying a McDonald's or Subway or 7-Eleven, will those big-name players want to sell to you, Joe the Franchisee?

Absolutely, says Hardy Grewal, a longtime Subway franchisee and Subway's development agent for Los Angeles County and Orange County, Calif. The chances for a regular guy to buy into a big brand like Subway "are there, if you have the capital and the background we're looking for," says Grewal, who receives about 4,000 applications every quarter. "We are still approving new franchisees now--maybe not to the extent as when the brand was growing originally, but there are always new opportunities. Plus, people in the system may want to retire and sell stores, so we're always looking into our pool of qualified people. "

Contrary to conventional franchising wisdom, Subway does seek the entrepreneurial spirit in new franchisees, Grewal says. Investors? Not so much.

"I sift out doctors or engineers who are looking for a second income," he says. "We want people involved in the day-to-day and who want to expand the brand."

Even in the current financial crisis, "don't expect the larger and more experienced or important brands to panic and take in any candidate that simply has the money to open," says Michael H. Seid, founder and managing director of franchise advisory firm Michael H. Seid & Associates and co-author of Franchising for Dummies.

In fact, single-unit franchisees might find an upside to the economic downturn. "Many franchisors are going to be challenged for the next nine months to a year," Seid says. "A solid single-unit franchisee will be attractive to them to help meet their current growth projections."

What, specifically, will make you attractive to franchisors? "Come to the table with the needed capital and an ability to qualify for a loan--that's what franchisors need right now from a prospective franchisee. For the next year, available liquid capital will play a very important role in candidate acceptance," Seid says. "Franchisors also look for background and experience, but not necessarily in a related industry. How well you've done in your career is an indication of future performance. And show you understand the brand and the culture of the franchise system, and be respectful, even excited, about joining the system."

Also understand that research is all the more important now--even the biggest franchises could be eventually affected by the economy, some for better, some for worse. "This downturn will positively affect those brands with quality offerings at a lower price point," Seid says. "But high-end restaurants and hotels will face some issues in the coming year."

What's Grewal's best advice for franchisees looking to succeed in a big franchise? Go for it in the due diligence phase, as he did when he bought his first Subway location.

"Instead of going to the financials right away, I talked to at least 10 franchisees in the system, asking their honest opinion about any problems," he says.

Also, ask questions about guarantees on leases and visit websites of franchisees--even the unhappy ones. Grewal says discontent franchisees are common in any large system.

"There will always be one or two franchisees [who are disgruntled]. If you visit 10 stores and they all say they want to sell, then that's when you shouldn't touch a franchise."

Once you join a big franchise, Grewal recommends maximizing your opportunity by staying open to growth.

"Some people buy one or two stores because they want to count the cash themselves every day. They don't want to delegate," he says. "I had the ability to do that."

Because of that ability, this Indian immigrant rose from buying one franchise to owning 25 to overseeing 700.

"I couldn't have dreamed of getting to where I am today without franchising," Grewal says. "I'd probably be an accountant making nowhere near what I'm earning now. It was through franchising that I was able to accomplish the American Dream."

Entrepreneur.com readers: How did you finance your franchise? In this tight credit market, franchisees have to be more creative than ever in financing their franchise. What is the most creative approach you took to find franchise funding, or what is the most creative financing story you've heard from another franchisee?

E-mail your stories tojchun@entrepreneur.com. Then check back to this column; in an upcoming month, we'll reveal the most creative financing stories of the bunch.

3 Sources of Franchise Financing (Entrepreneur.com)

3 Sources of Franchise Financing

Know how to make sense of the current economy and its impact on franchise funding.

By Jeff Elgin | November 03, 2008

URL: http://www.entrepreneur.com/franchises/buyingafranchisecoachjeffelgin/article198310.html

Everyone knows the current lending environment is a challenge--especially if you're trying to finance a startup. Yes, there's still financing available for qualified people, but selecting the right funding strategy is more important than ever. It's time to get creative when thinking about financing options.

Despite what you hear on the news, money is available. There are institutions and individuals who haven't been affected by the housing market and still have money to lend. It's important to note, however, that we're seeing some big changes from traditional lending procedures in the franchise industry.

The first change is that it's more important than ever to start sourcing financing options before even choosing the franchise you want to buy. While historically we've seen much of the franchise finance market driven by home-equity lines of credit, this type of financing is more difficult to obtain in the current financial climate. Therefore, it's never too early to look into financing alternatives.

Another change is that your credit score is far more important now than it was even a few months ago. In today's climate, getting financing will be difficult with any credit score below about 700.

Also, once you've decided on your franchise and are approved for a loan, act on it quickly. Lenders aren't going to leave credit commitments outstanding for 30 days or more the way they used to; they want you to act in five to 10 days. If you don't take it, they'll cancel their offer and lend the money to someone else.

In the past, people relied on time-tested approaches for franchise loans; but in today's economy, you may need to get more creative. Here are three alternative funding sources to consider:

Franchise Funding Specialists
How do you know which finance options might be best (or even available) for you? Companies such as FranFund or Guidant, which live in this market every day, can explain potential strategies you can use in your financing efforts.

These companies typically have established relationships with various lenders that specialize in one or more types of franchise financing. They may also offer equipment-leasing options, signature credit lines, 401(k) rollover products, SBA lending, conventional lending, etc. Finally, they can tell you how much credit is realistically going to be available to you.

After gathering your financial information, the franchise funding specialists will formulate a lending strategy with you. Once you make the final decision to proceed, they will package your information and follow the process from beginning to end. Their knowledge and relationships in the industry are critical in expediting the transaction, and these companies typically don't charge a fee for their services until or unless you actually receive your financing. So the upfront risk to you is limited to a small amount of your time.

Cash is King
We've heard it before. Well, this is never truer than in uncertain economic times. Many executives have been or are going to be displaced in this market shakeup, and they often receive a significant amount of cash to help them transition out of their old jobs.

This cash can come in the form of severance pay (lump sum or otherwise). It can also come as benefit continuations, retirement account settlements or rollovers. Ask yourself how you're going to "invest" this cash in an effort to re-create your lost income or, better yet, build some additional wealth for your family.

Consider investing it in yourself by building a franchise that can support you. Many people, after considering this idea, come to the conclusion that they can produce at least as high a return using this strategy as they would in the stock market. They will also have far more control during the process.

Thank You For Your Service
For our country's veterans, the government has established a program called the Patriot Express Pilot Loan Initiative. This is an SBA-guaranteed loan program for military veterans, those currently in the military who are close to retirement (Check the SBA website for eligibility requirements) or their spouses. The SBA will guarantee up to 85 percent of the loan. That means the lender only is at risk for 15 percent, which makes such loans more attractive to the lender. Best of all, the credit score requirements for Patriot Express loans are significantly lower than what we otherwise see in the current market, so it's easier to qualify for these loans.

Honorably discharged military personnel should also look into the VetFran program, which the International Franchise Association started as a way to help veterans. To date, more than 300 companies have joined the program, which offers substantial discounts on fees and expenses as a way to show appreciation for honorable service to our country.

Because there are many ways to finance a new franchise, be prepared to do some careful research on the subject to find the option that will work best for you. Though the financing market has gotten more difficult in this tight credit cycle, there are always loan dollars available for the right person and the right opportunity.

Remember to ask everyone you think might be helpful in your search (including the franchise company you are interested in) for any advice and options that might be available to you. Start early, and continue to refine your efforts as you get closer to deciding on a franchise. Good luck.

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.