Cesanteados reciben vales de negocio propio (Endi)

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

Cesanteados reciben vales de negocio propio

También se beneficiaron servidores públicos que se acogieron al retiro voluntario

Por Daniel Rivera Vargas / drivera2@elnuevodia.com

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

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

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

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

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

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

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

Siete pasos para montar tu negocio (endi)

Sigue las guías para conducirte hacia el éxito empresarial

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

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

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

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

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

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

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

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

Even in Recession, Some Small Businesses Grow (NYT)

By ANNE FIELD

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

How to Market Your Business With Facebook (NYT)

By KERMIT PATTISON

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Quick Tips:

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

Suggested Resources:

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

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

The New Rules of Angel Investing (NYT)

The New Rules of Angel Investing

By KERMIT PATTISON

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

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

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

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

Do It Yourself

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

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

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

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

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

Be Realistic About Valuations

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

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

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

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

Lay Out Milestones

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

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

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

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

Practice Your Pitch

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

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

Know Where to Look

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

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

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

Coached by an Angel

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

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

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

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

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

Quick Tips:

• Bootstrap as long as you can. Finding early ways to get revenue.

• Get to break even quickly and remember that VC financing has gotten harder to obtain.

• Be realistic about valuations. Be coachable.

• Practice pitching and be prepared to make your case to dozens or hundreds of angels.

• Look for angels who complement your strengths and can help you with more than money.

Suggested Readings and Resources:

• An overview of angel investing and a list of resources from Angel Capital Education Foundation.

• What Entrepreneurs Should Know About Angels from the Angel Capital Education Foundation.(pdf)

• A directory of angel investors from the Angel Capital Education Association.

Eleven Easy Ways to Destroy Your Company (NYT)

Eleven Easy Ways to Destroy Your Company

By Jay Goltz

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

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

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

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

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

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

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

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

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

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

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

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

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

Can anyone add to my list?

Jay Goltz owns five small businesses in Chicago.

Real-Life Lessons in Using Google AdWords (NYT)

Real-Life Lessons in Using Google AdWords

By DARREN DAHL

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Quick Tips:

• Set a budget, a daily or monthly amount you’re willing to spend.

• Begin by casting a narrow net, advertising in your local market and then expanding to additional markets like Google’s AdSense network.

• Try to choose keyword terms that your competition has overlooked to keep per-word costs low.

• Remember that good campaigns require constant adjustment.

Suggested Readings and Resources:

• Google’s step-by-step guide to getting started.

• Google’s blog about AdWords.

• AdWords for Dummies

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

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

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

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

Be Sure AdWords Is the Right Choice

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

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

Set a Realistic Budget

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

Focus on Local Markets

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

Narrow Your Keyword Net

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

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

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

Create Landing Pages

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

Stay on Top of Your Campaign ...

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

... or Consider Outsourcing It

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

This article has been revised to reflect the following correction:

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

Obama Announces Small-Business Lending Push (NYT)

Obama Announces Small-Business Lending Push

By ROBB MANDELBAUM

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

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

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

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

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

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

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

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

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

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

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

A Guide to Assessing Franchising Opportunities (NYT)

A Guide to Assessing Franchising Opportunities

By KERMIT PATTISON

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

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

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

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

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

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

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

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

Who Are You?

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

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

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

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

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

Should You Hire Experts?

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

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

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

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

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

What Is the Best Business Opportunity?

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

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

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

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

Who Is your Franchisor?

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

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

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

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

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

What Do Other Franchisees Say?

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

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

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

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

Can You Afford It?

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

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

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

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

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

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

What Are the Legal Terms?

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

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

Could You Do Better as an Independent?

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

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

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

Can You Negotiate?

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

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

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

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

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

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

How to Start a Business (NYT)

How to Start a Business

By TOM TAULLI

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

The Business Plan

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

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

Try to answer the following in the business plan:

1) Who is the customer?

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

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

2) What’s happening with your market?

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

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

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

3) What are the start-up costs?

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

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

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

O.K., you’ve got a plan.

Prove the Concept

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

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

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

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

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

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

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

Raising Capital

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

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

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

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

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

Choosing a Legal Structure

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

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

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

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

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

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

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

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

A lawyer can help with the process.

On to Plan B: Starting a Business (NYT)

On to Plan B: Starting a Business

By MICKEY MEECE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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