Wednesday, November 12, 2008

Small Business Owners Risk Losing It All

Many small business owners are at risk of losing their home and everything they own if their company fails, new research has revealed.

A survey by the Federation of Small Businesses (FSB) of more than 8,500 members found that 49% are keeping their companies going by putting their possessions at risk. Many small businesses are run from the owner’s home, which means that their dwelling is part of the assets of the business.

The FSB was concerned enough by the findings of the survey to appoint a professor of small business who will be able to assist companies in this period of economic turmoil. The new man is Professor Anderson. He says the survey’s findings are a concern and showed how small firms were putting themselves ‘in the firing line’.

His initial general suggestions are for companies to keep a close eye on their cash flow, to build up a relationship with their bank manager, and to add value for their customers in ways that only small businesses are able to do.

Separate research has revealed that 470,000 small businesses have gone to the wall since the credit crunch began 15 months ago.

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Saturday, November 8, 2008

How Entrepreneurs Can Profit with Obama

Regardless of your feelings about Obama—and I say this as a right-leaning small business owner—it's time to take notice of our smart counterparts out there who know his Presidency can translate into lots of profits. Remember, these savvy entrepreneurs know all about surviving and profiting from one political wind to the other. While the rest are watching football or Family Guy this Sunday, you can bet these folks will be plotting their strategy for later in 2009 when the Administration changes and the new Congress takes over. Here are a few shrewd moves and predictions we should all consider.

Think energy.

Sure, gas prices have dropped recently. But we're legitimately spooked. Spooked enough to motivate the next President to commit to doing something about our reliance on foreign oil. Obama plans to invest $150 billion in clean energy technology over the next 10 years. He also plans to create a federal Renewable Portfolio Standard that will require 25% of American electricity be derived from renewable sources by 2025.

Smart business owners will be following this money trail. And they won't even need to be in the energy sector to benefit. They'll just need to be selling and servicing those companies that are in the sector. They'll be changing their marketing, buying new lists, advertising in new places, and attending different conferences than before.

Don't forget about other markets.

It's not just the energy-related industries that will benefit from the next Administration. Obama plans to invest in child care by doubling support for after-school programs and expanding the Child & Dependent Care Tax Credit. He plans to invest $10 billion a year over the next five years to upgrade information technology systems used in the health-care industry. He plans to invest a bunch more money in improving the information and communications technology used to support public safety systems. He will be supporting investments in biomedical research, medical education, and training in health-related fields. He will be a proponent of stem-cell research and will allow more government funding in this area.

Smart business owners will be fathering more children from test tubes and getting them Microsoft (MSFT)-certified while they're still in diapers. Just kidding. Actually, they'll be asking themselves why they're wasting time selling into struggling industries when the next President is saying: Where the money's going to flow.

Let's play some games with our income.

I know that my taxes are going to go up next year. I've seen Obama's proposals. And the strong Democratic majority in Congress. People making more than $250,000 per year will face higher rates. Capital gains rates will go up, too. So will Social Security taxes. And business tax rates.
Smart business owners will recognize as much income as possible this year before potential new tax laws take effect. That means, depending whether you're on cash or accrual basis, getting as many invoices legally out the door and/or as much cash in the door as you can. These savvy business owners will also be finding ways to distribute income over the next few years. Think paying family members at lower rates, bartering, deferring income, and shifting profits overseas. Smart business owners will be lined up outside their accountant's door already, planning these strategies for 2009 and beyond.

Drive up expenses while investing for the future.

Our President-elect has already stated the need for investment in technologies. He's probably going to continue to support the IRS Section 179 Rule which allows qualifying small businesses to deduct certain equipment purchases. He also plans to eliminate all capital gains taxes on startup and small businesses to encourage innovation and job creation. And he plans to make the research and development tax credit permanent.

Smart business owners know that taxes will come down one day. But in the meantime, at least in the next few years, we know it's time to spend to invest, keep taxes low, and prepare our businesses for the next decade. I think we've all learned that investing in the stock market isn't the greatest idea any more. Maybe the guy's right, and we should plow our money back into something we can control.

Take a careful look at employees.

Obama's a big supporter of unions and a worker's freedom to unionize. He's going to change some of Bush's classification rules which will enable more people, formerly classified as supervisors, to become protected by federal labor laws. He's going to be on the side of striking workers. He's going to step up protection of employees who faceworkplace discrimination and encourage flexible work schedules. He's going to raise the minimum wage. And the Family & Medical Leave Act? He's going to expand that, too, to effect businesses from those now employ 50 or more to those that employ 25 or more. Oh…and something's going to happen with health care. I don't know what. But guess who's going to wind up paying? It's going to be good times for workers. Not such great times for employers.

Smart business owners will always need good people. Valuable, hard-working employees working at good small businesses will have job security. But if the costs of employment are going to increase, then we're going to do everything we can to minimize the number of people we employ. Look for a big push for outsourcing. Look for a new rise in subcontractors. Watch us use the remote technology available today and hire people around the country to do those tasks that we formerly had employees do. Watch us be very, very careful about hiring people over the next few years. The incentives for employing people have shrunk. Our motivation to find ways around these rules will be strong.

Have a few drinks with our estate attorney.

Estate taxes will be higher than ever. Where there was once a hope of lowering, or even eliminating estate taxes, an Obama Presidency means death for that idea (sorry, couldn't resist). Obama's estate tax will be 45% of assets over $3.5 million.

Smart business owners will immediately be seeking out their attorneys and learning the nuances of estate and trust laws. Christmas will start early. Gifts will need to be made, and fast. The transfer of assets to children, grandchildren, and significant others is going to be accelerated. The rest of us will just make sure not to die in the next few years.

So, let's face reality. Smart business owners, with a little forward thinking, will prosper during the Obama )residency. So bring it, baby…bring on the change!

Gene Marks, CPA, is the owner of the Marks Group, which sells customer relationship, service, and financial management tools to small and midsize businesses. Marks is the author of four best-selling small business books and writes the popular "Penny Pincher's Almanac" syndicated column. He frequently speaks to business groups on penny-pinching topics. More penny-pinching advice from Marks can be found at
Gene Marks

Thursday, November 6, 2008

Small Business Centers Offer Help to New and Established Firms

Small Business Development Centers are spread throughout the United States to help both new entrepreneurs start businesses and established businesses to flourish. The centers, which offer free consulting and training for nominal fees, are hosted by universities, colleges and state economic development agencies. The program was founded in 1979 and is funded in part by the Small Business Administration. The network of centers has seen its funding yo-yo over the years, but lawmakers and others recently have fortified the network with more money and confidence.

The Association of Small Business Development Centers releases a yearly annual peer-reviewed study (pdf) assessing the overall effectiveness and impact of the centers. This year's study, which is heavier with the statistics than the prose, assessed the economic impact of counseling provided by 62 of the centers to small businesses in 2006.

I spoke with ASBDC President and CEO Don Wilson, based in Burke, Va., about the study and what he sees on the small business horizon. Here are highlights from our interview:
Small Business Blog: About 58 percent of the participants seeking more than five hours of counseling were established businesses versus just over 42 percent for pre-ventures. Does that trend surprise you and what kind of information are the established firms seeking vs. the newcomers?

Don Wilson: It varies, although you'd think that newcomers are always looking for money, SBA loans are generally for established businesses as banks don't want to loan to non-established businesses. But many people are coming to us to come up with a good solid business plan. They want to know 'How do I get this started?' and 'What am I going to need?' We help them with everything from licenses to marketing plans to understanding how to comply with tax rules and [environmental and health and safety] regulations.

An interesting change that's occurred is that we now get more established businesses seeking counseling than startups...We get a lot of repeat customers and many startups that came to us years ago are coming back.

Some people come to us looking for grants, but that's not something that we do. In these economic times, many people are coming [to us] to help them get their finances in order and to get help repairing their credit. For the established businesses, they might be seeking a new marketing plan to go national or international.

One of the biggest trends we've seen is that with credit so tight, people are coming to us to help them fill out their loan forms...People used to be able to do it themselves when credit was flowing, but now we help them a lot with loan packaging and using the right language.

SBB: SBDC long-term clients generated approximately $7.2 billion in sales and more than 73,000 full-time jobs as a result of the assistance they received, according to the report.

Wilson: Our clients do much better than the average business. Part of it may be that we're dealing with people who are wise enough to know what they don't know -- so they go get help. An SBDC counselor may invest 60 to 100 hours in any specific business.

Our services also tend to be counter cyclical. When the economy is down, we see increases in the number of people we counsel. Counselors I've been talking to recently have seen an uptick in the number of clients.

A common issue for many of these people is that there have been a lot of small business owners who took equity out of their homes to launch a product line, but then they've seen a drop in home values. The whole issue of credit has become a bigger challenge.

SBB: When did the credit tightening and other problems begin? Do you see a trickle down from Wall Street?

Wilson: I think the base of the problems started two years ago or so. The [Federal Reserve] did a study last July that showed banks were tightening their lending to small firms. Over the last two to three months, an awful lot of small businesses have been seeing their credit lines being called. A lot of small businesses use their credit lines to purchase inventory and pay it back as they make the sales. Now many can't do that. Also, consumer spending is down and that affects all businesses whether in service or manufacturing. There is no question that Wall Street is hitting Main Street.

SBB: About 21 percent of all pre-venture clients received SBDC assistance for help in obtaining financing. Your clients raised an average of about $104,000 in SBA loans and about $82,000 from other sources of debt financing and $25,000 in equity financing.

Wilson: SBA had a real drop off in the number of loans it's affiliated with, but the size of the loans has climbed. We're a resource partner with the SBA. We're managed and overseen by the SBA. I think the relationship is better than ever because there's a lot of interaction. For example, we now bring the head of office at an SBDC to SBA board meetings.

SBB: How is your relationship with the SBA now?

Wilson: Even though this administration did not push the funding level that we thought was appropriate for SBDCs, we have an excellent relationship....But don't get me wrong, we disagree on things but we don't disagree in a disagreeable way....Our budget was flatlined for about eight years.

SBB: How did you manage to get more funding?

Wilson: We just kept bringing in all kinds of data that showed how effective SBDCs are. Congresswomen [Nydia] Velazquez (the New York Democrat who chairs the House Small Business Committee)...and we got tremendous support from [Senate Small Business and Entrepreneurship Committee Chairman] John Kerry (D-Mass.) and ranking Republican Olympia Snowe from Maine. We got $110 million for the program for 2007 and that should bring us up to the level where we used to be. Lawmakers began to see that we're doing a great job but were withering on the vine for lack of resources.

In the economy today with folks leaving their jobs and the national job loss - many of these people are going to look to self-employment and getting more money for us at this time is very timely.

SBB: What do many people not know about SBDCs?

Wilson: We spend very little on marketing, so a lot of people may not know about us. Our money is all invested in the counseling. But what most people don't know is how much we can help in a disaster situation. In 1999 there was a tremendous hurricane in North Carolina. We moved counselors and they lived there for six months. Eventually the state's governor turned disaster relief efforts over to the N.C. SBDC.

In 2001, after 9/11, many people were not going to work in midtown Manhattan...The hundreds of Chinese carryouts and other businesses were hurt. We did a tremendous job there and have definitive data that the loan approval rate for people who came to SBDCs for help in reconstructing their finances was far higher than the average applicant.

In all the years of disaster supplementals, the SBA has never asked for money for SBDCs, but when disaster hits they always come in and ask us to help. Our counselors volunteered, did it on their vacation and took non-paid leave. This year, in the big overall bill that Congress passed, there's actually $10 million for SBDCs to help with disaster relief.
By Sharon McLoone

Tuesday, November 4, 2008

Many Launching Their Own Small Business

A lot of people see the economic downturn as an opportunity to start their own small businesses.

It's not easy. Statistically speaking more than 50 percent of all new businesses will fail within the first few years, but that means some 50 percent will make it. So why not you?
Elizabeth Becker's hobby photography is now her job, but turning her passion into her own small business, Seaport Photography, was a little harder than she expected.

"The biggest advice I would give to someone is to sit down and write out your budget," said Becker.

Because to make money, you have to spend money, from business cards to establishing your own Web site. According to small business analysts, a web site is critical to success, with more than 70 percent of the population linked to the Internet. A huge help for Becker was a computer program, Microsoft's Office Live Small Business, which set up her Web site for free.

"Someone can go in and actually at no cost with the basic office live get a domain name, get a Web site up and running have e-mail and have a presence in the marketplace," said Becker.
But before the Web site, the cards, and the equipment, first and foremost create a business plan. For Becker, it's not as much fun as taking pictures but critical for any business to succeed.
"It's a challenge not only to have the technical skills to be a photographer the artistic skills but then the skills to run a business, and that's a challenge because you wear an awful lot of hats," said Becker.

A recent survey found that more than 70 percent of Americans would like to start their own business. And believe it or not this economic turmoil could be the perfect time to launch, as long as you do your homework before you get started.


Monday, November 3, 2008

10 Great Tips To Boost Your Business

After the rush of a small-business launch and the initial influx of curious customers, many small businesses reach a plateau. The proprietors are busy working hard to sustain the business doing what they've always done because it's worked so far, but this approach often means the business acquires and retains a certain customer base and sales volume and then "hits a wall".

Any business, but particularly a small business, must constantly adapt to changing market conditions, new business tools, and new sales opportunities to continue to grow and prosper. The small business owner must have one eye on routine operational tasks and one eye scanning the horizon for new opportunities. In this article we will discuss 10 breakout ideas for small businesses looking for growth opportunities.

Are you an entreprenuer?
Start your own small business
Add complementary products and services
A great way to increase sales and bring new customers to your sales base is adding new complementary products and services. But how do you decide what to add without turning your business into a third-rate Wal-Mart? A great place to start is by reviewing the definition of your business.

For example, if you sell house siding, ask yourself, are you in the siding business or the exterior building materials business? The result may be that you redefine your business and add gutters and downspouts, roofing and other coverings to your product line.

6 steps to a better business budget
Can you handle a home-based business?
Another surprisingly simple way to build a list of new products or services is to ask your customers what else they might buy from you if your business sold it. A few friendly conversations with customers and staff will likely get you more information than thousands of dollars spent on professional customer surveys.

Be sure to ask how much they would want to buy and how often to get a sense of whether the demand would be great enough to warrant the additional costs of building up this area of your business.

Explore new market niches
One way to find a new market niche is to seek alternative applications for your existing products and services, and we have a Cheez-y example of how this works. Kraft started out with a spreadable cheese product in a jar that could be spread on crackers for snacks - it was called Cheez Whiz.

Is buying a franchise wise?
This was fine, but selling a cracker topping will only take you so far in this world. That's why Kraft expanded the scope of Cheez Whiz and started promoting it as a base for a variety of dips and food toppings. Soon Cheez Whiz was an ingredient in all sorts of recipes. Kraft wasn't satisfied with only human consumption though. One of the latest unique uses of Cheez Whiz comes from a California fishing lure and bait company that sells Cheez Whiz in a prepackaged bait application, and it buys Cheez Whiz in 55 gallon drums.

If Kraft had stuck with the spreadable-cheese concept, sure, it would have covered a lot of crackers. But by thinking outside of its original intent, Kraft expanded the market and attracted customers it never would have targeted initially.

Find an unmet need in your industry and fill it
When you talk to your customers and clients, listen closely for this phrase: "If only they made/sold X". Your job as a business is to find out what X is and provide it. It sounds obvious, but customers will tell you what they want if you will only take the time to listen. And the good news is that if you can find a way to fill that need, breakout sales are virtually guaranteed.

Take, for example, the local lumber yard that feels the heat as big box retailers muscle their way into the lumber business. There's no way the smaller outfit can compete with the large volume and low prices of the big boxes. Instead the owner listens to his customers who tell him that the big chain stores lack custom or hard-to-find millwork and hardware.

This is an unmet need just waiting to be filled, and it could bring a new client base of suburban do-it-yourselfers who want to buy their unique weekend needs all in one place.

Use Internet and catalog sales tools
If you are reading this article, you're no doubt aware that that the Internet has more to offer than photos of pets dressed up like humans ... or humans dressed up like pets.

Many small businesses limit their sales reach and distribution to on-site, over-the-counter sales, but ecommerce can enhance your market reach, customer base and sales volume. Rather than the standard brick-and-mortar sales front, consider selling from a website, from an online storefront, a blog or from a printed catalog.

Let others sell your private-label products
By allowing distributors, wholesalers, big box stores and competitors to sell your products under their own label (also known as a white label product), you may be able to realise the benefits of increased production volume, including reduced unit cost, increased fixed-cost amortization possibilities, and increased sales revenue, all of which can bring significant bottom line growth to a small business.

This technique also allows the possibility of market segmentation under your own or other labels.

Build a better mousetrap - or at least buy one
We're all aware of the "build a better mousetrap" strategy as a breakout technique, but many small business owners don't know how to find technological innovations, patented products and processes in their industry, or how to license needed new technologies. There are a number of proprietary property licensing firms servicing companies of all sizes. These are easily found online if you search for "Technology Licensing".

There are two types of licensing (in-licensing and out-licensing) and not all firms handle both types. In-licensing involves searching for a particular tech innovation to make a better or different product, or a technique to make it at a lower cost.

In this instance you would ask a proprietary licensing firm to search and acquire a license for your business to acquire the needed, and usually protected, technology. Conversely, if your firm has developed and patented proprietary technology that you want to license to others, an out-license firm will search for businesses interested in buying a license for the technology or innovation from your firm for their own use.

Improve productivity and efficiency through enterprise management software
Enterprise management software integrates your company's existing and separate business functions and project tracking into one system. This streamlines operations, and can provide a parallel off-site system for backup and access from anywhere in the world. Software like this was once reserved for large firms with large budgets and the only suppliers were industry icons like SaaS, Microsoft and SAP.

These approaches can significantly reduce administrative staff load and costs, enhance productivity, efficiency and project tracking accuracy. This functional improvement can bring your business to a whole new level. The good news is that this software can now be had at reasonable rates from a variety of smaller software companies.

Align your products and services with popular values and trends
You may be able to align your company brand, products and services with local festivals, sports teams, known tourism sites, etc., to piggyback on their advertising, promotions and branding. In some cities local merchants combine their advertising with weekend festivals, the regional NFL and AHL team promotions, and profit from package bus tours to local historical sites.

Your business may also benefit from an association with popular commonly held themes such as an environmentally oriented program. This type of branding can enhance the reputation and credibility of your firm in your region and hype your sales.

A small business can often benefit from identifying with "hot" issues. Rather than offering direct dollar discounts, many auto dealerships and auto companies began offering free gasoline points as fuel prices skyrocketed in 2007-2008. The move spiked their sales and spread their promotional costs over an extended period.

In a similar vein, many small-scale fruit and produce farmers were feeling a price squeeze from the supermarket chains until they banded together to fund "buy locally grown food" campaigns.

Make use of clubs, associations and your competitors
Present your products and services to organizations with members who could be customers. Take advantage of your podium access at local service clubs like Rotary, Lions Club, Elks, VFW and the American Legion.

If you are a chamber of commerce or trade association member, volunteer to be a presenter at some of their seminars. If you can speak directly about your business, that's always best, but your presence and individual contacts at these meetings are excellent breakout opportunities.

As a presenter at one of the service clubs you are viewed as an expert and an authority on the subject. Your bio will include your company name, and people like to work with an expert.

It may sound crazy, but it also pays to work with your competitors to grow the market in your industry. Rival hotels and golf courses in resort locations often work together closely to bring more customers to their location. They then compete for the business once the location visit is confirmed. It's called "destination marketing".

Co-competition and "clustering" with competitors can be a breakout technique that works to increase your business.

Export your products and services
Exporting your products and services takes some preparation in documentation, setting up dealers or distributors in foreign countries, learning the importation rules and tariff schedules for the destination countries and learning something about payment conditions and letters of credit.

Determining your transportation mode, understanding transfer of ownership laws, and being knowledgeable about any cultural issues involved is also important.

Exporting makes the world your marketplace and exposes you to customer populations with huge sales potentials, especially in emerging markets with a growing middle class.

There are many ways to adapt, invigorate and position a small business for a breakout to the next level of sales growth and profitability. It takes owner vigilance, awareness and creativity. It also tends to be the fun part of the business as well as its best chance for continued growth and success. In the business world, the only constant is change.

Adapt, break out and prosper.

Dan Barufaldi, Investopedia

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