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Business Startup Strategy

2010-08-30T20:49:00.000+02:00

I strongly suggest that would-be entrepreneurs do a business plan. As a result of completing the plan you will be much better prepared and know whether or not your business idea is feasible. Try the following article for a short-cut. However, I caution you on following a short-cut unless you have substantial experience or knowledge about your area. Proceed with caution without a business plan!

How is your business unique, and why will your goods or services appeal to customers? What are the primary differences between your company and your competitors? What are the driving factors to choose your business over another?

In other words, what is the underlying reason a customer would do business with your company?

1) Define Your Business and Vision

Defining your vision is important. It will become the driving force of your business. Here are questions that will help you clarify your vision:

Who is the customer?
What business are you in?
What do you sell (product/service)?
What is your plan for growth?
What is your primary competitive advantage?

2) Write Down Your Goals

Create a list of goals with a brief description of action items. If your business is a start up, you will want to put more effort into your short-term goals. Often a new business concept must go through a period of research and development before the outcome can be accurately predicted for longer time frames.

Create two sets of goals:

Short term: range from six to 12 months.
Long term: can be two to five years.

Explain, as specifically as possible, what you want to achieve. Start with your personal goals. Then list your business goals. Answer these questions:

As the owner of this business, what do you want to achieve?
How large or small do you want this business to be?
Do you want to include family in your business?
Staff: do you desire to provide employment, or perhaps, you have a strong opinion on not wanting to manage people.
Is there some cause that you want the business to address?
Describe the quality, quantity and/or service and customer satisfaction levels.
How would you describe your primary competitive advantage?
How do you see the business making a difference in the lives of your customers?

3) Understand Your Customer

It is not realistic to expect you can meet the needs of everyone, no business can. Choose your target market carefully. Overlook this area, and I guarantee you will be disappointed with the performance of your business. Get this right and you will be more than pleased with the results.

Needs: what unmet needs do your prospective customers have? How does your business meet those needs? It is usually something the customer does not have or a need that is not currently being met. Identify those unmet needs.
Wants: think of this as your customer’s desire or wish. It can also be a deficiency.
Problems: remember people buy things to solve a specific problem. What problems does your product or service solve?
Perceptions: what are the negative and positive perceptions that customers have about you, your profession and its products or services? Identify both the negative and positive consequences. You will be able to use what you learn when you start marketing and promoting your business.

4) Learn From Your Competition

You can learn a lot about your business and customers by looking at how your competitors do business. Here are some questions to help you learn from your competition and focus on your customer:

What do you know about your target market?
What competitors do you have?
How are competitors approaching the market?
What are the competitor’s weaknesses and strengths?
How can you improve upon the competition’s approach?
What are the lifestyles, demographics and psychographics of your ideal customer?

5) Financial Matters

How will you make money? What is your break-even point? How much profit potential does your business have? Take the time to invest in preparing financial projections.

These projections should take into account the collection period for your accounts receivables (outstanding customer accounts) as well as the payment terms for your suppliers. For example, you may pay your bills in 30 days, but have to wait 45-60 days to get paid from your customers.

A cash flow projection will show you how much working capital you will need during those “gaps” in your cash position.

I recommend thinking about these six key areas:

Start up Investment
Assumptions
Running Monthly Overhead
Streamlined Sales Forecast
Cumulative Cash
Break-even

6) Identify Your Marketing Strategy

There are four steps to creating a marketing strategy for your business:

Identify All Target Markets: define WHO is your ideal customer or target market. Most companies experience 80% of their business from 20% of their customers. It makes sense then to direct your time and energy toward those customers who are most important.
Qualify the Best Target Markets: the purpose of this step is to further qualify and determine which customer profile meets the best odds of success. The strategy is to position your business at the same level as the majority of the buyers you are targeting. It is critical to figure out who your best customers are and how to best position your company in the marketplace.
Identify Tools, Strategies and Methods: a market you cannot access is a market you cannot serve. Marketing is the process of finding, communicating and educating your primary market about your products and services. Choose a combination of tools and strategies, that when combined, increase your odds of success.
Test Marketing Strategy and Tools: the assumptions we do not verify are typically the ones that have the potential to create business problems. Take the time to test all business assumptions, especially when you are making major expenditures.

How to Say "No" to an Economic Frankenfuture

2010-08-30T20:29:00.001+02:00

Dear Big Cheeses Who Run the World,

We regret to inform that you’re fired. We’re really, truly sorry about this, but we’re going to have to let you go. It’s time for you to pursue other opportunities.

In case you haven’t noticed (and who can blame you? It’s pretty hard to see it from private jets, mega-yachts, 158th floor boardrooms, and members-only backrooms) times are pretty tough lately, and we’ve got to cut back somewhere. In fact, that we’re beginning to suspect that maybe, just maybe the entire contract between us, you, and tomorrow — the Washington Consensus, yesterday’s blueprint for building economies, communities, and societies — is fatally broken.

Yes, though it did fuel a dismal sort of prosperity, we’d like to aim slightly higher than McGrowth. Because what that seems to have led to, at the end of the day, is a level-five epidemic of austerity. Your solution? Well, it’s all a little too Dr Frankenstein for us, frankly — undead companies, banks, funds, and boards, patched and stitched piecemeal back together, shocked back into life via the electric jolt of yet another bailout, stimulus, or special exemption so they can stagger on into a desolate tomorrow.

Thanks — really — but no thanks. We’d like to pass on your very kind, rather creepy plan for a Frankenfuture. It’s time, instead, for us to take a quantum leap into the 21st century; to, once again, with steadfast determination, unyielding courage, and just a little bit of trembling trepidation, leave the past behind — and furiously pioneer a better tomorrow.

Please don’t worry about us, though — because we’re not worried about you. Gambling away other peoples’ money, glad-handing each other, double-crossing Planet Earth, and driving companies and entire economies into the red — these are highly employable skills, and we’re sure you’ll land on your feet. We’ll be happy to provide a reference spelling out your expertise at being zombie overlords, should you ever need one.

Just in case, though, you’re in need of some totally utopian, rather idealistic, hopelessly naive, laughably unrealistic, stupidly hopeful, colossally constructive, thoroughly impertinent reading material, here’s a little crib sheet we’re leaving behind for you. It’s a brief, crude stab at a new set of design principles that might, just might, be able to spark 21st century economies, communities, and societies, and ignite a more authentic, enduring prosperity.

Call it, if you like, the Generation M* Consensus — the growing consensus of a global movement dedicated to toppling the old order, by doing meaningful stuff that matters the most.
.
The Empty Vessel Rule. Government, Arthur Okun famously argued, is a leaky bucket — one which leaks money at every turn. Yet, though the government may be often a leaky bucket, the corporation is just as often an empty vessel: bereft of any purpose higher than profit. What the private sector offers in terms of efficiency, it subtracts in terms of virtue. So what we really need to do today isn’t merely to privatize what used to be public, or the reverse, nationalization. We need to meld the efficiency of the private sector with the virtues of the public sector — to pioneer the legal, financial, and contractual basis for new corporate forms, like forporations, that balance obligations to shareholders and the many kinds of stakeholders; that exist “for” a higher purpose than mere near-term profit.

Shadow Tax Cuts. Low taxes are the next item on the Washington Consensus’s agenda: nice, but not nearly good enough. Sure, sky-high taxes will kill prosperity dead. So what about the hidden taxes we all pay every second of every day? Consider. The fumes smogging up our skies are a tax. The junkfood lining the bleak exurban shelves is a tax. Most big-box stores are taxes sucking the life, heart, and soul out of town. Wall Street’s “innovations” turned out to be a tax. The hidden charges and unfair fees that constitute most “business models” are the epitome of a tax. Where the Washington Consensus ignores all these very real taxes just a little too conveniently, the M Consensus suggests it’s time to see them, face them, and eliminate them: steep enough shadow taxes will render all growth meaningless and illusory, because value has simply been extracted — not actually created.

The Lessig Principle. How? Here’s one way to counterbalance shadow taxes. Property rights, the next bullet point in the Washington Consensus’s agenda, are essential to growth — and so they’ve got to be enshrined, embraced, and extended. And have they ever been. The original term of copyright was, for example 14 years; today, it’s nearly ten times that: up to 120 years. Given that growth rate, by 2100, the copyright on this blog post will last for approximately 47 billion years. Yet, as Mike Masnick tirelessly points out , building on the work of scholars like Larry Lessig, draconian intellectual property rights regimes stifle innovation, entrepreneurship, and disruption, at the expense of protecting tired, lazy incumbents (here’s an eloquent explanation on why from Lewis Hyde). So where the Washington Consensus argues for a heavy, rigid approach to property rights, the M Consensus pushes for feather-light rights, knowing that the scarcer special privilege is, the more real value everyone’s likely to enjoy.

The Porter Rule. While IP rights, are of course, a form of regulation, the next item on the Washington Consensus’s agenda is deregulation in almost all other respects. A giant oil spill, an even more gigantic financial crisis, and an even more gigantic lost decade all evoke the dangers of a dogmatic devotion to deregulation. The M Consensus, instead, subscribes to Michael Porter’s path-breaking Porter Hypothesis: crudely put, that stricter regulation isn’t what stifles competitiveness — it can be exactly what induces it, by encouraging disruptive innovations to spark and catch fire.

The People Principle. Perhaps the biggest incentive we can give corporations to start getting serious about real innovation again, then, is what might be called humanization. The next item of the Washington Consensus’s moldy agenda is legally protecting the corporation. It’s been taken to an absurd extreme, with the doctrine that corporations must enjoy legal personhood. But (Earth to beancounters) corporations aren’t people — only people are people. The former face few of the obligations citizens do, can’t face the same kinds of punishments, are legally bound to maximize profit in ways that citizens aren’t, and tend to have thousands of times more cash, time, and power, which means they can afford to de facto buy rights almost no person on earth has (like hiring batteries of lawyers to fight cases for decades). Corporations, like hammers, are just tools. And for the same reason we don’t anthropomorphize hammers, nor should we empower corporations with the same rights and powers as people. Where the Washington Consensus humanizes corporations, and dehumanizes people, the M consensus suggests unhumanizing corporations, and rehumanizing people.

The Uninterest Rate. So where the last item in the Washington Consensus’s agenda is interest rates, set by markets, to knock governments, people, and communities into shape, the final item in the M Consensus’s agenda is what I call an uninterest rate: the rate at which income isn’t transformed into outcomes. It’s outcomes that count. Though we got a little bit richer, did we actually realize tangible, enduring benefits that mattered? Or did we just get more insecure, obese, unhappy, and disconnected? If the uninterest rate is high, it means income isn’t translating into outcomes; because our economy’s engines and engineers — corporations, CEOs, investors — are uninterested in making stuff that actually makes us better off; they’re just interested in making a quick buck. The higher the uninterest rate, the more corporations are likely to be knocked into shape — by fed-up people, communities, society, and investors alike. If it’s low, incomes equal better outcomes, and the mere paper wealth we may have earned actually matters in human terms.

The plight of the global economy looks a lot less like a headsplitting hangover and a lot more like what tends to happen to a two-pack-a-day smoker after twenty years. So what I’ve just described is really this: the agenda for the kind of innovation that’s scarce, rare, and valuable today: institutional innovation. That’s the kind of innovation we need to restore economic health. And every day, I see more and more organizations signing off on it, in ways big and small — from Starbucks, to Pepsi, to Timberland, to Wal-Mart, to Nike, to Google, to Tata.

There endeth (for now, anyways) the M Consensus. Truth be told, of course, it’s not really a consensus, at least not yet. It’s just a highly flawed, surely imperfect, quickly written blog post with just a few ideas — no, not a comprehensive set of answers — for what tomorrow’s great consensus could be. So fire away in the comments with your own suggestions, questions, examples, and additions.

*Yes, I’m fully aware I don’t speak for everyone under the age of 25, 35, 45, or 95. Nor am I trying to. There are plenty of exceptions that prove the rule that Millennials put meaning, fulfillment, and purpose first. That said, the “M” in Gen M doesn’t stand for Millennials. It stands for “a movement to do meaningful stuff that matters the most”. It’s not about your age — it’s about your values, your vision, and your calling.

A Flexible Approach to Funding Entrepreneurs

2010-08-30T20:26:00.002+02:00

I spent eight years at eBay learning how businesses can create opportunities for people and benefit society. eBay supports millions of Internet entrepreneurs and $60 billion worth of commerce. But in my time as president of eBay International, I also realized that the firm’s social efforts wouldn’t necessarily reach poor people in less-connected parts of the world, because the expected financial returns in these geographies didn’t warrant expansion on our part.

This was much on my mind when I joined Omidyar Network three years ago to oversee its philanthropic strategy. The bottom line at ON is societal value. We believe in “flexible capital” — that is, we invest financial and human resources in both for-profit and nonprofit ventures. It’s not an either-or decision for us; we believe using both grants and for-profit investments can be powerfully complementary.

Since 2004, Omidyar Network has invested more than $350 million in more than 150 organizations. The range of sectors includes microfinance, consumer Internet and mobile applications, global entrepreneurship, government transparency, and property rights. Some 57% of those dollars have funded grants and 43% for-profit investments.

Philanthropy through grants can benefit society in many ways. Grants can help nonprofits provide public goods — for instance, the technology developed by the Rockefeller Foundation in support of the Green Revolution. They can help subsidize goods and services that produce positive societal outcomes — for instance, vaccines developed as a result of Gates Foundation grants. And they can spur investments in high-risk ventures — for instance, initial development of the microfinance industry.

Meanwhile, investments in for-profit ventures benefit society by leveraging the power of markets. When the primary motive is to generate profits, businesses will strive to deliver value in excess of costs and scale up. And, as Pierre Omidyar experienced first-hand, successful for-profit ventures can create substantial customer value, jobs, and economic activity.

But the combination of both can be quite powerful. Take microfinance’s phenomenal growth. In the 1980s and 1990s, most microfinance institutions were grant-funded NGOs. As microfinance’s impact and commercial viability became apparent, business investors, many with strong social motivations, invested heavily in commercial MFIs, helping them grow rapidly. The percentage of the world’s top 50 MFIs that were for-profit banks increased from 22% to 62% between 1998 and 2008. Grants sparked and nurtured microfinance while for-profit capital helped it scale.

Additionally, the Internet provides numerous examples of the ways for-profit and not-for-profit investments can complement one another. Nonprofit Wikipedia, for example, engages hundreds of millions of individuals in creating educational content, sharing information, and learning online. Meanwhile, the for-profit website ViiKii is a self-described Wikipedia-meets-Hulu platform where volunteers translate video content into a multitude of languages for subsequent viewing on ViiKii or partner sites. The site tears down language and cultural barriers while providing valuable content.

Increasingly, philanthropists and foundations are recognizing the benefits of the flexible approach. However, less than 1% of the capital U.S. foundations disbursed in 2007 (the last year of complete data) supported for-profit ventures. Moreover, only 4% of that 1% was invested in equity — precisely the kind of risk capital than can nurture businesses aimed at creating social good. With hundreds of billions of dollars flowing into philanthropy over the next few decades, the big urgent question will be: How can we best deploy these funds?

The private sector is being increasingly scrutinized for its ability to deliver societal value as well as profits, while the public sector, in this period of increased austerity, will be called upon to find creative ways to deliver more value with less. The flexible-capital approach holds great promise for both, in terms of improving the human condition.

We’d like to hear from the HBR community. How can philanthropists support innovative entrepreneurs — with both financial and human capital — to best help them succeed?

Matt Bannick is managing partner at Omidyar Network. He leads all aspects of the philanthropic investment firm’s strategy and operations.

If You’re the Boss, Start Killing More Good Ideas

2010-08-30T20:25:00.002+02:00

Recently, I posted a list of 12 Things Good Bosses Believe. Now I’m following up by delving into each one of them. This post is about the ninth belief: “Innovation is crucial to every team and organization. So my job is to encourage my people to generate and test all kinds of new ideas. But it is also my job to help them kill off all the bad ideas we generate, and most of the good ideas, too.”

An evidence-based mantra is that, to get a few good ideas, you and your colleagues need to generate a lot of bad ideas. I wrote about this notion in my last post on Forgive and Remember where we saw that, to yield a dozen or so commercially successful ideas for toys, a group at IDEO generated over 4,000 non-starters. It turns out, however, that the best managed enterprises don’t just recognize the flowers among the weeds; they mow down a lot of the flowers, too.

I first started thinking about this five years ago or so after a conversation with a Yahoo! executive participating in the Customer-Focused Innovation program that Huggy Rao and I run at Stanford. Yahoo! had just had Steve Jobs in to address their top 100 or so bosses. Jobs advised them that killing bad ideas isn’t that hard — lots of companies, even bad companies, are good at that. He insisted that what is really hard — and a hallmark of great companies — is killing good ideas. For any single good idea to succeed, it needs a lot of resources, time, and attention, and so only a few ideas can be developed fully. The challenge is to be tough enough to do the pruning so that the survivors have a chance of being implemented properly and reaching their full potential.

Since then it’s also become clear to me that good product and experience design depends on tossing out most good ideas. If too many of them are thrown in, then the result is a terrible and confusing Frankenstein of an offering. (This seems to be many people’s objection to Microsoft Word: It does everything, so therefore is annoying and confusing to use for many single things.)

The implication, then, is that the “innovation funnel” where a lot of ideas are whittled down to a precious few — should contain two major filtering stages: one where you get rid of the bad ideas and then another where you toss the good ideas that aren’t quite good enough to justify a thinner spread of resources, a greater diffusion of focus, and possibly a more complex customer experience.

If you take this argument to its logical conclusion, it means that a great boss — and let’s define that for the moment as a boss whose team delivers innovation — might track these two metrics:

How many good ideas are killed? If this number isn’t high enough, that is a bad sign. It means either that not enough ideas are being generated, or that important hard choices aren’t being made.
How many people are complaining — even leaving — because of good ideas being killed? This really is what makes the pruning so hard. It’s tough on the people who came up with ideas and are emotionally invested in them. Being the direct cause of their complaining, and even departure, is awful — and certainly doesn’t make you feel like a great boss. But if no one is complaining, that’s a worse sign. This kind of frustration is an unfortunate byproduct of an effective innovation process, and if your people don’t have enough pride and confidence to get upset when their innovative ideas are killed, then something is wrong with them — or your culture.

These are weird metrics, but they make sense given Jobs’ argument. His argument also resonates with our experience teaching in the Stanford d.school and my experience working with creative teams in industry: The groups that often do the worst work have too many pet ideas and can’t bring themselves to kill enough of them, so they don’t do a decent job on any of them.

Groups that can’t kill enough ideas often suffer from bad group dynamics, either because multiple members won’t allow the group to kill their pet ideas, or because the group avoids difficult conversations and decisions. As we advise the creative teams we coach at Stanford and elsewhere, we always stress that this “Sophie’s Choice” point in the process will come, and will have to be well managed. The team will have to be prepared to kill ideas it has nurtured and come to love.

To put this in a broader context, although the words “creativity” and “fun” are often used together, there is a lot about doing creative work that is no fun, Failure, confusion, and conflict are par for the course, and, even when you are doing things right, it involves killing good ideas and making people angry. That’s why, as I compiled my set of Good Boss, Bad Boss distinctions, this one made the cut. Enterprises depend on bosses to manage innovation as well as implementation. The very best bosses teach and inspire their people to accept defeat gracefully and move forward to implement the selected ideas, even if none of their pet ideas made the cut.

Robert Sutton is Professor of Management Science and Engineering at Stanford University. He studies and writes about management, innovation, and the nitty-gritty of organizational life. His new book is Good Boss, Bad Boss, from Business Plus.

Quick Tip #25 – Quick Discounting in Etsy

2010-08-30T20:24:00.002+02:00

No weekly inspiration this week because I just came across a wonderful Greasemonkey script for Etsy. Those of you who already use the EtsyHacks know about Greasemonkey, it is a wonderful add-on for the Firefox browser that lets to install scripts that modify how you can use websites (I also use some for gmail, squidoo, and a few other sites).

Today’s useful script is by Etsy seller krtwood and lets you bulk discount all items in your shop by a percentage and adds a quick edit link under the price in your currently listed item list.

Download Quick Price Edit Here

Notes:
1: % is set as that % of original price 50% of $10=$5, 80% of $10=$8. So 10% of $10 would be $1 not $9.
2: To reverse your discount do 10000/% used. So 10000/80=125%

2010-08-25T14:47:00.001+02:00

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Software and Resources for Creating Your Business Plan 1

2010-08-23T14:50:00.003+02:00

Create a better business plan with the following helpful resources and software applications.

Resources

U.S. SBA
The U.S. Small Business Administration provides business plan basics.

Business Plan Tutorial
This multimedia online tutorial from CIT Small Business Lending Corporation explains what should be included in your business plan.

Sample Business Plans
Read some award-winning business plans. You will likely pick up on more than one good idea you can incorporate in your plan.

Software

Planware
Planware offers business planning software tools, some free and some for trial use.

Business Plan Pro
PaloAlto Software offers Business Plan Pro and other related applications that can kick-start the creation of your own business plan.

PlanWrite
Business Resource Software sells PlanWrite software to create business and marketing plans.

BizPlanBuilder
JIAN BizPlanBuilder works with Microsoft Word and Excel (required) to create your business plan. It includes sample business plans, built-in financials, and Web resources.

PlanMagic
PlanMagic offers several business plan creation applications including specialty versions for verticals such as construction, bar, restaurant, bed and breakfast, hotel, and resort.

Venture Planning System Pro
Venture Planning System Pro is an Internet-based service from Advantage Venture Systems that lets you log in and create a business plan on its subscription-based system. A 10-day free trial with restricted capabilities is available.

Business Planner Pro
Planium’s Business Planner Pro lets you create a business plan, including financials, while analyzing feasibility and risks and exploring several scenarios. It requires Excel 2003 and Microsoft Word 2003.

Business Objects
SAP sells the Business Objects line of sophisticated business strategic and financial planning software.

You’ve Finished Your Business Plan -- Now Check It Twice

2010-08-23T14:50:00.000+02:00

You've worked hard to create a document that reflects the planning and projections that make your business great. But before you put your business plan to work -- with potential investors, lenders, and other interested parties -- there are a few more steps to strengthen this crucial document.

Use the following tips to improve your business plan.

Understand Your Tools

Spreadsheet templates can be a useful starting point in developing your own financial projection. Make sure you understand how the template works, including its financial logic. You don’t want to base your financial model on calculated assumptions that aren’t realistic for your business.

Hire an Accountant

If you want to make sure your financial projections make sense, get an accountant to look them over. The review should include both the printout included in your business plan and the software application that created it. Have your financial expert play with the software model, change a few of the figures, and recalculate the results to see if they still hang together.

Hire a Writer

We’re not all blessed with superb writing abilities. If you aren’t confident in your writing skills, consider asking a professional editor with experience in business plans to polish your words. Even professional writers know they need an editor.

Be in Charge

Some consultants offer to take on the complete responsibility for preparing your business plan. This is not the best approach; someone from your business should drive the process. You can use assistance as required but don’t outsource the whole knotty problem to a stranger. Let’s face it, no consultant, no matter how knowledgeable, has the same experience in the trenches running your business as you.

Check the Length

What’s the right length for a business plan? Enough to tell the story but no more. Business plan summaries, touching the highlights, typically run under 10 pages. Full-length business plans can run 100 or more pages. You can prepare both for distribution to different readers.

Develop a Verbal Pitch

Set down in writing the points you should include in a quick verbal outline, your business plan in a minute. Develop a succinct 60-second “elevator speech” of the rationale for your business and the investment required. You never know who you will bump into in your rounds of meetings. It’s good to have a polished pitch you can launch into when you meet a good prospective investor.

Update Regularly

A business plan is not just a document to get you through this year's budget or fund-raising. It's essential that you consider it a living document, one that is updated and reassessed regularly. Since most businesses work on an annual budget cycle, you should update and reassess your business plan annually.

Learn the Lingo Used in Business Planning

2010-08-23T14:49:00.003+02:00

Here are some terms that are good to know the meaning of when creating your business plan.

Business Plan

This document outlines the future goals for your business. The plan should explain the details of the what, why, who, and how of the proposed business opportunity. It should include a financial projection that shows the amount of money required to carry out the plan, the probable sources of the required funds, and the likely financial results if the plan is implemented.

Break-Even Analysis

This calculation shows the amount of sales revenue required to earn zero profit. That amount of sales is also called the break-even point. A higher level of sales will lead to a profit for the business.

Payback Period

This is the amount of time it takes for an investment in the business to be repaid. It’s considered the break-even point of an investment. While the payback period can be quick to calculate, it disregards the time value of money, unlike the return on investment. A shorter payback period represents a better deal for the investor.

Return on Investment

The ROI measures the profitability of the business in relation to the investment of both equity and debt required to earn it. It’s calculated by dividing the annual income of the business by the investment. The higher the ROI the better.

Marketing Plan

This document outlines the future sales objectives for the business and the actions proposed to achieve those goals. The plan should explain the details of the how, where, and to whom a business will sell its products or services. The marketing plan may be a stand-alone document. However, the marketing plan or a summary of it is often incorporated into a business plan.

Business Model

The business model explains how the business will generate revenue and shows the expenditures required to earn that revenue. It should show how the business is capable of earning a return on the investment of the owners. In a nutshell, the business model should demonstrate the economic viability of the business. An explanation of the business model should be incorporated into a business plan.

Financial Projection

Typically the financial projection will show the likely future financial results of the business. A projection will usually cover the next five years. The first year or two will show results on a month-by-month basis, while later years show only annual estimates. At a bare minimum, the financial projection will show details of future cash flow. An integrated financial projection will also show future income and expenses and balance sheets.

Template

A template is a model document or form that includes standard section headings, text, and calculation formulae along with blank sections that must be completed. Use of a template can save time and ensure that all the required information is included in the completed document.

Forms of Business Ownership

2010-08-23T14:49:00.000+02:00

From the Small Business Administration

One of the first decisions that you will have to make as a business owner is how the company should be structured. This decision will have long-term implications, so consult with an accountant and attorney to help you select the form of ownership that is right for you. In making a choice, you will want to take into account the following:

Your vision regarding the size and nature of your business.
The level of control you wish to have.
The level of "structure" you are willing to deal with.
The business's vulnerability to lawsuits.
Tax implications of the different ownership structures.
Expected profit (or loss) of the business.
Whether or not you need to re-invest earnings into the business.
Your need for access to cash out of the business for yourself.

SOLE PROPRIETORSHIPS

The vast majority of small business start out as sole proprietorships. These firms are owned by one person, usually the individual who has day-to-day responsibility for running the business. Sole proprietors own all the assets of the business and the profits generated by it. They also assume complete responsibility for any of its liabilities or debts. In the eyes of the law and the public, you are one in the same with the business.

Advantages of a Sole Proprietorship

Easiest and least expensive form of ownership to organize.
Sole proprietors are in complete control, and within the parameters of the law, may make decisions as they see fit.
Sole proprietors receive all income generated by the business to keep or reinvest.
Profits from the business flow-through directly to the owner's personal tax return.
The business is easy to dissolve, if desired.

Disadvantages of a Sole Proprietorship

Sole proprietors have unlimited liability and are legally responsible for all debts against the business. Their business and personal assets are at risk.

May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans.
May have a hard time attracting high-caliber employees, or those that are motivated by the opportunity to own a part of the business.
Some employee benefits such as owner's medical insurance premiums are not directly deductible from business income (only partially deductible as an adjustment to income).

Federal Tax Forms for Sole Proprietorship (only a partial list and some may not apply)

Form 1040: Individual Income Tax Return
Schedule C: Profit or Loss from Business (or Schedule C-EZ)
Schedule SE: Self-Employment Tax
Form 1040-ES: Estimated Tax for Individuals
Form 4562: Depreciation and Amortization
Form 8829: Expenses for Business Use of your Home
Employment Tax Forms

PARTNERSHIPS

In a Partnership, two or more people share ownership of a single business. Like proprietorships, the law does not distinguish between the business and its owners. The Partners should have a legal agreement that sets forth how decisions will be made, profits will be shared, disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out, or what steps will be taken to dissolve the partnership when needed;Yes, its hard to think about a "break-up" when the business is just getting started, but many partnerships split up at crisis times and unless there is a defined process, there will be even greater problems. They also must decide up front how much time and capital each will contribute, etc.

Advantages of a Partnership

Partnerships are relatively easy to establish; however time should be invested in developing the partnership agreement.
With more than one owner, the ability to raise funds may be increased.
The profits from the business flow directly through to the partners' personal tax returns.
Prospective employees may be attracted to the business if given the incentive to become a partner.
The business usually will benefit from partners who have complementary skills.

Disadvantages of a Partnership

Partners are jointly and individually liable for the actions of the other partners.
Profits must be shared with others.
Since decisions are shared, disagreements can occur.
Some employee benefits are not deductible from business income on tax returns.
The partnership may have a limited life; it may end upon the withdrawal or death of a partner.

Types of Partnerships that should be considered:

General Partnership

Partners divide responsibility for management and liability, as well as the shares of profit or loss according to their internal agreement. Equal shares are assumed unless there is a written agreement that states differently.

Limited Partnership and Partnership with Limited Liability

"Limited" means that most of the partners have limited liability (to the extent of their investment) as well as limited input regarding management decisions, which generally encourages investors for short term projects, or for investing in capital assets. This form of ownership is not often used for operating retail or service businesses. Forming a limited partnership is more complex and formal than that of a general partnership.

Joint Venture

Acts like a general partnership, but is clearly for a limited period of time or a single project. If the partners in a joint venture repeat the activity, they will be recognized as an ongoing partnership and will have to file as such, and distribute accumulated partnership assets upon dissolution of the entity.

Federal Tax Forms for Partnerships (only a partial list and some may not apply)

Form 1065: Partnership Return of Income
Form 1065 K-1: Partner's Share of Income, Credit, Deductions
Form 4562: Depreciation
Form 1040: Individual Income Tax Return
Schedule E: Supplemental Income and Loss
Schedule SE: Self-Employment Tax
Form 1040-ES: Estimated Tax for Individuals
Employment Tax Forms

CORPORATIONS

A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.

Advantages of a Corporation

Shareholders have limited liability for the corporation's debts or judgments against the corporations.
Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
Corporations can raise additional funds through the sale of stock.
A corporation may deduct the cost of benefits it provides to officers and employees.
Can elect S corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.

Disadvantages of a Corporation

The process of incorporation requires more time and money than other forms of organization.
Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible form business income, thus this income can be taxed twice.

Federal Tax Forms for Regular or "C" Corporations (only a partial list and some may not apply)

Form 1120 or 1120-A: Corporation Income Tax Return
Form 1120-W Estimated Tax for Corporation
Form 8109-B Deposit Coupon

Subchapter S Corporations

A tax election only; this election enables the shareholder to treat the earnings and profits as distributions, and have them pass thru directly to their personal tax return. The catch here is that the shareholder, if working for the company, and if there is a profit, must pay herself wages, and it must meet standards of "reasonable compensation". This can vary by geographical region as well as occupation, but the basic rule is to pay yourself what you would have to pay someone to do your job, as long as there is enough profit. If you do not do this, the IRS can reclassify all of the earnings and profit as wages, and you will be liable for all of the payroll taxes on the total amount.

Federal Tax Forms for Subchapter S Corporations (only a partial list and some may not apply)

Form 1120S: Income Tax Return for S Corporation
1120S K-1: Shareholder's Share of Income, Credit, Deductions
Form 4625 Depreciation
Employment Tax Forms
Form 1040: Individual Income Tax Return
Schedule E: Supplemental Income and Loss
Schedule SE: Self-Employment Tax
Form 1040-ES: Estimated Tax for Individuals
Other forms as needed for capital gains, sale of assets, alternative minimum tax, etc.

LIMITED LIABILITY COMPANY (LLC)

The LLC is a relatively new type of hybrid business structure that is now permissible in most states. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. Formation is more complex and formal than that of a general partnership.

The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration. LLC's must not have more than two of the four characteristics that define corporations: Limited liability to the extent of assets; continuity of life; centralization of management; and free transferability of ownership interests.

Federal Tax Forms for LLC

Taxed as partnership in most cases; corporation forms must be used if there are more than 2 of the 4 corporate characteristics, as described above.

In summary, deciding the form of ownership that best suits your business venture should be given careful consideration. Use your key advisors to assist you in the process.

(from Small Business Success, a workshop series sponsored by the Ohio Women's Business Resource Network.)

How Much Working Capital Does a Startup Really Need?

2010-08-23T14:44:00.005+02:00

Careful working-capital calculations to start a business are particularly important during an economic downturn. Follow these steps to make sure you have enough money to stay in business.

Learn About Your Industry

From the beginning, you need to know two things: how much a business in your industry typically spends to open its doors, and how long it will likely take the business to become profitable. To find these facts, seek out statistics for your industry. If you're opening a restaurant, for instance, call your state's restaurant association, which may have data it can share. State or federal government agencies or your local Small Business Administration office may also be good sources of statistics on business startups.

Network, Network, Network

There's only one place to get the real lowdown on business costs: from other business owners. Join local industry associations and befriend business owners of similar business types. Try to get answers to questions such as what costs took them by surprise when they first opened? What were their biggest costs? How did they keep costs down in those early months? How long did it take to break even? What were the most cost-effective ways of marketing the business? How many employees are needed, and what's the going pay rate?

Don't forget to ask about revenue as well. You need to know how much money the business will likely bring in during those early months. If local business owners in your sector view you as competition and clam up, try chatting up an owner of a business that's similar to yours but located in another town.

Determine Expenses

If business owners won't give you details about their own businesses, ask if they are willing to give you a blank financial statement, with all the numbers removed. This will at least show you all the expense categories you need to think about.

New business owners are often ignorant of the full range of expenses they’ll have, such as the cost of workers’ compensation insurance, unemployment payments, required state license fees, business taxes, and association dues. Having the blank statement will help prevent surprise costs that aren't in your working-capital budget.

Talk to Experts

Business owners provide excellent firsthand knowledge of working-capital needs, but good business consultants, accountants, and attorneys offer broad expertise you won’t find elsewhere. As your business grows, these advisors will become increasingly important; so if you can connect with a few strong advisors early on, all the better.

Consider the Recession Factor

If the economy is slow in your market, you'll likely want to plan on additional working-capital reserves beyond what experts and business owners tell you that you need. If other owners started in boom times, remember that your situation is different.

Find the Money

One thing to remember about working capital is you don't have to have it all in cash, all at once. Once you've come up with your working-capital estimate, just make sure you will have access to the cash you need as you get your business off the ground. If you can open a bank line of credit, you'll have money you can tap as you need it.

Besides banks, consider other possible sources of capital, such as family and friends, vendors, angel investors, and venture capital firms, depending on the nature and scope of your business. One increasingly popular option is peer-to-peer online lending sites such as Prosper.com and Zopa.com, where individual citizens lend money directly to business owners.

Business reporter Carol Tice contributes to several national and regional business publications.

Getting the Most Out of Your Trusted Business Advisors

2010-08-23T14:44:00.002+02:00

It is nearly impossible for a single business owner to know everything there is to know about running a business. To help stay current, successful business owners need a group of trusted business advisors they can call on from time to time to help keep their business running efficiently and generating the most profits possible.

Most business owners consider their core business advisors to be their corporate attorney, accountant, insurance agent, and business finance advisor. Depending on the type of business and number of employees, they may also have an intellectual property attorney, a human resources and regulatory issues management company, and advisors who provide other specific assistance.

Human resources and employee regulatory compliance, for example, has more than 100 rules, regulations, and laws an employer must comply with concerning treatment of employees. These rules and regulations are constantly changing, so having advisors to handle these responsibilities allows the business owner to manage the businesses while maximizing profits and minimizing risk.

Here are a few considerations when picking your trusted advisors and deciding how to use them best:

Corporate attorney: If your business is set up as anything other than a sole proprietorship, certain records and books must be maintained. If your company has more than a couple of shareholders, maintaining good corporate governance becomes even more important. You can keep many state-required corporate records, but having your corporate attorney review them annually is a good idea. He or she can also prepare buy/sell agreements and assist you with general contracts and minor litigation. The most important consideration is that your counsel gives you strong practical legal advice so you can make good decisions.
Accountant: Today with QuickBooks and other computerized accounting programs, many successful businesses do not rely on their accountant for daily bookkeeping. Accountants now bring the highest value to a company when they help establish the company chart of accounts and do an annual year-end compilation of the books. From the annual compilation they produce a tax return and necessary shareholder forms that become a part of the owner’s tax return. Often businesses ask their accountants to prepare IRS 1099s and W-2 forms to be sent to contractors and employees. Many small business owners also ask their accountant to prepare their quarterly IRS 940 reports and compute the appropriate taxes. During the year business owners may call on their accountants for advice as necessary to minimize taxes and maintain their good standing with the IRS.
Insurance agent: Many business owners don’t realize how much money a good property and casualty insurance agent can save them. This is particularly true if a company’s workers’ compensation premiums are high. The type of insurance a business must maintain varies by business but can include workers’ compensation, general liability, completed products liability, fire, and commercial auto. It doesn’t take long for the cost of various types of insurance to add up, so finding a qualified insurance agent who writes many types of business policies is valuable.
Business finance advisor: With the availability of business credit becoming harder to obtain and the number of financing options increasing, it is often worthwhile to have a coach who can help you find the best financing options and loan structuring for your business. Occasionally your accountant can fill this role, but with finance options and costs frequently changing in the market, it is worthwhile to have a relationship with someone who can help you keep good external financing options available and affordable.

Successful business owners develop their own style for how to use their trusted advisors and over time develop a strong synergy allowing them to do what they do best, which is manage their business while maximizing profits and minimizing risk.

Sam Thacker is a partner in Austin, Texas-based Business Finance Solutions.

Ten Things to Consider When Reviewing Your Business Plan

2010-08-23T14:43:00.005+02:00

Once you have completed your business plan, it's time to review your work. Remember, writing your business plan is a significant step in making your small business concept a reality. Therefore, you should review your plan carefully and ask others who you feel can provide sound advice to also critique your document.

Your business plan should include:

All key sections: Executive summary, business overview, sales and marketing, management team, competitive analysis, and financial plan.
A table of contents.
All key points explained clearly.
Concise language, eliminating any extraneous material, hype, or repetitive statements.
Substantiated facts, such as current and accurate data and verifiable claims.
A clearly defined target market and realistic goals to reach this audience.
A clear competitive analysis presented in a manner to show how you will gain a competitive edge.
Financial projections that are neither overestimated nor underestimated in a time frame suitable for launching the business. Be conservative with your estimates.
Visible contact information on a cover page and at the end of the document.
Content that has been thoroughly proofread and checked carefully for spelling and grammar.

Remember, a business plan is typically designed to attract investors and also to provide a blueprint for your business. It should illustrate the goals, objectives, strategies, and means of operations for your business. You should, therefore, present the information in a professional manner. Neatness and attention to detail indicate that you are serious about this business endeavor.

If the business plan is for your own purposes only, such as to guide you as an entrepreneur, review the plan as though you were reading it six months into the life of your business. Does it present a full quantifiable picture of the business at a given time? If you can see exactly where the business is at a designated time, you will be able to monitor your progress and make changes accordingly

Make Your Business Plan Customer-Centric

2010-08-23T14:43:00.002+02:00

There's a trend in business today for companies to become more customer-centric. Companies are focusing not only on their products and services, but also on their customers. Your company's objectives should highlight the quality of your product and the support of your customers.

Customer focus goes hand-in-hand with customer loyalty. More than customer satisfaction, customer loyalty extends to all customers in your business, from those who supply to those who buy. It includes your first customer too — your employee.

Customer-centricity also plays a role in defining and guiding the customer's experience. Walt Disney was the master of controlling a customer's experience. Disney's theme parks today control what visitors see, what they smell, when those sights and smells hit them, the emotions they feel, and much more. Every tiny detail is attended to by park employees. Disney is now the yardstick against which other companies' performances are measured. There's even a term for what Disney does and others try to emulate. It is called imagineering, the engineering of our imagination and thoughts.

So, what exactly is a customer-centric company? It is one that recognizes the only way to add lasting value to the company is to value the customer. Nothing is as crucial to the success of your business as the values of your customer, since they are fundamental to your survival and success.

Customer-focused leaders Don Peppers and Martha Rogers, Ph.D. offer the following seven guiding principles of successful customer-based firms:

Focus extensively on delivering value to customers.
Forgo short-term results and look instead at long-term business value.
Include senior level buy-in in your customer-based program.
Share your customer-focused initiatives with employees, partners, and customers alike.
Recognize that traditional measurement tools may not adequately track your customer values, such as emotions and loyalty.
Incorporate employee (and contractor) training as part of the customer-centric movement.
Identify internal stakeholders (owners, employees, partners, suppliers) and work to build support within this group.

As you write your business plan, consider how you may be able to work one, two, or even all seven of these habits into your daily work. Remember that your business plan is an evolving document. You can add these customer-centric initiatives incrementally to your plan and business.

This may sound a bit intimidating at this point in your business evolution. Entrepreneurs in the startup phase spend much of their waking moments focusing on their business concepts. However, it is important to focus on those individuals — the customers — who will make or break the business. Keep them in sight, if only on the periphery.

Take a moment and consider companies with whom you like to do business:

Why do you like doing business with this company?
Why do you return to it?
How many other potential customers have you told about your positive experiences with this company?
What part of this company's business operation can you emulate and use in your own business model?
Are you loyal to this company? Why?
As a customer, do you feel like an important part of the company's success?

There are many things to think about when planning a small business. While focusing on financing, business structure, and marketing, don't lose sight of the most important component: your customers. Without them, you have no business.

For more information on making and keeping happy customers, read Ten Suggestions to Build Customer Loyalty and Ten Rules for Great Customer Service

Startups: What Business Permits and Licenses Do You Need?

2010-08-23T14:42:00.003+02:00

Business permits and licenses represent another set of legal regulatory requirements. These must be obtained before you are able to officially open your doors and operate your business legally. State and local permits and licenses apply equally to proprietorships, partnerships, and corporations. In some instances federal permit requirements may also apply.

The most common license is the general business license. It’s for the privilege of operating in your jurisdiction. There are also special licenses that may apply, depending on the type of business you plan to start.

Here are some questions to ask yourself to help identify these requirements:

Where Am I Conducting My Business? Zoning ordinances are designed to protect land use and the character of neighborhoods. They are regulated on the local, municipal level. When deciding on the physical location for your business, you’ll want to make sure that your intended business use is allowed by the local ordinance. The same holds true for any rented commercial space you plan to lease.

Even if you contemplate working from home and your startup relies exclusively on Internet traffic, not foot traffic, you’ll still want to check with your local zoning or planning office. Many will require a permit. Some, for example, call it a Home Occupation Permit, and you’ll need to secure it before you can obtain a general business license. It’s not a complex form. Its purpose is to help the local authorities evaluate how your new venture will impact the neighborhood. Will it increase foot traffic? Car or truck traffic? How about parking problems or noise problems?
How Am I Conducting My Business? If, for example, you’re contemplating starting a manufacturing company, you may need to investigate federal and state discharge permit requirements if your enterprise discharges anything into the air, water, or ground. There may also be permit requirements for the proper disposal of hazardous waste.
Who Is Conducting My Business? Some businesses, by their very nature, require licensed professionals such as plumbers, electricians, beauticians, lawyers, accountants, and general building contractors. If an employee doesn’t have the right credentials, the employer can be held responsible.
What Is the Nature of My Business? Some businesses require special licenses to operate. If, for example, you’re planning to open a restaurant with a bar, you’ll need a liquor license. Your state and local government can help you identify what special licenses may apply to your business.

The foregoing is not an exhaustive list of business licenses or permits. It’s only a sampling to help you identify a big potential startup trap. Operating without a required license or permit can expose your business to fines and penalties. In some cases, those fines can be levied for each day you remain out of compliance. It adds up fast.

To find out what business licenses and permits apply to your specific business venture, contact the Secretary of State office of your state and your local municipality for information and advice. Tell them what you plan to do and they will gladly point you in the right direction, provide you with lots of useful contact information and checklists. You might also want to ask what permits or licenses need to be obtained first and what applications can be submitted simultaneously. It will save you time.

Unfortunately, there is no one-stop license and permit office because the requirements relevant to your specific business will probably rest with more than one office. As a result, securing all the necessary paperwork can be a tedious process. It will require multiple follow-up calls. Expect delays.

If you don’t have time for an administrative paper chase, or prefer the peace of mind of having a professional do it, you can always hire a lawyer with experience in these matters. Certain licensing services may also be available through business services such as LegalZoom.com, Incorporate.com, and Bizfilings.com.

Starting Up: How Much Money Do I Need?

2010-08-23T14:42:00.000+02:00

From smSmallBiz

IN 2001, WHEN Wade Tinney co-founded Large Animal Games, a New York online game developer, he and his partner Josh Welber had a woeful understanding of start-up costs. "We went into it pretty blindly," says Tinney of the business the two partners launched toward the end of the dot-com boom. Faced with a number of upfront expenses but knowing little about how much it all cost, Tinney says "we lived off credit cards and a bit of savings" and wound up about $15,000 in debt.

"We just knew that we wanted to make a living by creating games, and we knew there was a demand for that type of content," says Tinney. But that wasn't enough, he admits. While the venture is now thriving, "if I were starting a new business today, I would certainly do things differently."

It's well known that small businesses rarely make it past the two-year mark and even fewer survive more than four years. The lack of staying power, according to the U.S. Small Business Administration, is due in large part to businesses running out of money before they reach sustained profitability.

That's because starting and running a business, even for those lucky enough to be flush with cash, is often riddled with obstacles and unforeseen money drains. These not-at-all-pleasant surprises can quickly wipe out both business and personal savings, as well as cut into secondary priorities such as marketing and training employees. In short, not planning can leave you with a mountain of debt, or worse, bankrupt.

To insure against an untimely demise, figure out what you'll need and how much it's going to cost before you open your doors. Here's how to assess your business's start-up costs:

About Start-Up Costs

Start-up costs, which are essentially the expenses incurred getting a business off the ground, vary widely depending on what type of business or industry you're in. For example, says Joseph Anthony, a small-business tax professional in Portland, Ore., a service-based business may have to hire and train a large staff while a product-based business may need to spend a substantial sum on patents and trademarks.

Start-up costs are generally broken down into two categories: "pre-opening expenses," such as marketing, advertising and administrative costs, and "organizational expenses," like legal and accounting fees.

What Do You Need?

To figure out what to buy and how much to pay for it, look at what others in your industry are doing, suggests Anthony. Your direct competitors might want to keep mum, so "contact someone who does the business you do but in another market," he says. If your aspirations are high, consider checking out the balance sheet of a publicly traded company in your industry. An accountant well-versed in businesses like yours can be a good cost reference; so can trade publications and industry groups. The SBA offers counseling and assistance through a number of programs .

Calculate Costs

From smSmallBiz

About Start-Up Costs

What Do You Need?

Calculate Costs

Once you've determined what products or services to buy, figure out whether you can afford it. Many entrepreneurs scrape together enough money to launch a business using a combination of personal savings, credit cards and contributions from friends or family. Try this start-up calculator to see if you've got enough cash to set up shop.

Going forward, you'll also need to come up with a pricing plan for the products or services you sell to customers. Not sure? Check out how much the competition charges, suggests Ross Marino, a financial planner at Raymond James in Wilmington, N.C. Then, do the math. You may be forced to cut corners or push off some purchases to be competitive. Once your prices are set, estimate how much you can expect to bring in as income, which will help you develop an operating budget, Marino says.

Build a Cushion

Most entrepreneurs run into problems by overestimating initial sales and underestimating expenses. Rusty Cagle, a financial planner in Greenville, S.C., warns entrepreneurs not to overlook the importance of setting aside enough operating capital as they're considering start-up costs. He suggests providing a cash-cushion or establishing lines of credit to help keep your business afloat for three to six months in case profits don't come readily or if outside economic shocks take their toll. Even in down times, "you have to pay vendors and you still have to pay employees," Cagle says.

Create a Budget

In the beginning, says Marino, it's less about showing off and more about "what'll it take to keep the doors open." He adds that "you'll [also] need to be able to invest back into the business." In your budget, separate costs that recur monthly, such as rent and wages, from one-time upfront costs, such as permits or the fee for creating a limited liability company. Also, be aware that some expenses — for instance, the price of raw materials — may be subject to price fluctuations. He suggests padding your budget by 10% to 20%. "There will be extra expenses that you didn't anticipate," says Marino. Plus, he adds, when problems arise and you need to take time to deal with them, you'll need to compensate for that time you're not producing.

Be sure to also include one-time expenditures such as continuing education courses or attendance at an important industry conference. "People are pretty good about meeting monthly expenses," says Elizabeth Potts Weinstein, a financial planner and small business attorney in San Jose, Calif. "But then a big once-a-year payment hits, and those are the expenses that will put people under water." Once you have a budget in place, she suggests revisiting it once a month. See if your estimates were on point and, if not, revise as needed.

Take Advantage of Tax Breaks

Uncle Sam provides a few tax benefits to offset the risk that newbie entrepreneurs take on. New businesses may elect to deduct up to $5,000 of start-up costs (defined by the IRS as expenses related to investigating or setting up a new business, such as a marketing analysis or advertisements for a grand opening) and $5,000 of organizational costs (more strictly, the direct cost of creating a corporation) in the first year of doing business. The deductions are reduced when start-up costs start to exceed $50,000, and disappear entirely when costs rise above $55,000. (Note: Sole proprietors receive no deduction for organizational expenses.)

Thomas R. Pope, an accounting professor at the University of Kentucky in Lexington, Ky., offers this example: If a business owner spent $32,000 on both start-up and organizational expenses, he or she could deduct up to $10,000. The amount remaining could then be amortized over a 15-year period. For more on this, see the Internal Revenue Service's Publication 535.

"Starting Up," a weekly column written by Diana Ransom for smSmallBiz.com, follows entrepreneurs through the early stages of launching a business. Write to her at dransom@smartmoney.com

SmartMoney.com provides news, information, and tools for business professionals and growing businesses. All content provided by SmartMoney is © 2008 SmartMoney®, a Dow Jones & Company, Inc. and Hearst SM Partnership.

Where to Incorporate

2010-08-23T14:40:00.002+02:00

How do you decide where to incorporate? Well, as a practical matter, most businesses will incorporate in their home state, the place where they do most of their business, where they’re headquartered, or domiciled. This is especially true for small businesses that have a more local or regional focus. The choice is driven largely by convenience.

What about incorporating in a state that’s not your home state? Many large publicly traded corporations are particularly fond of Delaware as a place of incorporation, and you might be wondering whether you should be too. In their eyes, Delaware represents a business friendly climate that includes a relatively low cost of incorporation, and a mature body of corporate law that comes in handy if you expect to be sued or anticipate corporate governance issues, among other things.

As a small business you too can certainly take advantage of Delaware’s business-friendly climate. But if you do that, and are merely using Delaware as your home away from home, you still have to register to do business in your home state as a “foreign corporation.” In this context “foreign” does not necessarily mean international. Any corporation that’s incorporated in a state other than the one where they want to operate is defined as a foreign corporation.

For many small businesses, the time and expense necessary to make the additional filing outweighs the “benefit,” particularly since more states are adopting business-friendly laws of their own. On the other hand, if your future plans include going public, or you’re teeing up your business as a future buy-out target so you can buy an island and retire in the sun, it may be a different story. Consult your attorney.

Even if you don’t have a glamorous exit strategy, it’s smart to keep the “doing business as a foreign corporation” concept on your radar screen, because as your business grows and becomes more successful, you may find your activities spilling across state lines and trigger a filing requirement. The expansion could be a new franchise location, for example, or a regional sales office located closer to your expanding customer base.

Whenever you “do business” in another state, you’ll want to consult that state’s “doing business” regulations because each state has a slightly different definition of what constitutes “doing business.” Some require a high degree of business presence and activity. Other states have a lower threshold. It pays to check.

While deciding where to incorporate is a major step in the incorporation process, it is not an irreversible step. You can always change your state of incorporation the same way you can change your form of business organization. If you do find yourself wanting to make such a change at a later date, it is highly recommended that you consult with an accountant and an attorney who is experienced in such matters. That way you can avoid unnecessary tax consequences and complications. You’ll want to be sure that all of the appropriate legal steps are taken for a smooth and seamless transition.

Set Up Your Business Structure: Do It Yourself

2010-08-23T14:39:00.005+02:00

Starting a business can change your financial status. There are tax implications and legal implications. One frequently asked question when starting a business is whether you can incorporate the business yourself or whether you need a lawyer. As a general rule, unless you have experience in the legal aspects of business startups, it’s wise to consult with both an accountant and a lawyer.

A licensed professional can help you evaluate which corporate form of business is right for your new venture. They will review your tax situation with you and help you synchronize your short-term and long-term business objectives in a way that lets you maximize the benefit of business ownership.

Nonetheless, some folks prefer to move forward without the benefit of counsel. They may not have the resources available to hire counsel, or they simply prefer to assume the risk on their own. If you happen to be one of those people, you’re in luck because there are some resources you can take advantage of to make your job easier.

The first thing you’ll need to do is determine what state filing requirements there may be for the specific corporate form you wish to adopt. Check with the Office of Secretary of State in the state where you wish to incorporate. They’ll be happy to direct you to online resources and/or send you a package of materials, including a checklist of what’s required. The second thing you’ll need to do is figuring out what local filing requirements there may be for your corporation because even though the state filings create the corporation, you haven’t met all of the legal requirements until the local license and permit requirements have been satisfied.

There are also online service companies that, for a fee, will handle the state level filing requirements associated with operating under your fictitious (“Doing Business As”) name as well as help form limited liability companies, S corporations, C corporations, and partnerships. Examples of such companies include: LegalZoom.com, BizFilings.com, and Incorporate.com. They each have several packages to choose from.

Compare the offerings carefully. Some will even help obtain your Employer Identification Number (EIN) from the Internal Revenue Service for a small fee. An EIN is to a business what your social security number is to you. It’s a federal tax identification number. Applying for the number can be done online in a matter of minutes for free. You can find everything you need by going directly to the IRS Web site.

Setting up your business properly helps avoid penalties or fines. It can also avoid the liability exposure of your personal assets. Don’t be afraid to ask questions when gathering information from government offices. Remember, these offices are here to

help you. They want you to be successful because it makes their job easier. If you fully disclose your plans, they will help you find the right information. Withholding material information can backfire. You don’t, for example, want to find yourself trying to claim business losses on your tax return and the government saying, “Business, what business?”

Ultimately, the decision of whether you go it alone and follow the ten steps to forming a corporation, purchase a package from a service company, or independently hire a lawyer, is a trade off between time, money, and peace of mind. A new entrepreneur wears many hats. What hats you keep and what hats you successfully outsource are up to you.

Setting Up Your Business Structure: Hire Someone

2010-08-23T14:39:00.002+02:00

It’s smart to hire a licensed professional to help you evaluate which form of business organization is right for your new venture. They will review your tax situation and help you synchronize your short-term and long-term business objectives in a way that lets you maximize the benefit of business ownership. They can also ensure that your business will be in compliance with the necessary legal requirements at each stage of the startup process.

Even if you prefer to handle as much of the paperwork yourself as possible (see Do It Yourself), spending an hour with a lawyer is a wise investment. They can explain the process and together you can decide what steps you're most confident in handling yourself. If nothing else, it's a good reality check.

The “right lawyer” is someone you can speak to comfortably, someone who specializes in business law and has experience with business start-ups. They are also someone who is licensed to practice law in the jurisdiction where you wish to start your business.

A lawyer is a state licensed professional who is required to meet specific requirements before being granted the privilege to practice law. As a result, a lawyer from one state is not automatically allowed to practice in another. If you don’t already have recommendations for a local business lawyer from friends, family, or colleagues; you can always contact your state or local bar association for a referral.

There are lots of good lawyers to choose from. One common mistake people make is to assume any lawyer can handle any legal matter. That’s a dangerous assumption because lawyers specialize in specific areas of the law. It will save you time and money to work with someone who has done lots of business startups instead of a lawyer who last set eyes on the subject in law school.

Once you’ve identified a few good candidates, go interview them. But before you do, let them know you’re interviewing multiple lawyers and find out if an initial consultation is free, because if they’re under the impression that an attorney-client relationship has been established and start giving you legal advice you might find yourself on the receiving end of an invoice. Avoid that predictable surprise by managing expectations well before you get down to business. Remember, your purpose is to determine whether there is good fit between you and the lawyer on a business and professional level, not get free legal advice. Be fair.

Once you have the consultation issue squared away, you need to determine whether the lawyer you’re interviewing is a good listener. Are they interested in what you have to say? Do they understand your business? Can they help you and can they explain their services in plain English, without being intimidating? What’s your comfort level? Ask for client recommendations then call those people and ask about their experience with the lawyer. Does the lawyer return phone calls promptly?

Even though the startup process is usually a one-time transaction, keep in mind that you may want to call on a lawyer for other business needs. You may, for example, need an office, warehouse, or retail lease reviewed. Similarly, you may need help setting up your standard terms and conditions of sale, or purchase, or perhaps a confidentiality agreement. The only way you can judge chemistry and determine whether there’s potential for a long-term business relationship is to meet the lawyer in person.

While you’re there, you’ll also want to discuss their billing arrangements and billing rates. Some matters will be billed on a time and material basis, others as a flat fee. Find out who else will be working on your project and who you’ll be able to talk to when you have a question.

Finding the right lawyer may take some time and effort; but it’s a worthwhile investment. Having someone you trust and can call on to discuss the legal aspects of your growing business is a valuable asset.

The Importance of a Partnership Agreement Among Business Co-Owners

2010-08-23T14:38:00.003+02:00

It’s common for owners of a growing business to be neck-deep in the work of maintaining the company. As the business grows, so do the tasks, and more often than not the company’s owners continue a “nose to the grindstone” mentality. They don’t take the time to define what it is they actually should be doing, continuing instead to do and fix everything themselves.

This has been true for John Sanders, Roy Morgan, and Gary Gentry, the three owners of Premier Christian Cruises. They have been so busy running the company that they have not defined their prospective leadership roles. This, in turn, has created inefficiencies in the business that could prevent the company from continuing its successful growth.

“I’ve found close to 75 percent of businesses that are partnerships don’t have a written partnership agreement and they don’t have the hard conversation to discuss when things aren’t working,” says David Finkel, a consultant who is advising the owners of Premier Christian Cruises on key strategies to grow their business. “Sixty-plus percent haven’t had consistent dialogue at least twice a year about the direction of the company and prioritizing roles in the business. Premier hasn’t had this discussion in at least 12 months, which can be deadly for a company that wants to scale and grow.”

The first step toward clarifying the roles of the business owners, according to Finkel, is to create a partnership agreement. The partnership agreement is a legally binding document that defines ownership of the company and protects each owner from anything that could happen to the partnership. In the case of Premier Christian Cruises, the agreement is doubly critical in that it must help define the exit strategy for each owner, since they’re at a different life stages. With Sanders at 37 years old, Morgan in his 50s, and Gentry in his 60s, it’s important for partners to define what each owner desires from the company in the present and future. For instance, Sanders, being the youngest, is motivated more toward continuing to build the company in the long term, while Gary is more interested in leaving a legacy of giving through the Premier Foundation, the charitable organization of Premier.

A lack of communication and clearly defined roles in the company has at times pulled the three owners of Premier Christian Cruises in multiple directions and prevented the company from growing as much as the owners would like, admits co-owner John Sanders. When it comes to booking entertainment and planning the company’s themed cruises, the owners frequently wind up communicating with employees through multiple, overlapping e-mail exchanges – an inefficiency that could be eliminated with more clarity among the owners about who handles specific parts of the business.

With a partnership agreement in place, a business can build such additional key documents as an operating agreement. An operating agreement further details the duties that each executive will carry out – and with that, everyone knows exactly which part of the business they should focus on.

“If you don’t have a clearly defined organization chart of who covers what, the operations department doesn’t know where to go to, since as an owner you haven’t directed them,” Sanders said. “We need to make sure our operating agreement is where it needs to be. Part of that is first creating an organizational chart that covers our roles.”

To create an operating agreement, Finkel advises first mapping out an organizational chart. At Premier Christian Cruises, such functions as cruise ship charters and artist booking have been performed by the owners in the past, but these functions have not been set as the responsibility of one specific owner or employee. Another duty that needs clear assignment through an organizational chart will be the negotiation of cruise ship charters. In addition to assigning responsibilities on the chart, Finkel recommends also creating a clear set of metrics to measure the performance of each person in charge of each newly assigned area.

In the process of developing an operating agreement, owners can identify the strengths and weaknesses of each partner, which can help make the business run smoother. The owners of Premier Christian Cruises recently identified their strengths and weaknesses: Morgan is good at negotiating talent for the ship charters; Gentry is great at salvaging relationships and smoothing over confrontational situations; and Sanders is great at coming up with new business ideas.

As the last step in creating a successful business partnership, Finkel believes, it is essential for the partners in a business to have regular retreats. Finkel says it’s crucial to meet at least twice a year -- preferably quarterly – so that the owners can gather outside the business to talk about big-picture goals of the company. In the past, the owners of Premier Christian Cruises would meet in person only at business-related events, which they admit were not very productive. Now they plan on meeting quarterly and setting time aside for regular phone meetings.

While Premier Christian Cruises grew into a successful company without a partnership or operating agreement, in order to grow into an even larger company, they’ll need improved communication and the legal agreements that can lay the foundation for future work.

How Much Money Does a Startup Really Need?

2010-08-23T14:38:00.000+02:00

What sort of funding will your company need? Unless you're one of a very elite type of entrepreneur -- like the semi-mythical coding whiz-kid building a Web site in his bedroom -- the question of funding is likely to be the most significant challenge early in your company's story. Your startup funding will determine whether your plan lives up to its potential or fizzles out when customers fail to show up in the expected numbers, or don't pay on time.

That said, there's a surprising range of views on how a startup should plan its early life. In my conversations with serial entrepreneurs in Silicon Valley, I've learned that even among successful entrepreneurs, one can find very divergent views on how to fund a new venture. In general, these opinions can be divided into two camps.

The first school of thought holds that you should raise as much cash as humanly possible. This means hitting up other people, whether they're angel investors, venture capitalists, or well-heeled members of your family. You can also try finding government grants, taking out loans, saving up beforehand, or even draining your own credit cards (but I wouldn't recommend trying that last maneuver). Can you raise too much? Yes, but according to this school of thought, you should just proceed to spend what you raise if you don't have enough money, ensuring that your fledgling business will survive even a lengthy drought.

Most people aren't the kind of daredevil networkers that can pull off raising lots of capital without giving their company away, so a second philosophy is more common. This one holds that you should carefully estimate your initial costs and ongoing burn rate for one year to a year and a half, then attempt to raise enough money to last that period of time. When you're six months from running out of cash, start planning to raise more, with the amount of the second funding round determined by how far away profitability appears to be.

If you belong in this second camp, you can begin making a few more intelligent predictions about how much you'll need. Networking in your chosen industry can get you some good advice from peers, which together with your own calculations on initial costs (rental of space, tables, chairs, a kitchen and the cook's wages for a restaurant, for example) will help produce what seems like a good figure.

Got your figure? Good. Now add 40 percent. That's the figure that a project manager named Norman Augustine, who eventually become CEO of an aerospace company in the 1980s, found was the average cost overrun for the dozens of projects he was involved in. Tongue-in-cheek though this "Augustine's Law" may be, it's a good way of dealing with the only true rule of the startup world: Nothing will unfold the way you expect. And in a startup, your only safety net is your cash reserves.

4 Ways to Secure Financing

2010-08-23T14:37:00.002+02:00

As a small business owner, you’re charged with the often daunting task of finding enough money to operate and grow your business. There are a number of financing options out there. It’s important to acquaint yourself with all of them so you can determine which best suits your needs and how to go about cinching the deal. These are the most common types of small business financing.

Angel investors and venture capitalists: Angel investors can be a good source of funding for new businesses. They’re often willing to take on more risk than banks and they tend to invest for longer periods of time than other investors -- up to five years or more. However, they’ll generally invest a maximum of $1 million.

Venture capitalists usually invest more, but they have tougher investment criteria and look for high-growth businesses that will provide them with the greatest profit potential. They’re typically looking to cash out in three to five years. So most aren’t interested in very young businesses. Moreover, they almost invariably want a piece of your company and a seat on the board of directors, which can diminish the level of control you have over your business.
Commercial bank loans: These loans are often preferable because they don’t require you to surrender any equity or company control. However, repaying them can be a strain on younger companies with limited cash flow. Many new companies won’t qualify because they lack an operating history and substantial collateral. Businesses seeking $100,000 or less, though, may qualify for unsecured loans based upon their owner’s personal credit history or personal assets.
Small Business Administration loans: SBA loan guarantees can make all the difference in whether you get a bank loan. The federal agency doesn’t provide funding but typically guarantees 75 percent of individual loans made by private lenders -- up to $750,000. To be eligible, businesses need to demonstrate an inability to qualify for conventional financing with reasonable repayment terms. Business owners must personally guarantee SBA loans and show that they have enough cash flow to repay them.
Home-equity loans: These can be an attractive alternative to other types of loans because they usually offer the lowest interest rates available. However, you must carefully consider all the ramifications of risking your home to fund your business.

The most important criteria for securing the financing your business needs are a good personal credit history, business history, and a thorough business plan that demonstrates the feasibility of your operating model. In short, a good business plan will provide enough detail to answer any questions a lender might ask.

When creating your business plan, you must state the amount of money you’re looking for and specifically and accurately explain what you intend to do with the money. Be prepared to offer details on how you’ll use every dollar you’re requesting. Are you looking to fund operations, including new employees and marketing? Or maybe assets, including equipment and real estate? Or are you looking to pay off business debts?

Next state when you’ll repay the loan. Explain in detail how the loan will effectively and efficiently grow your business. You must be able to convince the lender -- through financial statements and cash flow projections -- that you’ll be able to repay the loan based on an increase in your profitability.

Finally, address what you’ll do if you don’t get the loan. Lenders want to see persistence and a deep commitment to your venture. Let them know that you plan to approach as many lenders as necessary to secure the funding you need to grow your business.

How Angel Investors Can Help Your Business

2010-08-23T14:36:00.002+02:00

When small business owners need to raise capital to expand their businesses, they have a number of options. One route few business owners consider is finding angel investors.

An angel investor is a wealthy individual who invests in growing small businesses in the hopes of earning a higher return on their money than they could get through the stock market or other investment vehicles. Unlike the terms you receive when you get a bank loan, an angel investor doesn’t require regular monthly payments. Instead, they expect their investment to be repaid after several years -- along with a substantial profit.

How Angels Help

A good angel provides business assistance in many ways:

They supply the money you need to grow your business.
They’re often current or former business owners themselves, so they can offer advice on business management.
They can tap their network to help you locate more angel investors, introduce you to important vendors, or assist you in finding key employees.
They may become actively involved in the company, helping you negotiate important agreements or introducing you to possible partners.
They might serve on your advisory board or board of directors, helping to shape company direction and policy.
By talking about your company to their colleagues, they can help promote your business and find you new customers.

The Basics of Angel Deals

In exchange for investing their money, angel investors typically require an ownership stake in your business. In essence, this is the collateral you’re putting up on the “loan” they’re providing. To determine the value of a partial ownership in your business, you need to obtain a professional business valuation. Once you know the value of your business, you can value a minority stake. For instance, if your business is valued at $5 million, you might offer an angel investor a 10 percent stake in the business for $500,000.

The investment agreement will be for a set term -- generally three to five years. At the end of the contract, you’ll be expected to repay the angel’s investment, plus provide an agreed-upon return. There also may be special provisions for how much the angel will receive if you sell the business or sell stock through an initial public offering (IPO).

These exits are often how angels are paid back, so before entering into an angel agreement, consider your own plans for the business. If you don’t envision a sale or IPO in the future, you’ll need an alternative plan for paying them back.

Finding Angels

There are several ways to meet angel investors. One is to simply network in your own city and talk to other small business owners who may be able to provide leads.

You can also contact angel investor groups. Many angels belong to investor groups and invest as part of the group. Meeting one may allow you to get an investment from the group as a whole, or could lead to an introduction to additional angels. The Angel Capital Association has a member directory of investors that’s organized by state.

Many angel groups and industry organizations such as ACA and FundingPost hold forums where small businesses can pitch their ideas. Even if you aren’t a chosen presenter, attending these events is an opportunity to meet many potential angel investors for your business in a single day or weekend.

You can also look for angel investors on online matchmaking portals such as RaiseCapital.com. Entrepreneurs post profiles of their businesses there and can approach investors with experience in their sector.

How Much Money Does a Startup Need?

2010-08-23T14:33:00.002+02:00

We hear lots of stories about well-funded venture capitalists and private equity funds making deals for interesting new startups. It sounds exciting, but reality is a little different. Most first-time entrepreneurs don’t have generous financial backers and are started on a shoestring. About 80 percent of first-time startups are self-funded, according to the nonprofit Kauffman Foundation.

Starting off “on a shoestring” can range anywhere from a few hundred dollars to a few million dollars a year. That’s quite a shoestring.

For specifics, I asked a Boston-based Steven K. Gold, who runs the Entrepreneurs Boot Camps and wrote Entrepreneur's Notebook: Practical Advice for Starting a New Business Venture. Many Web site or e-commerce businesses are started with little or no capital, except for living expenses, computers, and Internet access, he says. Building and operating a Web site yourself can cost less than $100 per year – hiring pros for up the front services costs between $2,000 and $9,000.

On the other side of the coin, he says, “a typical startup with 2-3 experienced founders (requiring at least partial compensation) who are developing a new product needs $150,000 to about $5 million to support a year of operations."

So how do you figure out where your startup fits in? Here are tips from the experts.

Estimate and add up your expenses for each month, while also factoring in any revenue. The cumulative deficit is the amount of investment required, says Gold. Don't forget the costs for marketing your offering.
Once you determine your expenses, increase that figure by 50 percent to 100 percent, to account for unexpected costs, which are inevitable, says Stephanie Chandler, founder of Business Guide.com and author of New! Leap! 101 Ways to Grow Your Business.
With those numbers, open a line of credit before you need it, especially if you are quitting your job, adds Chandler. “Once you leave the paycheck behind and start your business, you also have to start over with establishing your credit. Without a verifiable steady income, it’s much harder to get a loan or credit.”

Sometimes, there is more than one answer to how much money a particular startup needs. Ross Blanchard, co-founder of Blanchard & Loeb Publishers, which sells print and DVD manuals to nurses, told me a cautionary tale.

To get his startup off the ground four years ago Blanchard put together four financial plans ranging from a low-cost conservative scenario to an aggressive, expensive grab for market share. Eventually, a large well-established book publisher backed the aggressive plan, promising more than $7 million over five years.

But two years later, outside factors forced the investing publisher to suddenly pull out of the deal. B&L would have died right then, says Blanchard, except for the conservative financial plan that was still sitting on the shelf, gathering dust. Blanchard and his partner quickly switched gears—giving up their salaries, laying off staff and taking out credit lines on their homes. Today they are still following the parameters of their conservative plan, and their company is slowly growing again.

“If we didn’t have the other plan already put together, we couldn’t have developed it in time when we needed it. When disaster struck, we knew what we had to do,” Blanchard says wryly.

It’s enough to make you take the time to setup an alternate financial plan right at the start. I’m already sharpening my pencil.

Checklist for Starting a Business

2010-08-23T14:32:00.000+02:00

From the Small Business Administration

Owning a business is the dream of many Americans ... starting that business converts your dreams into reality. However, there is a gap between dreams and reality. Your dreams can only be achieved with careful planning. As an entrepreneur, you will need a plan to avoid pitfalls, to achieve your goals, and to build a profitable business.

This checklist is designed to help you get started. It has seven key components:

Identify Your Reasons
Self Analysis
Personal Skills and Experience
Finding a Niche
Market Analysis
Planning Your Startup; and
Finances

Each component is comprehensive and is designed to prepare you for self employment. In addition, each component includes an analysis of you responses as well as a menu of supporting resources.

1. IDENTIFY YOUR REASONS
As a first and often overlooked step, ask yourself why you want to own your own business. Check the reasons that apply to you.

Freedom from the 9-5 daily work routine
Being your own boss
Doing what you want when you want to do it
Improving your standard of living
Boredom with your present job
Having a product or service for which you feel there is a demand

Analysis:

Some reasons are better than others, none are wrong; however, be aware that there are tradeoffs. For example, you can escape the 9-5 daily routine, but you may replace it with a 6 a.m. to 8 p.m.

2. A SELF-ANALYSIS

Personal Characteristics

Are you a leader?
Do you like to make your own decisions?
Do others turn to you for help in making decisions?
Do you enjoy competition?
Do you have will power and self discipline?
Do you plan ahead?
Do you like people?
Do you get along well with others?

Personal Conditions

Are you aware that run

From the Small Business Administration

This checklist is designed to help you get started. It has seven key components:

Identify Your Reasons
Self Analysis
Personal Skills and Experience
Finding a Niche
Market Analysis
Planning Your Startup; and
Finances

Each component is comprehensive and is designed to prepare you for self employment. In addition, each component includes an analysis of you responses as well as a menu of supporting resources.

1. IDENTIFY YOUR REASONS
As a first and often overlooked step, ask yourself why you want to own your own business. Check the reasons that apply to you.

Freedom from the 9-5 daily work routine
Being your own boss
Doing what you want when you want to do it
Improving your standard of living
Boredom with your present job
Having a product or service for which you feel there is a demand

Analysis:

Some reasons are better than others, none are wrong; however, be aware that there are tradeoffs. For example, you can escape the 9-5 daily routine, but you may replace it with a 6 a.m. to 8 p.m.

2. A SELF-ANALYSIS

Personal Characteristics

Are you a leader?
Do you like to make your own decisions?
Do others turn to you for help in making decisions?
Do you enjoy competition?
Do you have will power and self discipline?
Do you plan ahead?
Do you like people?
Do you get along well with others?

Personal Conditions

Are you aware that running your own business may require working 12-16 hours a day six days a week and maybe even Sundays and holidays?
Do you have the physical stamina to handle the workload and schedule?
Do you have the emotional strength to withstand the strain?
Are you prepared if needed to temporarily lower your standard of living until your business is firmly established?
Is your family prepared to go along with the strains they too must bear?
Are you prepared to lose your savings?

3. PERSONAL SKILLS AND EXPERIENCE

Do you know what basic skills you will need in order to have a successful business?
Do you possess those skills?
When hiring personnel will you be able to determine if the applicants' skills meet the requirements for the positions you are filling?
Have you ever worked in a managerial or supervisory capacity?
Have you ever worked in a business similar to the one you want to start?
Have you had any business training in school?
If you discover you don't have the basic skills needed for your business will you be willing to delay your plans until you've acquired the necessary skills?

Analysis

Certain skills and experience are critical to the success of a business. Since it is unlikely that you possess all the skills and experience needed you'll need to hire personnel to supply those you lack. There are some basic and special skills you will need for your particular business.

The questions you responded to are designed to identify the skills you possess and those you lack.

4. FINDING A NICHE — Is Your Idea Feasible?

Identify and briefly describe the business you plan to start.
Identify the product or service you plan to sell.
Does your product or service satisfy an unfilled need?
Will your product or service serve an existing market in which demand exceeds supply?
Will your product or service be competitive based on its quality, selection, price or location?

5. MARKET ANALYSIS

Do you know who your customers will be?
Do you understand their needs and desires?
Do you know where they live?
Will you be offering the kind of products or services that they will buy?
Will your prices be competitive in quality and value?
Will your promotional program be effective?
Do you understand how your business compares with your competitors?
Will your business be conveniently located for the people you plan to serve?
Will there be adequate parking facilities for the people you plan to serve?

So far this checklist has helped you identify questions and problems you will face converting your idea into reality and determining if your idea is feasible. Through self-analysis you have learned of your personal qualifications and deficiencies and through market analysis you have learned if there is a demand for your product or service.

The following questions are grouped according to function. They are designed to help you plan your business startup.

Name and Legal Structure

Have you chosen a name for your business?
Have you chosen to operate as sole proprietorship, partnership or corporation?

Your Business and the Law

A person in business is not expected to be a lawyer but each business owner should have a basic knowledge of laws affecting the business. Here are some of the legal matters you should be acquainted with:

Do you know which licenses and permits you may need to operate your business?
Do you know the business laws you will have to obey?
Do you have a lawyer who can advise you and help you with legal papers?
Are you aware of:
- Occupational Safety and Health Administration (OSHA) requirements?
- Regulations covering hazardous material?
- Local ordinances covering signs snow removal etc.?
- Federal Tax Code provisions pertaining to small business?
- Federal regulations on withholding taxes and
- Social Security?
- State Workmen's Compensation laws?
Protecting Your Business
It is becoming increasingly important that attention be given to security and insurance protection for your business.
There are several areas that should be covered. Have you examined the following categories of risk protection?
- Fire
- Theft
- Robbery
- Vandalism
- Accident Liability
Business Premises and Location
- Have you found a suitable building in a location convenient for your customers?
- Can the building be modified for your needs at a reasonable cost?
- Have you considered renting or leasing with an option to buy?
- Will you have a lawyer check the zoning regulations and lease?
Merchandise
Have you decided what items you will sell or produce or what service(s) you will provide?
Have you made a merchandise plan based upon estimated sales to determine the amount of inventory you will need to control purchases?
Have you found reliable suppliers who will assist you in the start-up?
Have you compared the prices quality and credit terms of suppliers?

Business Records

Are you prepared to maintain complete records of sales income and expenses accounts payable and receivables?
Have you determined how to handle payroll records tax reports and payments?
Do you know what financial reports should be prepared and how to prepare them?

7. FINANCES

A large number of small businesses fail each year. There are a number of reasons for these failures but one of the main reasons is insufficient funds. Too many entrepreneurs try to start and operate a business without sufficient capital (money). To avoid this dilemma you can review your situation by analyzing these three questions:

How much money do you have?
How much money will you need to start your business?
How much money will you need to stay in business?

Use the following table (personal financial statement) to answer the first question:

Table 1

Personal Financial Statement

____________, 20 ___

ASSETS

Cash on hand
Savings account
Stocks, bonds, securities
Accounts/notes receivable
Real estate
Life insurance (cash value)
Automobile/other vehicles
Other liquid assets

LIABILITIES

Accounts payable
Notes payable
Contracts payable
Taxes
Real estate loans
Other liabilities

Table 2 (startup costs calculator) will help you answer the second question: How much money will you need to start your business?

The answer to the third question (How much money will you need to stay in business?) must be divided into two parts: immediate costs and future costs.

Table 2 — START-UP COST ESTIMATES

Decorating, remodeling
Fixtures, equipment
Installing fixtures, equipment
Services, supplies
Beginning inventory cost
Legal, professional fees
Licenses, permits
Telephone utility deposits
Insurance
Signs
Advertising for opening
Unanticipated expenses

From the moment the door to your new business opens a certain amount of income will undoubtedly come in. However this income should not be projected in your operating expenses. You will need enough money available to cover costs for at least the first three months of operation.

Table 3 (estimate of monthly expenses) will help you project your operating expenses on a monthly basis.

Table 3 — EXPENSES FOR ONE MONTH

Your living costs
Employee wages
Rent
Advertising
Supplies
Utilities
Insurance
Taxes
Maintenance
Delivery/transportation
Miscellaneous

SBA Loans for Home-Based Businesses

2010-08-23T14:27:00.000+02:00

Obtaining financing for a new venture is never easy, and finding funding for a home-based sole proprietorship business is even harder. But the Small Business Administration (SBA) has made it much easier for home-based businesses to find the financing they need. If your bank has turned down your business loan application, don't despair. You may be able to find funding for your business through the SBA's numerous funding options.

The SBA offers three distinct types of financing for small businesses. Study them carefully to make sure that you are applying for the loan that is best suited to your business.

The Microloan 7(m) Loan Program is the most popular loan for home-based businesses. You can apply for up to $35,000 for your business needs. You can use this money in a variety of different ways, such as purchasing needed inventory to run your business, buying necessary supplies or furniture, getting the computer equipment that you need, or for working capital. However, you will not be able to use this loan to pay off any existing debts or to purchase land or real estate for your home-based business.

With the Microloan program, you don't borrow money directly from the SBA; rather, the SBA guarantees your loan with a lender who provides the loan to you.

The Basic 7(a) Loan Guaranty is perfect for businesses that require more options for their loans and are having trouble getting funding through traditional lenders. This program offers more flexibility and, unlike the Microloan 7(m), can be used to pay off your debts and acquire property for your business. You can also use your 7(a) loan for working capital or to purchase supplies, equipment, and furniture.

The Certified Development Company (CDC) 504 Loan Plan is primarily for larger businesses that require a great deal of money to purchase real estate or expensive equipment. These loans can go as high as $1.3 million and are generally out of the reach of most home-based business. However, if you need to purchase high priced equipment for your business, you may be able to use this type of loan.

The CDC 504 Loan Plan is more complicated than the first two loans offered by the SBA. The business owner typically provides 10 percent of the equity for the purchase, another lender covers 50 percent, and the 504 loan will cover the remaining 40 percent.

While it can be difficult to get a loan for a home-based business, the SBA may be able to help. With these three programs, the owner of even the smallest small business can get the money he or she needs to become successful.

Check out the AllBusiness Practical Guide to SBA Loans for more information. Also read "Financing Your Home-Based Business" and "Ten Tips for Financing Your Home-Based Business" for other home-business financing options.

Minority Business Loan Programs

2010-08-23T14:26:00.002+02:00

If you are a woman or an ethnic minority, you may be entitled to funds earmarked for minority business development. Many businesses and government organizations allocate funds to lend to minority business owners.

The Minority Business Development Agency (MBDA) is the only federal agency created specifically to foster the establishment and growth of minority-owned businesses. MBDA provides funding for a network of Minority Business Development Centers (MBDCs), Native American Business Development Centers (NABDCs), and Business Resource Centers (BRCs) located throughout the country. The centers provide minority entrepreneurs with personalized assistance in writing business plans, marketing, management and technical assistance, and financial planning to secure adequate financing for business ventures.

If you need additional help putting together your loan application package, you can contact your local small business development corporation. These agencies often make loans to applicants who have been denied for regular bank loans. Learn more about What Lenders Look for Before Granting a Small Business Loan.

While the SBA does not offer grants to start or expand small businesses, it does guarantee loans of up to $250,000. Once you've been approved for an SBA-guaranteed loan, the next step is to find a lender that is approved by the SBA. Read about SBA Loan Key Requirements.

Almost any bank is a potential lender, although eligibility requirements vary among lending institutions. Of the banks SBA works with, Bank of America has been ranked as a top lender to minority groups.

Wells Fargo is another minority- and woman-friendly bank, having pledged to lend a billion dollars to African-American, Latino, and women-owned business. To qualify, you must be a profitable business, have been in business for at least two years, have good personal and business credit records, and not have declared bankruptcy in the past 10 years. Lines of credit can go from $5,000 to as much as $100,000.

Another option for business loans to minorities are small business investment companies (SBICs). These are privately owned and managed investment firms that offer venture capital and startup financing to small businesses. SBICs are licensed and regulated by the SBA. For more information about SBICs, visit the SBA's SBIC Web site.

Term Loans for Small Businesses

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When most people think of a typical bank loan, they think of a term loan. A term loan has a fixed length, often with amortization of principal. Amortization is the repayment of a loan with periodic payments of both principal and interest calculated to payoff the loan within a certain amount of time.

Short-term loans, typically lines of credit, working capital loans, or accounts receivable loans, usually reach maturity within one year or less. Long-term loans usually last one to seven years, although it is not uncommon for long-term loans to mature after 10 or 20 years.

Term loans sometimes require collateral to secure the loan, and loan amounts typically start at $25,000, with an industry average of 1 percent in fees. Should You Personally Guarantee a Loan to Your Small Business? The approval process for term loans is extremely thorough, so be prepared. Applicants must demonstrate strong character, good credit history, competence in and commitment to their business, and sufficient collateral and working capital. Just as with any other type of loan, banks take into consideration the same factors as with term loan applications. If you qualify, rates on term loans are generally lower than those of other types of loans.

Long-term and intermediate loans are most appropriate for established small businesses that can demonstrate the ability to make the required interest and principal payments. If you are thinking about financing equipment, make sure that you can claim ownership benefits on your taxes — comparing the overall cost benefits with leasing options is a good idea. Banks require complete financial statements for large loans of $100,000 and above. Read more about Bank Loans for Small Businesses.

Loans with longer maturities are designed for borrowers making large business purchases such as equipment, machinery, real estate, and furnishings. Long-term loans also help business owners fund construction projects, buy vehicles for business use or purchase existing businesses. An advantage to loans with longer timeframes is they can help businesses manage cash flow during slow times.

One thing to take into account when considering a term loan is that banks often limit the amount of additional liabilities a business can assume in addition to the loan. This includes employees' salaries, which could affect your ability to attract qualified workers. In some cases banks will require borrowers to set aside a set percentage of profits to repay the loan.

Loans for Business Owners with Poor Credit

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Gone are the days when you can walk into a bank and get a loan based on good rapport with a loan officer. But today the banking industry isn't willing to spend the time, or to undertake the risk, in issuing loans this way.

Today banks focus primarily on personal credit scores. If you have a checkered credit history, big banks won't be your best bet for funding your business. Not only will you almost certainly be denied, but each inquiry into your credit may actually lower your credit score. Here are some alternatives to big banks to fund your business.

Local Lenders

Community lenders and regional or local banks are more likely to consider other factors in addition to your personal credit score, such as your business credit score. Your business credit score is determined by similar factors as your personal credit, outstanding debt balance on credit accounts, bill payment history, but is associated with your business's tax ID number, not your Social Security number.

Establishing a separate business credit history is a key to a successful business. If your credit is damaged and you have not already secured a separate tax ID number from the Internal Revenue Service, get one as soon as possible. You can apply for a tax ID number without incorporating if your business is a sole proprietorship, a limited liability company, or a partnership.

Specialty Lenders

Some lenders actually specialize in loans for high-risk entrepreneurs. These loans generally have high interest rates with a provision for lowering the rate when the business shows positive cash flow and the borrower demonstrates ability to cover the debt.

Home Equity Loans

Another option is a home equity loan. Home equity loans can provide you with large amounts of cash at a relatively low interest rate, as well as certain tax advantages unavailable with other types of loans. But using a home equity loan to fund your business carries considerable risk: If your business fails, you will have lost both your business and your home.

Friends and Family

Family and friends may be able to offer financial assistance. Many business owners dislike asking family and friends for money, and some experts advise against involving relatives and friends in your business dealings, but if your options are limited, you may have no other choice.

If you pursue this route, treat your friend or family investor as you would any other investor. Present your business plan and draft legal documents that protect all parties. Things can go wrong in the closest of relationships, and a handshake just isn't enough.

The SBA

The Small Business Administration has a wide variety of programs to help you fund your business. While the SBA does not lend money, it does guarantee loans; this reduces the risks inherent in loaning money to small businesses and makes lenders more apt to issue a loan. You can call your local SBA office for more information. You can also consult the AllBusiness Practical Guide to SBA Loans for more information.

60-Second Guide to Getting A Loan

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Getting a small business loan is not as easy as saying you have a great idea and holding out your hand. While it is difficult to get a start-up business loan without a proven track record, it’s not impossible.

In just 60-seconds, we’ll show you how to improve your odds for getting a small business loan.

0:60 Get Help Before You Start Bank Shopping
Community small business resources like SCORE and the Small Business Development Center (SBDC) can be invaluable when you are ready to seek funding for your business. Not only do they know the ins and outs of approaching lenders, having done it all before, they can steer you to the small business-friendly banks in your area to help tip the scales in your favor right from the beginning.

0:48 Know What Lenders Are Looking For
You’ve got to be prepared with the information your lender needs to make a decision in your favor. Lenders typically evaluate four key factors: previous business experience; ability to repay the loan; collateral and personal guarantee; and character. Prepare your documents thoroughly — they include your business plan, balance sheet, cash-flow statement, income statement, personal financial statements, personal and business tax returns, and a description of the terms and loan amount, including how it will be used, secured and repaid.

0:30 Give Them Your Business
Show your lender that you are a good risk. Move all of your personal and business accounts to the bank, so that they can evaluate how you manage your money. This will also give you a chance to check out the bank’s loan policies and gather up the forms before you get started.

0:24 Bankers are People, Too
Get to know your bank’s staff including the tellers, loan officers and other employees. Developing a personal relationship with your bank is essential not only to help you get a loan, but also if you should fall on hard times. Taking the time to get to know your bankers is an important ingredient in demonstrating your character to your lender.

0:18 Don’t Go it Alone
After all of your research and preparation is completed, it’s time to make your pitch. Be sure to practice your presentation and take one of your mentors with you, be it your SCORE business counselor or SBDC advocate. Either or both can be invaluable as you meet with your loan officer and negotiate the loan. And, your lender will feel more confident if you have a trusted community business leader with you.

0:03 When at First You Don’t Succeed . . .
Many entrepreneurs get turned down for funding — some more than once before they succeed. But, don’t give up. Meet again with your SCORE business counselor to discuss your strategy and talk with your banker about amending your approach. Meet with other banks until you find the right fit. In the end, banks want your business and will work with you to find a solution. The U.S. Small Business Administration has a variety of small business guaranteed loan programs that may fit your business. Be sure to check them out. And, above all, be persistent.

Proving the financial health of your company — or of your business plan — requires an understanding of your business cash flow. Our plain-English guide to cash flow management tools explains which numbers you'll need to watch, and it also recommends programs that can help you analyze those numbers.

Brought to you by SCORE Counselors to America's Small Business

Where to Get Help Before Applying for an SBA Loan

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Adapted from the U.S. Small Business Administration Web site.

The Small Business Administration has offices in almost every major city in the United States. The SBA Office of Business Initiatives operates a toll-free Answer Desk at (800) 8-ASK-SBA, which can provide direct referrals to appropriate sources of information.

The SBA also sponsors a variety of counseling, training, and information services:

Service Corps of Retired Executives (SCORE)
Business Information Centers (BICs)
Small Business Development Centers (SBDC)

There are also more than 2,700 chambers of commerce located throughout the country to provide additional assistance. Be sure to read Finding an SBA Office and SBA Lenders Near You to begin the process.

Before you apply for a loan, you'll need to have the following information:

A complete business plan
Specific information on employee, vendor, and market possibilities
Potential locations of operations
A budget of needed funds

It is highly recommended that you have someone objective look over your plans. In addition to the resources listed above, you might also want to contact the business department of a local college for a second opinion. After you've taken these steps and prepared the necessary information, you're ready to apply.

For help writing a business plan, be sure to read Write a Winning Business Plan.

Ten Tips for Financing Your Home-Based Business

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To secure financing for your company is never easy. But when the venture in question is a home-based business, the challenge suddenly becomes even more difficult. Banks and community lenders don't always take home-based businesses seriously and may be hesitant to lend to them.

But financing is available if you know how and where to look. Here are 10 tips to turn your requests for financing into money in the bank.

Let them know you mean business. Your first hurdle is establishing the legitimacy of your proposed venture. It’s your job to convince lenders that your business concept is a winner and that you have what it takes to make it a success.
Write a business plan. Rare indeed is the lender who will loan money without seeing a business plan. Lenders need to see not only the business concept laid out, but they will also want to see the key metrics of your business: how much money you will need, how it will be spent, how much you will charge for your product or service, when the business will become profitable, and many other key indices.
Hone your presentation. In addition to a business plan, you will probably want to present some kind of product demonstration or sales pitch. Include a demonstration of your product or service, when possible, and present your marketing materials and other collateral. Focus on differentiating your offering from those of your competitors.
Look to family and friends. Mom and dad may require a little less due diligence than the neighborhood bank. If a good friend or family member wants to invest, that's great -- but be sure to draft a business plan and write up all the appropriate contracts.
Partner with your customers. If your business is already up and running, you may have customers who believe in you and in your company. If your customers have expressed an interest in investing in your business, draft a proposal and submit it to them.
Contact local colleges. Some colleges and universities offer financial support to entrepreneurs through their small business and entrepreneurial centers.
Apply for microloans. Some banks, governmental organizations, and business groups offer microloans, which are exactly what the name suggests: very small loans that generally range between $100 and $25,000. Also, most microloans are issued based on your character and management ability rather than on an established credit history. Microloans, in turn, can serve as a springboard to additional financing, and financing establishes your company's creditworthiness.
Solicit government agencies. There are several sources of government funding to consider. The Small Business Administration (SBA) doesn't issue loans as such, but they do guarantee loans given by private lenders. This reduces the risk that the bank assumes and makes them more likely to loan to your new business. Contact your local chamber of commerce for information on which government entities offer financing help.
Apply for grants. There are many different types of grants, and there could be one for your home-based business. However, it should be noted that grant requirements are strenuous, and there’s a great deal of competition for small and home-based business grants.
Talk to angels. Angel investors invest in fledgling businesses, generally because they know a good thing when they see it. They look for companies that exhibit good growth prospects, have a synergy with their own interests, or compete in an industry in which they have succeeded. If you are seeking equity capital from angel investors, you must be prepared to give up some equity -- and be answerable to your investor.

Consider SBA-Sponsored Funding Opportunities

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Congress created the Small Business Administration (SBA) in 1953 to assist entrepreneurs in creating successful small enterprises. There are SBA offices in each of the 50 states, as well as in the District of Columbia, the Virgin Islands, and Puerto Rico. Its primary goals are financing, training, and advocacy for small businesses. The SBA partners with thousands of lending, educational, and training institutions nationwide to meet these goals.

Contrary to popular thinking, the SBA is not a lending institution. It simply assists lending partners by guaranteeing major portions of loans made to small businesses when other funding or financing options are not available due to a variety of reasons.

SBA lending programs change, and program requirements are very broad in order to accommodate a wide range of financing needs. An exploration of the SBA Web site will provide the latest lending information and help you to define your requirements and needs analysis in more concrete terms.

The SBA partners with lending institutions. For example, when a small business applies to a bank or other financial institution for a loan, the lending officer reviews the application. It then decides if it merits a loan on its own. If yes, the loan is granted and no SBA involvement is needed.

If, however, the loan request can't stand on its own or there's too much risk for the bank to carry, it may require the additional support of an SBA guaranty. In this case, the lender requests SBA backing on the loan. The lending institution works directly with the SBA.

When the SBA guarantees the loan, it assures the bank that the government will reimburse the lending partner for a portion of its loss if the business defaults on the loan.

It's important to note that the SBA guarantee doesn't permit the lending institution to disregard standard commercial loan underwriting principals, such as collateral and personal guarantees. (In other words, a bad risk is still a bad risk.) However, it does allow the bank to loan more money, extend longer terms, and approve loans to startup or early growth businesses than it could otherwise. By financing these programs, the SBA helps businesses gain more access to capital in the long run, potentially creating jobs and expanding the tax base.

Typically, the SBA can guarantee as much as 85 percent on loans of up to $150,000 and 75 percent on loans of more than $150,000. In most cases, the maximum guaranty is $1 million. There are some exceptions, and these figures can change.

If you're considering a lending institution-SBA partnership for your financing needs, here are some guidelines to follow:

First, be prepared. Know your business, the intended market, your targeted customers, your potential niche, projected financials, and your competition. If you've planned your business thoroughly and strategically, you're covered on the first part.

Allow your business plan to be the voice of your vision. Be sure to provide personal financial statements and tax returns for the business owners as well, as there's little or no company history for the lending decision to be based on. Most important are financial statements that include monthly cash flow projections, which list critical assumptions.

Second, find the right lender. Not all banks are equal SBA partners. Local banks and other select commercial financial firms comprise the distribution system for SBA loans. Not every lender is the same nor does each one automatically fit your needs. Not all loan programs are available at all lending institutions.

Your financial institution should know your region (if your business is dependent on the local economy) and your business industry. Select a lender with an established track record, specifically with the SBA product that best matches your company's current financial needs.

The SBA is there to help small business owners. Help yourself first by doing the appropriate research and by preparing thoroughly for your meeting with the SBA partner.

For the who, what, where, when, and how of the SBA and your small business, read Who Can Apply for an SBA Loan?, SBA Loan Key Requirements, Where to Get Help Before Applying for an SBA Loan, When to Apply for an SBA Loan, and How to Apply for an SBA Loan.

Top 10 Mistakes Made When Applying for a Business Loan

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Whether you're applying for a business loan or a personal loan, there are common mistakes that can hinder the process. Below are 10 of the most common mistakes made when applying for a loan.

Not knowing your credit rating. Before you apply for a loan, you need to know where you stand. Get copies of your credit scores from the three major credit bureaus so you will know if you're likely to get the loan approved.
Not reading the terms carefully before signing. In your haste to get a loan, you may commit the common mistake of jumping the gun and signing without reading the details and terms of the loan. Not only should you take the time to read everything very carefully, but you should also ask questions about anything you do not fully understand.
Not locking in a rate. Interest rates change. If you think you've found a good rate, lock it in before it goes up. Too often, people make the mistake of getting greedy and waiting for interest rates to drop farther.
Not explaining what the loan is for. When applying for a business loan, you need to indicate how the money will be used. Lenders want to see that you know exactly what your needs are and how this loan will meet those needs.
Making major changes. Just as you do not want to open and close various credit cards before applying for a personal loan, you do not want to make significant personnel or other changes to your ongoing business structure before applying for a business loan. Lenders want to be able to see stability in how you do business and with whom.
Applying only to the most convenient lender. Although there are various lenders available, many people still head to their local bank first without shopping around. Credit unions and other sources are worth investigating. For example, if you are a small business owner, you should consider what the Small Business Administration can do through one of their loan programs.
Not having your finances up-to-date. Whether you are seeking a personal or business loan, you shouldn't apply without having the proper financial documentation. This is an area where many people put the cart before the horse, and try to get a loan without making sure their financials are up-to-date.
Failing to have some equity in the project. Not unlike a down payment when buying a home, having some equity in a business project significantly enhances your chances of securing a business loan. If you're not invested in the project, or in the business itself, the lender will be less enthusiastic about taking on such a risk.
Having no collateral. You need to provide some collateral, should there be a default in payment.
Not having a business plan. If you're starting a business, you need to demonstrate how the business will operate and make money. A business plan is essential for a lender to see your goals and specifically, how you intend to reach them. You must include all applicable supporting data, including financials.

For more information, check out AllBusiness.com's Business Loans Center.

Key Business Loan Issues

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When you start a business, you generally have two ways to raise capital: loans and equity contributions. There are some obvious disadvantages to loans. They require you, for example, to pay back the lender whether or not the business is successful, which is not the case with equity contributions. But the advantage of a typical loan is that if your business prospers, the lender is only entitled to an interest return on its loan -- not a percentage of the profits or a share in the company that an investor would expect.

Whether you obtain loans from a bank, individuals or other lenders, a number of variables can affect how good or how bad they are for your business. Virtually all of these variables are negotiable: There is no such thing as a "standard loan." Read Business Loans for Your Small Business for details on the process.

Be sure to negotiate these key issues if you plan to get a loan for your business:

Due date. You need to set a date when the loan is to be repaid. This can be formulated as a lump-sum payment at the end of the term of the loan or as a periodic payment of principal with a final payment. For example, you can agree to borrow $50,000, with entire principal due in two years, or you could agree to repay the principal in 20 equal monthly installments of $2,500. In any event, make sure that the payment schedule is reasonable given your anticipated cash flow. Realize that interest will be charged to you either way.
Interest payments. When a lender establishes an interest rate, it must comply with any applicable state usury laws. (These laws govern how much interest can be charged on a loan.) Often, however, usury laws will not apply to banks. The law may also allow a lender to charge a higher interest rate for business loans than for personal loans (such as consumer credit). The interest payment dates should be clearly defined -- the most common method requires monthly interest payments due the first day of each month. You might also try to adjust the timing of your interest payments to match the cash flow patterns of your business.
Loan fees. The lender may charge up-front loan or processing fees. Check these fees carefully, and try to get an estimate as soon as possible to help you evaluate the loan package.
Prepayment. Ideally, you want to be free to pay off the loan at any time before its due date. Make sure that your loan agreement or promissory note gives you this flexibility and try to avoid a prepayment penalty for paying off the loan early.
Defaults. The lender may define a variety of events that will constitute a default on the loan, including failure to make any payment on time, bankruptcy, insolvency and breaches of any obligations in the loan documents. Try to negotiate advance written notice of any alleged default, with a reasonable amount of time to cure the default.
Grace period. Try to get a grace period for any payments. For example, the monthly payments may come due on the first day of each month, but they won't be deemed late until the fifth day of the month.
Late charge. If the loan includes a fee for late payment, try to make sure that it is a reasonable charge.
Collateral. The lender may insist on a pledge or mortgage of some asset to secure the loan. Under a mortgage (for real property) or a security agreement (for personal property), if you default on the loan, the lender is able to foreclose upon the asset and sell it to repay the money owed to the lender. If you are required to provide security, try to limit the amount you have to give to secure the loan. And make sure that when the loan is repaid, the lender is obligated to release its mortgage or security interest and is required to make any government filings acknowledging this release.
Co-signers and guarantors. A lender may ask for a co-signer or guarantor as a way to further ensure that the loan will be repaid. A co-signer or guarantor runs the risk that their personal assets will be liable to repay the loan. If you ask someone to co-sign the loan with you, you may want to draw up a co-signer agreement to let the person know how you will repay them if you default on the loan.
Attorneys' fees. The lender will likely insist on a clause that says in the event of any failure to pay on the loan, the borrower will reimburse the lender's fees and costs in enforcing or collecting on the loan. Try to insert a qualifier that the reimbursement will cover only "reasonable" attorneys' fees.

Impress your lender by pulling together all your documents. It will expedite the process. For specifics, read Documents to Gather Before Applying for a Business Loan.

Should You Personally Guarantee a Loan to Your Small Business?

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You may not think twice about signing a personal guarantee for your business: after all, you believe wholeheartedly that your business will succeed. However, many financial experts would urge you to personally guarantee a business loan only as a last resort. After all, if your business goes belly up, you stand to lose major personal assets — most likely your house.

Before you decide to personally guarantee a small business loan, think about what a personal guarantee means. The guarantee applies only to you, not to your business partners nor to your managers. It means that you are declaring an individual pledge to make good on the loan, usually without exception. Depending on how your contract is written, you may be responsible for the loan even if your business is protected by limited liability laws. Many lenders require borrowers to personally guarantee a loan or secure it with personal assets if your business is organized as a limited liability entity. Learn more about the Elements of Successful Small Business Loan Applications.

You may even be responsible for the loan after your business has been dissolved. When you issue a personal guarantee, you are acting as a cosigner on the loan. As such, creditors will go after you in the event that the borrower — your business — fails to make the loan payments.

But every loan carries some degree of risk, even if you do not personally guarantee it. In some cases, a lender may have the right to sue you personally if your business is a sole proprietorship or general partnership. If the lender successfully sues you, they can confiscate your personal assets to satisfy the loan. Another thing to consider is that if you are married, your spouse may have to cosign the promissory note. In that event, your jointly owned possessions are on the line for the debt, as well as your spouse's assets and income. Learn more about Bank Loans for Small Businesses.

If you have exhausted all your other financing options, a personal guarantee may be your last resort. Guaranteeing a loan for your business demonstrates a high level of personal commitment to your business, which lenders like to see. Keep in mind that if you personally guarantee a loan to a business, you can expect a phone call from the lender if things go south.

In some cases, however, you may not have a choice if you want that loan. The Small Business Administration (SBA) requires that all loans they guarantee must also be personally guaranteed by any person with a 20 percent or larger ownership interest in the business. In addition the loans will typically be collateralized with some or all of the business’s assets and possibly with personal assets such as a second home mortgage. If you are seeking an SBA-backed loan, chances are not likely that you could find much better loan terms through banks and other lenders.

Small Business Loan Scams

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Small business loans scams are on the rise. Unscrupulous "loan brokers" are targeting business owners when they are at their most vulnerable: when they need money. Here are some of the more prevalent scams and some tips at avoiding them.

One popular con is the "advance fee scam." Someone claiming to be a loan broker asks for an up-front processing fee that can be as high as $3,000. If you pay the fee, you will never hear from the fraudulent broker again.

But money is not the only thing these criminals are after; many scam artists are after your personal information. These phony brokers generally promise low rates or instant approvals to entice you to apply. With this application, they have your Social Security number, credit card numbers, and bank account information to use for their nefarious purposes.

Many of these companies operate out of Canada. The fake ads generally read, “Starting a small business? Need a Consultant or Capital? We can help!”

Another scam is the bogus equipment loans or lease programs. You may get a letter or phone call saying that you are pre-approved for an equipment loan or lease. All you have to do is send in your first or first and last months' payment. The scam is that you never receive the equipment.

Be especially wary of unsolicited phone calls, emails, or letters from prospective lenders making claims that sound too good to be true. If a prospective lender guarantees a loan without checking your credit or reviewing your business plan, proceed with caution. Also beware of lenders who cater to applicants with bad credit, pressure you to make a decision on the spot, and lenders who request payment by Western Union to foreign addresses.

But even a domestic address is not a guarantee that your money or sensitive data won't leave the country for good. Fly-by-night loan operations routinely set up P.O. boxes or mail drops in the U.S. that are then forwarded to their operations elsewhere. Never send money before you receive a product or service, and remember that no transaction is safe unless you know for sure that you are dealing with a legitimate firm.

Before you do business with any prospective lender, check with the Better Business Bureau or state attorney general's office to see if any complaints have been filed against them. Request the lender’s financial statements, specifically assets and capital. Take advantage of local resources like the Small Business Development Corporation (SBDC), small business clubs, networking, and minority business groups for recommendations of trustworthy lenders.

The reality is that many entrepreneurs have less than perfect credit. If you are among them, do not let your guard down because you think your options are limited. While having poor personal credit presents real challenges, there are many legitimate programs that loan to businesses and business owners with less-than-perfect credit. You just have to devote some time to researching lenders who are friendlier to applicants with some flaws in their credit reports.

Funding a Woman-Owned Business

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Finding funding for a small business isn't easy. When you're a woman business owner, it can be even more challenging. By some accounts, roughly 30 percent of businesses are woman-owned, but their businesses get a paltry 3 percent of venture capital dollars.

How can you up your odds of landing the capital you need for your business? The Center for Women's Business Research identifies the four key traits needed to land traditional bank financing: credit, collateral, character, and capacity. In other words, if you have a good credit rating, a track record in business and good references, business assets you can pledge against a loan, and the capacity to use the loan to generate more business income, you're in good shape. Since many businesses can't say they have all four of these, finding funding usually involves some creativity.

Rather than simply applying for a loan at your nearest bank or pitching angel investors or venture capital firms in general, target institutions with a mission of funding women-owned businesses. Here’s how to get started.

Resources

A great place to start learning about good funders is the Small Business Administration's Office of Women's Business Ownership. The office operates more than 100 Women's Business Centers around the country, staffed with SBA employees and volunteers who specialize in helping women-owned businesses succeed.

There are also nongovernmental organizations such as Springboard Enterprises, which may be able to help. Springboard's mission is to connect women business owners with funders.

Certification

There may be advantages to becoming a certified Women's Business Enterprise, as this may help you qualify for government contracts. Having a signed contract for business in hand is counted as collateral by some funders, so this could help your funding quest. Many governments have requirements that a certain percentage of their contracts be awarded to women- or minority-owned businesses, so they must find qualified companies to do the work.

Microloans

If you don't need much money, $35,000 or less, to get your business going, consider pitching a microfinance organization. The majority of their loans go to women, many of whom are starting or running one-person businesses. Major microfinance lenders include Accion and Kiva. The latter just recently broadened its scope to include American businesses.

Angel Investors

There may be women angel investors within many angel groups whom a woman business owner could target. Check the Web sites of angel groups and scan their "team" list to see if women are involved. There's also one angel group focused entirely on women business owners: Seraph Capital Forum in the Seattle area.

Venture Capital

A handful of VC funds specifically target women business owners. Examples include Fund Isabella (its motto: "We're the New Girl Network!"), Women's Venture Fund, and Texas Women Ventures Fund. As with angel groups, you can also scan team lists to target women venture capitalists at other firms.

Business reporter Carol Tice contributes to several national and regional business publications.

State, County, and Local Small Business Loan Financing

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There are a variety of financing programs available to help your business grow. While the Small Business Administration (SBA) is the main resource for small business owners, it is not the only one. Each state has a Small Business Development Center (SBDC) to provide management assistance to current and prospective small business owners. If you are looking to start or expand a small business, contact your local SBDC to see if they can help you. In addition, be sure to read up on Minority Business Loan Programs.

SBDCs offer one-stop assistance to individuals and small businesses by providing a wide variety of information and guidance in central and easily accessible branch locations. The program is a cooperative effort of the private sector; the educational community; and federal, state, and local governments. Here are some of the loan programs your SBDC may offer:

504 loans are offered directly through approved local economic development agencies. The financing agency is limited to 40 percent of the project but not to exceed $1 million.

Community Adjustment & Investment Program (CAIP) loans are available to businesses at risk due to trade pattern changes in Canada and Mexico.

Microloans are great for borrowers seeking smaller loan amounts. Microloans are offered directly through approved local economic development agencies, and are available for amounts up to $25,000. The downside to these loans is that the interest rates generally are much higher than SBA-guaranteed loans.

Industrial Development Revenue Bond programs (IDRB) are for financing business and industrial expansions for firms with strong credit. Learn more about Cleaning Up Your Company's Credit Profile. IDRBs can provide low-interest loans for large projects. Bond proceeds can only be used to acquire land, building and equipment. Working capital and inventory are not eligible for this type of financing. These bonds are generally used when financing of $1 million and higher is required.

These bonds are issued by county or state agencies and purchased by private parties. The borrower is responsible for paying the principal, interest, and other costs of the bonds paid solely by the beneficiary company. In order to participate in this program, either as the borrower or bond purchaser, a company may not have participated as an owner or principal user in any tax-exempt financing totaling more than $40 million.

IDRBs may finance up to 100 percent of project costs, with loans up to $10 million for tax-exempt bonds, and no limit if the bond is taxable. Because of the cost of administrating these bonds, they are best for projects valued at $1 million or more. Interest rates on IDRBs may be fixed or variable, and maturities can range from five to 30 years.

Who Can Apply for an SBA Loan?

2010-08-23T14:14:00.003+02:00

Before becoming eligible for an SBA loan, first you must have been turned down for a conventional loan. Most small businesses that meet this requirement are eligible for SBA loans, although some types of businesses are ineligible. Eligibility generally depends on four factors: 1) the type of business, 2) the size of the business, 3) the use of loan funds, and 4) special circumstances.

Type of Business
The requirements in this category are quite broad. The business must be a for-profit enterprise. It must engage in or must propose to do business in the United States or its possessions. The business owner or loan applicant must have a reasonable financial investment in the business. And the owner must invest other financial resources, including personal assets, before applying for an SBA loan.

Size of Business
The Small Business Act defines an eligible small business as one that is independently owned and operated — and not dominant in its industry. The Act also states that the definition of small business varies from one industry to another. However, most businesses qualify as "small" under the SBA size guidelines.

Use of Loan Funds
Business owners may use SBA loans for a number of business activities, including purchase of real estate; construction, renovation, or leasehold improvements; acquisition of furniture, fixtures, machinery, and equipment; purchase of inventory; and working capital.

A business owner cannot use an SBA loan:

To purchase real estate where the participant has issued a forward commitment to the developer or where the real estate will be held primarily for investment purposes.
To finance floor plan needs.
To make payments to owners or to pay delinquent withholding taxes.
To pay existing debt, unless it can be shown that the refinancing will benefit the small business and that the need to refinance is not indicative of poor management.

Special Circumstances
Certain other requirements and restrictions apply to businesses and applicants in the following categories:

Franchises
Recreational facilities and clubs
Farms and agriculture
Fishing vessels
Medical facilities
Alter egos
Change of ownership
Aliens
Probation or parole
Academic schools

For more information on these "special circumstances" rules, consult the SBA special circumstances guidelines.

Ineligible Businesses
Certain types of businesses are explicitly ineligible for SBA loans. Ineligible businesses are those characterized by any of the following:

Real estate investment and other speculative activities
Lending activities
Pyramid sales plans
Illegal activities
Gambling activities
Charitable, religious, or certain other nonprofit institutions
Businesses with an owner who is on parole

Get started by reading How to Apply for an SBA Loan. Not sure if you meet the requirements for an SBA loan? Check out SBA Key Loan Requirements to see if you qualify.

Adapted from the U.S. Small Business Administration Web site.

Finding an SBA Office and SBA Lenders Near You

2010-08-23T14:14:00.000+02:00

Small Business Development Centers are administered by the Small Business Administration and provide management assistance to small business owners. They offer one-stop assistance to small businesses and individuals in the form of counseling, training, and technical assistance.

The SBDC program is a cooperative effort pulling together the resources of the private sector, the academic community, and federal, state, and local governments.

There are now 63 SBDCs, with at least one in every state as well as offices in the District of Columbia, Guam, Puerto Rico, Samoa, and the U.S. Virgin Islands. Each of the centers tailors its assistance to the local community and the needs of individual clients while working in cooperation with the local SBA district offices.

Together with an SBA Certified Development Company, the SBDCs can help you prepare your SBA loan application or assist you with any other questions about the SBA. Anyone who is interested in starting a small business or in expanding an already existing business is eligible to use the services of an SBDC.

See a list of SBDCs in your area.

The SBA provides a list of its local regional, district, and disaster field offices. You can also learn about any of the SBA-guaranteed loan programs on its website, or call 800-8ASK-SBA for more information.

Must-Have Items for Business Travelers

2010-08-23T14:12:00.002+02:00

So you've just landed the job of your dreams, one that comes with a great salary and a corner office with a downtown view. But don't get too comfortable, for along with this new position comes travel -- lots of travel. That tiny airplane seat will become your new, temporary workspace and home in the sky, and many of the comforts and amenities you take for granted on the ground will be lost.

Take into consideration purchasing all or some of the items below (depending on your needs) to ensure your many long-haul flights are both productive and restful:

Noise-canceling headphones. The number one must-have item for those who are frequently in the air. Bose's QuietComfort headphones are some of the most popular on the market. They're lightweight and easily compactable, and were designed specifically for airline travel. These headphones electronically identify and cancel out all the pesky, unwanted noise happening around you (chatter, crying babies, the plane's engine). They can also be used to listen to music or the audio track from the in-flight movie.
USB flash memory drive. Extremely important for those who will be cranking out new work on the laptop they've got perched on their foldout food service tray. Determine what your document storage capacity needs are before purchasing one; prices will vary greatly depending on this. Also, go for one that is as compact as possible. Many USB flash memory drive devices can now fit on your keychain (ones this small and innocuous also reduce the possibility of theft).
Wireless mouse. For those who need to do a lot of scrolling and dragging, a wireless mouse should be at the top of your portable technology wish list. Try to find one that offers four-way scrolling so you can scroll side to side in addition to up and down. In addition, look into purchasing one that is ergonomically designed for maximum arm and wrist comfort, as well as one with a battery life of up to six months.
iGo charger. These handy chargers supply continuous energy to laptops, which can suck up a lot of juice. Not only will it keep your laptop charged while working, it will also keep it powered up when performing an action that requires an extra amount of energy, such as watching a DVD. Be sure you purchase an iGo that has two cords, one for regular wall outlets and one for power-ready airline seats. Also, look for one that can charge your other electronic devices, such as your cell phone or MP3 player. Visit the iGo Web site online for more information.
Travel pillow. If you're taking a red-eye and really need to catch some sleep, be sure to bring a U- or L-shaped neck pillow on the flight. These pillows cradle your neck and head in a way that minimizes discomfort from sleeping in an upright position, and are also handy when you simply need to take a breather from working (they reduce built-up tension and soreness in the neck and shoulders). Go for one that either has memory foam or that's inflatable, in order to maximize your carry-on baggage space. It's also a good idea to have an eye mask handy for blocking out unnecessary light when trying to catch some in-flight z's.
Laptop carrying case. An ideal laptop case should come equipped with some kind of an air protection system or protective sleeve that will guard the laptop against bumps or accidental drops, which are sure to happen when traveling. Purchase one that offers plenty of room for additional items such as your cell phone, PDA, and adapter cords.

Be sure to stay safe when traveling, too. Read Business Travel Safety Tips for some helpful advice on how to protect yourself -- and your equipment -- while on the road. Also, be sure to check out Business Travel and Expense Reporting to ensure that all your business travel expenses are organized and accounted for.

Bank Loans for Small Businesses

2010-08-23T14:11:00.000+02:00

Traditionally, banks are more conservative with their investment dollars. Unlike many venture capitalists or angel investors, they are far more likely to approve a loan for an established business over a startup or emerging company. This is largely due to the fact that they are investing the money of their depositors.

However, thanks to government agencies such as the Small Business Administration (SBA), which work with many banks, small business owners can get business loans from banks with a strong business plan and well-prepared business loan request. Moreover, banks are more likely to give modest-sized loans, whereas venture capitalists are looking for much larger deals.

First and foremost, prior to approaching a bank, you should have all your key documents in order, starting with a solid business plan. You will also need to have the most recent financial statements available, projections for the business (this is typically in the business plan), and a repayment plan, plus collateral. Collateral may include:

Hard goods such as equipment;

Real estate;

Stocks or bonds;

Other personal assets;

Personal guarantees.

Banks also want to know that you're making your own investment in the business. A bank is more likely to approve a loan if (pending a solid business plan) it sees that the owners are investing a good percentage of the necessary startup capital into the business.

To maximize your chances of receiving approval on a business loan from a bank, it's wise to look at the situation from the standpoint of the lender. A lender wants to know:

Exactly how this business will operate and why it's expected to make money;

Exactly how the money will be used;

How you plan to repay the loan and over what time frame;

That you're willing to take a significant financial risk in the business;

That you're responsible and can manage this business;

Who else is involved in management or operations, and that they will also be responsible for the proper use of the money from the loan.

The smaller the business, the more closely the individual behind it will be evaluated. Most small businesses, in the forms of sole proprietorships or partnerships, are closely tied to the experience, know-how, and overall character of the owner(s). Therefore, you need to make sure you get your own financial records in order before asking for a bank (or any lender, for that matter) for money to start a business. A solid personal credit rating is also very important, since a small business is typically an extension of the individual who starts it.

The ABCs of Effective Advertising

2010-08-23T14:06:00.000+02:00

IF you want your advertising to resonate with prospective customers, it's essential that you appeal to their emotions in some way. Fail to do this and you might as well be throwing money out the window.

Effective ads sell your message, company, or product. They may or may not be creative, but if you can package some good creative in with a message that appeals to a strong need or want within your target audience, it will certainly help. Effective ads are convincing. They engage prospects as if you were speaking directly to them, and when you succeed in making this connection your prospective customer's thoughts will become your brand itself. Be sure to check out Advertising Basics for Small Businesses for some pointers.

Even if you achieve the enviable position of having a provocative ad execution with an effective message, your work is far from over. In fact, in the world of advertising, your work is never over. Continually exposing your customers, prospective customers, and suspects (those who aren't currently interested in your company or product, but who might be shortly) to the same messaging over a prolonged period of time will lead to stagnation. Eventually, you'll fail not only to inspire brand loyalty, but also to retain it. Even Coke, one of the world's most valuable brands, reinvents its messaging and image when it decides they have begun to lose effectiveness.

Creating an Effective Ad Campaign
So how do you create an effective ad campaign? One way is to go with the single benefit methodology, which directly links your brand to a single benefit. If your deodorant lasts longer, tell the world about it. The characterization or personification angle involves creating a character that expresses the product's benefits or personality. The narrative methodology involves developing a narrative story with episodes describing a problem and its outcome.

Again, aim to produce advertising that states not only a product's facts, but that also appeals to emotions. Using the deodorant example, you might accomplish this by playing off your customers' fears of having body odor at an inopportune time.

Although a calculated and well thought out advertising campaign may do a good job of creating brand awareness, it may fall short of inducing product preference or, the end goal, purchase. For this reason, don't rely on advertising as a complete solution. Instead, support it with marketing and sales promotion to help trigger a purchase.

Apply the following criteria to test the effectiveness of your advertising message:

The ad intelligibly and simply states a single message.
The ad evokes a specific, acute emotion.
The ad is being presented in a space where it will likely be noticed.
The overriding message is clearly evident.

inally, understand that even a carefully thought out, highly creative campaign with a strong, concise message will fall flat if the product you're advertising just isn't any good. Be honest with yourself on this one. Solicit existing customer feedback. Then decide whether or not it would be a wiser investment if you were to spend the money and time on first improving your product. The better your product is, the less time and money you'll need to spend on traditional advertising. After all, word of mouth advertising is free, and it's often what ultimately makes or breaks a product, brand, or company.

Analysis Tools for E-Commerce Sites

2010-08-23T14:03:00.000+02:00

Your Web site offers products for sale directly through the site, handles shopping carts, payments, order tracking, fulfillment, customer service, and all that. At the basic level, your site could be an online catalog, organizing products and descriptions in a database and giving customers a way to buy them. At the top end, you offer personalized pages, wish lists, shopping agents, and product recommendations.

How do you know whether your site incites shoppers to buy more or turns them off? You can get a Web analytics program that offers the basic features for tracking users through your site. For a more specialized analysis, you can also get an analytics package with features tailored to analyzing and fixing e-commerce sites. Look for these features when shopping for one:

Campaign Analysis: You'll need a solid grasp of the return on investment provided by each individual element of your marketing plan, with the initial buy tied to ultimate sales to give you the most granular information.
Market Segmentation: Even better than general campaign analysis, this lets you view your marketing results by user profile. Finding the most desirable behaviors or demographics helps you fine-tune your marketing message.
Conversion Funnel: The checkout process illustrates the classic conversion funnel. You'll put this tool to good use by minimizing drop-out.
Form Abandonment: Much of your conversion drop-out occurs when you begin to gather personal info about users, a sort of "put up or shut up" stage that requires a huge increase in commitment level from your customers. Encourage them through this stage by eliminating unnecessary fields.
Predictive Marketing and Systems Integration: To propel your site into the highest level of personalization, look for analytics software with a predictive component or integration between pattern analysis tools and your content management system. If you're unclear on the process of connecting your systems, talk to potential vendors about the options available. In the end, you may be investing a bit more for the feature, but for sites with high volume and inventory, your return should more than justify the cost.

AllBusiness.com Readers Rate Accounts Payable/Receivable Software

2010-08-23T14:01:00.000+02:00

We surveyed the readers of AllBusiness.com in 2006 to find out which accounts receivable/accounts payable systems are used and how highly they are rated. This was not a scientific poll, but a reader survey, open to anyone who chose to respond. Here are the results, culled from 232 responses:

1. How Do You Manage Your AP/AR?

More than four out of every 10 readers of AllBusiness.com who answered our survey manage AR/AP in-house with software. About one in every five still uses a manual AR/AP system, more than we expected. Relatively few, 1 in 20, outsource the management of AR/AP.

In-house, using software: 41 percent
In-house, using a manual system: 22 percent
Don't know: 20 percent
Outsource: 5 percent

2. Which Computerized AP/AR Program Do You Use?

Not all respondents use a computerized system, but among those who do the majority use one of two popular choices: Intuit's QuickBooks/Quicken small business accounting or Microsoft's Excel spreadsheet. Each choice was tied at 29 percent of readers surveyed. Sage Software, which owns a range of accounting software brands, including Peachtree, MAS, and ACCPAC, was a distant third choice used by 6 percent.

Intuit QuickBooks, Quicken: 29 percent
Microsoft Excel: 29 percent
Don't Know: 14 percent
Other: 12 percent
Sage (including Peachtree, MAS, ACCPAC, etc.): 6 percent
CheckMark MultiLedger: 3 percent
Microsoft Dynamics (including Great Plains, Navision, Axapta, Solomon): 3 percent
Cougar Mountain Accounting: 1 percent
NetSuite: 1 percent
Oracle: 1 percent

3. Are You Satisfied with the Quality?

For the remaining questions, we analyzed only the three most widely used systems. The AR/AP solutions we didn't include were used by comparatively few readers surveyed.

Readers were asked to rate quality on a scale of 1 through 5, where 5 represents the best. Users of Sage Software products were the most satisfied with the quality, rating them at 3.8, while Microsoft Excel was lowest with a still respectable rating of 3.3.

Sage (including Peachtree, MAS, ACCPAC, etc.): 3.8
Intuit QuickBooks, Quicken: 3.5
Microsoft Excel: 3.3

4. Is It Worth the Money?

Sage (including Peachtree, MAS, ACCPAC, etc.): 3.8
Intuit QuickBooks, Quicken: 3.5
Microsoft Excel: 3.3

4. Is It Worth the Money?

Readers were asked to rate the price/value ratio of Sage, Intuit, and Excel on a scale of 1 through 5, where 5 represents the best. All three ranked relatively high, in a tight range, between 3.7 and 3.8.

Microsoft Excel: 3.8
Intuit QuickBooks, Quicken: 3.7
Sage (including Peachtree, MAS, ACCPAC, etc.): 3.7

5. How Is the Support?

Readers were asked to rate support for the top three programs on a scale of 1 through 5, where 5 represents the best. Microsoft Excel and Sage Software tied for top honors, while Intuit's support was a little less highly regarded.

Microsoft Excel: 3.8
Sage (including Peachtree, MAS, ACCPAC, etc.): 3.8
Intuit QuickBooks, Quicken: 3.3

6. Would You Buy It Again?

Readers were asked to rate whether they would buy one of the top three programs again, on a scale of 1 through 5. Sage Software earned the top score, followed by Intuit's products and Microsoft's spreadsheet.

Sage (including Peachtree, MAS, ACCPAC, etc.): 4.2
Intuit QuickBooks, Quicken: 3.8
Microsoft Excel: 3.6

Listen for Your Prospect's Gap

2010-08-23T13:54:00.000+02:00

By Keith Rosen, MCC
The Executive Sales Coach TM

When you listen to a prospect, what exactly are you listening for? You certainly want to hear the gap, that which is missing. After all, you are presenting your solution to them, which fills their void, gap, or problem. So sell the gap! It is your solution, product, or service that becomes the bridge, taking the prospect from their present state to their desired state.

Keep in mind that the gap can differ from what they want or need. The client himself may not even be aware of it. If you can identify this gap, you can then bridge it with the right solution.

A client of mine hired me to train his company's sales team. As I explored the business and staff, I discovered that they were experiencing a large amount of turnover. There were many inconsistencies and breakdowns in their recruiting and hiring process. There was no documented process for staff members and administrators to follow consistently in order to attract the best talent, to screen candidates, or to retain new hires.

I found that they were experiencing a 35 percent attrition rate. I proposed a sales training program and also a more in depth solution to developing and strengthening their recruiting and retention strategy. In this way, they could reduce the amount of attrition and complement the training.

The result was a comprehensive recruitment and retention strategy which ultimately reduced turnover within their company dramatically. That was the gap that I was able to fill. Simply by listening deeper, I was able to uncover their true needs, their core challenges, and where their breakdown began. It was what they weren't saying that I listened for: the challenges, needs, and points of pain that they did not outwardly articulate.

There is a symbiotic relationship between the way we listen and the questions we ask. For example, if you're already listening from a certain place or through a particular filter, then you are not going to ask the questions that will create new selling opportunities.

After all, if you listen from the past and react based on past experiences or future expectations, you will continue to create the same, unchanged results.

About Keith Rosen, MCC -- The Executive Sales Coach
Keith Rosen is the executive sales coach that top corporations, executives, and sales professionals call first. As an engaging speaker, Master Coach, and well-known author of many books and articles, Keith is one of the foremost authorities on coaching people to achieve positive change in their attitude, behavior, and results. For his work as a pioneer and leader in the coaching profession, Inc. magazine and Fast Company named Keith one of the five most respected and influential executive coaches in the country.

If you're ready for better results quickly, contact Keith about personal or team coaching and training at 1-888-262-2450 or e-mail info@profitbuilders.com. Visit Keith Rosen online at Profit Builders and be sure to sign up for his free newsletter The Winners Path.

The Franchise Buying Rules Have Changed

2010-08-23T13:52:00.000+02:00

It used to be that franchisors would advertise wisely, talk only with prospects who showed a high level of interest, and then award the franchise to the most able. That still happens today, but the rules of the game have changed.

Franchisors (the sellers) are used to seeking out qualified prospects (the buyers). And while they still do, the World Wide Web has changed the game considerably. Now savvy prospects are seeking out the best-qualified franchisors. You might say they have the upper hand because they’re shopping intentionally.

Here’s how it goes: They shop the Web, find the franchisors that seem to have what they want, and then selectively communicate with those franchisors. Then they narrow their search to three or more franchisors, asking something along the lines of, “Here’s what I need and here’s what I want. What can you do for me?”

The prospects then choose the one franchisor that offers them the best fit. In essence, the buyers decide who they will purchase from.

The Intention Economy

Doc Searles, a savvy technology watcher, says this change in the buyer-seller relationship is a result of something that he calls the Intention Economy. “Buyers of the future,” he says, “will pursue sellers, rather than the other way around.”

But the truth is this: the Intention Economy is no longer a future trend; it is already alive in the franchising world. So what does that mean for franchise sales professionals as they adapt to this economy?

It means that now, more than ever, a successful sales process is more about making a personal connection than ever. And the sales professional who wins is the one that the prospect clicks with and trusts the most. While your franchisees are buying your concept, in the end they are just as surely buying your people.

Measuring Your Click IQ

To get an idea of how your franchise sales team is doing with each prospect, see how many of these statements they can answer yes to:

Building relationships is my number one objective with a prospect, and I spend quality time on it.
I strive to create a specific connection with a prospect in the first 15 minutes of the conversation.
I use that connection to build a strong foundation for my ongoing relationship with that prospect.
I strive to create a long-term relationship based on trust.
It used to be that franchisors would advertise wisely, talk only with prospects who showed a high level of interest, and then award the franchise to the most able. That still happens today, but the rules of the game have changed.
Franchisors (the sellers) are used to seeking out qualified prospects (the buyers). And while they still do, the World Wide Web has changed the game considerably. Now savvy prospects are seeking out the best-qualified franchisors. You might say they have the upper hand because they’re shopping intentionally.
Here’s how it goes: They shop the Web, find the franchisors that seem to have what they want, and then selectively communicate with those franchisors. Then they narrow their search to three or more franchisors, asking something along the lines of, “Here’s what I need and here’s what I want. What can you do for me?”
The prospects then choose the one franchisor that offers them the best fit. In essence, the buyers decide who they will purchase from.
The Intention Economy
Doc Searles, a savvy technology watcher, says this change in the buyer-seller relationship is a result of something that he calls the Intention Economy. “Buyers of the future,” he says, “will pursue sellers, rather than the other way around.”
But the truth is this: the Intention Economy is no longer a future trend; it is already alive in the franchising world. So what does that mean for franchise sales professionals as they adapt to this economy?
It means that now, more than ever, a successful sales process is more about making a personal connection than ever. And the sales professional who wins is the one that the prospect clicks with and trusts the most. While your franchisees are buying your concept, in the end they are just as surely buying your people.
Measuring Your Click IQ
To get an idea of how your franchise sales team is doing with each prospect, see how many of these statements they can answer yes to:
- Building relationships is my number one objective with a prospect, and I spend quality time on it.
- I strive to create a specific connection with a prospect in the first 15 minutes of the conversation.
- I use that connection to build a strong foundation for my ongoing relationship with that prospect.
- I strive to create a long-term relationship based on trust.
- I act as a strong partner as we move through the ups and downs of the sales process.
- I confront problems with ease.
- I use problems to strengthen the relationship.
- I know that the relationship we have developed will get us through the issues that are sure to crop up.
- I follow up consistently and positively.
- I close cleanly and surely.
The more "yes" answers you have, the higher your win potential!
Flo Schell, EdM, is former vice president of Franchise Development for Sylvan Learning Systems Inc. and founder of Franchise Coaching Systems. She has also written a book, Stop Selling...Start Clicking!, that explains her successful sales process. To learn more about the services offered by Franchise Coaching Systems, visit FloSchell.com.

Stop Selling... Start Clicking!

2010-08-23T13:50:00.000+02:00

Small business owners, imagine taking a hidden skill that you already have and turning it into a launch pad for successful sales.

Do you sometimes feel a "spark" when you're talking to someone for the first time? What if you could create that spark consistently, and have it lead to a closer connection with that person? What if you could do that with each and every prospect in your pipeline?

That spark is what I call "The Magic Click," and it can provide a solid, trustworthy foundation you can use to boost your business beyond what you ever thought possible.

Sales Is a Process

The dictionary defines sales as a one-time event where money is exchanged — but we all know that there is more to it than that. In fact, selling is a process that starts with solid preparation, progresses to a sincere connection, and culminates through diligent follow-up.

In the work I do with my clients and in my book, Stop Selling...Start Clicking!, I outline a 10-step sales model that starts with preparation:

As the sales professional, you first get clear on who you are and what you have to offer.
You'll list each problem that your business solves so that you can easily tell prospects what you do.
And then you'll create a marketing image for your prospects to see and hear.

When your Preparation Phase is complete, you'll move on to The Connection Phase. In this phase:

You'll be meeting and greeting potential customers everywhere.
You'll also be crafting what I call your "Care and Share" so that you're completely comfortable with what to say to others at networking events. And please take note, the Care and Share model works for all personality types. You do not need to be an extrovert to excel at connecting with others.

Once you meet a potential customer, you will have your chance to really connect and create The Magic Click — that wonderful spark that occurs when two people are talking for the first time and find something that they can connect through. Perhaps it's a sports team they both follow, or a vacation spot they both enjoy, or a region of the country they both grew up in.

When you feel The Magic Click you'll know it. Your ears will perk up, your heart may race a bit, and you may feel a level of excitement that makes you want to know this person better.

Listening for the Click

Small business owners, imagine taking a hidden skill that you already have and turning it into a launch pad for successful sales.

That spark is what I call "The Magic Click," and it can provide a solid, trustworthy foundation you can use to boost your business beyond what you ever thought possible.

Sales Is a Process

In the work I do with my clients and in my book, Stop Selling...Start Clicking!, I outline a 10-step sales model that starts with preparation:

As the sales professional, you first get clear on who you are and what you have to offer.
You'll list each problem that your business solves so that you can easily tell prospects what you do.
And then you'll create a marketing image for your prospects to see and hear.

When your Preparation Phase is complete, you'll move on to The Connection Phase. In this phase:

You'll be meeting and greeting potential customers everywhere.
You'll also be crafting what I call your "Care and Share" so that you're completely comfortable with what to say to others at networking events. And please take note, the Care and Share model works for all personality types. You do not need to be an extrovert to excel at connecting with others.

When you feel The Magic Click you'll know it. Your ears will perk up, your heart may race a bit, and you may feel a level of excitement that makes you want to know this person better.

Listening for the Click

Creating The Magic Click is at the core of my heart-based sales model. Here's an example of how you might create such a click by telephone:

Molly, a sales professional: Hello James, so good to meet you. Where are you calling in from today?

James: Hi. Good to meet you too. I'm calling from Florida.

Molly: Oh, where about in Florida?

James: Vero Beach.

Molly: Oh, I just love Vero Beach. Is that little taco shop still on the corner of Main Street?

James: You know it is! They have the best tacos in town.

Molly: Well, I certainly look forward to meeting you in person soon. Maybe we can enjoy some tacos together!

Molly has created The Magic Click!

Taking It to the Next Level

This click will set the foundation for a strong relationship. As a sales professional, Molly will build on this connection and use it to take the prospect to the next step.

Once a connection has been made, she will move into what I call the "Commitment" and then "Living Together" phases:

In the Living Together phase, the sales professional will be deepening the relationship and strengthening it. This means treating the customer with integrity, empathy, and openness. It also means tackling tough issues with care, treating the customer well at every opportunity, and allowing the customer to leave the relationship with clarity and closure.

Finally, when a customer relationship does end, your job is to create a soft landing. Honor the customer for the time they've spent with you. Stay in touch for a long, long time. And know that when that customer needs you again, you'll be easy to access and ready to serve.

Flo Schell, EdM, is former vice president of Franchise Development for Sylvan Learning Systems Inc. and founder of Franchise Coaching Systems. She has also written a book, Stop Selling...Start Clicking!, that explains her successful sales process. To learn more about the services offered by Franchise Coaching Systems, visit FloSchell.com.

Office Management Basics

2010-08-23T13:48:00.000+02:00

In order to successfully manage an office, regardless of your company's product or even your customer base, you should adhere to some basic guidelines. Here are six areas that you should keep in mind:

Employment and human resources. It's critical to have an employment policy in place. A policy manual gives you a blueprint for the way the company approaches employment. It spells out rules in a way that can prevent later problems. (Imagine working for an organization that came to a standstill each time an employment issue arose.) In addition, you'll want to include a training and development program under this area. Even if your training and development program is modest, you still need to consider building this into your policy. Read Ten Employee Training Tips to learn how to implement an effective training program.
Project management. Keeping track of projects is critical to the successful completion of important tasks and represents an essential piece of documentation. Knowing when things have to be completed and by whom gives everyone a clear idea of what's ahead. Deadlines are less likely to be missed and people are more likely to know their roles. Plus, each project, through careful documentation, can become a useful case study for future assignments.
Equipment and furniture requirements. You don't need every piece of office equipment out there to run a smooth operation. But you do need certain products that are going to optimize people's performance. What you need and how much it will cost are simple but important considerations. Check out What Office Equipment Do I Need for My Business? for a good introduction. And what about software? Are you trying to achieve a paperless office? If not, do you know how you'll store certain documents? Answering these and other questions about equipment will help you to prepare for the growth of your office.
Inter- and intra-office communications. For many small businesses, the responsibility for communication falls upon the office manager. Knowing how and when to communicate key information is vital to successful office management. E-mail blasts, posted instructions at the copier, and weekly staff meetings are just a few of the types of communication that occur within a busy office. Having a communication plan that everyone can adhere to will increase an office's productivity and ensure that information is disseminated clearly and quickly.
Conflict resolution. Conflicts are inevitable. Knowing how to handle them properly, however, will make life easier. Whether you have a formal policy or rely on your own wits, you need to prepare yourself for a wide variety of disagreements. Even with an employment manual, such issues as equitable distribution of work, pay rates, and job descriptions often arise in a company. Ignoring a conflict or waiting for it to dissipate is never the right solution. Having a plan or a policy for conflict resolution will help everyone navigate through a disagreement in a professional manner.
The company and its people. Knowing how to run an office must include understanding the company and its people. Knowing the product line and how it fulfills a need is just as important as ordering more toner for the printer. If you don't understand your company's mission, you won't know how best to support its various functions. The same goes for people — knowing employees' roles, where they fit into the big picture, and how they operate will help you manage the office so that every function supports the people tasked with getting things done. The more you know about how the company works and what people are doing to build business, fulfill customer requests, meet deadlines, and otherwise perform their duties, the more successful you'll be in creating and sustaining an environment that fosters success.

Make Your Manufacturing Supply Chain Greener

2010-08-23T13:47:00.000+02:00

As the demand for environmentally conscious products rises, manufacturers are moving to meet that demand with a variety of innovations in their supply chains, including the design of better and greener products that create less environmental waste.

A manufacturing supply chain involves every aspect of the manufacturing process, from the input and processing to the output and disposal. If you are manufacturing computers, for example, the input is all the component parts, and the processing is assembling these parts into a computer. The computer is your final output or product. Disposal can be for the material left over from the manufacturing process or disposal of the product itself at the end of its period of use.

The main challenge in making a manufacturing supply chain greener is to create it so that the waste from the manufacturing process is recycled and fed back into the input of another supply chain. When this happens it reduces the environmental and carbon footprint left by the company. This can also cut expenses, increase earnings, and help our planet by creating fewer pollutants and toxins that enter into the ecosystem.

To make your supply chains greener and reduce your environmental footprint, you need to create a sustainable supply chain. The following are some actions you can take:

Reuse and recycle your waste.
Reduce energy consumption.
Reduce your use of natural resources.

The conscious effort to implement a sustainable manufacturing supply chain begins at the design stage. This is the point where you design products that are recyclable, consume less energy, and make better use of natural resources. Basically you are designing products and services that bring social, environmental, operational, and innovation excellence together as one.

As an example, computer maker Hewlett-Packard has designed parts that snap together, avoiding the need for toxic solvents and making the products easier to recycle. HP eliminated 30,000 cubic feet of polystyrene computer packaging and more than 6 million pounds of PVC packaging that was part of its inkjet printer business.

Another way to innovate your supply chain and to make it greener is to work with your supply chain partners. For example, let your suppliers know what you need from them. This often means knowing what chemicals and practices are used in the materials you are purchasing for processing. You may encounter some initial resistance, but the idea is to find suppliers that can help you in your endeavor to become greener. What you input into your process has a great effect on the processing and output stages of your supply chain.

Innovations in processing have reduced consumption of energy and bolstered maximum usage of natural resources. Engineers have begun designing systems that require less power to operate. For instance, a large European company redesigned its processing system by using fatter pipes and as a result reduced its energy consumption by 92 percent. Such efforts not only make processing greener but also more cost effective.

In their book, Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Daniel C. Esty and Andrew S. Winston explain how everything coming out of a plant is either product, byproduct (which can be reused or sold), or waste. Waste that is not biodegradable harms the environment and squanders manufacturing materials that could possibly be reused.

The green challenge is to create a manufacturing supply chain that sustains itself without large amounts of material input and processing waste. By making the chain’s use of materials more efficient and by designing products that can be used and recycled, you can achieve the goal of becoming greener.

How Sierra Nevada Brewery Went Green

2010-08-23T13:45:00.002+02:00

Since its first batch of beer in 1980, Sierra Nevada Brewery has combined a quality product with green manufacturing concepts. The result has made it the 10th largest brewer in the United States and an excellent model for how well sustainability works in practice. The greening of Sierra Nevada Brewery provides a blueprint for other manufacturers wanting to be both successful and green.

A commitment to sustainability has always been a part of the award-winning brewery's overall business plan. Owner Ken Grossman has created a manufacturing supply chain where each part is sustainable within itself, but each part also contributes to the sustainability of the other parts and the whole of the operation. The following are the basic parts:

Input: The raw materials and supplies that come into a business
Processing: How raw materials and supplies are processed into the final product and service
Waste: How wastes are reused, recycled, and disposed of, and their overall effect on the environment

Sierra Nevada, based in Chico, California, uses green suppliers whenever possible. It buys materials that are biodegradable and recyclable. These include malt, yeast, hops, water, CO2, glass, pallets, cardboard, stretch wrap, and office paper. For example, its carbon dioxide recovery plant recovers CO2 gas from the fermentation process, purifies it, and reuses it in the brewing process. This creates a purer quality of CO2 than what is available from any of its commercial suppliers.

The processing part of the brewery is increasingly being operated by alternative energy sources. The brewery is installing one of the largest privately owned solar systems in the country. Located on three acres, the 500-kilowatt elevated tracking solar system helps Sierra Nevada meet its goals for clean energy.

Besides solar, the brewery also has one of the largest cogeneration fuel cell power plants in the United States. Its direct fuel cell technology provides the company a highly efficient energy source that has almost no environment footprint. This not only allows the company to fulfill its own energy needs but provides the ability to sell surplus energy back to the energy grid.

Dealing with waste is an essential part of any manufacturing process. The Sierra Nevada Brewery has installed a wastewater treatment facility that removes 95 percent of the load before it is released into the community sewer system. This once again reduces the environmental footprint.

The organic waste, such as the grains, yeasts, and hops, are recycled and reused as animal feed. In addition, the brewery uses it in its experimental program for growing its own organic hops. This ensures both the quality of the product and the ability to recycle the waste back into the supply chain. This is a key ingredient in sustainability.

Sierra Nevada’s ales are consistently rated as one of the best in the expanding business of domestic microbreweries. As a pioneer in the field, it uses the finest quality malted barley, whole hop flowers, brewer’s yeast, and pure water combined with traditional brewing techniques to produce a variety of brews. These include its award-winning pale ale, porter, stout, and barleywine, along with several types of lagers. One of these, Sierra Nevada Summerfest, won the gold medal in the commercial craft brewing competition at the 2007 California State Fair.

Sierra Nevada Brewery shows that a quality product coupled with a green manufacturing supply chain can translate into a highly successful business and that you can save money and the planet at the same time.

4 Ways Avatars Can Help Your Business

2010-08-19T21:12:00.001+02:00

With James Cameron’s highly anticipated sci-fi movie Avatar opening this weekend, we had to find out if avatars can help businesses in the real world as much as they help humans in fictitious alien worlds.

Unlike the 10-foot tall blue avatars in Cameron’s movie, Web site avatars aren’t science fiction; they’re “real” virtual agents that provide customer service worldwide. These self-service software applications (which can appear as an animation or a picture of a real person) are intelligent, engaging personalities that help Internet customers find solutions faster and more efficiently.

The Michelin Man avatar, for example, not only answers questions about Michelin tires, but can also engage in conversations about how old he is and whether he has a girlfriend.

Once a customer types in a question, avatars use context computing to answer the question and anticipate what else the customer might need (see “Avatars are more engaging” below). Context computing refers to the software application’s ability to gather as much information about a user based on their location, account information, and other environmental factors, and then intelligently apply this to deliver personal, relevant information without the user having to dig through endless Web pages to get their answer.

Just as Avatar is being touted as a breakthrough in filmmaking technology, avatar “virtual agents” are being touted as potential game-changers for businesses seeking a competitive edge. According to a recent report from Gartner Research, context-aware computing, such as avatars, increases customer intimacy, improves business processes, and provides better-targeted marketing. The report predicts that by 2015, applications that provide context-enriched information will be as influential in mobile customer services and relationships as search engines are to the Web. The report goes on to say that early adopters will have a competitive advantage and will find it easier to implement more sophisticated services in the future.

This leads to the obvious question: “Does my business site need an avatar?”

If your Web site handles a lot of customer questions that are unique to the user and can’t be answered through an FAQ or a general search, then avatar virtual agents can make a real difference in your Web site’s function.

“Companies implement us when they really want to take charge and assist customers in resolving their issues,” says Mark Gaydos, vice president of worldwide marketing for VirtuOz, a San Francisco-based company that creates avatars for major companies such as eBay, Michelin, PayPal, and H&R Block.

According to Gaydos, avatar virtual agents can help companies in the following four major ways.

Avatars are quicker than a live chat agent. Avatars can search for answers much faster than a live person can and are able to address an infinite number of customer queries. “Providing a virtual agent improves the customer experience, especially if you’re going to support tens of thousands of transactions a day,” says Gaydos. Avatars are not only faster, they’re also accurate. According to VirtuOz, its agents successfully respond to 80 percent of customer requests. If a request can’t be answered, the customer is

Avatars are quicker than a live chat agent. Avatars can search for answers much faster than a live person can and are able to address an infinite number of customer queries. “Providing a virtual agent improves the customer experience, especially if you’re going to support tens of thousands of transactions a day,” says Gaydos. Avatars are not only faster, they’re also accurate. According to VirtuOz, its agents successfully respond to 80 percent of customer requests. If a request can’t be answered, the customer is seamlessly passed to a live chat agent within the same window as the virtual agent. All previous conversations with the virtual agent are forwarded to the human agent so that the customer doesn’t have to repeat anything and the human agent can get to the point.
Avatars are more cost-effective. It costs money to employ customer service reps to operate live chats and call centers. It also costs money to lose customers who become frustrated and leave your Web site without answers. VirtuOz can implement a customized avatar and “teach” it your business rules for $50,000, plus ongoing fees that vary based on your company’s specific needs. Instead of employing five customer-service reps at $25,000 a year, you can buy one virtual agent to take their place.
Avatars are more engaging. Reading an FAQ section or using a Web site search tool leaves a huge gap in the intimate customer experience that creates loyal shoppers. These resources also lack the ability to answer user-specific questions that can’t be addressed in a general FAQ. For example, if a customer wants to know why their bill was so large last month, they won’t find the answer in a search engine.
“The beauty of a virtual agent is it can look specifically in your account to see what the differences are from month to month and suggest exactly why your bill is so large. If necessary, it can even ask if you’d like to change your plan and offer suggestions,” says Gaydos.
This begs the question, why doesn’t the customer just pick up the phone and ask a live customer service rep to look into their bill? The answer is simple, according to Gaydos. “People don’t want to talk to a live human,” he says.
If a customer can’t find answers on your site, they’ll leave feeling unhappy -- not only with your Web site, but with your company as well. A virtual agent eliminates this frustration by giving the customer what they want without having to place a phone call.
Avatars provide customer insight. Some avatars are able to capture conversations and auto-categorize them into customer trends. “Companies get a great deal of insight into the voice of the customer because they’re able to see what customers are having issues with,” says Gaydos.
Gaydos cites the example of a travel company that discovered people kept asking their VirtuOz avatar questions about booking tickets for pets. Once the issue was identified, the virtual agent was programmed to handle pet-related questions more effectively and a marketing campaign was launched targeting people traveling with pets.

All of these benefits are impressive, but just like the movie Avatar, avatar virtual agents have their critics as well. Avatar critics proclaim that behind the movie’s striking special effects lies a lackluster script. Could the same be said for avatar virtual agents? Even with an impressive 80 percent accuracy rate, 20 percent of customer queries still need to be passed on to live chat agents. Is it really worth the cost of replacing human reps?

Maybe not, but virtual agents can at least supplement the workload. Alaska Airlines has replaced all of its live chat agents with Jenn, a virtual assistant that fields nearly 7,000 questions a day. How many humans do you know who can answer 7,000 questions in one workday? Critics of the James Cameron blockbuster and virtual agents may have a point, but the fact remains: Both are pioneering a new way for people to use and enjoy technology.

4 Ways Avatars Can Help Your Business

2010-08-19T21:09:00.001+02:00

The Michelin Man avatar, for example, not only answers questions about Michelin tires, but can also engage in conversations about how old he is and whether he has a girlfriend.

This leads to the obvious question: “Does my business site need an avatar?”

According to Gaydos, avatar virtual agents can help companies in the following four major ways.

Avatars are quicker than a live chat agent. Avatars can search for answers much faster than a live person can and are able to address an infinite number of customer queries. “Providing a virtual agent improves the customer experience, especially if you’re going to support tens of thousands of transactions a day,” says Gaydos. Avatars are not only faster, they’re also accurate. According to VirtuOz, its agents successfully respond to 80 percent of customer requests. If a request can’t be answered, the customer is seamlessly passed to a live chat agent within the same window as the virtual agent. All previous conversations with the virtual agent are forwarded to the human agent so that the customer doesn’t have to repeat anything and the human agent can get to the point.
Avatars are more cost-effective. It costs money to employ customer service reps to operate live chats and call centers. It also costs money to lose customers who become frustrated and leave your Web site without answers. VirtuOz can implement a customized avatar and “teach” it your business rules for $50,000, plus ongoing fees that vary based on your company’s specific needs. Instead of employing five customer-service reps at $25,000 a year, you can buy one virtual agent to take their place.
Avatars are more engaging. Reading an FAQ section or using a Web site search tool leaves a huge gap in the intimate customer experience that creates loyal shoppers. These resources also lack the ability to answer user-specific questions that can’t be addressed in a general FAQ. For example, if a customer wants to know why their bill was so large last month, they won’t find the answer in a search engine.

“The beauty of a virtual agent is it can look specifically in your account to see what the differences are from month to month and suggest exactly why your bill is so large. If necessary, it can even ask if you’d like to change your plan and offer suggestions,” says Gaydos.
This begs the question, why doesn’t the customer just pick up the phone and ask a live customer service rep to look into their bill? The answer is simple, according to Gaydos. “People don’t want to talk to a live human,” he says.
If a customer can’t find answers on your site, they’ll leave feeling unhappy -- not only with your Web site, but with your company as well. A virtual agent eliminates this frustration by giving the customer what they want without having to place a phone call.
Avatars provide customer insight. Some avatars are able to capture conversations and auto-categorize them into customer trends. “Companies get a great deal of insight into the voice of the customer because they’re able to see what customers are having issues with,” says Gaydos.

Gaydos cites the example of a travel company that discovered people kept asking their VirtuOz avatar questions about booking tickets for pets. Once the issue was identified, the virtual agent was programmed to handle pet-related questions more effectively and a marketing campaign was launched targeting people traveling with pets.

Managing Inventory to Improve Cash Flow

2010-08-19T21:07:00.001+02:00

Nearly all of us in the finance world understand the importance of maintaining good cash flow to operate our businesses, but many business managers don’t know the importance that maintaining the right levels of the right inventory plays in managing cash flow. Even fewer managers really understand the principals of managing inventory to maximize cash performance.

In the cash flow cycle, you use the cash you have to buy inventory. When that inventory sells, it eventually turns back into cash. Maximizing the performance of your inventory can be help you obtain “best in class” management processes. Some metrics that are used to measure inventory performance are:

Inventory turnover – This is a measurement of how many times per year your inventory sells. There are several ways to measure this turnover. The method that gives you the truest picture of your entire inventory turnover is calculated by creating a ratio of your cost of goods sold (COGS) to the average inventory value at cost. The higher the ratio, the better your overall inventory performance is. Since inventory turnover varies dramatically by industry, you need to benchmark yours against your own industry data.
Percentage of order fill – A customer places an order and expects it to be filled 100 percent. The more items ordered that are not filled as ordered, the less satisfied your customer will be. For most industries achieving a 98 percent or greater fill rate is considered “best in class.”
Percentage of orders arriving on time – Customers not only want their orders filled at the highest possible percentage, they also want them delivered on time. Best in class performance requires a 98 percent or greater on time delivery. Sometimes, missing a deadline by even an hour can have dire consequences. I recently spoke with a business owner who supplied advertising novelty items to an event that was to occur on a specific date. The novelties were plastic sports water bottles printed with the event sponsor’s name, logo, and the date of the event on them. The bottles were being contract printed in China, the event was in Scotland, and the company with the order (and reputation) was in the U.S. Even though the company contracted with to supply the 10,000 water bottles did everything they could to get the order to the event on the correct date, the bottles arrived one day after the event occurred. The customer didn’t pay for them since they didn't arrived as promised; but the contract manufacturer had already been paid, so the distributor was left with the loss and 10,000 water bottles that couldn't be sold for salvage because of the organization’s trademark on them.
Customer order turnaround time – In most industries, time is a critical factor. When managing inventory, it's important to establish warehouse processes to constantly measure and improve order turnaround time so that you can get the order out the door within the specified time. It is important to balance turnaround time with quality control. If you are a manufacturer, it is more important to make your product right, rather than to make it right now. If you are a distributor, picking the correct parts off shelves and filling the order correctly is very important.

All of us in business today are feeling the pressure to do “more with less.” Managing inventory efficiently means you have to create an end-to-end process that is flexible and focuses on improving efficiency and performance. Other best in class strategies include making greater use of warehouse automation, and making better use of your warehouse space through optimization of existing storage mediums.

If you doubt that small companies can meet or beat the metrics I discuss above, consider this. I have a number of customers who supply products or services to Dell Computer’s custom manufactured desktop assembly lines in Austin Texas. Numerous times every day each Dell supplier (many are SMBs) must have a supply of their parts to the appropriate place on the assembly line within one hour of being ordered. If one supplier misses delivery by 30 minutes, it can mean as many as 2,000 PC assemblies get delayed, which costs Dell tens of thousands of dollars in lost time. Remarkably, because both Dell and each of their suppliers have perfected processes like those I describe above, down time caused by a supplier slip-up doesn’t happen very often.

You don’t have to develop a precision process resembling an intricate ballet for your company, but the more often you get everything right, the more profitable you will be and the happier your customer will be.

Managing Inventory to Improve Cash Flow

2010-08-19T21:05:00.001+02:00

Inventory turnover – This is a measurement of how many times per year your inventory sells. There are several ways to measure this turnover. The method that gives you the truest picture of your entire inventory turnover is calculated by creating a ratio of your cost of goods sold (COGS) to the average inventory value at cost. The higher the ratio, the better your overall inventory performance is. Since inventory turnover varies dramatically by industry, you need to benchmark yours against your own industry data.
Percentage of order fill – A customer places an order and expects it to be filled 100 percent. The more items ordered that are not filled as ordered, the less satisfied your customer will be. For most industries achieving a 98 percent or greater fill rate is considered “best in class.”
Percentage of orders arriving on time – Customers not only want their orders filled at the highest possible percentage, they also want them delivered on time. Best in class performance requires a 98 percent or greater on time delivery. Sometimes, missing a deadline by even an hour can have dire consequences. I recently spoke with a business owner who supplied advertising novelty items to an event that was to occur on a specific date. The novelties were plastic sports water bottles printed with the event sponsor’s name, logo, and the date of the event on them. The bottles were being contract printed in China, the event was in Scotland, and the company with the order (and reputation) was in the U.S. Even though the company contracted with to supply the 10,000 water bottles did everything they could to get the order to the event on the correct date, the bottles arrived one day after the event occurred. The customer didn’t pay for them since they didn't arrived as promised; but the contract manufacturer had already been paid, so the distributor was left with the loss and 10,000 water bottles that couldn't be sold for salvage because of the organization’s trademark on them.
Customer order turnaround time – In most industries, time is a critical factor. When managing inventory, it's important to establish warehouse processes to constantly measure and improve order turnaround time so that you can get the order out the door within the specified time. It is important to balance turnaround time with quality control. If you are a manufacturer, it is more important to make your product right, rather than to make it right now. If you are a distributor, picking the correct parts off shelves and filling the order correctly is very important.

Social Media for Small Business

2010-08-19T21:02:00.001+02:00

Social media is any kind of text, image, audio, or video content that is uploaded to the Internet and then accessed by and shared with others in the online community. Unlike traditional media such as newspaper, magazine, radio or TV advertisements, direct mail, scholarly articles and other vehicles that produce a one-way conversation, social media creates an interactive, two-way conversation between companies, customers and other stakeholders. Blogs, web forums, content sharing and networking sites such as Flicker, YouTube, Facebook, Twitter, and many others are examples of social media.

What can small business gain by using social media?

A particularly powerful benefit of participating in social media is getting and staying connected to customers. The online community provides a great opportunity to reach customers, keep them engaged, and be more responsive to their needs. Social media tools make it simple for current or potential customers to find, understand, and value your company's products and services. Specifically, using social media can help small businesses by:

    * Delivering powerful, world-wide marketing and public relations
      Social media communities provide an unparalleled opportunity to increase sales through the time-tested value of "word-of-mouth" marketing … recognized as probably the most powerful and effective forms of marketing. Let's say, for example, that a prospective customer of a bike shop is interested in buying a bicycle. He or she may casually consult with a friend that says "Oh, that place is a really great bike shop." The online world facilitates the creation and spread of this kind of word-of-mouth feedback and recommendations, and can create "buzz" from loyal customers world-wide, thereby broadening a company's reputation and sales opportunities to anyone sitting at a computer, all over the globe. Of course, it goes without saying that you have to have a great product or service to make that work. If you don't, then the same kind of feedback—but in a negative manner-- can do you in.
    * Leveling the "big budget" playing field
      Today, companies do not necessarily need a huge budget to to publicize news, products and offers or to gather reactions and feedback from customers. Through a well-planned, active web site offering timely and ongoing updates and interactions with current and potential customers, you can build a devoted, growing following for your business without a large budget. Success in promoting your business via social media then depends less on money and more on trategy, intelligence, creativity, hard work and, of course, offering a great product or service.

      For example, there is a small candy, coffee, and cheese shop in a beautiful Victorian home in Rochester, New York called Chocolate and Vines. It's owned by a young couple in their 20s. When they started their business, they put up a page on Twitter to develop a presence and get connected to customers. They promoted specials, offered wine tastings and publicized local events as a strategy to build a stronger loyal community than some giant chain bakery store in the same vicinity. They used social media to reduce the disadvantage of being a small business without a huge marketing budget.

    * Conducting free grassroots market research
      Companies, large and small, can use social media to follow what customers are saying for market research purposes. For example, a large phone carrier wanted to find out what innovative feature to offer in the next version of their cell phone. This company monitored sites frequented by teenagers and found a resounding
    *

    * Conducting free grassroots market research
      Companies, large and small, can use social media to follow what customers are saying for market research purposes. For example, a large phone carrier wanted to find out what innovative feature to offer in the next version of their cell phone. This company monitored sites frequented by teenagers and found a resounding complaint that teens were exceeding parental budgets for call and text time because they couldn't control their inbound calls and texts.

      This grass-roots conversation gave rise to the "friends and family" types of plans that offer unlimited in-bound calls and texting within the company network, providing a competitive advantage to that firm. Social media, then, can be a great source for companies to use to identify needs that are important to their customers that they otherwise might not have thought of.

    * Protecting your reputation
      Your company's reputation is an asset that needs to be protected! By regularly monitoring comments and opinions from customers across social media sites, companies can learn what customers like and, more importantly, what they don't like about doing business with you. Then, you can turn an obstacle into an opportunity by addressing these concerns, fixing the business issue, delighting the customer with how you responded to his or her experience, and building long-lasting loyalty in the process.
    * Keeping an eye on the competition
      Small businesses can gain powerful competitive intelligence by monitoring web sites and blogs of competitors, industry and trade associations, and other credible third-party sources to find out how your current or prospective customers compare you to your competition. You can find out what customers like or don't like about a competitive company and incorporate those insights into your business strategy.
    * Finding the right people to hire
      Recruiting is a definite benefit of active social media marketing. Putting a status update that you're hiring on your Facebook or Twitter page, or searching professional social media sites like LinkedIn and others can help companies proactively find prospects who are right for your company without incurring costly search consultants' fees.

      Finding the right people is not limited to hiring. Many firms use social media to find and engage in strategic partnerships and alliances with other small businesses. Small business web-based communities like AmexOPEN systematically provide those kinds of introductions within their membership. Much of social media revolves around connecting with the right people.

What should small businesses do to get started?

   1. Take the time to become social media-literate. Figure out the differences between the many different sites and be intentional about the ones you choose to participate in or monitor. Spend time with a variety of social media sites and networks.
   2. Set clear goals and allocate resources. Make sure you identify goals for engaging in social media and allocate the time and money it will take to establish and maintain your presence. Understand how social media fits into your larger marketing strategy. Decide whether you're going to hire someone to help or do it yourself. Putting information out there once and then neglecting it is worse than not doing anything at all.

   2.

      Finally, have a measure for success, whether it is percentage of new business, traffic to your own site, positive online press, or numbers of customer service issues resolved.

   3. Get and stay involved. My friend and colleague, Marina Wollberg has a website (see resources below) that teaches small business professionals how to use social media to promote their companies. She cites three levels of involvement for engagement in social media: observe, comment, create. First, read the right blogs, listen to the conversation and really understand what the issues are. Then, comment. Join the conversation. Become a known participant who shares valuable and relevant information and insights. Finally, write your own blog. Start your own conversations around issues that are central to your customers and industry. Remember: social media is all about two-way communication.
   4. Figure out how to build community to drive traffic to your products or services. Use your chosen form of social media to entice people to find you. Get the word out. Include your online information on all traditional forms of marketing materials so it's easy for people to find you. Be creative about giving away low-cost, high-value material to get people coming back.

      There are countless examples of small businesses putting social media to good use. One is a firm called Lion Brand Yarn, a 65-person person company in New York City founded in 1878. The firm produces podcasts, has a Facebook page with over 107,000 "fans" and a presence on Twitter that the company uses to offer free patterns and share instruction videos to drive traffic to its site. Lion Brand also participates in Raverly, a niche, user-driven social networking site for knitters, crocheters, designers, spinners, and weavers that provides excellent, targeted visibility within the "Ravelers" fibers community.

      Marketing VP Ilana Rabinowitz says that social media has helped build word-of-mouth marketing by allowing Lion Brand to speak one-on-one with customers. If Lion Brand finds out on Twitter or a blog about a problem a customer experienced with one of its products, the firm contacts the customer directly to offer Lion Brand's 100 percent satisfaction guarantee and discuss how to return or replace the product in question. Rabinowitz cites that customers are often surprised and delighted to hear quickly and directly from a real person that knows his or her name. As for impact on the bottom line, Rabinowitz says that Facebook traffic converts at a rate 40% higher than the average customer coming through a Google search.

Not engaging in social media is a missed opportunity. Done right, it forges strong connections with customers, helps small businesses learn what customers' value, and enables businesses to be even more responsive to those wants and needs to build customer satisfaction and loyalty. It also shows that you are a current, savvy marketer and a trusted expert resource. But remember, regardless of the media you choose, there is no substitute for a great product and impeccable customer service.

Here are some of my favorite blogs/experts on social media, as well as my most recent favorite blogger's post on how small business can use social media

Marina London: iwebu

http://iwebu.blogspot.com

Focus: Simple tips and strategies for boosting your business by using the social Web

Social media is any kind of text, image, audio, or video content that is uploaded to the Internet and then accessed by and shared with others in the online community. Unlike traditional media such as newspaper, magazine, radio or TV advertisements, direct mail, scholarly articles and other vehicles that produce a one-way conversation, social media creates an interactive, two-way conversation between companies, customers and other stakeholders. Blogs, web forums, content sharing and networking sites such as Flicker, YouTube, Facebook, Twitter, and many others are examples of social media.

What can small business gain by using social media?

A particularly powerful benefit of participating in social media is getting and staying connected to customers. The online community provides a great opportunity to reach customers, keep them engaged, and be more responsive to their needs. Social media tools make it simple for current or potential customers to find, understand, and value your company's products and services. Specifically, using social media can help small businesses by:

    * Delivering powerful, world-wide marketing and public relations
      Social media communities provide an unparalleled opportunity to increase sales through the time-tested value of "word-of-mouth" marketing … recognized as probably the most powerful and effective forms of marketing. Let's say, for example, that a prospective customer of a bike shop is interested in buying a bicycle. He or she may casually consult with a friend that says "Oh, that place is a really great bike shop." The online world facilitates the creation and spread of this kind of word-of-mouth feedback and recommendations, and can create "buzz" from loyal customers world-wide, thereby broadening a company's reputation and sales opportunities to anyone sitting at a computer, all over the globe. Of course, it goes without saying that you have to have a great product or service to make that work. If you don't, then the same kind of feedback—but in a negative manner-- can do you in.
    * Leveling the "big budget" playing field
      Today, companies do not necessarily need a huge budget to to publicize news, products and offers or to gather reactions and feedback from customers. Through a well-planned, active web site offering timely and ongoing updates and interactions with current and potential customers, you can build a devoted, growing following for your business without a large budget. Success in promoting your business via social media then depends less on money and more on trategy, intelligence, creativity, hard work and, of course, offering a great product or service.

      For example, there is a small candy, coffee, and cheese shop in a beautiful Victorian home in Rochester, New York called Chocolate and Vines. It's owned by a young couple in their 20s. When they started their business, they put up a page on Twitter to develop a presence and get connected to customers. They promoted specials, offered wine tastings and publicized local events as a strategy to build a stronger loyal community than some giant chain bakery store in the same vicinity. They used social media to reduce the disadvantage of being a small business without a huge marketing budget.

    * Conducting free grassroots market research
      Companies, large and small, can use social media to follow what customers are saying for market research purposes. For example, a large phone carrier wanted to find out what innovative feature to offer in the next version of their cell phone. This company monitored sites frequented by teenagers and found a resounding complaint that teens were exceeding parental budgets for call and text time because they couldn't control their inbound calls and texts.

      This grass-roots conversation gave rise to the "friends and family" types of plans that offer unlimited in-bound calls and texting within the company network, providing a competitive advantage to that firm. Social media, then, can be a great source for companies to use to identify needs that are important to their customers that they otherwise might not have thought of.

    * Protecting your reputation
      Your company's reputation is an asset that needs to be protected! By regularly monitoring comments and opinions from customers across social media sites, companies can learn what customers like and, more importantly, what they don't like about doing business with you. Then, you can turn an obstacle into an opportunity by addressing these concerns, fixing the business issue, delighting the customer with how you responded to his or her experience, and building long-lasting loyalty in the process.
    * Keeping an eye on the competition
      Small businesses can gain powerful competitive intelligence by monitoring web sites and blogs of competitors, industry and trade associations, and other credible third-party sources to find out how your current or prospective customers compare you to your competition. You can find out what customers like or don't like about a competitive company and incorporate those insights into your business strategy.
    * Finding the right people to hire
      Recruiting is a definite benefit of active social media marketing. Putting a status update that you're hiring on your Facebook or Twitter page, or searching professional social media sites like LinkedIn and others can help companies proactively find prospects who are right for your company without incurring costly search consultants' fees.

      Finding the right people is not limited to hiring. Many firms use social media to find and engage in strategic partnerships and alliances with other small businesses. Small business web-based communities like AmexOPEN systematically provide those kinds of introductions within their membership. Much of social media revolves around connecting with the right people.

What should small businesses do to get started?

   1. Take the time to become social media-literate. Figure out the differences between the many different sites and be intentional about the ones you choose to participate in or monitor. Spend time with a variety of social media sites and networks.
   2. Set clear goals and allocate resources. Make sure you identify goals for engaging in social media and allocate the time and money it will take to establish and maintain your presence. Understand how social media fits into your larger marketing strategy. Decide whether you're going to hire someone to help or do it yourself. Putting information out there once and then neglecting it is worse than not doing anything at all.

      Finally, have a measure for success, whether it is percentage of new business, traffic to your own site, positive online press, or numbers of customer service issues resolved.

   3. Get and stay involved. My friend and colleague, Marina Wollberg has a website (see resources below) that teaches small business professionals how to use social media to promote their companies. She cites three levels of involvement for engagement in social media: observe, comment, create. First, read the right blogs, listen to the conversation and really understand what the issues are. Then, comment. Join the conversation. Become a known participant who shares valuable and relevant information and insights. Finally, write your own blog. Start your own conversations around issues that are central to your customers and industry. Remember: social media is all about two-way communication.
   4. Figure out how to build community to drive traffic to your products or services. Use your chosen form of social media to entice people to find you. Get the word out. Include your online information on all traditional forms of marketing materials so it's easy for people to find you. Be creative about giving away low-cost, high-value material to get people coming back.

      There are countless examples of small businesses putting social media to good use. One is a firm called Lion Brand Yarn, a 65-person person company in New York City founded in 1878. The firm produces podcasts, has a Facebook page with over 107,000 "fans" and a presence on Twitter that the company uses to offer free patterns and share instruction videos to drive traffic to its site. Lion Brand also participates in Raverly, a niche, user-driven social networking site for knitters, crocheters, designers, spinners, and weavers that provides excellent, targeted visibility within the "Ravelers" fibers community.

      Marketing VP Ilana Rabinowitz says that social media has helped build word-of-mouth marketing by allowing Lion Brand to speak one-on-one with customers. If Lion Brand finds out on Twitter or a blog about a problem a customer experienced with one of its products, the firm contacts the customer directly to offer Lion Brand's 100 percent satisfaction guarantee and discuss how to return or replace the product in question. Rabinowitz cites that customers are often surprised and delighted to hear quickly and directly from a real person that knows his or her name. As for impact on the bottom line, Rabinowitz says that Facebook traffic converts at a rate 40% higher than the average customer coming through a Google search.

Not engaging in social media is a missed opportunity. Done right, it forges strong connections with customers, helps small businesses learn what customers' value, and enables businesses to be even more responsive to those wants and needs to build customer satisfaction and loyalty. It also shows that you are a current, savvy marketer and a trusted expert resource. But remember, regardless of the media you choose, there is no substitute for a great product and impeccable customer service.

Here are some of my favorite blogs/experts on social media, as well as my most recent favorite blogger's post on how small business can use social media

Marina London: iwebu

http://iwebu.blogspot.com

Focus: Simple tips and strategies for boosting your business by using the social Web

J.D. Lasica: SocialMedia.biz

http://www.socialmedia.biz

Focus: How smart businesses can leverage the social web

Charlene Li: Altimeter

http://www.altimetergroup.com/blog

Focus: Strategic use of social media for companies

Naomi Dunford: IttyBiz

http://www.ittybiz.com

Focus: Very small businesses

Toby Bloomberg: Diva Marketing Blog

http://www.bloombergmarketing.blogs.com

Focus: Strategic marketing using social media

Danny Sullivan: SearchEngineLand

http://www.searchengineland.com

Focus: Search engine marketing

Beth Kanter: Beth's Blog:

http://www.bethkanter.org

Focus: Non-profits

Darren Rowse; ProBlogger

http://www.problogger.net

Focus: Using blogs to increase income

Favorite Recent Blog Post: Darren Rowse; ProBlogger

http://www.problogger.net/archives/2010/03/18/30

Valuable-lessons-learned-using-social-media-for-small-business/

For a free summary checklist of "the best tools and tips for doing research with social media," contact Robert Berkman at robertberkman@gmail.com.

Social Media for Small Business

2010-08-19T21:01:00.001+02:00

Sales Follow-Up Tools: Document Approval Services

2010-08-19T15:16:00.001+02:00

of course you want to get deals signed as quickly as possible. Companies can't afford to let the contract-signing process slow the flow of business. Offering customers a way to sign contracts electronically may even increase your close rate because less time passes between when they agree to buy and when they're asked to sign.

Tools such as Echosign, RightSignature and E-Signature allow you to sign and get counter-signatures electronically.

Echosign

If your business uses electronic signatures on digital documents you'll need a way to store, search, and access the document in a central location. Echosign specifically provides this capability. Its pricing starts at $99 per month for five users.

RightSignature

Sales reps send estimates, contracts, and proposals via RightSignature's online dashboard and customers simply sign online using their mouse.

Using their Web-based user interface, reps upload a document and enter recipient information in less than a minute. Recipients may sign online, on a faxable signature page or on an iPhone. Digital signing makes it much easier for the client as well. Instead of signing a paper document and returning it right away by fax, scan or mail, recipients often will put it down on their desk to deal with later. They know it will take time from their day, so, with good intentions, they simply put it in their "to-do" pile. You can avoid this happening to your contracts when signing is done in seconds with a few clicks. RightSignature charges $14 per user per month.

E-Signature

E-Signature is different from the others mentioned. Its service is intended more for documents you need to sign. For a one-time fee of $44.95, they'll create a signature font that looks like the signature you send to them. From then on, any document that requires your signature or initials can be inserted with a few keystrokes. Use your font to insert signatures in letters as well. According to E-Signature, your signatures cannot be copied by recipients.

Nancy Nardin founded Smart Selling Tools after a prestigious career in high-tech and IT market research sales. She is considered the leading expert on sales productivity tools.