By Gina Blitstein

A simple fact of business is that you can’t operate without funding. Whether it’s at start up or when expanding your operations down the road - or both - there will come a time when an influx of capital is necessary to get and keep the ball rolling.

Traditional loans are all well and good but the fact is, lending institutions are tight with the money these days. Alternative financing may be more worth your time and effort to investigate than you might think. Finding investors and venture capitalists interested in financing your enterprise may just the ticket to get the money you need to build your business.

Where can potential investors be located? The answer is provided in the wisdom and experience of those who have successfully navigated the terrain.

Healy Jones is head of marketing for OfficeDrop, a digital filing system and document scanning service, and is also a former venture capitalist. Healy says, “We raised equity capital about a year ago. I have some pretty strong opinions on what works when trying to finance a small business, since Ive been on both sides of the table.”

Healy provided some tips for businesses looking to raise venture capital:

• Build relationships before you need funding. Get to know the lay of the land in your area. Early stage investing tends to be quite geographically local business, so networking can really help you a) figure out what types of financing are available and b) get into the right networks so that you can get warm introductions to investors.

• Venture capitalists really, really prefer introductions to new companies from people they trust - much more than the "cold" business plan submitted via the web. The best introductions to investors come from successful entrepreneurs (especially ones that have worked with the VC before).

• Understand the "metrics" side of your business - what you measure and what it means. Having a great instinctive feel for your business is not enough. Venture capitalists will pick apart everything - projections, operations, sales strategy and vision. VCs are financiers and you will need to be able to speak their language. The ability to talk about your operations, growth, etc using numbers is critical to impressing venture professionals.
  

Lowell Bike who launched myautotips.com earlier this year applied some valuable advice while creating his business plan for possible investors:

• Do not overpromise. This applies to not only the return investors can expect, but when they can expect it.

• Let them dip their toes in the water. To turn a smaller investor into a larger investor you can show her all the projections you want, but until she sees actual results to back up the projections she will not be comfortable making a larger investment.

• Do not give up any of your decision-making ability. The investor might have a stake in the company, but the person who runs the small business is the expert on what it takes to make money. Do not sacrifice any control of day-to-day activities to secure investors.

It isn’t surprising that cultivating relationships with potential investors is a crucial element of obtaining financing from them. Forging those relationships early on before approaching with your hand out will establish you as a reputable businessperson from the get-go. As opposed to a lending “institution” an investor is a person whose trust you need to secure before they will be interested in funding your enterprise. That trust can be further enhanced by providing solid information, golden references from mutual acquaintances, reliable data and realistic expectations about your business. All those factors figure into the total package in which the investor is staking his or her money.

Once your track record is established, your investors may be persuaded to increase their investment in your business. The more they know about you, your business and its success, the more easily they’ll be convinced that you are a safe and beneficial investment.

Investors and venture capitalists are looking for novel and profitable ways to put their money to work. You can reap the benefits of what they offer by following the advice of those who have successfully secured such investments for their businesses.

Who do you know who would invest in your business?

By Gina Blitstein

Financing of any kind is hard to come by these days as we slowly rebound from a significant economic downturn. No one is bending over backwards to loan money to anyone but the economy needs to keep forging ahead and that means, among other things, new business development. What are some avenues to explore to get your small start-up business the financing it needs to hit the ground running?

According to John Reddish of Advent Management International, Ltd., who provides financial consulting, coaching/mentoring, speaking, capital formation, and training, “Most small start-ups don’t hold much interest for venture capitalists, angel investors or, frankly, most banks - who will steer you to a home equity loan or often offer their low-end personal loan option which is usually limited to $10K.” John provided some suggestions for traditional financing options (and a few exotic ones) which include:

1. The usual suspects - The most obvious places you may have money available to you without jumping through a lot of hoops:

• Your savings
• Your home equity
• 401k and retirement funds
• Your credit cards (Beware of high interest rates and "sin" fees if you go over your credit limit. Even if the bank reduces your credit limit arbitrarily this can be expensive money.)
• Your relatives and friends (Be certain to keep the relationship on a professional level - execute loan documents that detail how much interest will be earned and when they get paid, just like any other lender would receive.)

With the exception of the 401k and the home equity, the other resources are relatively easy and fast to obtain.

2. Local and regional micro-loan funds - These are available to stimulate local business formation. Some women-directed funds exist and amounts for loans usually range from $35K to as much as $50K. An Internet search will identify many such sources.

3. Customer funding - This is a form of pre-selling. If you have a key customer (or non-competing customers) targeted and a really unique, one-of-a-kind business, you can often negotiate with the customer to "float" part of their initial and ongoing purchase price as an advance (or series of advances/deposits). That may be enough to get you up and running.

If you are starting a service business, a long-term contract from a customer can be enough to get you started if you can set your bare-bones budget within the limits of the contract. The potential danger is if the customer sees a decline in sales and cuts your contract back - or cancels it - you are without income. While not always possible in actual practice, John recommends as the safest arrangement that no client represent more than your gross profit margin.

4. Licensing - John suggests the following when your product/idea is at least at the "prototype" stage where you can identify customers/markets: Identify a supplier who makes similar products and instead of approaching them as your manufacturing source, propose a licensing arrangement. If they are already marketing similar products, they have both manufacturing and distribution. If you have pre-sales or targeted customers, (see #2 above) so much the better. A royalty with only ongoing administrative costs costs less to operate than a full-blown business - and you can get on to your next product. Bear in mind, however, with royalty rates ranging from 3% to 15% on most products, you have to make sure there is enough potential for both you and the supplier to make it worth while.

5. State and Local government, SBDCs and private foundations - Often there is money available as grants and/or loans available from a variety of governmental or NGO sources for start-ups. These could include SBIR (Small Business Innovation & Research) grants tied to State Funds or policy initiatives that will make money available for training, operations and other costs. Small business incubators and some Enterprise Zone funding are tied to these sources. This is a fertile source of funding and definitely worth investigating.

In these times when financing is tight, you may have to look outside the box to find the capital you need to get your business off the ground. It’s out there - it’s just a matter of doing the necessary legwork to secure it. Research, resourcefulness and creativity will serve you well as you seek the money you need to set your start-up off on a strong financial footing.

What are your best suggestions for financing a start-up in the current economic climate?

By Gina Blitstein

Starting you own business is an enormous undertaking, which takes and enormous amount of time, effort - and money. One of the most crucial elements to setting sail on your own enterprise is getting your start-up funded. Your ship won’t sail far without the capital it needs to purchase equipment, market itself, open the doors and get established.

But you’re an expert in your business - not necessarily at funding your business. How do you go about securing the money you need to get your business afloat? Securing funding for your operation is your first order of business.

According to Nathan Heerdt, CEO at Go Big Network, LLC, "Raising capital is very much like finding a new job. He suggests you approach the search for start-up monies in the same way you would approach a job search. Here are the key points to Nathan’s start-up funding strategy:

Your resume is your business plan. Take your time, think through your business idea and clearly communicate your thoughts. If you don't have a good business plan (much like a good resume), you're fighting uphill from the start. You need something an investor can review and understand. It helps you get in the door.

Pinpoint your funding opportunities. If you blindly apply to every job you find on a job board you're not going to have much luck in getting a response. However, if you take your time and connect with job openings that are a match to your background, your response rate will be better. Fundraising is the same way. All investors are not alike. Some invest only in technology, some only in manufacturing, some with established companies only, some with pure start-ups. It's up to you to find and pinpoint the right type of investor for your idea/start-up.

Networking to find the right contact. Again, if you simply apply to a job posting and sit back and wait, you're likely to be waiting for that reply for a good long time. Instead, when you find the right fit for your funding needs, begin researching your network to find a contact that is somehow, some way connected to the investor. Reach out to that person to help make the introduction. If you don't have anyone in your network to help you make the introduction, use websites that are geared for this type of communication.

Have realistic aspirations for your job search...I mean your funding efforts. They say it normally takes 6-12 months to find a job in good job market. Well, I can promise you it can take just as long to find the right investors for your start-up as well. Take the approach that you will be looking for investors for 6+ months and settle in for a sustained effort.

Looking at the raising of capital like a job search is an effective way to approach this arduous challenge. By taking it on as a serious endeavor - like a job search - which will take drive, focus, research, determination and abundant patience, you will remain aware that funding your business is indeed a job in itself. This way of thinking about fundraising also helps keep the process in perspective - you have to “sell” your business idea to potential investors in the same way you have to “sell” yourself to potential employers. Like in a job interview, maintain the mindset that this is your first opportunity to present your company. Once you land the “job “ of getting the funding from your investors, you’ll be rewarded with many more opportunities to present your company to your customers.

On raising capital for your start-up, Nathan says, “It's tough but rewarding. Good luck!”

What approach to financing your business did you take?

By Gina Blitstein

Does your business have inventory to sell? Then you are well aware that it is in your best interest to keep track of that inventory - to know when and where it came from and when and where it goes. Obviously you want to make certain that you have what you need to sell but not so much that you are sitting on a warehouse full of unsold merchandise.

Why is it so important to keep tabs on your inventory?

The goal of efficient inventory management is keeping it moving. Generally speaking, the less inventory you have on hand at any given time, the less costs are involved in its purchase, its storage and in insuring its safety. There's no sense tying up capital in a warehouse!

May Maihien, Executive Assistant at San Francisco Bay Area clothing company, Fiftyseven-Thirtythree, explains, "As a small company, our main source of revenue is online sales. Tracking inventory is crucial when even a "small" loss of resources in truth is not small at all, and can be a major blow to our numbers."

John Krech, President/Founder/Inventor of ePhiphony Incorporated likens inventory to an investment. As an investment, its financial performance must be tracked for profitability. John suggests utilizing technology to help accomplish this goal: "According to a study by Aberdeen, the bottom 30% performing businesses have nine times more inventory than their top 20% performing peers. This is a huge variation in performance and a significant disadvantage when it comes to cash flow. It is best to use technologies than can use business intelligence to analyze demand patterns to not only order materials when you need it but also highlight which items are in surplus."

What is important to track?

John Williams, Partner, B2B CFO® says:

• Date/Expiration of Products. If a person is dealing in perishable items, tracking by date of manufacture or expiration date is critical. This not only insures that customers get high quality products and reduces or eliminates out of date inventory that must be thrown away.
• Location of Products. Good locator systems are also critical if the inventory is of any significance. If one can tie in the sales order system to the locator system, it provides a smooth and efficient way to fill orders and improve customer satisfaction.
• Sales/Billing of Products. An integration of sales orders, inventory tracking and then billing provides consistent information and insures accurate and complete billings to customers.
• Changes in Products in Inventory. Flexibility of use is critical. Inventory adjustments are a way of life and making sure inventory can be corrected by authorized users (and no one else) makes life easier for business owners.

How can technology help keep track of inventory?

There are plenty of choices available for tracking your inventory that are more accurate than paper, pencil and a clipboard. Among the more popular are systems that scan using UPC (Universal Product Code) and RFID (Radio Frequency Identification) technology. These systems capture information from the product and store it on a computer. Software applications interpret this data into reports that enhance your ability to manage your merchandise. These reports offer not only accurate numbers of what you've bought and sold but can also make suggestions for future purchases based on your inventory's history.

Regardless of the type of system your business employs, technology can help you keep a keen eye on your inventory to maximize your profit and minimize your headaches.

Are you utilizing technology to help you keep tabs on your inventory costs?

By Gina Blitstein

Freelancers must take proactive measures to make certain they are paid for their services. In most cases, clients will respect your work, take your invoice seriously and pay up accordingly. But what if they don't? What if - for whatever reason - a client doesn't pay you for services rendered? What recourse does a freelancer have that won't create a myriad of other expenses in terms of time spent on collection efforts resulting in a loss of billable hours for paying clients?

It is a difficult situation for a freelancer; since you have a finite client base, every client is particularly precious. You can't afford to alienate someone who may simply be slow to pay by coming on too strong in your efforts to collect timely payment, implying they are a "deadbeat." On the other hand, you need to be paid in a timely manner for exactly the same reason: You have a limited number of clients from whom you earn your livelihood and when someone fails to come through with their share of your wages, you feel an acute financial sting.

Gwen Hoover, Director of Public Relations for Altitude Marketing, says that when a proactive approach including clear communication and contracting fail to compel the client to pay on time, she advises the following steps:

• Re-bill overdue bills immediately. As soon as your first bill is past due, re-bill promptly as a gentle reminder. Alternatively, send a monthly statement with the amount that is outstanding clearly labeled as past due. The “aging” statement automatically generated by QuickBooks are difficult for the customer to understand. I recommend recapping in an email and attaching the aging report.

• Call the client. Emails are easy to delete and can lead to misunderstanding, which is why for clients who make delinquent payments, it’s important to call them if you aren’t paid after two weeks – especially if they haven’t replied to your emails. There could be a completely valid reason behind this, but it’s important to hear it from your client directly. There are many reasons why a client may not be paying, and usually it’s not because they are dissatisfied, so don’t be afraid to ask.

• Build Bridges. If a payment is past-due, make a point of seeking out and ask to be connected to Accounts Payable (call the client front desk or operator). Check whether the invoice was received and if you can help in any way. All the while maintain a positive relationship. Don’t hang up until you get a verbal agreement confirming when the payment will be made. Be willing to stretch out the payments if necessary. Follow-up with an e-mail confirming the conversation and ALWAYS maintain a paper trail.

• Never apologize. Never apologize for chasing payment or even consider bargaining. No matter how much empathy you feel for a client who is struggling financially or otherwise.

Gwen advises, "If engaging a collection agency, hiring an attorney, or going to court aren't attractive or viable alternatives, you can always report the company to the Better Business Bureau. You may not get the money you are due, but at least it lessens the chances that they will do it to someone else." The key is striking a professional, no-nonsense stance that the client will respect and respond to. In reference to these methods of collecting what she was owed from her clients, Gwen says, "Good news--once their cash flow was back all but the one who went bankrupt have come back to do more business."

While it's uncomfortable for most freelancers to be in "collections mode," it is important to assume and maintain an assertive attitude when it comes to getting paid for services you provided in good faith. Consider it one of the "necessary evils" that come with being your own boss. You'll be rewarded with a sense of self-sufficiency when you gain control over your cashflow and professional relationships.

What do you do when clients don't - or won't pay?

By Gina Blitstein

As a freelancer, you enjoy different freedoms - and shoulder different responsibilities - than those who are not self-employed. One of the most important differences is that, as a freelancer, you are solely responsible for making certain that you get paid. No one hands you a paycheck at the end of the week or month. You have to make the effort to ensure that you receive the compensation for your work.

It's vital to your livelihood to make sure that your clients pay you for the work your perform for them. What can you as a freelancer do to secure payment so that you don't end up in the uncomfortable and inconvenient situation of having to collect a debt from a client? Clear and assertive communication from the get-go is the answer.

Jody Shyllberg of JS Graphics, Inc. recommends having the "money talk" with clients and prospects early and often. "I talk about budget in the first meeting - some prospects say they don't know how much "X" should cost, but you get a sense of what they're willing to pay if you give them a range such as "This could cost as little as $000 or as much as $0000." Spending time chasing a prospect who can't afford you is a waste of everyone's time. I give every project a detailed proposal, budget and contract, which outlines everyone's responsibilities and timeline for deliverables as well as payments. All my projects require a deposit of 25-50% before starting - it helps with cash flow, but also weeds out those who aren't serious about their project, or who really don't have the money."

Gwen Hoover, Director of Public Relations at Altitude Marketing, says that, "Like many women I know, I tend to over-deliver, undercharge, don’t ask for money in advance and don’t like confrontation." Those factors can lead directly to finding yourself unpaid for your services. Gwen offers some well-considered tips on securing payment for your freelance work in a timely fashion. She says, "The best advice is to plan ahead so you minimize the damage if someone does not pay. Gwen recommends the following actions to protect yourself from being taken advantage of:

• Have a signed contract and a clear schedule of deliverables. To ensure that the client will take the agreement seriously, it helps to have a mutually signed and legally binding agreement. It's also useful to include a list of deliverables for both you and your client – including the payment. This sets expectations and helps to decrease the chances that a client will use lack of clarity as a reason they aren't paying.

• Find a way to make early payments beneficial to the client. Discounts can be powerful motivators. One example is to offer a certain percentage discount if they pay the invoice within 24 hours from the time it was sent. Another alternative is providing a discount or promo coupon for the client’s next order.

• Maintain Leverage. Always keep in your back pocket one piece of leverage that you can hold back until payment is complete, a deliverable, taking down a website.

• Learn from Lawyers. They don’t start work until you send them money. When they have burned through the initial fee they STOP working until you send them more money.

When you are negotiating a business agreement with a new client, there is often the concern that too many requirements will cause them to simply go elsewhere for the service. The important thing to remember that your clearly stated and reasonable requirements protect you from being cheated. A client who takes your work without paying is a liability - not an asset. Any client worth working with will understand and respect your needs as a businessperson when contracting for your professional services.

What do you do to ensure that your clients pay for your services?

By Gina Blitstein

In order for your business to fly, you have to alert people of your existence, which means you must advertise. While the actual cost varies from industry to industry and business to business, the bottom line remains: Advertising, while necessary, can be costly, regardless of the economic climate. When that business is a service business, without a pretty this or a practical that to show off to potential customers, advertising is especially challenging as well. While hiring a professional marketing firm and a spokesperson to extol the virtues of your particular service may seem to be the best way to spread the word, it simply is not in the budget for many solo entrepreneurs.

Do-It-Yourself marketing is probably the best solution for keeping the advertising dollars spent both affordable and effective. Not only does it cost the entrepreneur little to nothing (except his or her own time) but the personal touch proves particularly potent in getting your message across. Can your service business benefit from a dose of self-promotion?

Nicole Amsler, with fifteen years of experience in marketing, seems to have found the secret to growing a business when economic conditions are tight: "I have found business picking up in this economic downturn, rather than decreasing," Nicole declares. As a freelance marketing consultant and copywriter at Keylocke Services, Nicole suggests several ways you can become your own best advertising:

• Learn to speak. I never envisioned myself as a public speaker but after a few gigs at local Chambers of Commerce, networking groups and universities, I have found I enjoy teaching and speaking in front of a small crowd. I offer seminars on social networking and marketing strategies to small businesses, which is my target market. I have received a tremendous amount of business and “buzz” by offering these seminars and other valuable free information.
• Give it away. I clock several hours a month doing pro bono work for organizations and business groups to which I belong. Recently I did all the publicity for a leadership conference and in return was listed as a sponsor on all their materials. I also market a free office makeover with a small group of women entrepreneurs, which has garnered us all positive press and goodwill.
• Make face time. It is easy to lock myself in my office and just work. But I find a lot of business comes from face to face networking events such as LinkedIn brunches, Chamber of Commerce breakfasts and TweetUps. There are several online social media groups I belong to and each one has their own in-person social event. I make sure to attend at least one a week, with business cards in hand.
• Fake it before you make it. Before I even had one client, I made sure to have an attractive website, a professional logo and accompanying marketing collateral and a separate phone line. I have taken my business seriously from the beginning and made sure I gave off a professional image.

Nicole goes on to say that every interaction she has with her clients and potential clients is advertising in action. "I counsel all my clients on this same lesson. My clientele know I offer professional services because every interaction with them is professional. Most don’t know I work from home."

With some wise advice on representing your business yourself, advertising takes on less "spin" and greater authenticity. When it comes right down to it, there is no more passionate evangelist for your business than you. Implementing a strong blend of technology and handshaking can create an effective marketing campaign without breaking the bank.

How does your small service business advertise affordably?

By Gina Blitstein

It would be great if customers would simply peel off the benjamins when it was time to pay us for our product or service. These days a merchant or service provider has practically no choice but to accept credit cards as a common, ubiquitous form of payment. The fact is, the world runs on credit so it behooves us to receive payment of the plastic persuasion as well as the paper.

The process for processing credit cards has become easier too. No longer is bulky equipment necessary to "swipe" a credit card's magnetic strip. It can all be done securely on your computer. Everything you need can be accessed and processed as safely and effectively as if your customer were shopping at her local megamart.

While at first glance it may seem daunting, the process of accepting credit cards is fairly simple. According to Amy Hoy of Freckle Time Tracking and co-author of "The Jump Start Guide to Credit Card Processing," it goes something like this:

• Collect billing information (card number and expiration date are technically all that is necessary).
• Send through a processing Gateway which provides:
  • Address verification
  • An interface between your credit card processing request and the merchant bank service, where the transaction is authorized and the funds are "captured."
  • Secure storage of customer credit card information
• Receive a credit in your merchant account, which is the bank account which actually receives the funds from the credit card companies themselves.
• Transfer the money from the merchant account into your business account.

While the process itself is straightforward, the user experience can vary from processing company to processing company. Accepting credit cards for payment of their products and/or services can be on the costly side, especially for a small or new business. LeAnn Ryan, Owner of Say It With a Sign Co. says, "Small businesses don't get a break on credit cards!" LeAnn has used three different credit card processing companies in a search for one that is affordable and which processes transactions reliably and rapidly. She says one company cost $30 per month, then took 1.9% of the total plus $.20 per transaction, while taking up to four days to transfer her money into her bank account. Another company gave her a difficult time processing one large transaction, informing her that the only way they could conduct the transaction would be to put a 90 day hold on her money, in case the payer should back out. Finally she found a more suitable processing company that charges only $9.98 per month, 1.9% of the charged amount and $.20 per transaction. LeAnn reports that with this company, her funds are available in just a couple of days. In addition, she says their customer support is friendly and prompt.

Remember, whichever company you choose to process your credit card, the inner workings of credit processing are all the same. It's good to know there are choices in the marketplace. Especially for a small business, it is worth the time to shop around for a company that doesn't cause you a pain in the wallet. After all, it's your money.

What is important to you in choosing a company to process credit card transactions?

By Gina Blitstein

Business owners often wear many hats but can rarely wear them all, even at a small firm. Finding the two requirements - competent and affordable - in one employee is challenging at best and at worst nearly impossible. Wouldn't it be nice if you could find the talent and skill you require in someone who would be satisfactorily compensated for her contributions by the experience she would gain working on the job for you?

Let's consider where the next generation of talented, educated employees is coming from...Universities, colleges and other institutes of specialized higher education, of course! Many students are eager and willing to get to work and gain some on-the-job training...why not for you? Utilizing interns as an alternative to hiring a professional may be a great solution for filling positions with competent workers without writing a check.

Dawn Lancaster, Vice President of Carved Solutions, a Vermont-based purveyor of hand-crafted and carved soaps and candles, explains, "As a business owner, I am constantly searching for ways to better our company and reduce costs. To that end we do utilize interns and have found it to be a huge benefit."

How did Carved Solutions begin utilizing interns? Dawn recounts, "I graduated from Champlain College and was an intern myself. When interns became internal discussions in our planning, I immediately contacted Champlain & St. Mike’s. Since then – impressed by the work we’ve done with students they seek us out."

Dawn describes how internships work at her company: "We create a job description that is reviewed by the professor and the student for match and interest." The schools stay apprised of the workplace experience the student is receiving by means such as site visits, student journals, weekly class, projects and updates. Dawn relates, "I, personally, want the interns to get the most out of their experience with us and work with them explaining what we are doing and why, how what they do effects the success of the whole project and how it applies to their major and future."

In an advertising campaign for interns, the company literature assures students, "You will not be filing!" As an example of the kinds of jobs Carved Solutions makes available to interns, Dawn says, "We currently have multiple interns including 3 who are working on an SEO project “in class." We are basically a guinea pig for their professors to show them how to apply real life skills now – see the cause & effect in real time. The students come to the office to interview, check in, report in and out – it’s a pretty amazing process."

Dawn recognizes several benefits to the interns she has utilized through the years:

Academic credit for real life experience in their field (opportunity to apply their “book smarts"

• Increases value of resume
• Increases their skill set and marketability to future employers
• Increases their references
• Potential career opportunities

She also describes numerous benefits interns provide to a business:

• Opportunity to train future hiring pool
• Academic credit allows for work to be performed in exchange for your guidance and training versus a financial investment/outlay
• Increases exposure of business to local colleges and soon to be graduates
• Opportunity to give back to the schools (we’re not big enough to offer scholarships or large donations but we can give real life value through training and educating interns. We also offer our time to speak/teach/share in the colleges our interns come from).
• Fresh view on company, products, services, policies etc. (nothing like a young voice in a management meeting – yes we all “tweet” now!)

Dawn cautions that the "Downfalls to utilizing interns are the same as any “bad hire” and requires an immediate correction. With a student that requires too much hands on guidance you’ll find your cost savings lost in additional labor time in training and supervision." She continues, "Finding the right intern is just like finding the right employee – pick the superstars and they’ll impress you every time!"

Interns are clearly prepared and able to take on serious and important work. Why not give an enthusiastic newcomer some much-needed and appreciated hands-on experience in your business? It's a relationship that will benefit both of you in many ways.

Could interns provide your organization savings and fresh talent?

By Gina Blitstein

There is hardly any business that has not been affected by this economic downturn. The current financial climate is downright dreary, especially for new entrepreneurs. New businesses usually take some time to ramp up, their progress slowed by limited operating capital and lack of experience in the marketplace.

Is there any hope for the new entrepreneur to succeed in this - or any - tight economic condition?

While the nay-sayers claim there's slim to no chance, some entrepreneurs are actually defying conventional wisdom and making a go of it - or even flourishing - by remaining on their toes, staying flexible and listening to the needs of their customers. Some advice from someone in the know could help you make successful choices in your new business, improving your odds to be among the winners.

Constance Drew is a small business coach/consultant specializing in helping women entrepreneurs to start and grow successful businesses. With over 20 years of business and management experience and an MBA, she knows what it takes to make a business thrive.

Here are Constance's top 3 strategies for succeess in today’s economy:

1. Allocate advertising dollars effectively. Many business owners spend unnecessary money on advertising for new clients when they have hidden profits in their own backyard. Spend more time nurturing your existing customers and offer them more value add-ins.
2. Form small business alliances. In times like these, small businesses should focus more on the B2B services that can help out both parties. For example, use affiliate partners to promote each other’s businesses, offer package deals combining services and really work to help each other out. We are all in this together and the more we can reach out and form partnerships, the better our chances of thriving.
3. Trim the fat. Really assess where your business can cut back and focus more to what is working. Now is not the time to pioneer new products unless you have a surplus of finance. Rather, take time to figure out what your custos needs are now compared to a year ago. Ask them. Take surveys. Let your customers tell you what they really need and are willing to part with their hard earned money for.

In addition to the areas Constance mentions, a common cost-effective strategy is to market your business in less expensive, more creative ways. Social media web sites such as Twitter, Linkedin and Facebook are free and effective tools to spread the word about your product or service and also provide customer service. Emphasizing your presence on the Internet or in person by participating in groups or volunteering in your community gets and keeps you and your business out in front of potential clients.

Other strategies for weathering a tough economy include:

• Focus on how your service or product provides savings or represents a "need" to your customers.
• Look for opportunities brought on by the downturn - prices on real estate, equipment or even employees may become more affordable.
• Evaluate your product or service to determine whether you would be better served by diversifying or focusing more narrowly with your offerings.

It is important also to remember that an economic downturn will eventually be followed by an upswing. If at all possible, utilize your slow spell to organize and prepare your business practices and systems for busier and more profitable times ahead. A lot of the misery experienced in a downturn is caused by negative attitude. Follow good advice and try to stay productive and positive until the tide turns. When it eventually does, you'll be that much farther ahead for your planning and preparation for prosperity.

How has your new enterprise flourished through tough economic times?

By Maia Nolan

Health insurance continues to be a hot-button political issue on the national scene, but for entrepreneurs and their employees, it’s not just about policy. How do you balance your employees’ health and your bottom line?

“For small business owners, the challenge of providing a benefits package without breaking the bank can be difficult,” said Matthew McDermott, an employee benefits consultant with Landmark Group of Brighton, Inc. “You want to be able to attract and retain quality workers to your business.”

McDermott offered a few suggestions for small business owners looking at health insurance options:

• “See what other employers are doing in your industry and local labor market. Generally speaking you want to be competitive with other options an employee might have, but not overpay where you don’t need to.”
• “Check out options available from your local chamber of commerce or professional associations. They sometimes have pooled benefit options available that keep costs lower for everyone.”
• “Take a look at non-traditional options like High Deductible Health Plans coupled with a Health Savings Account. There’s insurance in place to cover both wellness services and more importantly, catastrophic care. Expenses for non-catastrophic and routine services are paid for out of the Health Savings Account (which the employer might help fund at some level).”
  
• “Use a benefits broker to help assess your options. Brokers are independent and working with your interest in mind, not agents of an insurance company trying to push a particular product.”

It is possible to find a health care plan that takes care of your employees’ needs and doesn’t leave you bankrupt, although you may need to think outside the box. Last year, Seattle entrepreneur Andrea Goodmansen, owner of McLeod Construction, did three things to reduce the cost of insuring her 25 employees:

1. She changed insurance trusts.

“We had been with our local builders association insurance trust for the past four years,” Goodmansen said. When the company started looking into cutting insurance costs, they worked with a local insurance broker who shopped the company around to different trusts.

“We ended up switching from a builders group to a Washington State employers group and were able to get better benefits (lower deductible, copay, and coinsurance maximum) for less money,” Goodmansen said.

2. She decided to self-insure for dental and vision.

“We were spending $13,000 a year for dental alone through the builders trust, whether our employees used the insurance or not,” Goodmansen said. Now, McLeod Construction works with a direct reimbursement (DR) plan advocated by the Washington State Dental Association. The company funds the plan each pay period and reimburses at a predetermined rate, up to $1500 per employee.

“The best part about DR is that we are earning interest on the ‘premiums’ not being applied to the reimbursement,” Goodmansen said.

3. She changed the company’s premium policy.

“We were covering employee premiums 100% until last year,” Goodmansen said. Now the company’s employees pay 20% of their deductible (about $9 per week), which resulted in savings of about $3,500 per year.

The three measures have racked up a total annual savings of about $8,000 for the company, and employees and management alike have been pleased with the outcome.

What will your business do?

by Gina Blitstein

As you well know, insuring your business against loss is one of the most important elements of your strategy for success. Having the right insurance for your business is not only prudent but can provide a level of confidence as you grow. Insurance is one of those specialties, like banking and accounting, where it is best to rely on a professional's expertise, rather than attempting to navigate the ins and outs on you own - even for a relatively small firm. Let's hear what the professionals advise when it comes to being insurance savvy.

Here are some basic truths about Business Insurance from Ryan Pinney, CSFP Chartered Senior Financial Planner and Brokerage Director:

• Almost any risk can be lessened through some type of insurance policy.
  
• Large firms often have the luxury of hiring full-time risk managers, but smaller businesses almost always have to face this challenge solo, without the assistance of a specialist.
  
• Most smaller firms can limit their insurance to three basic types of protection: property, liability, and workers compensation.
  
• Often businesses can bundle property and liability insurance needs into a Business Owners Package Policy, also known as a BOP saving time, money and duplication of coverage.

"Unfortunately," Ryan reminds us, "Many miss the boat when it comes to their application. Each year, businesses spend over $100 billion on insurance premiums. Yet many firms have the wrong coverage, or pay too much for the protection they get."

What factors should you take into account when choosing insurance protection for your business?

Ellen Bohn-Gitlitz, a Massachusetts insurance broker for over 15 years suggests the following:

1. Work with a broker who understands your industry. When I am referred an account that is outside my specialty either I refer it to someone else in my office or I walk away from it because I can’t do the best for the client

2. Think of best value and not lowest price. Price is a very important consideration but value is more important. I have picked up a number of clients because their old broker didn’t read the forms and the main focus of their business was excluded from the policy. This was in the fine print. Even though their old policy was a lower price, what good did it do if it didn’t cover what they needed it to cover?

3. Find a broker that you can trust and consider your broker part of the management team. If you don’t tell your broker what is going on in the company, how can that person suggest the appropriate insurance?

4. Don’t put it out to bid every year but every 2 to 3 years. When you are dealing with middle market or larger accounts, if an underwriter has quoted it every year for 5 years and didn’t get it, they either won’t quote or won’t be serious about getting you the best value.

5. Check the financial stability of the carrier and how their claim services are rated. Also find out if the carrier writes a lot of business in your industry.

Insurance is one of the the biggest expenses for a business, yet the peace of mind gained from knowing you are adequately covered against loss is priceless. Keeping these factors in mind will help you obtain the right insurance coverage from a reputable source for the optimum protection of your business.

Are your business' insurance needs being adequately and competently met?

by Gina Blitstein

Just when you thought you were in a minority as a woman business owner, along comes the fact in a publication by the Center for Women's Business Research that one in eleven adult women in the U.S. now owns a business. Female entrepreneurship has been growing at twice the national average for over a decade, currently accounting for 30% of all U.S. businesses. So how do the roughly 10.1 million firms owned by women fare in the entrepreneurial arena?

They are tremendously successful. Collectively, women-owned businesses generate $1.9 trillion in sales while employing 13 million workers. In addition to their substantial fiscal contribution, women-owned businesses offer some significant benefits to their employees. Overall, women-owned businesses employ a more gender-balanced workforce of 52% women/48% men than their men-owned counterparts at 38% women/62% men. They are also more likely to offer such perks as flex-time, tuition reimbursement and profit sharing to their employees.

Women-owned businesses are pulling ahead in the big leagues with firms employing 100 or more increasing by 44% as opposed to 26% growth among all other businesses. This research also shows that these high revenue women-owned businesses account for 67% of the total revenue and 59% of total employment of all women-owned firms in the United States. In fact, according to a report released in December, 2008, by the Center for Women’s Business Research, women own 20% of the firms with revenues exceeding $1 million.

Let's examine how these women-owned businesses are reaching the big leagues. What factors contribute to a million-dollar business success story?

The research for this report, underwritten by American Express OPEN? and The Jana Matthews Group, sheds light on the common personality traits of these successful businesswomen that may contribute to their success.

“This research reinforces what many involved in women’s advocacy efforts have known all along: that women business owners create jobs and generate revenue from which we all benefit,” said Amy Fitzgibbons, senior manager of American Express OPEN. “Identifying and sharing best practices of successful women business owners is the key to helping even more women entrepreneurs achieve that same level of success.”

The findings identify several vital differences in overall management style that distinguish those who grow million-dollar businesses and those who don't. Apparently it is important to make a transition from working "in" the business to working "on" the business.

By delegating the day to day operations to others, these women can concentrate their efforts on cultivating beneficial relationships within networks and the financial community. They have stepped up to their responsibility, making the distinction between the mindset of employee and that of CEO.

Other findings show that women business owners who exceed the million-dollar revenue mark typically share these traits:

• Are “gutsy,” action-oriented women.
• Have a solutions orientation.
• Believe that a larger business is provides more freedom.
• Are energized by the “business of growing a business.”
• Create their own rules.
• Focus on internal business culture.
• Are life-long learners.

“This research is ground-breaking and provides new insights about successful women business owners,” said Jana Matthews, founder and CEO of The Jana Matthews Group. “The fact that many women have managed to grow a company to $1 million or more is great news. Now that we have ‘cracked the code,’ we should be able to help more women grow more successful companies with revenues in excess of $1 million.”

How are you exercising your "million-dollar strategy?"

by Gina Blitstein

Is it a scary time to be in business? Businesses seem to be failing left and right due to the down eceonomy and those that have managed to survive are reporting record losses. You can use all the seasoned financial advice you can get. While it may sometimes seem as if your financial circumstances are beyond your control, accountant Heather Villa, CEO of IAC-EZ, has some good news: There are some actions you can take to help keep afloat in these stormy economic seas.

Here are some well-considered tips from Heather:

• With tax time upon us, make sure you don’t miss any deductions.  For example, many people who are paying off student loans are unaware they can deduct all or part of the interest if their earnings were less than $70,000.  Did you know that you can claim deductions on medical supplies that are advised by doctors but not prescribed -- and transportation costs incurred due to medical care.  You may be able to deduct subscriptions to professional journals, your personal computer or cell phone if required for business-use.  But make sure to check with an accountant because job-related deductions can be tricky.

• If you own your own business and it suffered financial losses last year, be aware that this will reduce both your business and personal taxable income. Make sure to have your year-end statements from investment brokers that clearly reflect this loss. And if your business is showing a net operating loss, you should carry it forward to next year’s taxes.

• With many predicting sharp increases in credit card rates due to the ongoing economic crisis, it’s a good idea to start paying down any credit cards ASAP. But have a plan.  Pay down credit cards with the highest interest rate first.  Don’t use your emergency funds or make withdrawals from a  tax-advantaged IRA.  And don’t actually close down credit card accounts because that can cause serious harm in the long-term by hurting your credit rating.

• Recessions can actually be a good time to start new businesses. If you think you have the makings of an entrepreneur, the good news is that the Small Business Development Center Network (SBDC) offers free counseling to help you get started. SBDCs are funded in part by the Small Business Association. Find the nearest SBDC on the web at asbdc-us.org

• In tough economic times, it’s more important than ever to keep track of all your expenses, both for having a budget plan and preparing for tax filing. You can pile receipts into shoeboxes or track in handwritten ledgers, but you can also use accounting software to see everything at a glance and produce reports.

So take heart: there are things you can do help your business's bottom line - despite the challenges facing you in the marketplace today. From careful tax preparation to managing debt - this is good advice, especially in this economic climate. Use common sense, extra diligence, wise planning, and the advice of a competent accountant. Remember that the economy has always had its ebbs and flows. Be particularly attentive to your finances to help prevent your business from floundering until the tide comes in again.

What are you worth?

That’s a question many entrepreneurs aren’t sure how to answer. What value should you place on the services you offer? How do you make sure you’re charging enough – but not too much?

According to Belinda Fuchs, this is a question many women entrepreneurs grapple with on a larger scale than even they may realize. Fuchs is a wealth coach who is president of OwnYourMoney.com, a financial coaching and education company dedicated to teaching women entrepreneurs how to “create the life of financial freedom they deserve.”

She says the question has as much to do with personal values as it does with monetary value.

“Determining how much to charge for products and services is one of the most significant challenges that business owners face,” Fuchs said. “The ‘value’ is often intricately linked to personal belief systems around money, success, and wealth. The extra challenge for women is that these belief systems often have a non-supportive component, which confuses and often limits pricing structures.”

These beliefs — which Fuchs categorizes as “supportive” and “non-supportive” — can either help you achieve more wealth or hold you back.

Supportive beliefs provide encouragement, empowerment and positive feelings.

Non-supportive beliefs can lead to disempowerment, helplessness, hopelessness, and undervaluing your goods and services.

“Once you identify these latter beliefs, you can learn how to control them and make more conscious, objective, and smart financial decisions,” Fuchs said. She added that there are two separate questions at play here:

1. What can I charge for my services in the marketplace?

2. What am I worth?

“Deciding what to charge can be based on an unemotional analysis considering market factors, such as demand, supply, experience, and especially value created,” Fuchs said. “What you are ‘worth’ is a much larger, loaded question. An individual’s worthiness is created from the inside out, not the other way around. It’s your positive self-worth that leads to your positive net worth.” The key, Fuchs added, is to ground your outlook in positive, supportive beliefs and choose to “own your money.”

It’s important not to under-value your goods and services. With the economy in the shape it’s in, it may be tempting to discount your services in order to generate sales, but Fuchs warns against this.

“You notify the market that your services are now valued lower and worth less,” she said.

Fuchs offers these alternatives to lowering prices:

• Choose to repackage your services and products, moving away from an hourly or per-unit model.
  
• Get creative on marketing techniques, including boosting your joint venture efforts, using new interactive media, and increasing both in-person and social networking.
  
• Increase the value you provide to specific niche groups within your target market. The tighter the niche, the faster you can get rich! Are you under-valuing your goods and services? What challenges do you have when setting prices?

Are you under-valueing your products and services? What challenges do you face setting prices?

With the economy in its current worrisome state, you may be understandably nervous about the state of your business. How will you stay solvent? The key, financial experts say, is managing your cash flow.

Jennifer Goldman, founder of MyVirtualCOO.com, suggests taking a few basic steps to streamline your bookkeeping process, including:

• Using a credit card for all purchases, since you can easily download your statement into your bookkeeping software (and frequently, entries are already categorized).

• Keeping all cash receipts in a brightly-colored envelope. It keeps your receipts organized and makes them easy to find when it’s time to enter cash payments into your bookkeeping software.

• Having only one bank account and one credit card for your business. “Any more than one card and account makes managing your cash flow way too cumbersome,” Goldman said. She also suggests linking your business account to your personal account so you can transfer money easily, and setting up auto-pay on the credit card from your business account so you never miss a bill.

• Hiring a bookkeeper to come in once a month and update your records. “The extra expense is worth it,” Goldman said. “Your books will tell you what is selling, what isn’t, where you are making your biggest profits and how the business is doing in terms of reaching your goal of making a certain amount of money.”

Julie Welch is a CPA and Certified Financial Planner with Meara Welch Browne in Kansas City, MO and co-author of 101 Tax-Saving Ideas. She stresses the importance of tax planning as year-end approaches.

“If your business is facing adversity, especially in light of the current economic situation, there are several actions that you can take to improve your cash flow,” Welch said. Those ideas include:

• Sales – Focus on a niche or a demand that is “recession-proof,” like food, fuel, storage or medical care. Keep tabs on your competitors’ prices, and discount slow-moving inventory.

• Collections – Use e-mail to speed collections, tighten credit policies, resolve billing disputes promptly, shore up collections practices, and put yourself in charge of customer relations.

• Disbursements – Trim your insurance coverage. Scrutinize your utility costs. Pay your bills when they’re due, and renegotiate credit terms.

• Payroll – Utilize non-cash rewards for employee recognition. Cut back on travel and budget and eliminate overtime. Reward employees who come up with cost-cutting ideas. Use contract labor rather when you can.

CPA Ann Fleming of Pittsburgh’s Herbein & Co. suggests keeping a few basic practices in mind:

• Keep debt as low as possible.

• Minimize expenses, especially overhead.

• Stay on top of accounts receivable. Offer incentives for early payment, send reminders, and do not continue to extend credit to customers who are slow to pay.

Most of all, Fleming said, “Cultivate loyal, satisfied customers.”