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Money Matters
"Crisis Survival Kit: 10 Cash
Flow Tips You Need Now"
"10 Ways to
Cut Your 2008 Tax Bill"
"Deciding
on Debt-Based or Debt-Free Expansion"
"How to
Buy the Right Business Insurance"
Bright Ideas
"Eight Steps to Attracting New
Business in a Lagging Economy"
"Being
Big Brother"
"Green
Inc.: 10 Ways to Get Green"
Grow
"Economy Stalling Your Business?
Shift Gears"
"When Less
Means More"
"Businesses
Use Social Media as Marketing Tools"
Off Hours
"Skishing"
"A Silver
Lining for Vacationers in the Caribbean"
Crisis Survival Kit:
10 Cash Flow Tips You Need Now
bMighty.com (09/30/08) Paul, Fredric
The current credit crisis has many small business owners feeling like the
world is collapsing around them. However, small and medium businesses
actually have some of the best options available to help them through this
difficult time, says consultant Rusty Luhring. Luhring says SMBs need to do
some detailed planning to understand the magnitude of the problem, and when
their cash needs are greatest. Similarly, Luhring says SMBs can increase
cash flow by thinking outside the box about invoicing and collections.
First, make a list of all payments due for the next three months, give
payroll priority, and see what can be negotiated and paid later. Second,
call customers to check on overdue and upcoming payments. It may be
possible to ask for early payment from customers that you have a good
relationship with. Offer to forgive 15 percent of the overdue balance, or
the late payment penalty, if customers with overdue payments pay within the
week. Make sure to send out invoices early, as sending them out late
results in late receipts. Offering discounts for on-time payments can
ensure a steady cash flow, but be sure you know exactly how much those
discounts cost you. Consider billing twice a month, on the 1st and the
15th, to speed up immediate cash flow. Ask for some payment up front,
instead of just billing for time as it is incurred. Ask for a third up
front, a third while the job is in progress, and a third upon completion. Fine
tune the timing of your payables to take advantage of the maximum allowable
time to pay suppliers. This grace period can be used as an interest-free
line of credit that provides more time to collect accounts receivable
without spending money on short term credit lines. Finally, consider
layoffs. In small businesses, every employee plays a vital role, but
staying afloat is the priority. Discuss rehiring employees as freelancers,
which reduces the cost of health insurance, payroll, and stock options, and
increases their freedom.
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10 Ways to Cut Your
2008 Tax Bill
Business Week SmallBiz (10/08) P. 64;
Kahn, Virginia Munger
New tax incentives passed by Congress this year can provide relief for
small business owners looking to cushion the blow from investment losses
and the struggling economy. First, if your business has less than $810,000
in depreciable property, Section 179 of the tax code allows for up to
$250,000 in deductibles on new equipment purchases. Business owners can
then take bonus depreciation equal to 50 percent of the equipment's value,
all before regular depreciation kicks in, as long as you start using the
new equipment before the year ends. Second, businesses can get credit for
paying employees who have been called to service in the reserves. The
Heroes Earnings Assistance & Relief Tax Act of 2008 allows businesses
with fewer than 50 employees to receive a tax credit of 20 percent of the
amount paid, up to $20,000, when they pay reservists the difference between
their civilian and military pay. Third, buying a hybrid car for a business
earns a tax credit based on the vehicle's fuel efficiency. Fourth,
capitalize on the increase in the standard mileage deduction rate, which
rose to 58.5 cents per mile and is applicable to the last six months of
2008. Fifth, investment losses in taxable accounts can be used to offset
capital gains, up to $3,000 in income. Sixth, invest in a retirement
account. This year, funding a defined contribution plan with up to $46,000,
or $51,000 if over 50, qualifies. Seventh, become a landlord as commercial
real estate is one of the few investments that can provide positive cash
flow while reporting a loss for tax purposes. Eighth, opt out of an
installment sale. It may make sense to pay the taxes on the gain from
selling a capital asset all at once, even if you are taking payments on an
installment basis. Ninth, boost expenses such as restocking office
supplies. The more expenses you book this year, the more you can write off.
Tenth, clean up your books and get ready for next year. Settle all
outstanding balances, and be willing to write off dated inventory.
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Deciding on Debt-Based
or Debt-Free Expansion
Investor's Business Daily (09/29/08) P.
A8; Stettner, Morey
Having a good idea and launching a business is not enough to guarantee that
your business will succeed. The most successful entrepreneurs plan to
expand their company and find ways of funding growth. Some entrepreneurs
with a negative view of outside capital may try to work their way to
success without help, but with the variety of capital sources available,
particularly ones that specialize in small-business growth, funding can be
found for those who want it. The key to sustaining success after borrowing
money is to take responsibility and make sure the money is repaid on time.
As proprietor of a business, the business' finances are ultimately your
responsibility, even if you have an accountant or banker managing the money.
A franchise model can help a business grow, particularly businesses in
capital-intensive industries such as restaurants. Franchising removes the
demand to raise the capital through internal cash flow, which can take
longer to gather. Finagle A Bagel president Laura Trust says that she used
traditional back financing when she first bought the business, but since
then she has used cash flow to grow from five to 20 locations. ScripNet CEO
Dennis Sponer says he has used cash flow from operations to grow his
business so far, but he has since established a line of credit and obtained
a business loan to further the company's expansion plans.
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How to Buy the Right
Business Insurance
Inc. Guidebook (09/08) Vol. 30, No. 9,
P. 1
Insurance is available for nearly every peril a small business faces, but
smart owners buy only the policies they really need. Before shopping for
insurance, thoroughly research what perils a company in your industry is
most likely to experience, and which can threaten your company's survival.
Consultant David Young says small business owners should only buy insurance
to cover the out-of-the-park catastrophe that would irrevocably cripple
their business. Young suggests contacting your trade association and asking
for any risk assessment tools, papers, or expert opinions for your
particular industry. Most businesses will need a few of the basic policies.
Workers' compensation insurance is required almost everywhere and covers
medical expenses, lost income, and rehabilitation for workers injured on
the job, as well as death benefits should an employee die on the job.
Property insurance protects buildings and their contents, such as
equipment, furnishings, and inventory, making it the most popular insurance
for small businesses. General liability coverage is less common than
property insurance, but arguably more important, because a claim for
serious injury can be devastating. Liability covers any injury or damage a
business' employees may cause other people, their reputation, or their
property. Business vehicle insurance can cover cars and trucks a company
owns or leases, rents, or even uses, and is recommended even when an owner
or employee uses a personal car for work. Business interruption insurance
can help a company rebuild following a disaster by replacing lost income
and paying normal expenses. Some special policies include key man
insurance, which pays should an invaluable team member be unable to work,
errors and omissions insurance, which is professional liability coverage,
and directors and officers liability, which comes into play when companies
have outside investors.
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Eight Steps to
Attracting New Business in a Lagging Economy
Manage Smarter (10/06/08) Black, Joanne
When the economy is struggling, keeping a small business going can be
difficult. Instinct says to cut advertising, travel, training, marketing,
and discretionary expenses, but such an approach causes the pipeline to
close, worsening the situation and making it more difficult to thrive when
the market does recover. A few strategies will help your business stay
afloat until the economy improves. First, broaden your perspective and
redefine and reinvent yourself. Determine how you can create new demand for
your products and services, build new alliances, and consider alternative
distribution channels. Second, be nimble and innovative. Be ready to make
quick decisions and act fast to create new uses for your products, or even
create a new business model. Third, take care of your current customers to
keep them. Fourth, prioritize wisely. The most important activity for any
salesperson is to focus on the "closest catch," be it following
up on a prospect, writing a proposal, or closing a deal. Fifth, become an
expert in your field. Companies hire experts because they cannot afford to
make a mistake. Position your company as the expert on a specific product
or in a market niche. Sixth, stay connected and network whenever possible.
Attend a minimum of one event per week. Every person you meet is a
potential customer or referral. Talk to people and find out how their
business is doing and what you could do to help them. Seventh, instead of
cutting prices, increase value. Cutting prices only cuts down profits.
Instead, consider how to "get in and get started." Offering
high-value products and services will lead to more referrals and more
sales, even in a slow economy. Divide products or services into smaller,
more affordable pieces to get initial purchases that will lead to larger
purchases. Eighth, commit to building your referral business. Referrals are
extra important in a slow economy, because a customer referred to you will
result in a sale 70 percent to 90 percent of the time.
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Headlines
Being Big Brother
Fortune Small Business (10/08) Vol. 18,
No. 8, P. 43; Alsever, Jennifer
Many small businesses are abandoning closed-circuit TV systems in favor of
online video surveillance. Restaurant owner Ryan Elmore, for example,
assumed that his employees continued to work hard after he left work, but
after installing cameras and using an online service to monitor his
restaurant, he discovered that the restaurant manager on duty left a few
minutes after him, servers sat at tables, sent messages, and gave free
meals to friends, and cooks took multiple cigarette breaks every hour and
cut corners on his signature dish. However, now employees at Elmore's
Pepper Jack's Neighborhood Grill know that Elmore can log in online, view a
receipt, and call up a video of that transaction. Elmore can remotely see
whether employees cleaned the restaurant, if they are smiling at customers,
if a customer's order arrives at a table late, or if employees are helping
themselves to meals. Online surveillance companies will install cameras and
provide monthly services in a variety of price ranges, and some even offer
software that can be used to build a library of training videos, such as
best practices for store openings and closings. Elmore started using his
service accidentally when a pizza chain he bought had the service
installed. Elmore installed the service at Pepper Jack's and immediately
started seeing results. Elmore and his wife Janel noticed numerous times
when the restaurant was over staffed, allowing them to adjust schedules and
cut labor costs by 5 percent, and food costs dropped 3 percent because
servers stopped giving free food to friends. For an annual operating cost
of $1,920, Elmore was able to cut operating costs by $100,000. Elmore says
he felt guilty at first for not trusting employees, but the results
eliminated any concerns. "As an operator, I want to know where every
dollar is going," he says.
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Green Inc.: 10 Ways to
Get Green
Pink (10/08) Vol. 4, No. 2, P. 66;
Pomerance, Rachel
Environmental awareness and energy conservation have recently been pushed
to the forefront of many American's minds, and women-owned small businesses
are on the cutting edge of sustainability. Environmental efforts among
small businesses can include everything from producing environmentally
friendly products for consumers, such as all-natural shampoos or organic
cotton, to outfitting offices with energy-efficient appliances and light
bulbs. Many small business owners that go green at work find that the
biggest payoff comes from passionate customers, committed employees, and
their own personal fulfillment. A Women's Business Enterprise National
Council study found that 71 percent of its more than 1,200 members are
trying to make their businesses "greener," primarily through
their products or how they run their business from day to day. A great way
to start the process of going green is to form a "green team," or
a committee to chart plans and progress in the office. Set a large goal,
such as reducing office energy consumption and waste by a certain
percentage or incorporating more environmentally products into you product
line, to inspire and motivate employees. Buy locally to cut transportation
costs and fuel emissions and to support your local economy. Cut energy by
using compact fluorescent light bulbs and put set computers to enter
"sleep" when not being used, and set printers to print on both
sides. Distribute memos and office communications digitally. Incorporate
green, high-performance building technology and practices when designing
work spaces, and encourage employees to car pool by organizing a car pool
signup. Going green can be difficult, particularly during slow economic
times, but the satisfaction and customer goodwill and loyalty gained are
often worth the sacrifice.
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Headlines
Economy Stalling Your
Business? Shift Gears
New York Times (10/09/08) P. B13;
Bowers, Brent
Until recently, Christopher Hazlett, founder and president of software
design firm Integrate Consulting, ran a successful business developing
software for Fortune 100 companies. However, the recent economic downturn
has forced him to look elsewhere to keep his business alive. Hazlett says
in early January Integrate had 12 months of work in the pipeline, but in
just two weeks all of his active clients backed out of their contracts. He
knew he was focusing too much on a specific area, but the big contracts made
that easy to do. Acknowledging the downturn, Hazlett made a big gamble to
save his company by switching from its strength of developing software for
companies to developing a Web product for a market that includes churches
and synagogues. Hazlett is now ready to launch a software program called
Event Clipboard. He says the new product fills a niche that didn't exist,
which he defines as groups within large corporations, nonprofits, and
small- and medium-sized businesses. Hazlett says he has learned several
important lessons from this experience. First, be frugal. During
Integrate's heyday, Hazlett thought about renting an office, but decided
there was no compelling reason to do so, allowing him to save on rent.
Hazlett also cut his salary last year, and puts much of what he earns into
personal savings. Switch to a new product or service if the one you are
marketing is not selling. Be patient and look for opportunities during
tough economic times. Corporate cost cutting hurt Integrate, so Hazlett is
now marketing a budget-conscious product to help customers save money.
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Headlines
When Less Means More
Fortune Small Business (11/08) Vol. 18,
No. 9, P. 81; Kimes, Mina
Nearly 70 percent of small business owners would prefer to keep their
businesses small, reveals a Discover Financial Services survey. In addition
to the fear of losing control, top-line growth can lower profits.
"Growth for the sake of growth isn't good; it's bottom-line
performance that matters," says consultant Eric Siegel. "In many
cases, you can make more money as a smaller firm." Expanding a company
also means hiring more employees, which results in more time managing
employees and less time doing hands-on work, higher health insurance costs,
and potentially new labor and employment laws, including the Americans With
Disabilities Act, which affects companies with 15 or more employees.
Although most companies with fewer than 10 workers never break $1 million
in sales, there are some exceptions, and it is possible for smaller
companies to outperform larger ones. In 2006, the Georgia Institute of
Technology studied the methods that forward-thinking small businesses used
to establish and maintain a competitive edge. Many of the most profitable
small firms in the study favored strategic alliances, long-term contracts,
close client relationships, and highly efficient manufacturing systems.
Consultant Traci Entel says small business owners are redefining what it
means to be an entrepreneur, using partnerships and technology to expand.
The economic downturn may even benefit small businesses, because while
larger companies usually have to resort to layoffs to cut overhead, small
businesses are more nimble and can more easily dial up or down their
efforts and resources.
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Headlines
Businesses Use Social
Media as Marketing Tools
Charleston Regional Business Journal
(SC) (10/13/08) Frampton, Ashley Fletcher
Small business owner Andrea Serrano discovered that most customers knew
about her downtown clothing boutique through recommendations from other
customers, which is why she now relies primarily on the power of online
social networking to bring new customers to her store. Serrano's store has
a Facebook page that sends new merchandise updates and other information
directly to her store's 750 registered customers. Although Serrano had been
using an email distribution list to reach customers, she says the Facebook
account provides another way to get her customer's attention. Serrano's store
is an example of how the Web tools once thought to be dominated by teens
and young adults are now part of businesses' marketing strategies. Many
businesses are just starting to experiment with the tools, but marketing
experts are urging more businesses to get involved in online social
networks. The term Web 2.0 is being used to describe a variety of online
tools that promote collaboration, engagement, and user-driven content.
Along with Facebook, Web 2.0 technology includes blogs, micro-blogs, sites
that scan and aggregate blogs, video-sharing services, and virtual worlds
where individuals and businesses can meet and interact. These online
options can be overwhelming, but the key is to not use all of the tools at
once. Determine your target audience and find the best tool for contacting
them. Aaron Siegel, owner of Fiery Ron's Home Team BBQ, also uses a
Facebook page to provide members with updates on specials and events.
"Frankly, I think people are more attentive to Facebook than to their
own email at this point," Siegel says. "A big email blast, they
might just skip over."
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Headlines
Skishing
Forbes (10/27/08) Vol. 182, No. 8, P.
202; Burke, Monte
Skishing, a combination of fishing, swimming, and water skiing, was created
by Paul Melnyk of Long Island. "It's actually swim-fishing,"
Melnyk says. "But 'swishing' just didn't sound right to me."
Wearing a wetsuit and flippers, Melnyk demonstrates skishing by swimming
out into open water. About 100 yards from the shore, intentionally in a
riptide and buoyed by his wetsuit, Melnyk casts his line from the crest of
a four-foot wave. Melnyk says skishing is a stealthy way to fish that adds
an element of danger to what is normally a peaceful and safe sport. A
strong riptide can carry skishers father from the shore than they should
go, and the possibility drowning is certainly a reality. Melnyk discovered
skishing by accident when, fishing from a rock, he was pulled into the
ocean by a 40-pound fish. Melnyk says at first he was frightened, but he
quickly started enjoying the experience. There also is the possibility of
catching a big and powerful fish that gives the skisher more of a ride than
intended. And there is the possibility of sharks. "I've seen fins and
been bumped by them," Melnyk says. "But they don't mess with me
because I show no fear." During the demonstration, Melnyk caught a
small striped bass, only about eight pounds, that he reeled in and
released, but he says he has caught fish up to about 50 pounds. Other
unconventional fishing strategies include kayak fishers, who look to catch
a ride by catching large fish off the shore of Nantucket, Mass.,
"noodlers" who dive into rivers and stick their arms into holes
they hope are occupied by dog-sized catfish, and fishers who use bows and
arrows on the Illinois River to catch Asian carp that jump high out of the
water when agitated by the sound of boat engines.
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Headlines
A Silver Lining for
Vacationers in the Caribbean
Wall Street Journal (10/08/08) P. D1;
Nassauer, Sarah
Now may be a good time to vacation in the Caribbean, as many hotels are
offering discounts and deals to attract tourists. Even before the current
economic crisis, the Caribbean's tourist industry was struggling. Flights
to the area dropped as airfare prices have risen, and an active hurricane
season further discouraged potential tourists. Meanwhile, hotel
construction in the area continues, creating more rooms that need to be
filled. Consequently, the traditional off-season discounts are particularly
enticing this year. Worldwide, the travel industry may be in for a
difficult time during the foreseeable future. Hotels around the world have
started to see revenues fall, despite the fact that room rates have risen
steadily over the past few years, except in the Caribbean. The Caribbean is
the only geographic area in the world to experience declining room rates
over the past few months, with the average rate for a room in the Caribbean
falling 8.2 percent since August 2007. Online travel agencies also are
reporting significant discounts in the Caribbean. In addition to lower
rates, hotels are offering perks such as free meals, resort credits, and
airfare reimbursement to keep travelers coming before the traditional busy
winter holiday season. The lower rates also are an effort to counter rising
travel costs as airlines have been raising rates and reducing the number of
flights to the Caribbean. This year, about 15 percent fewer flights are
expected to fly to the Caribbean in December, compared to the same time
last year. Most hotels say the holiday season is looking strong, but note
that bookings are still lower than usual.
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