Friday, December 23, 2011

How To Make Your Facebook Business Page Go Viral

imageThis article was written by Pete Lisoskie, CEO, BeLocal

Next in the series of articles from beLocal is social media marketing.  The reason: Your potential customers are using Facebook, LinkedIn, and Twitter in massive numbers.  And they use social media to share, communicate, and interact with others and with products and services. Y our potential customer’s eyeballs have shifted from TV to social media.  And Facebook has now surpassed Google in weekly traffic!  So you need to be there.  Facebook is by far the largest social media platform at over 800 million users.  The numbers are staggering!  In this article we’ll show you how to get a Facebook business page and then make your Facebook business page to go viral. Here’s how:

For those companies who do not currently have a Facebook page, the process to get one is very easy...

1. Go to Facebook.com and click Sign Up.

2. Provide some basic information like a valid email address.  You will receive an email confirmation. Confirm and you now have a Facebook profile.

3. To create a Facebook page, go to http://www.Facebook.com/pages/create.php

4. Type in the name of page exactly as you want it to appear and as you think users will search for it (Important: you won't be able to change this later).  Try to pick a name that customer’s would use to search for the page not necessarily your company name.

5. Select the category most appropriate for your business.  (Note: avoid choosing other unless there is absolutely nothing else that matches your business)

6. Add content and publish your page — and you are done!

7. Review the help guidelines at http://www.Facebook.com/help.php or send an email to info@Facebook.com if you experience any problems.

Creating a Facebook business page is only the first step.  Now you have to optimize and promote the page to benefit from the free viral marketing that Facebook can provide.  And we have some great ways for you to do just that.

· Make your business personal — People primarily use Facebook to share information with friends and family; although they do “Like” pages of interest.  As a business, you need to make your Facebook business page “Like-able” with products and services content that connect with users on a personal level.  The more you show the human side of your business, products, and people to the community, the more likely you are to be successful.

· Use News Feed — the news feed on a Facebook user’s home pages tells them what their friends are doing.  When users become your fans, News Feed tells their friends and invites them to become fans of you as well.  This leads to a friends-of-your-friends viral effect.  This viral effect can really drive traffic to your Facebook page.

· Update your Facebook page frequently — Facebook was designed so that people can share content on a regular basis and Facebook highlights new information and recent content changes.  Updating your page with fresh content will result in more users coming back regularly to visit and interact – especially if what you are putting up there is interesting to those that “Liked” your page.  You can also send updates to fans (Facebook's term for your subscribers, friends or colleagues) to announce new products, in-store giveaways, special promotions, coupon, contests, or events.  To find out more about how to do this, visit http://www.belocalgroup/Facebook.

· “App” up your Facebook page — Facebook users and developers have created hundreds of applications you can integrate into your page to provide more functionality and make it feature rich!  The apps you are interested in; however, relate to the business aspect of using Facebook pages so that you are not missing out on valuable traffic that could be potential customers or clients. Check out our Top 13 Must-Have Facebook Applications for Business by going to http://www.belocalgroup/Facebook.

· Promote your page with Facebook AdsFacebook ads are a way to laser focus on a desired audience with relevant targeted ads.  If the ad image and copy is well-designed and executed, it produce amazing branding and lead conversion results for you and your business!  These are pay-per-click ads that run in both traditional banner format and in the news feed.  The ads can be audience targeted based on age, gender, geography, educational level, interest, relationship status and keyword.  Facebook ads do not always convert well, but if you test and measure you may come across a winning campaign and more importantly, you are developing “mental” brand with these ads by getting thousands of impressions in a short amount of time.

There you have it!  While Facebook is only a small piece of Authority Marketing principles we use at beLocal, it can be very effective for getting your business in front of thousands of potential customers.  And with proper integrated marketing techniques, it can be very powerful.  If you would like to know more about Facebook business pages or how to use Facebook to get in front of potential customers or clients, go to http://www.belocalgroup.com and look for the Facebook tab.  Here’s to making you the Authority in your local marketplace!

In Pete’s 14+ years experience as a small business entrepreneur he created businesses in financial services, publishing, seminars, recruiting, construction, network marketing, radio shows, and internet-related products and services.  His groundbreaking book “Customers for Keeps” led the customer relationship management movement.  Lisoskie applied these timeless concepts to the internet platform when he founded beLocal [http://www.belocalgroup.com] and developed the exclusive “Authority Marketing Program” for local small business.

Raising Money From Informal Investors

This article was written by Asheesh Advani, in Entrepreneur Magazine, December 2011, reprinted by permission

The devil's in the details when taking money from--and structuring a deal with--friends, family and angel investors

No matter who you're raising capital from and no matter whether you're raising money in the form of debt or equity funding, you'll be faced with the prospect of financing agreements that are written to favor the investor over the entrepreneur.  Over the years, the agreements used by more informal investors have come to mirror the investor-friendly agreements used by venture capital firms. So it's critical, especially during the startup stage when your negotiating leverage with investors is often weak, to know the difference between what is tolerable and what is intolerable when it comes to structuring a financing deal.

Your guiding principle should be this: Look into your crystal ball and choose your first investor carefully.  Don't agree to terms that will limit or restrict your ability down the road to grow your company or attract additional investors.  When raising money from angel investors or relatives and friends, the terms negotiated by your first investor in a financing round tend to be the terms that last for the entire round.  Similarly, the terms you agree to in your first round set the stage for later rounds.  And giving away too much could come back to hurt you or your business.

So here are a few tips about what to look out for to get a deal that works for you:

Don't give pro-rata rights to your first investors.  If your first investor (or his or her attorney) negotiates pro-rata rights (which means the investor is given the right to maintain ownership in the company through future investment rounds), all the investors in the round are likely to also want those rights, even if most wouldn't have otherwise requested them.  Although anti-dilution provisions are in the interest of early investors, they're off-putting to later investors.  So you'll need to balance the needs of your early investors to protect their stake in the company with how attractive your company will appear to later institutional investors.

Avoid giving too many people the right to be overly involved. The follow-the-leader mentality described above gets particularly problematic when you give up control of the business and require investor consent for business decisions.  If you're not careful, you may find yourself in the tedious and time-consuming position of needing signatures from all or most of your shareholders to make future financing decisions or management choices--all because you gave these rights to your first investor. Similarly, some investors will want detailed reports on a weekly, monthly or quarterly basis. Agree to this only when it seems necessary.  Spending a lot of time preparing and mailing reports, and requesting and collecting signatures, is probably not the best use of your time.

What You Need to Know about Universal Product Codes

imageThis article was written by Jim Fulton, SCORE Orange County Management Counselor

SCORE gets frequent questions about the Universal Product Code (UPC), expressed as a barcode, now found on virtually every package in commerce.  In Europe, these codes are known as EAN’s. However, the UPC and EAN are the same and do not duplicate each other.  If you are going to distribute your products beyond the local boutique or your own website, you will need to obtain a set of codes.  There are two closely related items to discuss, the UPC code and a manufacturers part numbers.

Part numbering is strictly a convenience for the manufacturer and indirectly the distributor and retail outlet (primarily for their inventory control).  Historically, a part number started on the right with a variation number or letter, preceded by a number designating a specific part.  As things got more complex, it became common to have another number on the left indicating a product or assembly number, and so on.

The UPC code is strictly of use in the distribution channel.  It starts on the left.  The left most code describes the country (indirectly the continent) of the part manufacturer or supplier.  The next code group to the right defines the particular manufacturer (or source) of the material.  Then comes a long code group that the manufacturer or supplier can use any way he pleases.

To aid distribution, every variant in the packaging of a product is given a separate UPC code.  If you sell a package of four items, it gets a UPC number.  If you sell a box of ten packages of four items, it gets a UPC number.  If you sell a case of 100 packages of four items, it gets a UPC number.  The case may include ten boxes, but the case and box have different UPC numbers.  If color plays an important role in your product, packages containing different color products get their own UPC.

It is useful to prepare a table of all of your products down to the level of major part or assembly numbers (including color or other parameter that is important).  The number of pigeon holes in this table indicates the number of UPC codes you need to acquire.  Once you get all of your product offerings identified, you will convert the table(s) to a serial list with an individual UPC number for each item in the list.  Leave empty spots in the serial list wherever they occur naturally.  These can be used later for revised parts/packages etc.

You now have a list of unique UPC codes that can be tied to your separate pricing information and any separate more detailed parts lists related to a specific UPC or group of UPC codes.  When a distributor handles your product, it will create a computer program assigning their sale price to the UPC of your product and track the quantity and location of your product through their system with a separate inventory control program.

You need to purchase a block of UPC codes from an authorized vendor/registrar.  I usually suggest a start up purchases a block of 100 codes that start from the left with identifiers for your country and company with the numbers farther to the right initially unassigned.  You then assign these numbers on the right to specific products or assemblies as you release them into the market place.  If the above tabulation suggests you need more UPC codes, acquire the appropriate number, they are cheaper by the dozen, or 10,000.

I suggest you Google universal product code on the internet and read up on the whole subject.  A good place to start might be How the UPC Works, http://electronics.howstuffworks.com/gadgets/high-tech-gadgets/upc.htm

Saturday, November 19, 2011

The New Patent Law Modifications Were Needed

imageThis article was written by Jim Fulton, SCORE Orange County Management Counselor

The recent changes to the Patent Law of the USA have caused consternation among the public. As usual with Congress, they involved a variety of largely unrelated compromises. The changes involved two major features:

1. The Congress now allows the US Patent and Trademark Office to keep more of the fees it collects, in order to hire more examiners. This had the goal of reducing the backlog in unexamined applications that are now delaying patent awards into the four year or longer time period.  The time to obtain an actual patent has become so long that I have had to change my interpretation of how venture capitalists consider new ideas.  Whereas they used to prefer, even demand, an issued patent before providing financial support to an organization exploiting a new invention, they recognize they can no longer wait for the issuance of a patent. The VC must accept more risk in considering these new inventions.

2. The Congress changed the primary criteria for establishing who is entitled to Patent protection. The new law says the first person to file a viable patent application, potentially including a provisional patent, is entitled to be recognized as the inventor. Up until now, the law stated that the first person to invent something was the legal inventor. This criterion led to endless arguments in courtrooms about who could demonstrate most forcefully they invented something before someone else (sometimes several years before any application was actually filed). Not infrequently, these cases went on for over ten years. In one case, Edwin Armstrong, the now recognized inventor of frequency modulation (FM) radio, committed suicide by jumping from his radio tower in sight of the RCA Building in New York when he lost an extended case to the Radio Corporation of America.  This change makes it more important to file a viable (complete) patent application early. It also raises the importance of filing a viable "provisional patent application."  If the provisional patent does not contain a well worded statement of its claims, the filer is left in the same situation as before; a long legal battle can be expected as to whether the claimant actually and adequately disclosed a new and novel invention at the time they filed the provisional patent.

As before, the inventor's best path is to read David Pressman's Book on "How to Prepare Your Own Patent" that is available from nearly every city library. It is also available for about $30 from Nolo Press in Berkeley, Calif. As does he, I advise reading his book, preparing a preliminary patent application, doing a preliminary search of the Patent Office files over the Internet, and then hiring an experienced Patent Agent to prepare your formal application. The preliminary search must be done using the Patent Office files. Doing a Google search is a waste of your time. The Patent Office files can be accessed at http://www.uspto.gov/web/patents/classification/uspcindex/indextouspc.htm

Use the HTML row of letters to select the first letter of how you describe your invention, a lamp, a pump, a motor, etc. You will then be taken to a list of how the Patent Office interprets that title and suggests the appropriate class and subclass in their system to  examine.  They will frequently suggest an alternate name or category to search.

Internet Marketing: How to Convert Online Prospects to Customers with Authority Marketing

imageThis article was written by Pete Lisoskie

Our world has shifted.  As business owners, we’ve gone through a tough recession.  While the economy faltered, technology did not and your customers changed the way they found, evaluated, and decided on their product or service purchases.  They went from offline advertising to local online advertising.  Don’t believe it?  Yellow page companies are going bankrupt. Newspapers are going out of business.  When you go into Starbucks do you see more newspapers or laptops?

Let’s look at some startling statistics that are impacting your business as you read this article:

· There are more than 2.6 billion local searches each month on the internet.

· 30% of all search engine queries contain city, state or zip code.

· The internet surpassed yellow pages & newspapers for local consumer information.

· 70% of U.S. households use the internet when shopping locally. Do you?

· 54% of search users have substituted internet search for the phone book.

· Consumers are doing product research online, but 67% of the purchases by consumers are made offline locally.

· 34% of bloggers post about products and services: what they are saying about you?

· Facebook tops Google for weekly traffic in the U.S.

· If Facebook were a country, it would be the 3rd largest in the world

· YouTube is the 2nd largest search engine in the world

· Every minute 24 hours of video are uploaded to YouTube

· A new member joins LinkedIn every second

· Groupon will reach $1 billion in sales faster than any company in history

· 90% of consumers trust peer recommendations from Yelp, City Search, and Google

Social media, internet search, and online evaluation are the very fabric that your existing and new customers are using to find products and services.  If you are not online now or have a strategy on how to do this, most likely your business will not exist 5 years from now. You don’t really have a choice on whether you have an online presence; the question is how you do it?  The answer: Authority Marketing. Remember, good marketing is good marketing online or offline. All customers go through a 3-Step psychological buying process of Search, Evaluate, and Decide.  Most Search Engine Optimization companies cover search to get you on page 1 of Google or have a social media presence, but they are not helping you convert those prospects into customers.  This is where Authority Marketing is powerful.  As a business owner, you MUST become the Online Authority so customers choose you. What is Authority Marketing?  It is an integrated marketing approach using keyword strategy, social media, videos, articles, blogging, coupon sites, Google maps, email, and text messaging.  The outcome is your customer taking a Call to Action, CTA. A CTA is a phone call, email, service request, or booking. In future articles, we’ll cover each piece of Authority Marketing so you can implement it into your own business.

About the Author: Pete’s 14+ years experience in small business and entrepreneurialism helped him to create business startups from financial services, publishing, seminars, recruiting, construction, network marketing, radio shows, and internet-related products and services. Lisoskie founded beLocal and the exclusive “Authority Marketing Program” for local small business bricks and mortar.

What is an Employer to do….?

imageThis article was written by Robin Noah, SCORE Orange County Management Counselor

More and more employers are burdened with rules and regulations regarding employee issues. Many employers turn to background checks to ensure, to the best of their ability, that the persons they hire will not become challenges in their workplace.

At a recent Society for Human Resources Management conference in Washington, DC one of the topics discussed was the act of background checks. It was mentioned that because bias complaints from rejected job applicants are on the rise the EEOC is cracking down on discrimination in employers’ hiring practices.

A case in point is a comment from INC magazine (Dec 2010) that the U S Equal Employment Opportunity Commission saw a record 99,922 discrimination claims filed in the fiscal year ending September 30, 2010.  It was the highest number of cases brought in the agency’s 45-year history.

So what is an employer to do?

“Take a more proactive approach toward education and prevention.”

Employers need to 1) understand the rules for background checks and 2) review all of their company’s selection procedures, making sure they’re necessary and related to the positions they’re going to hire for. You can get more information at www.eeoc.gov

A small business owner or nonprofit organization can take a proactive stance to protect themselves against employee workplace lawsuits primarily by hiring the right people. Additionally know what employees’ legal rights are, and be scrupulous in following the law,”

“Become knowledgeable of labor practices.”

A review of current procedures, handbooks, training or educational tools in place should be done annually to ensure that current rules, regulations and laws are reflected. I also recommend that employers have Methods and Procedures guidelines to guard against future lawsuits of discrimination. Nonprofits frequently have a Managing Volunteers Guide.

“Protect the company against lawsuits”

A good business practice is to look into Employment Practices Liability Insurance (EPLI) to develop protection against liability that may arise out of employment practices. Nonprofit organizations should also look into the impact of their volunteer staffs.

Mind Your Business: A Scary Proposition

This article was written by Jeanette Mulvey, BusinessNewsDaily Managing Editor – Reprinted by Permission

   

Taking the leap into entrepreneurship can be a scary proposition. That's especially true if you're betting all your chips (and dollars, for that matter) on the success of this one great business venture.
And it's not just small businesses that have reason to be afraid. In our story, "The 10 Scariest Business Blunders of the Year," we look at some of this year's missteps and misfortunes of some of the country's biggest businesses. For companies both big and small, there's never been a more nerve-racking time to be in business. The good news is that small businesses stand a better chance of surviving even in this frightening age of economic uncertainty, unrelenting social media scrutiny and a constantly changing competitive landscape.
Here are a few things small businesses can do to leverage their strengths and avoid making the mistakes that have sent many a big business to the corporate graveyard.

Customer service – There's no doubt small business can offer better customer service than the big guys. That's probably the reason why your customers come to you. Be sure you take care to keep your customer service chops polished, and you'll beat your big competitors every time.

Social mediaSocial media marketing is truly the great equalizer. It allows you to develop a local, national or international following without spending even a dime. Facebook, Twitter, LinkedIn and websites like Yelp help small businesses create a big presence. Don't miss one single opportunity to use them.

Giving back – Customers want to buy from someone who understands where they come from. When you get involved with your local community, you become one of your customers and they'd always rather buy from one of their own. Find a charity, a cause or a group to support and get involved.

Changing on a dime – Consumer tastes and preferences can change overnight. For big companies, with large infrastructures and long lead times, changing to meet those demands can be challenging. Small businesses, on the other hand, can change overnight. Be sure you're listening to your customers and are ready to give what they want, when they want it.

Flexibility – When's the last time a giant company worked with a customer to reduce the price on a bill or find a creative solution to a problem? It rarely happens. You, on the other hand, can make the big decisions that allow you to give a customer a break or offer a special service to meet a customer's unique need. Take advantage of it.

Teamwork – Small companies have the ability to handpick a specialized team of employees, all of whom bring a different set of skills and focus to your business. Big companies, on the other hand, don't have that kind of control over how their teams develop. No matter how hard they try, there will eventually be slackers, malcontents and troublemakers. Use your small stature to make sure you create a team that treats each customer individually and that can carry on your vision for running a great business, even in your ads.

SCORE OC Gets the Word Out through Social Media

Those of you familiar with SCORE 114's Facebook page might be surprised to see that we've added a new look and a whole lot of new content to Facebook as well as all our other social media sites. We're now known as SCORE OC (facebook/scoreoc.com), and we're posting comments, news items and events several times a week. We have a brand new Wordpress blog (scoreoc.wordpress.com) where we post original content based on the experiences of SCORE clients and counselors, and we welcome your comments there. You can also now join us on LinkedIn -- we have lively discussions going on in the SCORE Orange County Group, and would love to hear from you as well. And, if you follow us on Twitter (@scoreoc) you will see regular updates about articles, events and news of interest to small businesses in Orange County. Come check us out on social media, and learn what SCORE OC can do for your business and you!

You can find us at the following sites:

Facebook: www.facebook.com/scoreoc

LinkedIn: linkedin.com (SCORE Orange County Discussion Group)

Twitter: twitter.com/#!/scoreoc (@scoreoc)

Blog: scoreoc.wordpress.com

Monday, October 24, 2011

Mission Impossible: Not Anymore

imageThis article was written by Michelle Rusillo, SCORE Orange County Management Counselor

Having a mission statement can lead a team to improve teamwork, to create a productive work environment, improve profits.

The mission statement

A mission statement is an inspiration clear succinct statement that clarifies the purpose of the business. The mission statement would lead the CEO and their employees to better understand the purpose of the business. The mission statement makes the purpose tangible for all employees to understand. This mission would guide each employee through decision making while interacting with customers/clients and co-workers. This mission would also guide the leaders to make good decisions that benefit employees and most importantly the customers/clients. This mission is the beacon in the night that directs everyone to improve teamwork, create a productive work environment, improve patient compliance and increase profits.

A mission statement is critically important to the foundation for all businesses. The mission statement is equal to a home’s foundation. The foundation keeps the home strong during turbulent times like a mission will do for a business. Unfortunately, leadership does not always have enough exposure to the purpose of a mission statement and never developed one.

The mission incorporates a strong statement to the commitment of services. For example a local veterinary company wanted its clients and their pets to be well taken care of at each and every visit to their hospital. They chose a mission to state “to provide quality compassionate care to the client and their pets”. The mission directs every employee to know what is expected of them to do. There now was no question in employee’s mind what was their purpose when they are working. At any point , when a question of what should I do occurs during an exchange with a client , the employee refers to the mission and follows its sentiment.

Educate you, employees, customers and the community

The mission statement needs to clearly state your business goals and objectives. It should explain what the business is, what special niche and how you will make a difference in the lives of customers and clients. It should tell you what you need to do to thrive and help initiate activities and set priorities for the investment of your limited resources. It should clearly state the goals and values of the organization. In addition, the mission should express the future goals and dreams of the organization.

Once the mission statement is complete start sharing it by posting it everywhere, prominently displayed on the company’s Web site, as part of the social media plan as well as in brochures and other marketing material. The mission statement is an essential leadership tool. It will help align activities to match future goals, create desirable change and focus the workforce towards the company’s vision.

Mission Impossible made possible

Once a mission is written, implemented and communicated, there will be a transformation of employees understanding and performance which will increase revenue too. Having a mission can excite the employees, given direction to the business and clearly identified the value and philosophy of the business. The leadership will know its scope and purpose; now so do all the employees. A mission statement is critical for any business, writing one is not mission impossible. This is not an impossible task but a critical one for leading your business to improved quality and customer service.

8 Easy Ways to Lose Customers

imageThis article was written by Jeff Haden | September 26, 2011, reprinted by permission

Jeff Haden learned much of what he knows about management as he worked his way up the printing business from forklift driver to manager of a 250-employee book plant. Everything else he knows, he has picked up from ghostwriting books for some of the smartest CEOs he knows in business. He has written more than 30 non-fiction books, including four Business and Investing titles that reached #1 on Amazon's bestseller list. He'd tell you which ones, but then he'd have to kill you.

Visit his website at: www.blackbirdinc.com

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Since often your most profitable customers are long-term customers, don’t lose them by

making these mistakes:

  1. Accept high employee turnover. High turnover is a fact of life in a few industries, but in most cases employees leave because they aren’t treated well. So do customers. Unless systems truly drive your business, you cannot expect to have long-term customers unless you first have long-term employees. If turnover is high, find ways to fix it. Otherwise customer turnover will always be high as well.
  2. Treat new and existing customers too differently. Offering discounts or incentives to land new customers is often necessary, but existing customers can quickly resent the fact their loyalty is not rewarded. Think hard about the carrots you offer new customers and make sure you “reward” existing customers as much if not more. And never forget that while new customers make an immediate top-line impact, sales to existing customers typically create a bigger impact on the bottom line.
  3. Introduce too many new faces. It’s easy to assume long-term customers love your brand, but more often than not they love your employees. (Customers buy from people, not companies.) Relationships are the lifeblood of most small businesses so don’t rotate salespeople, customer service reps, or key contacts unless absolutely necessary. When employees build relationships with customers, do everything possible to protect and foster those relationships. Employees are rarely interchangeable where strong business relationships are concerned.
  4. Focus too heavily on price. Being the low-cost provider is a competitive advantage, but good luck maintaining that advantage. Somewhere, someone is planning to steal your customers by cutting prices. You goal is to provide the best value, not necessarily the lowest cost, because value is an advantage you have a much better chance of maintaining through a combination of price, schedule, service, and relationships. If your marketing focuses mostly on price you’ll train customers to constantly look for a lower price — either from you or from your competition. Spend at least as much time finding ways to increase value as you do finding ways to lower costs and prices.
  5. Push too hard to grow customer revenue. Trying to sell more to existing customers is great, but don’t do so blindly. Know what each customer needs first and only then try to meet those needs. Never suggest a product or service a customer doesn’t need. And never say, “Is there anything else we could do for you?” unless you already know the answer and are ready to describe and provide a great solution. Otherwise you’re just pushing — and customers hate being pushed.
  6. Take your principals for granted. Every business has principal products or services that “keep the lights on.” Every business also has key customers that keep the lights on. Those are your “principals” (the association with “principle” is intended) but over time they can be taken for granted while newer, sexier, higher profile initiatives get all the attention. Make a list of the customers you can’t afford to lose. Then list what those customers buy. That’s the foundation of your business. Make it a principle to focus on your principals.
  7. Encourage the wrong focus. This happens most often in sales, when commission rates are much higher for new customers than existing customers. If that’s the case and I’m a salesman, why should I work to maintain existing accounts when I get paid a lot more to find new ones? That approach only works if someone else systemically takes over the responsibility for keeping an existing customer in the fold. Think about the incentives you provide and goals you set and make sure you encourage the outcomes you really want.
  8. Make it difficult to resolve problems. Policies and guidelines are great for ensuring employee compliance, but a customer with a problem doesn’t care about policies; she just wants her problem fixed. Let employees see complaint-resolution policies as guidelines rather than rules and allow freedom to make judgment calls. Resolving a customer problem or complaint can actually be the moment when your business establishes an even stronger customer relationship — if your employees are free to make that happen.

Drop Shipping - How To Reduce Your Inventory and Not Lose Sales

imageThis article was written by Michael Capsuto; Certified Public Accountant, Doctor of Business Administration, SCORE Orange County Management Counselor

Businesses are always afraid of losing a sale. Certain products are kept readily available in their inventory even though there is not much demand for it. There are many costs incurred - the costs of purchasing it, warehousing it, and maintaining it, all in hopes of a sale. If the product does not sell you risk not recouping your cost but also negatively impacting your cash flow. One possible method of reducing this risk while not losing sales is through drop shipping.

What is drop shipping? Drop shipping is an inventory reduction technique where a seller does not keep a product in stock for immediate delivery to a customer. The seller routes the order directly to a supplier who in turn ships the product directly to the customer. The seller makes a profit on the difference between the selling price and the supplier's price. The supplier can be the manufacturer or distributor of the product.

Who uses drop shipping? Businesses large and small use drop shipping. Examples are:

• The television home shopping programs. Orders are received from viewers. The order is then forwarded to the supplier who ships the merchandise to the customer.

• Retailers that sell large ticket items such as carpeting, appliances or furniture. They keep sample items or a similar items in the store so that the buyer can inspect it prior to purchase. The seller takes a deposit or full purchase price and has the desired item drop shipped from the manufacturer or distributor.

• Customized products such as coffee mugs or t-shirts with the buyer's logo. A manufacturer produces the product to the buyer's specifications and ships it directly to the customer.

• Others use drop shipping when selling through online auctions, catalogs or websites. This method of customer buying is becoming more popular each year.

What are the benefits of drop shipping?

Drop Shipping has several benefits.

• There is a positive cash flow. The seller is usually paid in full or receives a deposit which can cover the seller's cost, at the time the purchase is made. The seller does not pay the supplier until the merchandise is shipped. There is this period of time in which the seller has the customer’s money until the payment is made to the supplier. This is called float.

• There is a facility savings. By not stocking a slow selling item, warehouse space is reduced. This results in savings in rent, insurance and maintenance. Alternatively, the space can be used for stocking more popular items or to expand your product line.

• Become a full service seller. Most businesses stock items that are fast selling and ignore other slow selling complimentary items. By having access to catalogs or websites to show customers these products you can increase sales.

What are the drawbacks of drop shipping? Drop shipping is not without its difficulties.

• Drop shipping is not an across the board method for reducing or eliminating inventory. The products must be carefully selected. Drop shipping works best in cases where the customer has an expectation of waiting a reasonable period of time for delivery such as products that are customized, large ticket items, difficult to find, or normally ordered from a catalog or websites. If the product can be found readily on hand elsewhere, you will not only lose the sale but also the customer.

• The ability of the supplier is critical. The supplier must be reliable, have the item in stock, ship on time, and in the quantities and quality the customer expects. The shipper is invisible to your customer, therefore any problems that arise are a reflection on you.

• The customer may find out who are your suppliers and go directly to them for future sales. This can be overcome by “blind shipping” (shipping merchandise without a return label or with just a return street address). Other methods include customized shipping labels with the return address of the seller, customized packing slips with the seller's name, logo, and contact information.

• Increased costs. Unit costs may be increased when purchasing small quantities to meet a specific customer order rather than purchasing larger quantities for your inventory. There also will be added packaging and shipping costs imposed by the supplier. These must be considered in determining your selling price and profit margin.

What is the difference between drop shipping and a fulfillment house? Using drop shipping you do not purchase the inventory until an order is received or shipped to a customer. When using a fulfillment house you are out sourcing your warehouse operations. You purchase the products prior to sale in the quantities that are anticipated to be sold and park them at the fulfillment house. The fulfillment house stores receive your orders, packages, and ships the ordered items to your customer. The fee that is charged you is generally less than maintaining your own warehouse operations. For small businesses or start-up companies that may not have adequate storage facilities or the funds to build them, a fulfillment house can satisfy their warehouse needs.

What are the steps necessary for successful drop shipping? There are several important procedural steps in using drop shipping. These are detailed below.

• Verify that the customer is an approved buyer. Other than a cash buyer, it is possible that the person who signed the purchase order is not authorized to do so by the company.

• Verify that the supplier has the stock on hand. The customer expects a reasonable shipping time. If the items are not in stock notify the customer of the additional time needed to receive the order.

• Confirm prices. If the supplier’s current prices are significantly different than what was included in determining your selling price, discuss the situation with the customer.

• Substantiate that the customer's has sufficient credit before forwarding the order to the supplier. Once the customer receives the items, it becomes difficult to obtain payment.

• Verify that the order was received and processed by the supplier. This is the highest risk in the drop shipping process. Verification can be done simply by fax, email or phone.

• Match the bill of lading to the customer’s order. Request that a copy of the bill of lading be sent to you at the time of shipment. A bill of lading is a document issued by the supplier to the shipper itemizing the items shipped and delivery point. Match the shipped items with the customer 's order. This information is needed to invoice the customer. An invoice should be sent to the customer even if they paid you in full at the time of purchase. This keeps the line of communication open and also provides an additional opportunity to sell other products by including brochures and marketing information with the invoice..

• Investigate all open orders. Open orders are old orders that have not been shipped or shipped orders with a small number of items in backlog. Follow up on these open orders to determine if the supplier is able to ship them or if the customer still wants them.

• Maintain good customer service. Follow up on all customers periodically. Do not assume that once the merchandise is received by the customer that all is well. Resolve all issues to the customer's satisfaction. Benefits of maintaining open communication are customer loyalty, customer referrals, increased customer satisfaction and increased revenue. Good customer service is so important that it often is the difference between businesses that survive and those that fail. There is an old business expression: “No customers, no paycheck”.

Employee or Independent Contractor – An Update

imageThis article was written by Robin Noah, SCORE Orange County Management Counselor

For some time, Human Resource professionals have been advising clients to make sure they are classifying their workers correctly or suffer the consequences. Not everyone they hire as an ”Independent Contractor” meets the IRS description of an IC.

It is estimated that more than 10 million American workers are classified as independent contractors. But how many of them are really self-employed and how many are falsely labeled as such by unprincipled employers?

That's one of the questions the Senate Committee on Health, Education, Labor and Pensions (HELP) set out to answer in a hearing on employee misclassification in 2010.

A 2000 study commissioned by the Department of Labor found that up to 30% of employers misclassify at least some of their employees. The practice is widespread in the construction industry and in low-wage and gray market sectors of the economy. By misclassifying their workers employers can cut their labor costs by up to a third.

Some employers mislabel their employees as contractors in order to avoid paying Medicare, UI and Social Security taxes. Committee Chair Tom Harkin (D-Iowa) pointed out this kind of tax evasion is costing cash-strapped state unemployment insurance funds billions of dollars a year.

Who counts as an employee? The law takes a pretty commonsense view of the question. Basically, if you work for wages with the employer's tools at the employer's workplace under the employer's supervision, you're an employee. True independent contractors are literally in business for themselves. They invest capital in their own ventures and share in the profits or losses of their enterprises.

Most workers don't realize that most of the rights they take for granted in the workplace derive from their legal status as employees. For example, most anti-discrimination laws are written in terms of what employers can do to their employees. Contractors may not be protected.

In January of 2010, the DOL hired more inspectors to combat misclassification. The President's 2011 budget calls for an additional $25 million to help the DOL, IRS and other agencies address the problem.

The IRS recently announced a new voluntary disclosure for companies with misclassified workers. Workers are frequently misclassified for a variety of reasons, either intentionally to save costs, or unintentionally because of a lack of knowledge.

Misclassification reduces tax revenue in two ways. First, those classified as self-employed are less tax compliant than W-2 employees and second the employers fail to pay unemployment and Social Security and Medicare due on employee salaries.

The IRS has estimated that misclassification costs the treasury over $1 billion per year. Those companies misclassifying employees also improperly avoid paying benefits including vacation pay, sick pay, workers compensation, health insurance and retirement benefits.

If the IRS determines you have misclassified a worker as an independent contractor rather than an employee, get out your checkbook. You may be charged for back taxes, interest and penalties. In fact, there is even the possibility of criminal charges. And in some cases the misclassified worker has been able to sue the employer for lost benefits during the time in which he should have been considered an employee.

The IRS has a set of guidelines an employer can use to determine the proper status of a worker. After reviewing the criteria, if you are still uncertain, the IRS will make the determination for you if you file the form SS-8.

While in the short-term, using independent contractors in your business may save you money, it could cost you significantly more in the long-term.

Make sure you choose wisely.

For more information, check out these articles on www.Business.gov

How to Become an Independent Contractor and Hiring Independent Contractors

The SCORE Advisory Board

imageThis article was written by Dennis Wright, SCORE Orange County Management Counselor

"It's hard to believe all of this costs me nothing"...  that's what he said after I recapped a plan to help him meet the challenges and opportunities his business was facing. 

It all started with an e-mail in which this business owner asked for help with increasing sales.  When I received it I contacted him and made arrangements to meet him at his office, to get acquainted and to determine exactly what we could do to help him and who within our Chapter would be the best person or persons to provide that help. 

Of course as I was driving down the interstate to that meeting I was already mulling over several ideas, but when I arrived; when we finally sat down together I listened to him outline his situation in more detail and it became apparent there was much more we could do for him.  Much more!

I not only learned how far his sales volume had declined, but that marketing was almost non-existent, that inventory had grown, that several suppliers were becoming "anxious", and on top of that his business was housed in a facility about twice the size needed. 

So what was the end result of that meeting: a quick fix?  No, but I assembled a team of SCORE counselors - each with different experience and skills - who subsequently visited that business one at a time to address matters within their respective field of expertise and made recommendations for needed change.  In addition, one of them assumed the ongoing role of mentor. 

And what did we get out of it?  A chance to put our experience and skills to good use, and a heartfelt thanks from a business owner who needed help... and it all started with that very short e mail.   

We certainly can't make personal visits to every Orange County business in need of help, but you may be surprised who we will visit / who we do visit.  Take a quick look at our Advisory Board application using this link: http://www.score114.org/advisory.aspx  We recognize that it's hard for many business owners to get away, to come in for advice.  Advisory Board represents one of our several solutions.

Monday, September 26, 2011

Building Your Business. . One employee at a time!

imageThis article was written by Barry McKinley, SCORE Orange County Management Counselor

The most important asset of your business will be your employees. Whether you have one employee or 100 they represent your company and are the first ones that will project your company image. You can have the most beautiful offices but if your employee does not make a good first impression, your beautiful offices mean nothing! Remember first impressions!

In a previous newsletter article, I discussed hiring practices and the importance of asking good probing questions. I have found in counseling over 1,900 clients that many are no better prepared to interview a perspective employee then the employee is prepared to be interviewed. It is virtually impossible to evaluate a potential employee for preparedness when the interviewer is not prepared!

A key ingredient in the interview process is listening to the potential candidate’s questions. Their questions will give you a much better idea of their:

Communication skills

Interest in the job

Long term goals

Confidence level

Ability to grasp new concepts

Interest in the field

Intelligence level

Hot buttons

As the interviewer, you need to watch how the candidate handles themselves in the interview. Are they constantly moving around, sneaking peeks at their cell phone, not paying attention, or asking unimportant questions. Some of the most common mistakes that potential candidates make are:

Not being prepared

Knowing little or nothing about the company or industry

Not able to communicate well

Too wordy- or short abrupt answers

Not being on time

Having lack of eye contact

Unaware of surroundings

Not showing much, if any, excitement

Chewing gum

Poor body language

Not asking what the next step is

In a recent article written by Brad Remillard, he quoted the VP of Human Resources at Rockwell International as saying he always looks for the four A's:

Appearance: This does not just refer to their clothes or style but body language, handshake, the appearance of the cover letter and resume, presentation skills and, unfortunately, physical appearance.

Assertive: This will measure how they handle their self during the interview. There is a big difference between being assertive and aggressive. Aggressive can be offensive to most interviewers and many times will shorten the interview and interest.

Affable: Is the applicant outgoing, do they seem relaxed in the interview? Are they interesting and easy to communicate with?

Articulate: Is the candidate a good listener? Are their answers clear and to the point? Does the candidate speak well and clearly? Does the candidate ramble-on trying to cover every point?

Investing time in the interview process will reward the business owner with staff members that fit in and will project a favorable company image. You will know with proper training, support and motivation that each new hire will quickly grow to their potential in creating a career rather than a job! In simple Business Terms: Good Hires - - Increase Bottom Line Profits!

Starting Your Business

clip_image002Author Nellie Akalp is CEO of CorpNet, her second incorporation filing service based on her strong passion to assist small business owners and entrepreneurs in starting and protecting their business. She has formed over 100,000 corporations and LLCs across the U.S. Reprinted by permission

Another summer is officially over. It’s time to start trading in beach towels for some warmer clothes. For the busy entrepreneur and business owner, September marks the perfect time to focus on goals. September is your month…and it’s time to turn your dreams into reality.

Whether you’re considering starting your own business, or your business is already in full swing, the start of fall is a perfect time to take stock of what needs to get done–because, believe it or not, the New Year is right around the corner.

What to think about if you’re considering starting a business:

For those of you dreaming of starting your own business one day, now’s the perfect time to focus on turning those aspirations into reality. More entrepreneurs are coming into their own as business owners. And that’s a good thing. After all, small businesses are the backbone of our economy. According to the Small Business Administration (SBA), small firms are responsible for generating 64 percent of net new jobs over the past 15 years. And our economy could use more jobs right about now.

Fall is a great time to start putting a plan in motion to launch a new business for 2012. You’ve got three months to create your business plan, assemble whatever resources you need, and research your legal and tax obligations for starting a business.

As an entrepreneur myself, I understand that legal paperwork doesn’t always rank high on the priority list. But getting your legal ducks in a row will help you grow more smoothly, avoid legal pitfalls in the coming years, and yes, maybe even help you save money on taxes.

Here’s a quick rundown of the laws and regulations you need to consider for your startup or small business.

Make sure you’re legally permitted to use your business name:

Before you start ordering business cards, make sure that your great new business name isn’t infringing on the rights of an already existing business. For example, calling yourself “McDonalds” won’t work; choosing the name “McDowells,” on the other hand, should be OK, unless you’re going into the restaurant/food business. In most cases, you don’t need an attorney for this task, as you can perform a free search online that looks at business names registered with your secretary of state. You should also conduct a trademark search to see if your name is available for use in all 50 states.

Register your DBA (“Doing Business As,” aka Fictitious Business Name):

If you have a sole proprietorship or general partnership, a DBA registration must be filed when your company name is different than your own name. For an LLC or corporation, DBAs must be filed under the corporation or LLC whenever you conduct business using a name that’s different than your corporation or LLC name. Depending on your state, DBAs are filed at the state and/or county level.

Incorporate or form an LLC:

Forming an LLC or corporation is essential to protect your personal assets (such as your personal property or your child’s college fund) from any liabilities of the company. Depending on your specific circumstances, you can choose among an LLC (great for small businesses that want legal protection, but minimal formality), an S corporation (great for small businesses that can qualify), or a C corporation (for companies that plan to seek funding from a VC). It’s relatively easy and inexpensive to legalize your business these days. And unless your business is particularly complex, you should be able to incorporate your business or form an LLC online, without having to retain a business attorney.

Get a Federal Tax ID Number, a.k.a an “EIN” or “Employer Identification Number:”

To distinguish your business as a separate legal entity, you’ll need to obtain a Federal Tax Identification Number, also referred to as an Employer Identification Number. The tax ID number is issued by the federal government. It’s similar to your personal Social Security number and allows the IRS to track your company’s transactions.

File for trademark protection:

You’re not actually required by law to register a trademark. Using a name instantly gives you common law rights as an owner, even without formal registration. However, you should consider registering your trademark in order to properly protect it — after all, you’ve spent untold hours brainstorming the ideal name, and you’ll be putting even more effort into cultivating brand recognition.

Educate yourself on employment law:

Do you have a staff or future plans to bring employees on board? Your legal obligations as an employer begin as soon as you hire that first employee. I advise spending time with an employment law professional to fully understand your obligations in such areas as federal and state payroll and withholding taxes, self-employment taxes, anti-discrimination laws, OSHA regulations, unemployment insurance, workers’ compensation rules and wage and hour requirements, among others.

Obtain business licenses and permits:

Depending on your business type, you may be required to have one or more business licenses and/or permits from the state, local (city and county) or even on the federal level. Such licenses include: a general business operation license, zoning and land use permits, sales tax license, health department permits, and occupational or professional licenses.

What to think about if you already have a business:

The next few months present a perfect opportunity to tie up any loose ends that you may have put off throughout the year. For example: Did you file a DBA (Doing Business As) for your business name? Do you need to file for a trademark? Did you get a Tax ID number (or Employer ID Number)? Are all your necessary licenses and permits in order? Have you still not incorporated or formed an LLC for your business?

Most importantly, don’t forget to celebrate each accomplishment, no matter how small. As a small business owner, you’ve got an exciting journey ahead of you; don’t forget to enjoy the ride!

8 Ways to Lose in Business

By John C. Maxwell September 12, 2011, reprinted by permission

clip_image002What’s holding you back in your business or career? It may be something you are doing now and don’t even realize it.

The seed of this lesson comes from the former president of Coca-Cola, Don Keough. He wrote a satirical article about ways people lose in business. A few of the points that I will share with you today come from that article.

So let’s get started. Here are some rules and attitudes to follow if you want to lose in business.

1. Quit taking risks.

“A ship in the harbor is safe… but that is not what ships are for.” Isn’t that a great saying? Anybody who has been in business realizes that risk is a big part of it. The moment you decide not to take a risk is when your competitors will pass you by.

It isn’t the incompetent who destroy an organization. The incompetent never get in a position to destroy it. It is those who have achieved something and want to rest upon their achievements that are forever clogging things up.

2. Rely totally on experts and research to make decisions for you.

Charles F. Kettering said, “Research is an organized method of trying to find out what you are going to do after you cannot do what you are doing now.” There are some wonderful consultants out there who add value to our businesses. The key word above is totally. When one allows what the experts say to totally govern decisions, that’s when trouble arises.

3. Always ask yourself, “What would the founder have done?”

The simple fact is that no one knows what a great leader would do in a new set of circumstances—except that he would not lose. There simply is no eternal formula for success handed down through generations.

4. Concentrate on your competitor instead of your customer.

I’ve read everything that has been written by the late John Wooden, the legendary basketball coach of the UCLA Bruins. Not only was he an incredible coach, but he was also an incredible teacher to his players and others who knew him.

In an interview he was asked how he prepared his team for the next game. It was widely known in the basketball coaching circles that Coach Wooden wasn’t one to send his staff out to scout teams that were coming up on their schedule. He said, “The way to build a team isn’t to worry about your competitor; the way to build a team is to play to your strengths. If we play our game right, they will be playing our game. We won’t play their game.”

Coach Wooden realized it’s much better to spend time making your team better than trying to anticipate what the other team was going to do.

Remember that the customer is king. The following customer service truths are the results of research conducted at the Tyler International Research Institute Inc., as well as that of the Technical Research Assistance Institute and other supporting research organizations.

> Poor service is the No. 1 reason American companies lose business.

> The average dissatisfied customer tells nine others of their dissatisfaction.

> Conversely, the average satisfied customer tells only five people.

> It costs between five and 10 times more to attract a new customer than it does to keep an old one.

> Customers pay more for better service.

5. Administrative concerns take precedence over all others.

When the organization becomes bogged down with administrative issues and bureaucracy, growth can screech to a halt. Zimmerman’s Law says regardless of whether a mission expands or contracts, administrative overhead continues to grow at a steady rate. Isn’t that the truth!

In the article that I referenced in the beginning from Don Keough, he has some scathing things to say about the cost of administration: “Look at any well-oiled bureaucracy. Innovation is never permitted to get in the way of the preservation of the organization. Such bureaucracies have something in common: Most of them are consistent losers or soon will be.”

6. Be inflexible.

A wise person once said, “Inflexibility is one of the worst human failings. You can learn to check impetuosity, overcome fear with confidence and laziness with discipline. But for rigidity of mind there is no antidote. It carries the seeds of its own destruction.”

Generating this flexible thinking requires an emphasis on high quality and strategic thinking, a commitment to principles, and a focus on learning. It also helps to have a cultural bias toward improvisation and innovation, within your framework of principles and a coherent strategy.

7. Look to someone else to do your thinking for you.

Author Gordon MacDonald calls this “mental flabbiness.” He writes, “In our pressurized society, people who are out of shape mentally usually fall victim to ideas and systems that are destructive to the human spirit and to human relationships. They are victimized because they have not taught themselves how to think, nor have they set themselves to the lifelong pursuit of the growth of the mind. Not having the facility of a strong mind, they grow dependent upon the thoughts and opinions of others. Rather than deal with ideas and issues, they reduce themselves to lives full of rules, regulations and program.”

8. Memorize the motto, “That’s good enough.”

Nothing is changed by a mediocre performance.

Complacency is a blight that saps energy, dulls attitudes and causes a drain on the brain. The first symptom is satisfaction with things as they are. The second is rejection of things as they might be. “Good enough” becomes today’s watchword and tomorrow’s standard. Complacency makes people fear the unknown, mistrust the untried and abhor the new. Like water, the man who is complacent follows the easiest course—downhill. He draws fake strength from looking back.

Excellence is not a policy decision. It is a mindset, an attitude, a way of thinking and behaving. We create a mindset of excellence in our businesses, our sports teams, our churches and our homes not merely by demanding excellence or preaching excellence, but by modeling excellence, just as Walt Disney did. Once we have created a climate where quality is not just something we do but a feature of who we are as an organization, then the people in our organization will be inspired to go far beyond policy, far beyond duties and job descriptions, in order to maintain the organization’s reputation for excellence.

Forecast for Startups

By Pauline Estrem, June 9, 2011, reprinted by permission

The economic climate for small business startups shows immense and never-before-seen potential.

“We tend to be very optimistic about small business in general,” says Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council. “If you’ve got a solid idea, then it’s always a great time to start a business, whether it’s good or bad economic times. Now continues to be a great time.”

Dane Stangler, director of research at the Ewing Marion Kauffman Foundation, agrees: “It is never really a bad time to start a company. There are always opportunities to be created and exploited, inefficiencies to correct and sectors of the economy to disrupt.”

In fact, many of today’s most successful, innovative corporations got started during economic downturns.

Both Kerrigan and Stangler agree that it does pay to be aware of external factors to maximize your chances of success—either to plan for challenges or to spur you to take advantage of opportunities. Consider the following factors influencing today’s entrepreneurial climate.

Money

While access to money has always been an issue—even in great economic times—financing conditions are slowly improving. “Recent data suggest that the financing environment for small and mid-sized companies is strengthening, although the nation’s biggest banks have almost completely moved out of this, leaving it to regional and community banks,” Stangler says.

Banks are in the business of loaning money, after all, and Kerrigan points out that “for the business owner who can demonstrate profitability in their model, has sound financials, can walk through their business plan and can provide solid projections on growth, banks do want to loan money.”

According to the SBA, in mid-2010, commercial banks began to ease the tight lending conditions on small businesses that had begun in early 2007. And credit has continued to flow, as loans under $1 million totaled $695 billion in fiscal year 2009. Also, after declining over the past few years, venture capital investment dollars increased in mid-2010.

The key to acquiring funding is equal parts persistence, patience and passion, Kerrigan says. “For individuals who keep looking and are very driven, there still are angel investors, venture capitalists and individuals out there who do want to invest in solid business plans.”

Technology

One variable that will continue to improve for entrepreneurs is technology, which will enable today’s small-business owner to do more than ever before.

“It’s much easier, much more affordable and more efficient for individuals and businesses to market their products, to network and to collaborate with business partners with social media,” Kerrigan says. She points specifically to the game-changing effect that broadband technology has had on the business world, including mobile apps, cloud computing tools, online business resources and social media.

These advances have also increased access to the rich global marketplace—a major advantage for today’s small-business owner.

“A new company can be global on Day One,” says Stangler. “And, as we all know, the strongest economic growth right now is in emerging countries. Theoretically, at least, new companies in the United States should be better able to capitalize on access to global markets and the strong economic performance in other countries.”

Kerrigan agrees that the convergence of technology and globalization provides new and exciting opportunities for businesses large and small. “Ninety-five percent of the world’s consumer base lives outside of the United States, so it’s easier to sell your products and services abroad,” she says. “You not only have to look locally, regionally or within your country for a base. You can look outside.” She adds that the prospect of exporting goods is becoming less and less risky as entrepreneurial markets in foreign countries are maturing and becoming more sophisticated.

Technology also encourages better communication among business owners, which, especially in today’s economic climate, can lead to mutually beneficial collaboration, says Kerrigan.

“Entrepreneurs are looking at ways they can team up with other businesses in partnerships and alliances, and I think this culture of collaboration is growing. So, for those who feel like, ‘I can’t do this on my own. Is there someone I can partner with where it makes sense to do so, where we can accelerate our growth quicker, reach markets and bring our resources together to operate more efficiently and reach goals more and more quickly?’ So that is another really positive thing that many business owners can take advantage of today.”

Consumer Confidence

Stangler and Kerrigan both say that, while still low, consumer confidence is steadily improving. In fact, in February, thanks to the slowly recovering market and growing personal income levels, consumer confidence reached its highest level in three years.

Costs

One of the biggest concerns for small businesses is inflation and the cost of “raw goods, energy and inputs into the business that chew away profitability, particularly if you have tight margins,” Kerrigan says. “Of course, for small to midsize businesses, it’s difficult to pass these costs on because of competition, and you’re always trying to give the consumer a good value for a decent price.”

Changing Policies and Laws

Very small firms with fewer than 20 employees annually spend 36 percent more per employee than larger firms to comply with federal regulations, according to the U.S. Small Business Administration. These very small firms spend 4.5 times as much per employee to comply with environmental regulations and three times more per employee on tax compliance than their larger counterparts, the SBA says.

Understandably, another concern for small-business owners are policy changes, especially where taxes and health care are concerned. “The big unknown is what are policymakers going to do on key issues that impact entrepreneurs? Most of our business owners just want stability when it comes to policy,” Kerrigan says. “Sometimes policies are made—whether in Washington or on state or local levels—that present barriers. Whether it’s taxes or certain regulations or mandates that essentially take away business resources or drive up cost of capital and that take capital off the table in this country and maybe drive investment overseas.”

However, she says bipartisan efforts over the next three to five years should fix the tax code and other issues, bringing some stability back to the small-business economy.

“Once there’s some certainty, then you have an environment for entrepreneurialism in general across the country,” she says. “There won’t be these government-imposed barriers. Everyone will be encouraged.”

So, overall, small businesses will continue to face some challenges and uncertainties as economic conditions continue to climb back to healthy levels. But Kerrigan remains optimistic—and encourages entrepreneurs to think positively as well. “The optimism of most business owners will help them thrive and survive,” she says. “And that’s what makes our country great.”

How I Do It

By Brenna Fisher, in Entrepeneur.com, reprinted by permission.

When you hear that online retailer Zappos.com is expected to make more than $1 billion in gross sales this year, you might imagine this large company is the very model of traditional corporate America—a well-oiled moneymaking machine. While Zappos.com is the ever-expanding No. 1 online shoe retailer, profits aren’t the top priority.

Zappos CEO Tony Hsieh, 35, makes a paltry $36,000 a year. Of course, he did sell advertising network LinkExchange, which he co-founded, to Microsoft for $265 million in 1998. So he’s not hurting for money. But Hsieh will be the first to tell you he’s not motivated by money, but by the prospect of creating something different. He talks to SUCCESS about the Zappos culture.

What were the first steps the company took to make customer service the No. 1 priority?

It was already important, but definitely not the No. 1 priority. Basically, what we found was that as we kept making improvements to the customer experience—and that was through a number of different ways—the more loyal customers were, the more word-of-mouth occurred.

Which customer-service elements make Zappos.com stand out?

It’s free shipping both ways. We have a 365-day return policy. We promise customers that they’re going to get their shoes in four to five business days, but actually, for almost all of our customers, we do a surprise upgrade to overnight shipping. We run our warehouse 24/7, which isn’t the most efficient way to run a warehouse, but it gets the orders out to customers as quickly as possible.

We run our customer loyalty team, which is our call center, 24/7. Most call centers have this concept of average handle time, which is all about how many customers a day each agent can talk to—and the more the better. But that just ends up translating into, “How quickly can we get the customer off the phone?” which we don’t think is great customer service. We don’t upsell the customers. Everyone is trained so that if their customer is looking for a specific pair of shoes, and we’re out of stock in their size, then they look at three other competitor Web sites. If they find that shoe in stock, they are supposed to direct the customer to that Web site.

How did you manage to hang on to such expensive business practices for so long without making a profit?

The year 2007 was the first where we made a significant profit. It was roughly 5 percent operating margins off of our net sales. Several years prior to that, we ran the company at break-even in order to maximize our growth. We could have made a profit in any of the previous three years, but we decided, whatever profit we did make, to reinvest it back into the business.

We didn’t always have all of those [expensive practices]. As an example, we used to ship everything ground, and then, when we could afford it, we would ship everything in three days as a surprise. Then, finally, we got to the point where we could afford to ship everything overnight as a surprise.

How has this investment in customer service affected your sales in the long run?

Basically, over a nine-year period, we’ve gone from zero to $1 billion in gross merchandise sales. And the No. 1 driver of that growth has been repeat customers and word-of-mouth. On any given day, [repeat business] is about 75 percent of our orders.

How do you train your employees?

It’s a four-week program. We go over company history, our philosophy about customer service and the importance of company culture, which is actually our No. 1 focus for the company (not customer service). It doesn’t matter which position you [accept]. You can be an accountant or a lawyer, and you still go through that same training that our call center representatives go through…. If we want our brand to be about customer service, then customer service needs to be the whole company, not just a department.

Is it true that you don’t have your own office? And if so, why not?

We figure the best way to have an open-door policy is not to have a door in the first place. I think, for employees, it’s good because they can just walk by and say hi or ask a question. For me, it’s good just because I can overhear conversations that are happening nearby, and that gives me a feel for what’s going on in the business.

Why is the personal connection with employees important?

I think it helps humanize all of us and makes us more approachable. We have, for example, happy hours for different departments and the new classes, and I try to attend as many of those as possible. I also host a New Year’s party and a Fourth of July barbecue at my house every year, and all the employees are invited. In Vegas, it’s about 800 people. This past Fourth of July we probably had about 300 show up.

What advice would you give to other business owners?

The traditional thing has been that you want to separate work from personal, and we really just view it as one blended thing. We actively encourage our managers to spend 10 to 20 percent of their time outside the office with their teams because when teams get to know each other as people and get to see them in different environments and perspectives, it really helps with communication and trust inside the office. We’ve asked, “How much more efficient are [your] teams because [you’ve] known each other outside the office?” The answers range anywhere from 20 percent on the low end to 100 percent on the high end, in terms of increased efficiency. If you’re able to do that with your team, it should be viewed as an investment, and it will more than pay off in terms of overall productivity.

How do all these activities and benefits, including daily free lunches and full medical and dental coverage, affect your employees and, ultimately, the business?

I think that happier employees lead to happier customers, and happier customers lead to better business overall.

May We Never Forget

imageThis article was written by Jim Roberts, SCORE Orange County Management Counselor

Editor, SCORE Orange County Newsletter

Editor’s Note: Earlier this month, our nation paused to observe the 10th anniversary of the 9/11 attacks on our country. This was a defining moment for our nation, and all who watched the various events that were part of the ceremony were touched as we reflected upon the sacrifice made by the nearly 3000 ordinary working Americans who were struck down that day. We grieved as we watched the thousands of families enter the 9/11 memorial to locate the names of their loved ones etched into the memorials built into the footprints of the World Trade Center towers, the grounds of the Pentagon, and the meadows of Pennsylvania. For me, a particularly powerful moment occurred when one of the speakers read a letter written a long time ago to a Mother who lived in Boston and who lost her five sons in the horror that was the Civil War. The lesson contained in the words of this letter provides an eloquent tribute to all those who have given their lives for our freedom and speaks an everlasting testament to the spirit of America bolstered by the strength of will of its people. May we never forget.

Dear Madam,

I have been shown in the files of the War Department a statement of the Adjutant-General of Massachusetts, that you are the mother of five sons who have died gloriously on the field of battle.

I feel how weak and fruitless must be any words of mine which should attempt to beguile you from the grief of a loss so overwhelming. But I cannot refrain from tendering to you the consolation that may be found in the thanks of the Republic they died to save.

I pray that our Heavenly Father may assuage the anguish of your bereavement, and leave you only the cherished memory of the loved and lost, and the solemn pride that must be yours, to have laid so costly a sacrifice upon the altar of Freedom.

Yours, very sincerely and respectfully,

Abraham Lincoln

How I Do It

By Brenna Fisher, in Entrepeneur.com, reprinted by permission.

When you hear that online retailer Zappos.com is expected to make more than $1 billion in gross sales this year, you might imagine this large company is the very model of traditional corporate America—a well-oiled moneymaking machine. While Zappos.com is the ever-expanding No. 1 online shoe retailer, profits aren’t the top priority.

Zappos CEO Tony Hsieh, 35, makes a paltry $36,000 a year. Of course, he did sell advertising network LinkExchange, which he co-founded, to Microsoft for $265 million in 1998. So he’s not hurting for money. But Hsieh will be the first to tell you he’s not motivated by money, but by the prospect of creating something different. He talks to SUCCESS about the Zappos culture.

What were the first steps the company took to make customer service the No. 1 priority?

It was already important, but definitely not the No. 1 priority. Basically, what we found was that as we kept making improvements to the customer experience—and that was through a number of different ways—the more loyal customers were, the more word-of-mouth occurred.

Which customer-service elements make Zappos.com stand out?

It’s free shipping both ways. We have a 365-day return policy. We promise customers that they’re going to get their shoes in four to five business days, but actually, for almost all of our customers, we do a surprise upgrade to overnight shipping. We run our warehouse 24/7, which isn’t the most efficient way to run a warehouse, but it gets the orders out to customers as quickly as possible.

We run our customer loyalty team, which is our call center, 24/7. Most call centers have this concept of average handle time, which is all about how many customers a day each agent can talk to—and the more the better. But that just ends up translating into, “How quickly can we get the customer off the phone?” which we don’t think is great customer service. We don’t upsell the customers. Everyone is trained so that if their customer is looking for a specific pair of shoes, and we’re out of stock in their size, then they look at three other competitor Web sites. If they find that shoe in stock, they are supposed to direct the customer to that Web site.

How did you manage to hang on to such expensive business practices for so long without making a profit?

The year 2007 was the first where we made a significant profit. It was roughly 5 percent operating margins off of our net sales. Several years prior to that, we ran the company at break-even in order to maximize our growth. We could have made a profit in any of the previous three years, but we decided, whatever profit we did make, to reinvest it back into the business.

We didn’t always have all of those [expensive practices]. As an example, we used to ship everything ground, and then, when we could afford it, we would ship everything in three days as a surprise. Then, finally, we got to the point where we could afford to ship everything overnight as a surprise.

How has this investment in customer service affected your sales in the long run?

Basically, over a nine-year period, we’ve gone from zero to $1 billion in gross merchandise sales. And the No. 1 driver of that growth has been repeat customers and word-of-mouth. On any given day, [repeat business] is about 75 percent of our orders.

How do you train your employees?

It’s a four-week program. We go over company history, our philosophy about customer service and the importance of company culture, which is actually our No. 1 focus for the company (not customer service). It doesn’t matter which position you [accept]. You can be an accountant or a lawyer, and you still go through that same training that our call center representatives go through…. If we want our brand to be about customer service, then customer service needs to be the whole company, not just a department.

Is it true that you don’t have your own office? And if so, why not?

We figure the best way to have an open-door policy is not to have a door in the first place. I think, for employees, it’s good because they can just walk by and say hi or ask a question. For me, it’s good just because I can overhear conversations that are happening nearby, and that gives me a feel for what’s going on in the business.

Why is the personal connection with employees important?

I think it helps humanize all of us and makes us more approachable. We have, for example, happy hours for different departments and the new classes, and I try to attend as many of those as possible. I also host a New Year’s party and a Fourth of July barbecue at my house every year, and all the employees are invited. In Vegas, it’s about 800 people. This past Fourth of July we probably had about 300 show up.

What advice would you give to other business owners?

The traditional thing has been that you want to separate work from personal, and we really just view it as one blended thing. We actively encourage our managers to spend 10 to 20 percent of their time outside the office with their teams because when teams get to know each other as people and get to see them in different environments and perspectives, it really helps with communication and trust inside the office. We’ve asked, “How much more efficient are [your] teams because [you’ve] known each other outside the office?” The answers range anywhere from 20 percent on the low end to 100 percent on the high end, in terms of increased efficiency. If you’re able to do that with your team, it should be viewed as an investment, and it will more than pay off in terms of overall productivity.

How do all these activities and benefits, including daily free lunches and full medical and dental coverage, affect your employees and, ultimately, the business?

I think that happier employees lead to happier customers, and happier customers lead to better business overall.

Monday, August 22, 2011

The Impact Of The S&P U.S. Credit Downgrade On Small Businesses

Small Business Trends| Aug. 9, 2011, reprinted by permission

Standard & Poor’s downgrading the U.S. credit rating from AAA to AA+ is the first time since the credit rating business started that America’s credit rating has been downgraded. Since Washington reached a debt ceiling agreement and jobs numbers came in at a relatively healthy 117,000, this downgrade was unexpected to a certain extent. However, the major issue is that the debt ceiling deal is very ambiguous in nature.  The spending limits have been raised by $2.3 trillion by 2013, while cuts of $2.1 trillion are spread over 10 years.

What does all this mean for small business owners already concerned by slow or no growth in the economy?

They key effects of the credit downgrade for small businesses are:

1. The U.S. government’s leverage to pump up the economy has gone down even further.

That means that cuts in federal spending along with increases in taxation are going to come a lot sooner. This will lead to even more weakening of the growth in the U.S. economy in the short to medium term, and increasing business and personal tax rates for small business owners will not help. Cuts in government spending will affect innovation even more in the short to medium term and will cause a slowdown in innovation in the economy. Small business has led the U.S. out of every recession after the Great Depression until now. Coupled with increased globalization, job growth and overall demand in the economy will be anemic and will lead to stagnation in the economy.

2. Interest rates will go up in near future as the cost of borrowing money in the U.S. will rise.

Lack of credit access coupled with higher interest rates will raise the cost of capital for small businesses, both further hurting their bottom line and slowing job growth even more. The dollar will fall, thereby raising the costs of imports, including gasoline. Coupled with weak real estate prices, this means small businesses should be braced for tough times.

However, everything is not gloom and doom, as a weaker dollar and lower costs can make small businesses more competitive. Small businesses, when run efficiently, can become big export engines, as Germany has shown. The key issue is whether small businesses will get enough incentives and support, including seller financing from U.S. Exim Bank, to boost exports.

Also, small businesses will need to make cash flow more efficient, become more cost conscious, and learn to operate in an economic environment that will see very low growth over the next three to five years.

The S&P credit downgrade should be a wake up call for U.S. policymakers and business owners. It may indeed act as the best stimulant for the economy overall. Otherwise, America is set on a path of declining power, much like the U.K. in the post-World-War-II era.