WELCOME

A Debt to your Family or Friends is Risky Business

A loan from family or friends for your small business’s uncertain new venture is clearly like dancing across hot coals. This economy, however, causes some to either dance on the coals or watch the business tank while you’re gasping for air.

Banks, sadly, will tighten their safety belts when they see you coming, or maybe they might look through your carefully-prepared file folders first. And then escort you out. Here are a few tips if your best friend or your parents have signed on to keep you afloat:

First, if considering family’s money, be sure to evaluate the risk. If the new venture fails, would your relationships withstand the crash? Second, be sure you have exhausted all other options for raising capital. Next, is everything in writing? And a business plan is a must. Next, there’s nothing wrong with using credit cards to carry you through an emergency. Last, regular communication with your “investors” is of ultimate importance.

Libby Beatty, Chair
MBA Board of Directors

NEWSWORTHY

Mileage Rates for 2011 Business Vehicles

The Internal Revenue Service has announced an increase in the optional standard mileage rates for the final six months of 2011. The rate will increase to 55.5 cents per mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

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INSURANCE

The Administrators, Inc., MBA’s endorsed health plan administrator, has provided the following article.

Life Insurance
What’s the Right Kind for Me?

The truth is there is no right kind or good kind or bad kind. Unfortunately, many agents recommend life insurance that may not be appropriate for their clients’ financial circumstances or station in life.

With that said, there are basically two types of life insurance: term or permanent. Term insurance comes in several variations, usually categorized by the period of time for which the premiums are guaranteed i.e. 10, 15 or 20-year term. There usually is no cash build-up commonly known as cash value. Some more recently-issued plans do have a refund of premium rider that returns premiums paid at a predetermined future period of time. In addition, some plans also have a long term care rider to help with nursing home costs. Term insurance, as a rule of thumb, is generally inexpensive and like “renting” the coverage.

Permanent insurance is far more complicated and often has a bad reputation for all the wrong reasons, meaning that agents sometimes mis-sell these programs. Permanent insurance’s most famous family member is whole life. There is a brother named universal life and a sister named variable universal life. All of these plans offer potential lifetime coverage, level premiums and cash value. The main difference is how your cash value (the savings) part of the plan is invested. Whole life is dividend-based. Universal life is interest-rate based and variable life, for the most part, is stock market-based. In comparison to term insurance, permanent insurance is more like “owning” the coverage, instead of “renting” the coverage.

Peter Cisick
Chartered Life Underwriter
Chartered Financial Consultant
(610) 247-6842

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MARKETING

The Promise and Perils of Groupon

Groupon is a service that allows businesses to offer coupons with big discounts to its customers. The popularity of the service has been growing, but small businesses need to be aware that the potential benefits of the site are coupled with unseen perils:

Bargain Bandits: These one-time customers have no intention of buying beyond their coupon and probably won’t be back. The solution - have your sales people prepared to make a hard sell on coupon customers and get them to capture e-mail addresses at the register.

Poor Planning: If your coupon draws big sales, you will need to have enough inventory or time to meet the needs of these customers. Falling short can ruin your reputation. Also, offering high-end services/products at deep discounts can reduce the perceived value to your regular customers.

Conniving Customers: These deal hunters use underhanded tactics to take advantage of your promotion by trying to reuse or use multiple coupons at once. Deter these types by sticking to the fine print of the coupon and by using the redemption tracking service offered by Groupon.

Ask and You Shall Receive…Customer Feedback

Feedback about your customers’ experiences is an invaluable tool for growing your business, so make asking and listening part of your ongoing marketing strategy. Here are some ideas to help you track down and snare customer feedback:

What’s Already There: Scour the Internet for mentions and reviews of your business. Sites like Yelp, YellowPages.com, Groupon, Open Table, Bing Local, Citysearch and Google Places are just a few places you can find feedback. Twitter’s search tool can be used to find mentions and, if you have a Facebook page, keep on top of any posts.

Stir the Pot: If you don’t find enough mentions to start a conversation, then start one yourself. Use captured customer e-mail addresses to request feedback, or send an invite to one of many survey sites like Survey Monkey or Zoomerang. Facebook’s questions feature is another easy and free technique to pick the mind of your fans/customers.

Respond: Let customers know what you plan to do with their feedback. Show your gratitude by offering customers who share their experiences a small discount or a gift. If you come across an especially enthusiastic review, ask that customer to create a testimonial .

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YOUR FINANCES

Understanding the Risks of Extending Credit

Banks ask customers to file applications and provide financial statements before extending credit to them – so maybe you should too. Here are some ways to find out if your customers are creditworthy:

Credit Application: This application should include basic information and a tax ID number. Make sure that it is also accompanied by references from other institutions that have previously lent to the candidate. And follow-up on the applications to make sure they’re legitimate.

Public Information: A company’s social media and news releases on its website may give you an insight into their financial situation. In addition, publicly traded companies are required to file reports to the Securities and Exchange Commission which are available through sec.gov using the EDGAR service.

Credit Evaluation Tools: Cortera, Equifax and Experian are sites that offer credit monitoring tools.

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FOR THE HOME-BASED BIZ

Moving Out of your Home Office

If your growing business has you considering a move from a home office to a rented space, here are a few issues to consider:

What Kind of Office: How much space will you need? How long and costly is the commute? What are the zoning laws for the new location? Start to consider these questions before you look for the space. A good real estate agent will be able to gather leads fast.

Transition: Unless you have reason to rush this process, consider some intermediate steps. If the right space doesn’t present itself, consider moving to a larger home or apartment. Another option is to share an office space with another small business. If you share, try to maintain a small work space at home in case things don’t work out.

Other Considerations: You will need to revamp your marketing materials to reflect the change in address and contact information. Retarget former prospects that had reservations about working with you because you worked from home. Moving from your house to a commercial space affects your taxes, so talk to your tax advisor to get an idea of what to expect.

Hiring your First Employee

As your home business grows, you may find that you need to hire help. Here’s what you need to keep in mind if you decide to hire your first employee:

Cost: Hiring a new employee can be an expensive endeavor, even for a home business. Remember to take employment taxes, insurance and rental space into account when you’re deciding if you can afford to hire.

Who: Creating a clear job description will help you decide who and what you need. This includes the status of the employee, part or full-time; what is expected; and what it will cost. These answers will help you formulate interview questions that will save time.

References: Request up to three references; two professional and one personal. When you talk to the professional references, ask specific questions about the candidate’s responsibilities and how they relate to your needs.

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HUMAN RESOURCES

Payroll Cards for Employees

Employees that don’t have bank accounts are usually happy to accept their compensation in the form of a paycheck, but you may be able to save money on payroll by switching to payroll cards. These cards allow employers to make direct deposits to special accounts at financial institutions that allow employees to access their funds with their card. Here’s what to consider before making the switch:

Insured Institutions: Some payroll card services are offered by nonbank institutions that add an element of risk.Find an FDIC-insured bank that offers this service to eliminate that risk.

Educate Employees: Many institutions will charge additional fees for payroll cards like ATM fees, monthly fees, etc. Shop around and see who offers the lowest fees, but still offer protections against fraud, theft and errors as not all services cover the liabilities assumed by federal laws.

Consent: Law requires that you offer payroll choices to your employees, so you can’t force anyone into the program. Instead you will need a written disclosure that states the terms and conditions of each option and written consent to set it in motion.

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IT

Facebook Apps to Boost your Business

Facebook can be an extremely powerful business tool, but most people don’t realize just how many applications are available. Here are a few of the lesser-known Facebook applications that can benefit your business:

Reviews: This is a tool for feedback. It looks like a regular Wall post, but it allows users to rate with a five-star system. Having a page dedicated to just reviews and testimonials is a great way for prospective customers to hear what others are saying about your business.

Poll: This app lets you ask questions on your Wall so you can poll your fans and customers at will. The results of your poll will show up in your News Feed to help spread awareness. You can even track the results capturing the voter’s user I.D., name and gender.

Social eCart: This app helps you sell products directly through your Facebook page. If you already sell online the Facebook app supports most popular ecommerce solutions and shopping carts. If don’t have a store, this app allows you to create one in about five minutes.

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COMMENTARY

Leadership 101

By Stephen Markowitz

Taking on our President at this point almost seems unnecessary, but as business people there are lessons to be learned from the wreckage of this Presidency.

All of us who run small businesses lead…whether we lead one person or 100. Our success at doing that is a major contributing factor to the success of our business. The most important thing we are called upon to do is to develop and embody a “mission statement” for our business. The Obama Administration has demonstrated clearly for us the weakness of any organization that cannot clearly deliver a message showing our goals in a way that will inspire and educate. This is the first failure of President Obama and the reason we hear so many saying, “Where is the President’s plan?”, or “What is he trying to accomplish?” “Hope and Change” was a political mantra and not a plan. And neither of those words even comes close to describing the miasmic stew brewed by this President.

No leader can survive for long blaming others for his failures. All of us inherit problems that existed, or employees who try in their own way to stand in the way of progress or change. But a real leader overcomes that by clearly indicating the value of his or her mission to all employees and not just those who feel they will benefit if others suffer. Our President has chosen to divide rather than unite, point fingers rather than deliver an action plan that will benefit all.

A smart leader acknowledges the accomplishments of those employees who are most successful, and tries to imbue others with the kinds of skills that led to those successes. He does not diminish the successful employees by looking for ways to harass and intimidate them so the other less successful employees think he is in their corner.

And finally, a good leader does not have to show his face every ten minutes so that the employees will know he is on the job….especially when he has nothing to say.

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NEW MEMBERS

When our member base increases there is more of everything: more creative networking, more benefits and more experienced, enthusiastic business owners. All move our members toward growth, success and the entrepreneurial spirit.

Click here to meet our newest small business partners.

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Unless specifically indicated, MBA does not intend mention of companies, products or services discussed in this publication to be construed to be endorsements. The information in this publication is offered as examples that may be useful to our small business readers. Please consult with an industry professional before implementing any of the tips or subscribing to any of the services described above.