Fear Protects Children, Hurts Artisans

It all came to our attention in 2007 when large numbers of children's products manufactured in China were found to contain the poison. Then Congress created the Consumer Products Safety Improvement Act (CPSIA), established August 2008. The revision to the Consumer Products Safety Act required all children's items to be tested for led before they could be sold.

I would tell you the story myself, but I think this article, The Risk of Avoiding it all, by Lenore Skenazy, explains replications of the CPSIA beautifully.

The Act requires the certification and labeling of items, not just toys, intended for children 12 years old and less. For small businesses it's a costly burden that could range from $300 - $4000, and will most likely cause a lot of shops who create handmade products to close.

There is a movement to Help Save Handmade products and progress is slowly coming. This week the Consumer Product Safety Commission has exempted yarn from CPSIA. This is good news indeed for the hand-knitting industry.

You can Help Save Handmade by writing to your United States Congress Person and Senator to request changes in the CPSIA to save handmade toys and children's products. The Handmade Toy Alliance offers a sample letter or write your own. You can find your Congress Person here and Senator here.

It’s Time to Start Your Small Business

I know, I know you’re thinking that you’d have to be crazy to start a business in this economy. Well, maybe not. Changes in the American Recovery and Reinvestment Act intend to make it easier for small businesses to win venture capital.

The changes are designed to help Small Business Investment Companies (SBICs). The idea is if these companies can perform better, then small businesses will have greater accesses to venture capital. Small Business Investment Companies are privately owned and managed venture-capital firms licensed and regulated by Small Business Administration. They use a combination of funds raised from private sources and money raised through the use of SBA guarantees to make investments in small businesses. The Small Business Investment Companies program was created in 1958 to stimulate the growth of America’s small businesses by supplementing the long-term debt and private-equity capital available to them.


The following shows the changes, which in a nutshell make it possible for SBICs to lend out more money:

• Investing 25 percent of investment dollars into “smaller” businesses.
• Changing the amount of funding an SBIC may invest in a single small business to 10 percent of an SBIC’s total capital rather than the previous limit of 20 percent of an SBIC’s private capital only — which could mean a 50 percent increase in funding available to a single business by an SBIC.
  
  Maximum SBA funding levels to SBICs will increase up to three times the private capital raised by the SBIC, up to a maximum of $150 million for single SBICs, or up to $225 million for multiple SBICs that are under common control. The cap for all licensees was set at $137.1 million before the Recovery Act.

These limits are even higher for SBICs that are licensed after October 1, 2009, that certify that at least 50 percent of their investments will be made in small businesses located in low-income areas, up to $175 million for single licensees and up to $250 million for jointly controlled multiple licensees.

Venture Capital is probably not available for your dream coffee shop. Typically it’s given to young companies that show combination of extremely rare yet sought after qualities, such as innovative technology, potential for rapid growth, well thought through business model and impressive management team. VCs typically reject 98% of opportunities presented to them, reflecting the rarity of this combination. However, now that more funds can be released the competition to receive VC may be less great.

Bad Economy is Good for Your Business

You read that headline correctly. Let me be more specific a struggling economy is good for business. Businesses that anticipate and prepare for recession will survive. But, good businesses don't just survive during recession they thrive. That's because good business leaders are motivated into action when things get tough.

3 Recession Survival Tactics
In the Philadelphia Business Journal, Strategic Business adviser Carter Schelling presents precautions businesses take to prepare for looming recession, likening it to fire drill. "Companies," he says, "get better at what they do during bad times."

First, Schelling suggests that business owners gauge customers' ability to resist recession and redesign customer offerings accordingly. Isn't this the basic rule of business? Offer customers what they want, where they want it, when they want it. Your business is only successful if your customers deem it as necessary.

Second, use lean principles, replace unhappy workers with those more motivated, eager and highly competitive. There is nothing more detrimental to a business than sour employees. Every employee from the every rank must be encouraged and motivated. Forget looking at employees as overhead, salaries or bodies. Likewise don't think of layoffs as cutting costs. The right employee, including the person who answers the phone, is a sales representative.

And finally, over-communicate. Talk to your employees. Explain strategies to your customers. Encourage communication back from your customers. Don't be afraid of what you'll learn it could save your business.

Charitable giving benefits your business

Maybe the numbers don't add up quite in favor of charitable giving and employee parties this year. But that doesn't mean you have to skip the cheer of giving. A little creative thinking can give new life to the spirit of the holidays, increase employee moral and even boost your business.

Supporting the community doesn't have to mean writing a check. Spalon, Golden-area salon and spa, gave free haircuts, nail polish changes and make-up lessons to children in exchange for the an unwrapped toy or donation for the Kempe Foundation, a Denver-based group that helps abused children and works to prevent child abuse. Coors Credit Union employees in Arvada volunteered at neighboring business Beyond the Blackboard wrapping gifts in exchange for nominal donations to charity.

Turn your holiday party into an opportunity to make a difference. For example, one business and it's employees volunteered to help out a local non-profit by cooking and serving at the organization's holiday party.

Another way to give is through pro bono work. Pro bono can give you good exposure and increase your contacts while helping an organization in need of professional work.

Lighten up it's good for business (not just small business)

News headlines have lately been occupied with the death of the office holiday party. Big corporations are cutting back on black tie galas. Oh My! Is anyone really saddened by this? Does anyone really have a good time at these things? In big companies top executives dress as they normally would for an important evening out. Middle-management must buy something that looks classic yet fun. While the youngest of the worker bees always end looking like they are going to prom. And then there's the schmoozing. Top execs really only want to sit with other top execs, but will visit with the prom queens. Middle levels are trying to visit with their staff and schmooze upper management. Really it's a lot of work.

It's also expensive for the company. But that doesn't mean that we need to forget about thanking our staff during the giving season. Scaling back is fine as long as no one feels cheated. Maybe it's time to return to the good old fashion office party. The kind with no pretensions or assigned seats.

I remember one of my most fun places to work was a small manufacturing firm. We partied frequently at the office because the boss believed in fun. They were small parties with potluck food and prizes for everyone. The company owner was endeared as a generous boss who cared about his employees.

Now, my husband works for a small Swedish company that likes to have fun on a scale that would embarrass most Americans. Yeah, we'd probably call their latest thing sexual harassment, but they call it hilarious. This month their having the Feronome contest to see or should I say smell who has the most attractive scent. This involves getting hand washed by the company coordinator and wearing the same t-shirt for days without showering. It's crazy. It's weird. It can be offensive, but by gosh is it silly. And it costs the company basically nothing.

The point isn't to save all your thank you's for the end of the year and then shoot them out in one big fancy thank you. The point is to make your employees feel special all year long. The point of making them feel special is to keep moral going. It's especially important during a tough economy when not only could your business be lagging but so could their personal economies. If all they've got to look forward to is getting dressed up once a year and partying with their co-workers in a fancy dining hall then when that is taken away or changed it affects moral. And don't think they won't trash talk their employer to the outside world.

Maybe the reason we're all searching for life-work balance is because work has become too much work and no fun.

Your Small Business: Software for Inventory Management

Inventory and cash flow walk hand-in-hand through your business. But if you don't know what there doing they might just run away. A good software system can streamline the process of inventory control, but without the right processes it can wreak havoc.

In an article by Business Week Stephen Carroll, owner of Walking Equipment Co. in Largo, Fla., describes how engaging a Stone Edge technology software enabled him to automatically inventory his stock. When an order was pulled from the shelf the software produces, Shipping tags and pick lists automatically. Thus, keeping him up-to-date on supplies and assisting in cash flow management.

Software doesn't have to be expensive. The Stone Edge system runs from $1,000 to $6,000. But many SBOs make due by pushing the limits of Quicken Pro. A small retailer that I know on the coast of Oregon developed a customized program in Excel that works well for her 4-employee yarn shop.

The goal is to be able to predict when and what to order in the future and to match that with cash flow control. Cash flow is all about inventory and vice versa.

And speaking of employees...They are really the key to successful inventory control. Without the right processes software is just a computer program. Before implementing inventory software it's important to review all aspects of your business such as: sales trends, supplier delivery time, invoicing, and customer needs. You must use a diligent eye to review the business and decide what procedures could work. Be prepared for a bit of trial, error and training. Your employees who work directly with shipping may also have good ideas. And for a system to work you must have their buy-in.

Once you decide to go with a software system you'll need to determine if decide if you want to host it own servers or outsource it. Newer systems are moving toward Internet hosting. This saves you money in the long run as you'll be able to keep up with upgrades without paying for development.

Any inventory management system must support your accounting method, whether you operate on "first in first out" or "last in first out" (FIFO or LIFO) basis. Your system should keep track of goods as they are received and shipped, giving you a view of everything in your warehouse. You want results in as close to real time as possible, and the information should be available to your sales force, preferably online, so no one is making mistakes at order entry time.

What's your BUSINESS credit score?

You hear about credit scores all the time. But if you operate a small business your personal credit report affects more than the rate you get on a mortgage. If your credit is less than par, it could be a detriment to your business health.

Commercial credit reports do exist. Dun & Bradstreet, Experian and Equifax all maintain commercial reports. But to warrant a commercial report you've got to be big business. Most small companies live on personal credit. Suppliers are more likely to look at trade references and solid financial statements. Many industry vendors will not consider extending any credit for supplies until they done business with you for at least a year.

Review your Credit Report
So this gives you one more reason to stay on top of your credit report. Order your free reports from the three data collectors at AnnualCreditReport.com. If you should find errors act on them immediately by contacting the reporting agency directly.
Equifax - http://www.equifax.com/ Experian - http://www.experian.com/ TransUnion - http://www.transunion.com/

Tight Credit
The economy has caused many banks to tighten their lending, especially to small business. Before you go asking be sure your credit report is in order. Credit unions are often overlooked by small businesses, but can be a terrific resource for affordable loans. Because credit unions see the opportunity in business loans, you're like to find highly competitive financial services with great rates. You could also ask for a business credit card which can often give you a larger line of credit.

How to work with independent contractors

Hiring the right people is invaluable to your small business. But with staff come lots of expenses. So why not hire out? In other words hire independent contractors. This is often a good solution especially in cyclical or seasonal businesses. But working with independents requires an understanding both of the law and the unspoken rules of engagement.

The general rule is that an independent contractor relationship exists if you can control the result of the work but not the means and methods of accomplishing the result. This is really, really important to understand because it affects not only the legal side of how you deal with independents, but also how you or any of your employees deal with independents.

If you're not sure if you're working with an employee or an independent review these questions:

• Is there risk of profit and loss to the individual?
• Does the individual provide his or her own work location, tools, and equipment?
• Does the individual have control over when, where, and how he or she will work?
• Does the individual incur non-reimbursed expenses in the completion of tasks?
• Is the individual free to provide similar work for others?

A friend of mine is a freelance HR recruiter. She's been going through hell with her current contract who can't seem to understand what her status means. It's a written 6 month contract that they keep extending. But they don't understand that they can't require certain things such as attending last minute meetings or answering email while she is in India on vacation. What they can expect is for her to complete assignments on-time and at a level of quality that benefits them. It's important to know to understand that independents are typically free to set their own rules.

Another distinction is in benefits and taxes. Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independents. You also do not typically provide any health or other benefits to independents.

You can't have it both ways either. If you try to classify an employee as an independent contractor the IRS could get on you and you may be held liable for employment taxes for that worker See Internal Revenue Code for more information.

Independent contractors can be great for your business. The right relationship can bring you quality work without the legal overhead. And if you understand the limitations of the agreement (i.e. you can't always require them to work when it's convenient for you) than it can be a win-win for all.

It's a Small Biz Christmas

It's tough enough being a small retailer, but the holiday season is it's own animal. On one hand it can be the biggest money maker, on the other it's when you've really got to set yourself apart from everyone else. And this year the competition is going to be even stiffer.

The National Retail Federation (NRF) reports that consumer spending holiday shopping will be up only 1.9 percent over last year. That represents the lowest increase in planned consumer holiday spending since the survey on the subject began in 2002. Further the Survey reveals that U.S. consumers will spend an average $832.36 on holiday shopping this year.

More importantly, consumers say one factor will play the biggest role in buying decisions this year: price. Forty percent of shoppers say that sales or promotions will be the largest factor in determining where to shop. The average person this year will spend $466.13 on gifts for family; $94.52 on friends; $26.70 on co-workers; and $43.50 on other gifts. Spending is expected to be particularly weak among young adults, with 18- to 24-year-olds planning to spend $50 less on gifts than a year ago.

Okay don't get all glum. It's Halloween and hopefully you've already begun making plans for the big season. Still there are some ideas that will help you compete against the big box stores.

One thing that you've got that they don't is customer service. So don't skimp in this area this year. Put yourself in your customers shoes and know what they want.

1. Customers still want to feel the warm cozy experience of the holidays. Make your shop a destination. Serve hot cider on chilly weekends. Offer shopper tag-a-longs a comfortable spot in which to wait.
2. Everyone is on a tighter budget. Group items by price and display the price such as; an under $20 gift table, an under $50 gift table and so on. In other words, make it easy on your customers to find gifts that fit within their budget.
3. Designate an employee as a personal shopper. One site suggests calling this person a Budget Wizard. "...call him or her your Budget Wizard -- what their budget is, what type of gifts they need and for whom. Then, let your Budget Wizard find items in your store that fit the budget and the general concept of what the customer wants to buy."
4. Create unique gift displays that show how to put more than one item together for a great gift.
5. Pamper last minute shoppers by staying open longer and helping them make decisions.

Manage your costs while meeting customer needs.

• Shift hours to meet customer demand. You can maintain overhead balance by opening later on weekdays and staying open later at night.
• Invite charity groups to provide gift wrapping services for donations. They'll supply the materials and customers service without any cost of time or money to you.

Step up the creative marketing

• Work with your chamber of commerce and other local retailers to create holiday events
• Polish your website
• Use social marketing sites such as Twitter and MySpace to communicate with customers. Be sure to tell your customers how to find you by posting info at your shop.
• Encourage customers to write reviews on sites like Yelp and CitySearch.
• Setup collaborative displays with other retailers in their shops or other places that customers frequent like coffee shops, credit unions, etc.

Your Small Business: Why Your Marketing Does Work.

Whether you sell Mary Kay cosmetics, lawn services or professional services you've got to market yourself, but it can be difficult to choose a channel that reaches your customers. And so often you'll get bombarded with "terrific opportunities" that just end up eating away at your profit in the end. How do you decide what works? You've got to keep your head on straight and listen to logic.

Recently I found a local blogger who tells it like it is. Chuck Blakeman owns TeamNimbusWest, and provides outcome-based peer advisory, coaching, and consulting for Business Owners, CEOs, and their growing businesses. I've been reading Chuck's blog lately and his columns cut through the textbook marketing to tell it like it is.

Chuck has been running a series on his blog called Why Our Marketing Doesn't Work. It's a 7 part series that debunks some common marketing methods and gets to the point that in the end it's the sales that really count.

I liked reason #6 in which Chuck addresses marketing channels. It's like the other day I was walking through our family room when the teens were watching some comedy in which the character was complaining that his business wasn't booming. Honestly I can't remember what the show or character were, but that's not important. Anyway, the character held up the phone book and said something like, "But I bought the big ad. Didn't they see that?" You can probably guess that the big ad wasn't bringing in the sales. Chuck talks about that very stuff--using the right channel to draw customers.

Take a look at the guy that aerates our lawn every fall and spring. I don't even know if we need to do that twice a year. But like clockwork he is there knocking on my door and all of my neighbors on the weekend. He doesn't waste time sticking fliers on our doors. He doesn't put up signs on customer lawns. He doesn't drive a truck with advertising on it. Heck, he doesn't even have a company name. We just write checks to him. But he does practically every lawn in our neighborhood and that is hundreds of houses. So hmm...knocking on a door vs. phone book advertising.

Find out what channel reaches your customers. It doesn't always need to be fancy or expensive, it does need to be efficient and appropriate for your business.

Recession Proof Your Small Business

I once worked in an office where words like "problem" "trouble", and "difficult" were not allowed. It seemed silly at first. If you let a word like that slip one time you were corrected like a child, "It's not a problem, it's a challenge." The next slip would just get you a sideways look. Everyone quickly learned to speak only of "challenges" and even though we all knew it was code for some nasty problem using the word "challenge" actually did make most of start to view problems as opportunities. Such are the times we are currently experiencing. SBOs who view this not as a bleak and uncertain time, but as one of challenge and opportunity will come out of this with stronger small businesses.

It's time for business as UNusual.
Review your market and offer something new. It might be repackaging of items or a shift in the way you manage clients. Start looking at your products and services in a new light. Break down your product into smaller more affordable bites. For example, if you are a personal trainer you might find clients reluctant to splurge on such a luxury--try offering group trainings that are more affordable yet allow you to reach more people in less time. Be sure that the changes you make offer a perceived value to your customers. So if you own a coffee shop, don't reduce the size of your cups, instead you could get creative with your menu or add community events to entice more traffic.

Take customer service to a new level.
The biggest advantage small businesses have over large is human connection. Get personal with your customers. Understand their particular challenges and help create solutions. People are always more willing to work with someone they know and trust. If you own a salon find those customers that haven't come in for awhile. Give them a call, make it personal, and invite them in for a special treat.

Review your accounts receivable.
Keep an eye on customers who might show signs of having trouble paying. No matter what your payment terms make them clear and don't let things slide. A customer with a cash flow problem could bring you down with them. This isn't the time to let friendship cloud your judgement.

Focus on the basics.
Keep a tight watch on your cash flow and keep funding your emergency fund. Review your balance sheet and bank accounts frequently.

Don't ignore credit.
Consider increasing your line of credit now in case of emergency. Secure the best rate that you can--it's easier while your business is still in good standing. If things should turn south it will be much harder to get the cash you need to turn things around.

Trim discretionary spending.
Even a tightly run small business can find a little fat to trim. Hold off on major purchases that aren't absolutely necessary. Find ways to reward employees without overspending. Reduce overtime and travel expenses. Use technology to your advantage to find more efficient and cost-effective ways to operate.

Don't fire marketing.
So many companies make the mistake of firing the marketing team/firm, and cutting the advertising during down times. But these are the things that bring and keep business. If necessary you can reduce your marketing and advertising budget, but keep it focused and creative. Look for new ways to reach customers. Find an funny, innovative or unique way to present your business.

So, as you look at your balance sheet, customer database, to do lists, and accounts receivable give a smile and see the opportunities that shine through these...eh, hem...challenges.

Your Small Business Finances

Cash May be King, But Credit Keeps the Order

photo by Willrad

Okay, okay I'm talking about using a credit card when the financial news is all about trouble and moving back to a cash-based society--which by the way I predict will never happen, even if we aren't taking on so much personal debt. And by the way, this can also apply to your personal finances.

Using a credit card smartly can help you organize and plan your business expenses and cash flow. The trick is not to treat it as a buy now--pay when you can vehicle. In other words pay off your card completely each month. Really if you just can't grasp that concept you might consider using a debit card, but you're actually more likely to spend frivolously. Really, I'm serious.

Yes, your debit card pulls right from your checking account which contains a limited pool of money. It's nice because there are no interest payments and no bills to deal with. But here's the catch--Unless you are highly organized and balance your checking account weekly the debit card is not likely to work for your business. Now some SBOs are very organized and will download their transactions to Quicken or Money frequently. But others get so busy minding the shop that they let the piratical stuff pile up. This leads to inefficient supply ordering, inaccurate planning, and poor cash flow management.

Here's the difference with a credit card.

#1 Credit is Important

You probably know how valuable having a line of credit is for your business. Some suppliers may not extend credit, others are cutting back on credit and if there is an emergency the card comes in handy. But having a card and using it are completely different. You've got to keep the card active to maintain your credit status, which is just as important for your business as your personal finances.

#2 Monthly Bills

When you use your card for supplies and other business expenses you'll receive a monthly bill. You'll be able to pay most or even all of your expenses with one check. If you are using a business checking account with limited check writing this is a much more efficient way to pay for expenses.

#3 Monthly Bills-as statements

Your monthly credit card bill/statement is a goldmine of information. It shows you exactly what you purchased for the business in a tidy format. If you're a statistics junky you can even determine your purchase needs throughout the month and compare it to your business results. Plus, if you use online banking these bills are often stored electronically. You can go back at anytime to compare your spending needs month-to-month throughout the year. Use this as a tool for planning and adjusting your budget.

So should you ignore the media and economic frenzy that we're in now? No, it's obvious we got to this point by simple greed and over spending by multiple parties. But it's no reason to panic about your small business. Credit cards are not the evil of our economy they are simply another financial tool and when you use your head they can be quite useful in running your business.

Does your small business have a legacy plan?

I've been in mourning for most of the past week since Paul Newman passed. No I didn't know him personally, but I met him when I was in college. I had a wonderful summer job back then. I worked for an awesome elderly woman, Judy Streete, who owned Apple Pie Farm in southeastern Pennsylvania. I weeded the herb fields on Mrs. Streete's 14 acre farm. That's where I met Mr. Newman. He purchased herbs from the farm for Newman's Own. Since he was hands-on owner of his company he liked to visit the places where his ingredients came from.

I remember being way out on the field the day he came. I could see Judy's bent frame leading a tall man and woman (Joanne Woodward was with him) out to the harvesting house. I swear I could see his shining blue eyes from my weeding spot. Anyway, he asked Judy to call the field workers in to the harvesting house, so I did get to meet the Newmans.

What I took away from that meeting was more than just the wow of shaking hands with a famous actor and being dazzled by those blue eyes. Paul Newman was a man of integrity who sought to do good in the world.

Paul and Judy were very much alike. Both were involved in every detail of their work and both did all that they could to ensure quality. They both built strong/healthy businesses. Because a plan wasn't publicly announced CNNMoney.com ran an article wondering what would happen to Newman's Own now that the highly-involved owner was gone. I can't claim to know, but since Mr. Newman had been sick for several months and was in his eighties I'd guess that his family and business partners had a plan in place.

That's where Judy and Paul may have differed. Again, I'm speculating. But Judy Streete was in her 90's when I worked for her. As far as I can tell none of her family or employees took over her business. I've tried to Google her name and the farm and have come up with nothing. It's sad to see a business built from scratch--literally, Judy started her business by selling homemade apple pies--fall away after the creator passes on.

The Small Business Administration estimates that one-third of family-owned businesses will survive the transition from the first to the second generation. If you manage to clear that hurdle, higher ones lie ahead. The Family Firm Institute says only 12% of family-owned businesses stay viable into the third generation, and only 3% are alive at the fourth-generation level and beyond.

It's important to your business to have a legacy plan not just for the sake of passing on the family business. If something should suddenly happen to you how would that effect your business and your family?

Some things to consider:

Don't expect that your children will take it on

For any number of reasons it's common that children of business owners want nothing to do with the family shop. Have someone outside of the family who you trust get to know the business well.

The dinner table is no place for a board meeting
Keep family and business separate. Mixing the two will turn your life into all work and no play and bore your family away from the business.

Make them earn it
Your family will appreciate the business more if it's not just handed to them. Don't hire family members until they've gained experience in someone else's business. They'll come back with new skills and perspectives and get used to being paid what they are worth.

Choose a successor early

Decide who will take over the business by selecting the person who is most interested and passionate about the job. Don't assume your spouse or oldest child will want it. Make your plan known to all the key players: family members and top employees. This will cut down on speculation and bickering.

Deal with hit head-on

The most important thing about a legacy plan is to have one. Maybe it's in your head or you're "just sure" that the kids will work together and take it over. Don't leave it to chance. You may even think of making a legal statement in your will with instructions of what should happen with your business. Don't leave it up to anyone else to decide.