Financially Speaking / Archive RSS Feed
Archive for the ‘small business’ Category
Summer vacation is almost over. The summer that was supposed to be “The Summer of Recovery” didn’t prove itself to be one. In today’s economic climate, business owners are apprehensive about hiring help. The cycles of hope and despair that have been plaguing us for at least a year have left people disillusioned and less adventurous.
If you need help in your small business, and don’t want to hire people because you are afraid you’ll have to let them go a few months later, maybe an internship program is the way to go.
Internship is defined by the Department of Labor by certain criteria: It has to be in the same academic or vocational field, the intern should not replace any paid worker and the internship should primarily benefit the intern, not the employer. The employer, on the other hand, “derives no immediate advantage” from the internship.
Read on, not all internships are born alike.
If you establish contact with a higher education institute that has courses in your field, you have a way into the talent pool of the future. The young generation is most likely up to date with new technology which can make your life easier, or move your business forward.
Those students want to learn. They think of your business as their profession of choice and they are willing not to get paid to learn how it works in the real world.
What a wonderful way to screen your future employees, and keep the ones you like by turning them into student employees. If you want to get young talent into your business, you might have just hired the new whiz-kid.
An article in ReadWrite Start has 5 tips on creating an internship program. How to create a work plan, how to assign a good supervisor (it can be you…), how to give and take feedback and provide compensation when the work that’s done doesn’t fall into the categories mentioned above.
New rules which will go into effect in January 2012 require all businesses and nonprofit organizations to issue a 1099 form for all goods and services which were paid over $600 a year. The buzz that this new regulation causes can be heard from those who will impacted the most – small business owners.
How this legislation happened is another story. It was slipped into the Health Care bill which was passed in March as an attempt at closing a gap of income tax revenue reporting. The additional paperwork puts business owners at a disadvantage because of minimal or non-existent support staff.
Pennsylvania’s SMC business networking organization surveyed its members and found that they currently average 10 filings a year. The new rules might push that average to over 200 fillings per year for typical small business.
What will be the effect of this regulation?
It will undoubtedly cause small businesses to consolidate their purchases, going from many vendors they do business with, to only a few to ease on the reporting. That might hurt small businesses in general.
It will also cause a larger paper trail. ”Small businesses that lack the capacity to track customer purchases may lose customers, leaving the economy with more large national vendors and less local competition.” Says SMC Business Councils Tom Henschke.
Because of product returns and other complications, the payment documented by the 1099 won’t match up cleanly against the revenue business report, putting small business owners to have increased communication with the IRS.
How to avoid the new reporting?
The buzz this new requirement created was heard all the way to the IRS. In May, in a speech before two payroll trade groups, IRS Commissioner, Douglas Shulman, announced a major exemption to the new rule. The IRS plans to exempt transactions made through credit cards and debit cards. “Whenever a business uses a credit or debit card, there will be no new burden under the new law,” Shulman said.
The main beneficiaries of that exemption are likely to be credit card companies, which will get an added hook to get small businesses to pay their fees.
Image thanks to http://www.flickr.com/photos/joshuacraig/2415343592/lightbox/
Getting an SBA loan is not an easy task, we all know. It is a little like winning the biggest stuffed animal at the carnival. Odds are against you, but sometimes it does happen, writes Geoff Williams in his article in AOL small business. He spoke with Christine Reilly, the president of Small Business Lending for CIT, who said about a year ago the federal government tinkered with the formula for getting an SBA loan and for a brief moment the loans were semi easy to get. The SBA guaranteed 90 cents on the dollar instead of 75 cents and waived the borrower’s fees (about 3% of the loan). SBA lending jumped until the 90 cents guarantee ended in May. In June lending has dropped a whopping 74%.
Here are some things you need to know before you apply for a loan:
- Learn about the loans – There are a few SBA loans, applying for the correct one will give you a better chance of getting the loan.
The 7(a) loans are the most popular. Within it there are four types of loans:
The Express loan – Aimed at getting your loan as fast as possible
Export Loan Program – for businesses that export their products.
Rural Lender Advantage Program – designed for businesses in small communities, away from big city areas.
Special Purpose Loan Programs – designed for businesses that were affected by NAFTA.
There are also loans called 8(a) which are aimed at ‘Socially Disadvantaged Individuals’.
SBA 504 loans are another type of loans for real estate or infrastructure such as buying land or expending your building.
- Prepare The Documents – It’s not enough to ask for a loan and bring some papers to back up a request. John Martinka, Vice-President of Partners, a Kirkland, Washington company, suggests his clients prepare a “book” about the company and the individuals involved. It can be a 10 tab divider with business and personal financial statements, tax returns, accounts receivable, accounts payable, a business plan, reference letters and whatever else is related to the business or the loan. Bankers see many applications, the well-organized ones gives them an idea of how you run your business and how in tune you are to details. Tell a good story about you and your business.
- Collateral – SBA requires that the lender put up all available collateral, including home equity, against the loan. Your business might have some assets that can guarantee the loan.
- Risk factors – Even if you think you have the uncanny ability to turn tin into gold, don’t brag about it to the bank. Traditional lenders hate risk and it’s not the best environment to go way outside your core business.
Image thanks to http://www.flickr.com/photos/42179515@N06/3908285404/
These days social media experts demand, nay, expect everyone under the sun to be actively Tweeting. However, small businesses are somewhat weary to jump on the bandwagon due to a lack of results.
Here are some stories from business owners who Tweet, and the results they achieved:
A company called Avaya, a global communication provider out of Baskin Ridge, N.J. follows about 2,500 tweets a week. They use third party applications to track mentions of their name and questions posted that are related to their business. “We see those, we’re on them in 15 or 20 minutes.” says Paul Dunay the managing director of services and social marketing. “That provides killer support and customer delight.” Mr. Dunay tells a story about a post he read from a company looking for a new phone system. “Within 13 days, we were able to convert that one tweet into a $250,000 sale.”
Humphry Slocombe is a 14 seat ice cream shop in San Francisco. They have gathered 300,000 Twitter followers. “We started using Twitter just because we have zero money for any kind of advertising or promotions” says Sean Vahey the co-owner. Their flavors change daily and they wanted to have a way to keep their clients up to date. “As soon as we put it on Twitter, it moves” He says, “It’s an insane response”.
Whole Foods uses Twitter as a live version of a FAQ. They have 1.7 million followers. The theory is that if one person has a question others will as well. Answering it in no time shows the customers the company cares about them.
Kiss my Bundt is a small bakery in Los Angeles. Chrysta Wilson, the owner, likes to experiment with new products and Twitter is like a focus group for her to see which of her new products gets the best tweets. “It’s great for getting input – they become your sounding board” she says. “It’s a way to break out of the business owner’s bubble and get an outsider’s perspective.”
Read more here.
Over the course of 2010, there is one thing that visitors to ZippyCart.com keep asking us about, and this is which ecommerce software solutions have social commerce tools that they can use to better market their online store. At the beginning of 2010, the social commerce tools available to most merchants via their ecommerce solution provider were very limited, but now the top companies in the space are offering a good mix of social commerce tools. Ecommerce merchants are very concerned about marketing their online store, and they’re constantly on the lookout for the latest and greatest tools to keep them on the cutting edge. The best ecommerce software companies are aware of this desire, and this is why, over the course of this year, they have continued to introduce social commerce tools to meet the needs of their merchants. However there is still 4.5 months left in the year for these ecommerce companies to improve their tools so that they can be atop the pack in 2011 when merchants start to review if their current ecommerce platform is still the best choice to power their online store.
Why Social Commerce?
Social Commerce is a constantly evolving niche as new techniques and methods are being experimented with so merchants can figure out how to best way to expand the reach of their online store. Some of the ecommerce software companies leading the way right now are 3dcart, BigCommerce, Volusion, and CoreCommerce. These companies provide a variety of social commerce features, but two stand out from the crowd. First is the ability to include the addthis button on your site, so that people can quickly share your products on a variety of social bookmarking sites. Additionally they all provide merchants a way to setup some sort of ecommerce storefront on Facebook and other social networks, so that they can generate revenue from other marketing channels. The ability to sell directly on Facebook is different than just using a Facebook shopping cart app. Instead, all of a merchant’s Facebook sales directly integrate with their ecommerce platform, making it very easy to manage sales throughout channels.
Since the niche is so new, there is still a lot of room for innovation and improvement, and ecommerce software companies are all competiting to ensure that they provide the best social commerce tools possible so that their merchants can be successful. Two things that we see becoming key for merchants demanding social commerce tools, are more automation so that merchants can focus on other tasks, and more advanced ways to utilize Twitter. While it is great that ecommerce solution providers offer social commerce tools, merchants have little time to test out new strategies, and want things to be more automated so that they do not have to spend too much time managing multiple stores. Current Twitter tools from ecommerce software companies are a bit basic, and none that we know of have tools like Wishpot offers in their social commerce platform. They allow a merchant to sync up their product feed to Twitter, and define parameters around price drops, sales, and new items. After a merchant sets this up, they then can control the frequency of tweets, and the platform takes care of automatically tweeting products from the feed that match the criteria set by merchants.
The bottom line is that social commerce is now a must for most merchants, as they need to be able to engage with customers via a variety of mediums outside of pay-per-click search and SEO. As the holiday shopping season draws near, merchants should begin to examine how social commerce fits into their social media marketing strategy. If your ecommerce software does not have any social commerce tools, then you should request them now, and in the meantime review other 3rd party companies in the space to see what they have to offer.
About the Author: Nick Grant is the co-founder of ZippyCart.com, the Internet’s leading ecommerce software review website. Merchants in search of a shopping cart to power their online store turn to ZippyCart to read shopping cart reviews and compare the best ecommerce solutions in the industry and determine which option is best for their needs.
Image thanks to http://www.momisteaching.com/
New bank overdraft regulations that went into effect August 15, 2010 may cost banks billions in lost revenue according to guess who: major banks. Research firm Moebs Services estimates overdraft brought banks $37.1 billion last year, as reported in The Washington Post.
The new rules may help small businesses that are dealing with tight cash flow and were slapped with huge fines. Here are how the rules were before the new regulation:
Let’s assume your bank account shows you have a few hundred dollars in your account. You buy a cup of coffee, you buy stamps, you maybe have lunch. You paid for all of those with your debit card.
A few days later you discover you are overdrawn by hundreds of dollars. How could that possibly happen when you had a few hundred dollars in your account? Quite simply, banks decide which withdrawals they post first. Let’s assume a check you gave a month ago was just now posted into your account, or a recurring automatic payment you forgot about went through.
Regardless of the dates, the bank posted your big check first. That brought your balance to zero. All the other withdrawals, small as they may be, now appear after it. Instead of paying overdraft on one big withdrawal, you now pay for all the small ones – with a fine. The cup of latte for which you paid $3, has now a fine of $37. A few of those and now you owe the bank hundreds of dollars.
This was one of the ways the banks made a lot of money with an unfair but legal practice, and that is one of the problems the Dodd-Frank Wall Street Reform and Consumer Protection Act addresses.
According to the new rules, the banks have to give their customer the option to enroll in overdraft protection or opt out. But many economists fear the new rules are not spelled clear enough, so here they are:
The customer can decide if he enrolls in the program and has the bank honor all of his debit card withdrawals regardless of whether there’s money in the account. Overdraft charges will be accompanied with a fine. If the customer opts out, banks will not honor debit card payments when there’s not enough money in the account to cover them.
The FDIC admits the complaints about overdraft abuse doubled from 2008 to 2009, prompting the agency to write guidelines that include small banks as well. They say the banks have to limit the number of times an overdraft accrues by limiting the dollar amount or the number of times the fee can be slapped, a provision that is not included in the bill, and they call to review the order in which bank post the withdrawals.
What worried bank critics is the idea that the bank will now look for other inventive ways to make up for their lost revenues. Legislation takes years and until the public catches up with the bank shenanigans, the customers lose.
Image thanks to http://www.flickr.com/photos/7578081@N07/2585039824/
Unfortunately most credit card processing rate quotes cannot be trusted, which is why we created TransFS, where all the offers are full-disclosure and fully accurate.
Here is an example of how a merchant account provider has advertised false rates.
Business owners all over the country say it is almost impossible to be approved for a bank loan. The banks are very careful, demanding documentation and projections that are very hard to satisfy. The banks demand good credit scores and collateral, but with real estate prices still down, business owners often find they don’t have enough collateral to guarantee their loans.
The big banks throw the blame on the customers. They say people are applying less for loans, afraid to expand because they do not know what the next day will bring.
As reported in the New York Times, Mr. Bernanke said: “It seems clear that some creditworthy businesses – including some whose collateral has lost value but whose cash flows remain strong – have had difficulty obtaining the credit that they need to expand, and in some cases, even to continue operating.”
Some small business owners found it helpful to try microlending.
If this concept sounds foreign, it’s because it is. Microlending has been operating in developing countries for over two decades now. Muhammad Yunus, the founder of Grameen Bank, a nonprofit organization based in Bangladesh, has received the Noble Peace Prize for his work in microlending, granting small loans mainly to poor people. Now Grameen Bank has arrived to the United States. Together with another organization called Kiva, which has lent more than $150 million in 53 countries, they are widening their loans to Americans.
The trend is growing. Cities like New York and San Francisco have introduces their own microloans programs. “Everyone is knocking on our doors, even those with good credit,” said Galen Gondolfi from “Justine Peterson,” another microlending company based in St. Louis.
There are more than 360 outfits for microlending in the United States, some have been operating since the 80’s and experts expect the numbers to rise as long as the bank remains tight.
According to another article in the New York Times, microlending programs in the United States typically lend up to $35,000 to small businesses with less than 5 employees. The interest rate is a bit higher than the bank rate, between 5%-18%, but the documentation required is reasonable.
While banks rely mainly on credit scores, the microlenders consider passion and commitment as well. They require participation in marketing and business-plan workshops and money management courses that can help the small business owner even more in the long run.
The article tells the story of a small business owner (a wine shop in St. Louis) who tried to get a $50,000 loan from his longtime bank. He was rejected because the bank claimed he had too much debt. Another bank turned him down as well. He applied for a microloan and he got $15,000, for 10 years with a 12% interest rate. He had to scale back his plans, he says, but “It’s the only way to go.”
Grameen bank has opened 4 new branches in NY and one in Omaha and has plans to open branches in San Francisco, Washington, Boston and North Carolina.
Kiva works in a different way. It uploads the business profile onto their site. People browse the site and decide, based on the business owner’s profile, who they would like to loan money to. Kiva distributes the money. Borrowers can ask for as much as $10,000, and Kiva made almost one million dollars in loans up till now.
So if your bank has turned you down for a loan, don’t despair. There’s another way to go.
An interesting report from the Kauffman Foundation sheds light on employment practices and duration at startups. The results are somewhat surprising. By looking at hiring practices over 23 years, the report concludes that there is an interesting relationship between job growth and well, the opposite, at startups: Firms that grow and hire many people balance out the other firms who fail and fire workers. Here are some other interesting tidbits:
1) Startups retain an average of 80% of initial employment up to five years from inception. That may be the most shocking and somewhat counterintuitive result since people tend to think of startup employment as more temporary than permanent.
2) Launching during a recessions does not affect a startup’s employment levels after five years.
3) Prolonged exposure to recession does, however, affect employment–startups exposed to recession for long periods of time (3 years) had approximately 10% lower employment after five years than startups not exposed to recession.
Read more about the methodology and results of the report here.
SBA Site Gets a Makeover
The Small Business Administration is revamping its site in order to be a better resource for small business owners.
We’re redesigning SBA.gov from top to bottom with small business owners in mind. Our goal is to build a site that helps small businesses do what they do best: grow businesses and create jobs.
Check the site frequently for updated resources, articles, and information on programs that can help your small business.
