Tuesday, November 30, 2010

Is chronic compromise the cause of business failure?

The mortality rate for small businesses is still scary. Approximately seven out of 10 new small businesses survive at least two years, half almost five years, a third more than 10 years, according to the most recent United States census...
The reasons for the high mortality rate changes little year-to-year, according to the U.S. Small Business Administration. High on the list are insufficient funds, poor product or service, unqualified entrepreneurs, and lack of commitment.
But the most important, yet seldom discussed, reason most small businesses fail is fear of failure...

Read the rest of the Mark Cox article HERE.

Monday, November 29, 2010

OTC meds will need Rx for Health Flex Spending

I believe there are some really good aspects of the new health care bill. This is not one of them: Over-the-counter medications will require a prescription to buy them with flexible spending account funds next year under new health care reform regulations. "The health care reform law sharply restricts FSA reimbursements for OTC purchases such as nonprescription pain relievers, cold medicines, antacids and allergy medications." Insulin is specifically excluded from this ruling.

Specifically, "the IRS says OTC reimbursements require a prescription, which it defines as a 'written or electronic order for a medicine or drug that meets the legal requirements of a prescription in the state in which a medical expense is incurred and that is issued by an individual who is legally authorized to issue a prescription in that state,'" whatever THAT means.

Saturday, November 27, 2010

Small Business Owners Don't Feel Government Support

The majority (82%) of small business owners feel that their interests are typically overlooked by the government, according to a new survey by Regus.

More than half (56%) in the U.S. believe banks should be forced to lend more to entrepreneurial ventures and small businesses. Seventy-five percent of U.S. entrepreneurs also stated that government venture capital funds should be available to support entrepreneurs and their business initiatives, indicating that maintaining cash flow continues to be of concern for businesses.

More HERE.

Friday, November 26, 2010

New York State sets aside $25M for small business loans

A recent article in the Albany Business Review brought to my attention that New York State has set aside $25M for small business loans.

The board of Empire State Development Corporation approved the funds Nov. 18. The money, in the form of a revolving loan fund, was included in the current state budget as an attempt to combat the problems small companies have had accessing credit during the recession.

The lenders are to provide an equal amount of matching funds—generating $50 million for lending to small businesses, particularly minority- and women-owned firms, over the next two years.

The low-interest capital will flow through 20 “alternative lenders,” such as credit unions and community development financial institutions. The money will support micro-loans of $25,000 and below, as well as larger loans of up to $250,000.

To see a list of the financial organizations receiving the money and to learn more, click here.

Thursday, November 25, 2010


Thanksgiving: thanks to the Census Bureau.

The "event became a national holiday in 1863 when President Abraham Lincoln proclaimed the last Thursday of November as a national day of thanksgiving. Later, President Franklin Roosevelt clarified that Thanksgiving should always be celebrated on the fourth Thursday of the month to encourage earlier holiday shopping, never on the occasional fifth Thursday."

We are thankful that FDR provided that extra shopping period. Otherwise, Thanksgiving would have been a week later in 2000, 2006 and 2007, and would be a week later in 2012, 2017, 2018, 2023, 2028, 2029...

Seriously, I am thankful for all sorts of good things.

Wednesday, November 24, 2010

Pricing Strategies in an Inflationary Market

As supply costs in the food and beverage industry are inflating at alarming rates, now is a good time for effective food service managers to revisit their menus and develop some pricing strategies to position them for continued success in the marketplace. Quite a few operators are rightfully concerned about recent price increases. Still, this actually provides a nice window of opportunity to make some changes to menu prices and actually increase profit.

While I would like to provide a tried and proven formula food service managers could use for pricing their menus, the fact is that menu pricing is more of an art than a science. There are just too many different factors that come in to play and probably one of the biggest mistakes managers make is to price their menu offerings based on formula rather than thinking about some of these factors.Any business that is considering their menu prices should not only consider their supplier costs, but also a competitive analysis and some form of consumer price sensitivity research.

Having spent over 18 years as a manager in the food and beverage industry, I have heard so many of my colleagues make this erroneous statement – “You have to maintain a food cost of 33% or less or you can’t make it in this business.” Many food service managers take this to heart so much that they figure out their ingredient costs for an item and then multiply times 3 to get their menu price. This is a foolish pricing strategy, as there is significantly more involved in developing a successful menu.

The first thing to remember in pricing strategy is that it there is a difference between food cost/gross margins and gross profit. Gross margin is the percentage of the difference between your selling price and your supplier cost divided by the selling price (food cost is simply 100% – gross margin %)

Gross Margin = (Selling Price – Supplier Cost)/Selling Price

Gross profit is the dollar amount difference between the selling price and the supplier cost.

Gross Profit = Selling Price – Supplier Cost

The most important thing to remember is that gross profit is what pays the bills, not gross margin!

Below is an example of two restaurant managers with a company that owns a small chain of fine dining establishments. In this scenario, their supplier raised the cost of a bottle of their most popular wine from $6.00/bottle to $9.00/bottle. Each manager has a different strategy for dealing with the price increase.
Original PricingRestaurant 1Restaurant 2
Supplier Cost$6.00$9.00$9.00
Menu Price$20.00$30.00$24.00
Food Cost %30%30%37.5%
Gross Margin%70%70%63.5%
Gross Profit$14.00$21.00$15.00

In Restaurant 1, the manager believes in maintaining his margin, so he raises his price to $30.00 per bottle. All is good in his world, as he is now making $7.00 more per bottle of wine than he was before and he is still maintaining his 30% food cost.

Restaurant 2 features a savvier manager. She knows her customers and is afraid that with such a steep increase, more of her customers will skip the wine to keep their dinner bills down. She still raises her prices to increase her gross profit, but her increase is not nearly as much as her counterpart at Restaurant 1 and she is losing a bit of her margin.

Chances are that Restaurant 1 will lose some sales because their price increase is so steep. Restaurant 2 is more likely to maintain the same volume of units sold. They compare notes at the end of the following month and find the following results:

Restaurant 1 Last MonthRestaurant 1 This MonthRestaurant 2 Last MonthRestaurant 2 This Month
Food Cost %30%30%30%37.5%
Gross Margin %70%70%70%63.5%
Gross Profit$1,400.00$1,050.00$1,4000.00$1,5000.00

By keeping her price increase at a lower level, Restaurant 2 did not lose any units sold and made $100 more dollars than the previous month even though her gross margin decreased. Restaurant 2 made $350 less than the previous month, even though he maintained his margin.

This is obviously an oversimplification of what can happen in these difficult times, but as prices go up from suppliers, menu prices will have to go up, as well. If not, an establishment will have to get a lot more customers to make the same amount of money that was being earned prior to the supplier increases. At the same time, an overreaction and too much of a price increase may make it easier to lose customer loyalty to competitors who are not as aggressive with their price increases.

In developing a strategy to deal with higher supplier costs, food service managers should remember to focus more on profit than on margin. For many establishments that have a loyal customer base, it is fairly easy to site articles that are showing 200% - 300% increases in supplier costs and then tell customers that a price increase was necessary, but that the increases were kept to a bare minimum.

With a bit of attention to consumer spending habits, the competition and supplier costs, smart operators have the opportunity to turn the proverbial lemons into lemonade.

Rick Leibowitz, North Country SBDC
Note: This was originally written in March 2008, while Rick was working for the East Central Indiana SBDC...even though some supply costs have leveled a bit, we think this information is still relevant.
Previously published HERE.

Tuesday, November 23, 2010

How to Hone Your BS Detecting Skills

Succeeding in business is all about accurately analyzing information and then making smart decisions. Falling for BS is antithetical to both. But with the world awash in half-truths, partial distortions, aggrandizing exaggerations and out-and-out lies you’ll have plenty of opportunities to fall prey to other people’s bull. How can you protect yourself from being led astray by their nonsense?

Read HERE.

Monday, November 22, 2010

Why A Business Plan?

Many people come to the SBDC for assistance with creating a business plan. This is always a necessity when applying for financing at a bank or credit union. When someone is going to agree to give you money, they darn well want to know what the plan is for, how it will be spent, and how it will be paid back. But it is also a good idea to create a plan or the rest of the pack - the lone wolves who just want to get the business started, the folks who are self-financing or who have loads of experience in the field in which they are creating their start-up, or the individuals who have small-beans goals.

Why is this the case? Your plan can also be used internally by yourself as a living document as a way to understand your thought processes over time. This allows you to make adjustments to your life - err, that's a diary or journal and I mean business - but you see the similarity in the purpose of this type of writing, right? Of course, if you ever wanted to bring in a partner or private investor, they might like to see something in writing too, as opposed to simply your conversation from the neighbor's cocktail party last Friday night.

What should (or could) your plan look like? One reason folks tend to balk at creating a plan is that the perceived complexity of it creates a paralysis. Instead, consider your plan as a strategic document that is as simple as it needs to be for your current business incarnation. A detailed Executive Summary if you will - maybe around 5 pages would be a perfect start in many of these cases. Important items to always include would be a basic marketing plan, a basic financial analysis or cash flow, and a clear description of your current product or service.

Find your local SBDC

Frank Cetera, Onondaga SBDC

Sunday, November 21, 2010

How To Lose Customers

Noted pop culture writer Mark Evanier wrote:

I went into the first [sandwich shop], which was not a Subway, and scanned the menu, taking note of a meatball sandwich which was described as containing meatballs, marinara sauce, mozzarella and green peppers, all served up on a french roll. I told him I'd like one of them but without the green peppers. I do not like green peppers and what's worse is that they do not like me.

Check out the response!

Saturday, November 20, 2010

Economic Indicator Search Tool

The Census Bureau has introduced a new, user-friendly Internet tool that takes all the guesswork out of finding, downloading and using data from economic indicators. For the first time, users can access data from multiple indicators in one place and all in the same format. This tool provides an easy way to create data tables in ASCII text or time series charts in your favorite spreadsheet format. Users can select an indicator and choose data by item, time period and other dimensions using drop-down menus. Of the Census Bureau's 12 economic indicators, four are operational in the new tool now — international trade, manufactures' shipments, monthly wholesale trade and quarterly services; the remainder are expected to be available in this database throughout the course of 2011. See also a blog on this tool.

Friday, November 19, 2010

Hiring Incentives for Employers

Recently I received a request that asked if there were any "federal programs for hiring the unemployed". Through the course of my research, I found three programs that might entice employers to hire new employees regardless of the current state of the economy.


Under the Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, two new tax benefits are available to employers who hire certain previously unemployed workers.

The first, referred to as the payroll tax exemption, provides employers with an exemption from the employer’s 6.2 percent share of social security tax on wages paid to qualifying employees, effective for wages paid from March 19, 2010 through December 31, 2010.

In addition, for each qualified employee retained for at least 52 consecutive weeks, businesses will also be eligible for a general business tax credit, referred to as the new hire retention credit, of 6.2 percent of wages paid to the qualified employee over the 52 week period, up to a maximum credit of $1,000.

Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) is designed to promote the hiring of individuals who qualify as a member of a target group; for example, businesses can receive up to $2,400 in federal tax savings for hiring low-income individuals with barriers to employment. Two target groups have been established as part of the American Recovery and Reinvestment Act of 2009. These new groups cover unemployed veterans and disconnected youth who begin working for the employer in 2009 and 2010.

On-the-Job Training

On April 13, 2010, the New York State Department of Labor (NYSDOL) issued a Request for Application (RFA) for a new State On-the-Job Training (OJT) program. DOL has $2.8 million in State Workforce Investment Act funds to offer businesses under the OJT program. This program is designed to:

- encourage new hiring, especially of peoplewho are long-term unemployed
- help train these new hires

Thursday, November 18, 2010

You Can't Cut Your Way to the Bottom Line

by Rick Leibowitz

With all the talk about the economic slowdown in the news, businesses are scrambling to find the best strategies to deal with the challenges of increases operating costs (mostly due to inflation in the energy & commodities markets) and anticipated decreases in consumer spending. Business articles talk about how now is a good time for small business owners to tighten their belts and watch their discretionary spending.

I’ve personally read a number of articles that suggest cutting advertising budgets and hours of operation as a means to cost savings. However, I caution all small business owners to think carefully about the consequences of cost cutting before you take action.

Developing a contingency to deal with the economic slowdown is a very smart strategy for every small business owner, but the key to a good plan is to dedicate time to forecast the expected results of each decision. Another thing to keep in mind is that it is highly unlikely that your business can maintain profitability levels strictly through cost savings.

Unless you have been a completely inefficient manager of operations for your business, your expense lines are there for a purpose, which is mainly to help you generate revenue. You need to understand that the rash reactions of cutting expenses may result in cutting revenues that might have remained with your businesses had you not made those expense cuts.

To help highlight this point, there is a well-known story that relates to a chain of quick oil change services. It is said that a corporate financial officer noticed that an average service center spent $5,000/year on coffee and donuts for customers in the waiting area. The corporate officer sent a memo to all the retailers telling them to stop offering free coffee and donuts to give a quick $5,000 per year increase in their bottom line performance. The retailers who complied with this advice averaged about a 10% reduction in sales performance. Apparently some customers valued getting free coffee and donuts while waiting for their vehicles more than this financial officer thought and the customers either reduced the frequency of their visits or went to a competitor instead. With the average business unit doing $500,000/year in sales and making a 30% margin on sales, the average retailer would have realized a $10,000/year net loss in profit by following this advice.

I once served on an executive committee for a large corporation in the hospitality industry and we discussed similar cost savings strategies at our monthly forecasting meetings. As ideas for expense reductions were brought up, our wise general manager would always say, “You can’t cut your way to the bottom line.” She would always encourage us to be creative in looking for new revenue opportunities.

So as you proceed with a strategy to deal with the economic slow down, remember, there are only three things you can do to increase your bottom line performance:

• Decrease expenses

• Increase prices

• Increase volume

There are implications to applying each strategy, and the intelligent business owner will think about each opportunity.

I wish I could offer a catch-all strategy that would work for every small business, but life is just not that simple. Each enterprise has a unique business model that is affected differently by the changes in the economy.

The one common suggestion I can offer is to research customer spending habits, come up with a plan for your business and project expected outcomes before taking any action. And remember to think about adding to your revenues, not just decreasing your expenses.

As Winston Churchill once said, “Let our advanced worrying become advanced thinking and planning.”
Originally published here on August 7, 2008, which just points out how long the economic slowdown has been going on.

Wednesday, November 17, 2010

Where To Get the Green: Sources of Funds for Green Entrepreneurs

Many people struggle to figure out how they can obtain the capital required to start and/or scale a business. This guide may not offer all of the answers, but it does provide helpful insights into a wide variety of financing options available to aspiring entrepreneurs as well as existing small business owners.

ARTICLE RECOMMENDED by Walter Reid, Farmingdale SBDC

Tuesday, November 16, 2010

Have Consumers Become More Frugal?

The Federal Reserve Bank of New York released its Quarterly Report on Household Debt and Credit for the third quarter of 2010, which shows that consumer debt continues its downward trend of the previous seven quarters, though the pace of decline has slowed recently. Since its peak in the third quarter of 2008, nearly $1 trillion has been shaved from outstanding consumer debts.

Additionally, this quarter’s supplemental report addresses for the first time the question of how this decline has been achieved and notes a sharp reversal in household cash flow from debt, indicating a decrease in available funds for consumption.

More HERE.

Quoting the American Consumers Newsletter: At the household level, the Consumer Expenditure Survey shows the same pattern. Household spending peaked in 2006 at $51,688. In 2008, the average household spent $50,486, or $1,200 less after adjusting for inflation. On many categories of products and services, the average household reversed the direction of its spending in the 2006-08 time period compared with the 2000-06 time period. Here are the 10 most telling U-turns in consumer spending, cf 2006 w 2006-2008:

1. RESTAURANTS: +8 percent to -6 percent. Americans are spending more on groceries.
2. MORTGAGE INTEREST: +21 percent to -5 percent. No age group has been hit as hard as 35-to-44-year-olds.
3. STATIONERY AND GIFT WRAP: +15 percent to -11 percent. Is there anything more discretionary than gift wrap?
4. DAY CARE: +16 percent to -8 percent. As the unemployment rate climbed, spending on day care fell.
5. FURNITURE: +1 percent to -22 percent. Houses were selling furiously during the housing boom, but spending on furniture was surprisingly lackluster.
6. HOUSEHOLD TEXTILES: +24 percent to -23 percent Towels, sheets, blankets, curtains.
7. BABY CLOTHES: 0 percent to -9 percent. When the recession set in, the number of births began to fall, and so did spending on baby clothes.
8. DRUGS: +6 percent to -12 percent. Behind the decline is the Medicare Prescription Drug Plan, which went into effect in 2006.
9. ADMISSIONS TO ENTERTAINMENT EVENTS: +1 percent to -5 percent During the downturn, households continued to spend on high-definition television sets. But they cut back on other entertainment categories.
10. CASH CONTRIBUTIONS: +34 percent to -13 percent. Donations to charities are plummeting, says the Chronicle of Philanthropy.

American consumers spent $330 billion a year in borrowed dollars between 2000 and 2007, according to the Fed study. Now those dollars--and many of the businesses they built--are gone for good.

Grant money for your business

Someone posted this on my personal blog last week. It might be spam - the article itself was a couple years old - but thought I'd post it here:

"I am going to formulate my own, personal business since you don't see any positive jobs around the market.

"Could any individual provide any ideas or web sites about how to apply for government grant money to begin with my own business? I have already been looking on the web but just about every website asks for money and I've been told by the unemployment office to stay away from the websites that ask for money for grant information because they are scam. I'd personally be sincerely grateful for any help."

Well, first off, the unemployment office is correct. Those websites promising you lots of money for your initial outlay should send off a warning buzzer in your head. It's a very good likelihood that those sites make only the website owner wealthy.

The rest of the story is that, unless you are opening a not-for-profit - and there are definite tradeoffs doing that - there's no government pot of gold waiting for you to start your business. If that were the case, EVERYBODY would be opening a business. I'D be opening a business.

My recommendation is that you make an appointment with the Small Business Development Center nearest you and talk about what financial options - loans, et al. - may be available to you.

Monday, November 15, 2010

Ruling On New York State's So-Called "Amazon Law"

A recent State appellate court ruling upheld New York law requiring Internet retailers to collect sales tax on sales to New York customers.

To view the entire document please visit HERE.

New York State Climate Action Plan

The New York State Climate Action Plan: Interim Report was released on November 9, 2010.

The Challenge and the Opportunity

Climate change, resulting primarily from the combustion of fossil fuels and other human activities, is a significant threat to our environment, economy, and communities. Climate change is already occurring: its adverse effects are well documented across the globe and throughout our region. That realization, combined with the economic and national security vulnerability associated with our current, finite, fossil-based energy system, has created a sense of urgency in advancing a sustainable low-carbon energy future.

New York State is committed to reducing Green House Gas emissions. The plan is to reduce these gases 15% by 2015 and 80% by 2050. The state is is aiming for an energy portfolio of 30% renewable by 2015.

Businesses: Help New York State take the lead in this effort. Learn about the NYS SBDC Energy Savings Program.

ARTICLE RECOMMENDED by Tony Presti, Farmingdale SBDC

Friday, November 12, 2010

Twitter for Business

A recent article in The Albany Business Review quoted a "serial entrepreneur and social media guru" stating that "businesses have 2.6 seconds to get an audience’s attention". In the article, Promoting your biz 140 characters @ a time, Peter Shankman states that "a 140-character tweet translates to 2.6 seconds, the new collective attention span". So how can your business use a mere 140 characters, or 2.6 seconds, to grab and retain a client's attention span? Below are some articles and tips to do just that.

Twitter 101 for Business - A Special Guide

The Ultimate Video Guide to Twitter for Business

An Absolute Beginner's Guide to Using Twitter for Business

50 Ideas on Using Twitter for Business

5 Unique Ways to Use Twitter for Business

A Lesson in Control

DealBook: A Lesson in Control By STEVEN M. DAVIDOFF
November 10, 2010 New York Times

The Deal Professor examines the use of venture capital for a start-up, saying many entrepreneurs receive needed money, but lose control of their business

"A venture fund will negotiate a set of agreements with the founders at the time of its investment... Not only will the fund negotiate to ensure that an exit occurs, but the V.C. will insist that it be paid back before the founder.

"The key for entrepreneurs in deal negotiations is to make sure that when they do raise V.C. money, they have options. If they can get multiple term sheet offers from more than one venture capital firm, then they can negotiate to sell the smallest part of their company on the most lenient terms. If you only have one term sheet, you are not going to fare well.

"When the company is not performing to expectations, these legal rights negotiated at the beginning of the founder-V.C. relationship come into play."


Thursday, November 11, 2010

Veterans Day: Facts for Features

Veterans Day originated as “Armistice Day” on Nov. 11, 1919, the first anniversary of the end of World War I. Congress passed a resolution in 1926 for an annual observance, and Nov. 11 became a national holiday beginning in 1938. President Dwight D. Eisenhower signed legislation in 1954 to change the name to Veterans Day as a way to honor those who served in all American wars. The day honors living military veterans with parades and speeches across the nation. A national ceremony takes place at the Tomb of the Unknowns at Arlington National Cemetery in Virginia.

Wednesday, November 10, 2010

Business Lessons from the Elections notes:

5 Lessons Entrepreneurs Can Learn From the Midterm Election

No, this isn’t another “what the elections mean for your business” – though those opinion pieces are also worth looking at! Rather, it suggests some lessons entrepreneurs can learn from the winners and losers of the election.

Does money guarantee success? Is experience necessarily a good thing? Check out these thoughts from Mark Hall, founder of Input Ladder LLC and blogger at startup blog My Two And A Half Cents.

Tuesday, November 09, 2010

How to Craft a Memorable Elevator Pitch

An MBA student sent me info on Elevator Pitch resources. Specifically, one from the Guide To Online MBA. He writes, "It has a ton of great elevator pitch resources, including competitions and writing resources that you and your users may find useful!"

And I wondered: Do Entrepreneurs Need Elevator Pitches? Guess what? The page addressed that very question.

Tuesday, November 02, 2010

The Consumer Issue

I love Advertising Age magazine. Several of us read our office subscription. The October 11, 2010 edition is The Consumer Issue, and contains several useful articles, including:

How U.S. Assimilation Is Changing Marketing Rules
Will Ad Industry's Opt-Out Program Entice Consumers?
Marketers Still Struggling With Mommy Issues - they fail to recognize mommy is likely older, e.g.
Don't Be So Quick to Dismiss Power of Asian Consumers
'Urban' Trope Misses a Large Swath of Black Consumers
Tweens Embrace Makeup, Reject Miley
Media-Savvy Gen Y Finds Smart and Funny Is 'New Rock 'n' Roll'

There is a finite nymber of articles you can access online without a subscription. One suggestion: How U.S. Consumers Are Steering the 'Spend Shift'
Five Eye-Opening Takeaways From an in-Depth Analysis on How Americans Are Changing in a Post-Crisis Society
1. The New American Frontier -- the values of optimism, resiliency and opportunity
2. Don't Fence Me In -- the values of retooling, education and betterment
3. The Badge of Awesomeness -- the values of nimbleness, adaptability and thrift
4. An Army of Davids -- the values of community, cooperation and expression
5. We're moving from mindless to mindful consumption.

Market for Food-Allergy-Friendly Biz More Than Peanuts; Marketers Finding That Extra Effort for Customers With Dietary Restrictions Can Help Build Brand Loyalty, Sales
As a child with a peanut allergy, I can definitely relate. Don't label your food products, I won't buy your food products.

Monday, November 01, 2010

Qualified Census Tracts and Difficult Development Areas

"The U.S. Department of Housing and Urban Development's (HUD's) Office of Policy Development and Research (PD&R) supports the Department's efforts to help create cohesive, economically healthy communities.

"PD&R is responsible for maintaining current information on housing needs, market conditions, and existing programs, as well as conducting research on priority housing and community development issues. The Office provides reliable and objective data and analysis to help inform policy decisions. PD&R is committed to involving a greater diversity of perspectives, methods, and researchers in HUD research."

And that's where I found Qualified Census Tracts and Difficult Development Areas and other low-income data regarding housing, which can be applied to other uses.