Business Banker

Case Study: How to lose customers

2008-08-12T14:55:00.000-07:00

As I read the Wall Street Journal yesterday I came across an interesting article on the Opinion section of the paper. Its title: Cigarette Tax Burnout.

Smoking is a big business, whenever I asked a smoker why he/she smokes the answer is "I like it" or "it relaxes me". Anyways, even though I am not a smoker and I personally consider smoking as burning money away (literally), I believe smokers have a right to smoke. Now, they buy a product that is heavily taxed by state governments, the government states the tax on cigarettes funds other projects and many smokers are OK with paying some taxes, however, politicians need to take a business class to teach them the basics of Price and Demand. Politicians think the increase in the tax on cigarettes does not have any effect on the demand, but now they are learning that it does.

This is a perfect example on how you can price yourself out of business... the government increases the tax on cigarettes, smokers buy less cigarettes, cigarette companies report less profit, share holders make less money, employees may work less hours and state governments have less money to balance their budget or fund other projects.

"Politicians in Annapolis are scratching their heads wondering what happened to all those chain smokers who were supposed to help balance Maryland's budget. Last year the legislature doubled the cigarette tax to $2.00 a pack to pay for expanded health-care coverage. Eight months later, cigarette sales have plunged 25% and the state is in fiscal distress again."

Here is the link for the full article.
enjoy,

http://online.wsj.com/article/SB121841215866128319.html

FDIC Part VI: Employee Benefit Plan Accounts

2008-08-11T15:47:00.000-07:00

Employee benefit plan accounts are deposits of a pension plan, profit-sharing plan or other employee benefit plan.
Employee benefit plan deposits are insured up to $100,000 for each participant's non-contingent interest in the plan.

This coverage is known as "pass-through" insurance because the insurance coverage passes through he plan administrator to each participant's interest or share.
Coverage for a plan's deposits is not based on the number of participants, but rather on each participant's share of the plan. Because plan participants normally have different interest in the plan, insurance coverage cannot be determined by simply multiplying the number of participants by $100,000.
To determine the maximum amount a plan can have on deposit in a single bank and remain fully insured, first determine which participant has the largest share of the plan assets, then divide $100,000 by that percentage. For example, if a plan has 20 participants, but one participant has an 80% share of the plan assets the most that can be on deposits and remain fully insured is $125,000 ($100,000 /.80= $125,000).

FDIC Part V: Irrevocable Trust Accounts

2008-08-11T14:58:00.000-07:00

Irrevocable trust accounts are deposits held by a trust established by statute or a written trust agreement in which the grantor (the creator of the trust - also referred to as a trustor or settlor) contributes deposits or other property and gives up all power to cancel or change the trust.

An irrevocable trust also may come into existence upon the death of an owner of a revocable trust. The reason is that the owner no longer can revolve or change the terms of the trust. If a trust has multiple owners and one owner passes away, the trust agreement may call for the trust to split owned by the survivor. Because these two trusts are held under different ownership types, the insurance coverage may be very different, even if the beneficiaries have not change.

The interest of a beneficiary in all deposit accounts established by the same grantor and held at the same insured bank under an irrevocable trust are added together and insured up to $100,000, only if all of the following requirements are met:

The insured bank's deposit accounts records must disclose the existence of the trust relationship.
The beneficiaries and their interests in the trust must be identifiable from the bank's deposit account records or from the trustee's records.
True trust must be valid under state law.

FDIC Part IV: Revocable Trust Accounts

2008-08-11T11:06:00.000-07:00

Revocable Trust Accounts
A revocable trust account is a deposit owned by one or more people that indicates an intention that the deposits will belong to one or more named beneficiaries upon the death of the owner(s). A revocable trust account can be revoked (or terminated) at the discretion of the owner. The term "owner" means the grantor, settlor, or trustor of the trust.
There are both informal and formal revocable trusts.

Informal revocable trusts, often called "payable on death" (POD), "Totten trust" or "in trust for" (ITF) accounts, are created when the account owner signs an agreement usually part of the bank's signature card stating that the deposits are payable to one or more beneficiaries upon the owner's death.

Formal revocable trusts known as "living" or "family" trusts are written trusts created for estate planning purposes. The owner controls the deposits and other assets in the trust during his or her lifetime. Upon the owner's death, the trust generally becomes irrevocable.

All deposits that an owner has in both informal and formal revocable trusts are added together for insurance purposes, and the insurance limit is applied to the combined total.

Payable on Death (POD) Accounts
The owner of a POD account is insured up to $100,000 for each beneficiary if all of the following requirements are met:

The account title must include a commonly accepted term such as "payable on death," "in trust for," "as trustee for" or similar language to indicate the existence of a trust relationship. The term may be abbreviated (for example, "POD," "ITF" or "ATF").
The beneficiaries must be identified by name in the deposit account records of the insured bank.
The beneficiaries must be the owner's spouse, child, grandchild, parent, or sibling. Adopted and step children, grandchildren, parents, and siblings also qualify. Others including in-laws, cousins, nieces and nephews, friends, organization (including charities) and trusts do not qualify.

FDIC Insurance: Ownership: Joint Accounts Part III

2008-08-06T10:36:00.000-07:00

A joint account is a deposit owned by two or more people. To qualify for insurance under this ownership category, all of the following requirements must be met:

1. All co-owners must be people. Legal entities such as corporations, trusts, estates, or partnerships are not eligible for joint account coverage.

2. All co-owners must have equal rights to withdraw funds from the account. For example, if one co-owner can withdraw funds on his or her signature alone but the other co-owner can withdraw deposits only with the signature of both co-owners, the co-owners do not have equal withdrawal rights.

3. All co-owners must sign the deposit account signature card unless the account is a CD or is established by an agent, nominee, guardian, custodian, executor or conservator.

If all these requirements are met, each co-owner's share of every account that is jointly held at the same insured bank is added together with the co-owner's shares, and the total is insured up to $100,000.

The FDIC assumes that all co-owners' shares are equal unless the deposit account records state otherwise.

For example, a husband and wife could have up to $200,000 in one or more joint accounts at the same insured bank and the deposits would be fully insured. The husband's ownership share is insured up to $100,000 and the wife's ownership share is insured up to $100,000.

Insurance coverage of joint accounts is not increased by rearranging the owners' names or by changing the styling of their names. Altering the use of "or," "and" or "and/or" to separate the names of co-owners in a joint account title also does not affect the amount of insurance coverage provided. In addition, using different Social Security numbers on multiple accounts held by the same co-owners will not increase insurance coverage.

Joint Account Example

Account Title*********Deposit Type*****Account Balance

Mary & John Smith***NOW*************$ 25,000

John or Mary Smith***Savings*********$100,000

Mary or John or Robert Smith** *******$150,000

Total Deposits***********************$275,000

Insurance coverage for each owner is calculated as follows:

Depositors**Ownership Share***Amnt Insured**Amnt Uninsured

Mary********$ 112,500************$ 100,000*******$ 12,500

John********$ 112,500************$100,000*******$12,500

Robert******$ 50,000***********$50,000*********$ 0

Total*******$275,000***********$250,000********$25,000

FDIC Insurance: Ownership: Single: Part II

2008-08-01T14:04:00.000-07:00

Single Accounts

What is considered a Single Account?

A single account is a deposit owned by one person.

Accounts established for one person by an agent, nominee, guardian, custodian, or conservator, including Uniform Transfers to Minors Act accounts, escrow accounts, and brokered deposit accounts.

Accounts held in the name of business that is a sole proprietorship (DBA accounts)

Accounts established for a decedent's estate.

Note:

If an individual has a deposit account titled in his or her name alone but gives another person the right to withdraw deposits from the account, the account will be insured as a single account only if the insured bank's deposit account records indicate that:

The other signer is authorized to make withdrawals pursuant to a Power of Attorney

the account is owned by one person and the other person is authorized to withdraw deposits on the owner's behalf (a convenience account)

If the insured bank's account records do not indicate that such a relationship exists, the deposit would be insured as a joint account.

Here is an example of Single Account

Account *****************Deposit Type******Account Balance

Marci Jones************** NOW************* 5,000.

Marci Jones****************Savings**********20,000

Marci Jones***************CD***************100,000

Marci's Memories (sole prop)*********checking*******25,000

Total Deposits********************************150,000

Amount Insured*****************************100,000

Amount uninsured***************************$50,000

Your BANK and FDIC insurance Part I (the basics)

2008-08-01T10:19:00.000-07:00

In July 11th 2008 IndyMac made headlines when the FDIC office took over the bank. The media showed pictures and video clips of people in front of IndyMac branches trying to take their money out. Since the fall of IndyMac two other banks have also failed, First National Bank of Nevada and First Heritage Bank in Newport Beach in California. Unlike the IndyMac fall, these other two banks did not get same the press coverage. If you visit the FDIC website under Failed Bank list http://www.fdic.gov/bank/individual/failed/banklist.html you will notice that more than 30 banks have failed since 2000. What does this mean for you? is it the fall of our banking system? should we put our money under the mattress? can we still trust our banking system?

Yes. We have a strong banking system and No, we do not need to hide our money under the mattress. As you can see from the list many banks fail but are taken over by the FDIC and the majority of depositors do not lose their money.

In this section: Your Bank and FDIC insurance, I will discuss what is FDIC, the basics of FDIC insurance, what it covers and ownership categories and how to maximize its benefits. The information below is not top secret, you can find it on the FDIC brochure provided by each Financial institution that is FDIC insured.

Who is the FDIC?
It is short for the Federal Deposit Insurance Corporation. It is an independent agency of the United States government. The FDIC protects depositors against the loss of their insured deposits in an FDIC insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government.

If a depositor's accounts at one FDIC insured bank or savings association total $100,000 or less the deposits are fully insured. A depositor can have more than $100,000 at one insured bank or savings association and still be fully insured provided the accounts meet certain requirements. In addition, federal law provides for insurance coverage of up to $250,000 for certain retirement accounts.

What does FDIC deposit insurance cover?

FDIC insurance covers all types of deposits received at an insured bank, including deposits in checking, NOW, and savings accounts, money market deposit accounts, and time deposits such as certificates of deposits (CDs). FDIC covers the balance of each depositor's account, dollar for dollar, up to the insurance limit, including principal and any accrued interest through the date of the insured bank's closing.
The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if these investments were bought from an insured bank. The FDIC does not insure U.S. Treasury bills, bonds, or notes. These are backed by the full faith and credit of the United States government.

How much insurance coverage does the FDIC provide?
The basic insurance amount is $100,000 per depositor, per insured bank. The $100,000 amount applies to all depositors of an insured bank except for owners of certain retirement accounts, which are insured up to $250,000 per owner, per insured bank.

Deposits in separate branches of an insured bank are not separately insured. Deposits in one insured bank are insured separately from deposits in another insured bank.

Deposit maintained in different categories of legal ownership at the same bank can be separately insured. Therefore, it is possible to have deposits of more than $100,000 at one insured bank and still be fully insured.

What is a P&L or The Profit and Loss Statement?

2008-06-18T20:04:00.000-07:00

It adds all the revenues of the business and subtracts all the operating expenses, thereby providing you with a figure representing a profit or a loss. The P&L measures the results of operations of a business over a given period of time, usually a month, quarter, or a year. The P&L is also known as Income Statement.

The income statement is the one of the three major financial statements. The other two are the balance sheet and the statement of cash flow. The income statement is divided into two parts: the operating and non-operating sections. The section of the income statement that deals with operating items is interesting to investors and analysts because it discloses information about revenues and expenses that are a direct result of the regular business operations.

The non-operating items section discloses revenue and expense information about activities that are not tied directly to a company's regular operations.

Here is a sample of an Income Statement or Profit and Loss:

ABC Inc

Profit and Loss Statement

December 31, 200x

Sales (revenues)

- Cost of goods sold

= Gross margin

Expenses

Wages and salaries

Rent

Selling expenses

Telephone

Utilities

Total expenses

Net income (pretax)

What is a Balance Sheet?

2008-06-18T16:23:00.003-07:00

The Balance Sheet is also known as statement of financial position. The balance sheet is a picture of a company's financial condition.

The Balance sheet is divided in three parts: Assets are listed first, follow by Liabilities, and the last part is the Shareholder's equity. The difference between the assets and the liabilities is known as equity or the net assets or the net worth of the company.

In financial accounting the balance sheet is the only statement which applies to a single point in time.

Here is an example of a Balance Sheet:

BALANCE SHEET of ABC Inc. as of Dec 31 200x

Assets

Current Assets
Cash and cash equivalents
Accounts receivable (debtors)
Inventories
Prepaid Expenses
Investments held for trading
Other current assets

Fixed Assets (Non-current Assets)
Property, plant and equipment
Less: Accumulated Depreciation
Goodwill
Other intangible fixed assets
Investments in associates
Deferred tax assets

Liabilities and Equity

Current Liabilities: amounts due within one year
Accounts payable
Current income tax liabilities
Current portion of bank loans payable
Short-term liabilities
Other current liabilities

Long Term Liabilities: amounts due more than one year
Bank Loans
Issue debt securities
Deferred tax liability
Provisions
Minority interest

Equity
Retained Earnings

What Can You Learn From TOYOTA?

2008-06-18T16:23:00.001-07:00

I just read the article about Toyota, titled The Contradictions That Drive Toyota's Success by Hirotaka Takeuchi, Emi Osomo and Norihiko Shimizu. On the Harvard Business Review, June 2008.

It is a great article that provides a lot useful information. What amazes me about Toyota is that they keep everything as simple as possible, but its behavior contradicts what a large organization typically does. Here are some of their beliefs:

Never being satisfied. But setting impossible goals Toyota's employees push to achieve they very best.
Everybody should win. A true win-win: Customers, dealers, company, employees and management.
Toyota trains its employees in solving problems, Toyota invests in its employees for the long term, if the company needs to cut cost, they will cut cost except lay off its workforce.
Employees play mentor roles.
Toyota allows information to flow freely, up and down the hierarchy.
Toyota give people the freedom to VOICE CONTRARY OPINION. When was the last time you had this freedom at work without fearing repercussions? Employees feel safe, even empowered to voice contrary opinions and are able to contradict superior.

Can American companies compete against Toyota and be profitable? I believe so, however, it will be extremely difficult because the Toyota way can't be simply copy and paste. Toyota is a culture and as every culture it needs to grow, people must believe in it and it takes a long time to be nurtured. Will companies' share holders have the patience? Only time will tell.

I encourage you to read the article, you will learn something and apply it to your business.

Best,

Reduce Your Fuel Cost

2008-06-18T15:08:00.000-07:00

The average price of a gallon in the U. S. is now $4.08, in other areas such as the San Francisco Bay Area, the average price is $4.60 per gallon. What to do to keep your fuel cost from eating into your profits? The option of buying a smaller fleet of vehicles or a fleet of hybrid vehicles may be nice but it is also very unrealistic.

Here are a few tips that can help reduce your fuel cost and won't cost you much.

Drive more efficiently: driving at 65 mph instead of 75 mph will reduce your fuel cost a 13%. The technology is available that will allow you to set up a maximum speed on your company's vehicles so your employees won't be able to drive faster than the set speed.
Maintain your vehicles: change dirty air filters, proper pressure on your tires, these can decrease your fuel cost another 13%
Avoid idling.

Other companies are investing in technology to reduce their fuel cost as well as their carbon print. Interserve, a building management company has saved 15% of its fuel costs by tracking its vehicles with satellites, they have cut the average speed of vehicles, they have been able to plan their routes more efficiently such as on duplicated journeys. Interserve uses Cybit's Fleetstar-Online (a British company) http://www.cybit.co.uk/ Their system is web based and reports on any given vehicle every 20 seconds. The system will display additional information such as: mileage information, traffic report.

How about reducing the number of Left Turns you make? will that reduce your fuel cost? Just ask UPS. According to UPS, reducing the numbers of left turns also reduces the idle time of the vehicle which in turn lowers fuel consumption. For the full article about UPS here is the link http://multichannelmerchant.com/opsandfulfillment/advisor/fuel_conserve/

Implement the changes now... The price of gas will continue to increase.

Good Luck. .

The Basics of Sales

2008-06-17T16:23:00.001-07:00

If you want to be a successful business owner you need to control cost and bring in the revenue. Sales will support the life of the business, and its importance is the same in the for profit and non-profit businesses.

This section will touch the basic of sales, we'll later expand more in the art of selling.

Things to Consider Before You Start Selling

Your image is YOUR business's image. These things influence that image:

First Impressions
Dress
Language
Being On Time
Business Meeting Etiquette

Some of the Traits of Successful Sellers

High energy
Self motivation
Persistence and perseverance
Good listening skills
Technical knowledge
Ability to use the product
Ability to explain the product
Good communication skills
Ability to overcome objections
Knowing how to close the sale

Six Steps to Sales Success

Prospect and Prioritize Accounts
Plan and Prepare for Sales Calls
Make the First Contact Count
Present your Product
Handle Objections
Close the Sale

Closing Techniques

Basic close
Offer Alternative Choice
Compare Pros and Cons of Buying the Product
Ask Closing questions and Summarize
Cite Examples of Others Who have purchased
Isolate the Customer's Potential Objection and Clarify
Use a Secondary Question to Close

REMEMBER: WHEN WE COMMUNICATE:

7% OF OUR MESSAGE IS DELIVERED BY WORDS

93% OF OUR MESSAGE IS NONVERBAL!

Four Customer Service Basics

Positive Talk
Recognizing Customer Needs
Finding Common Ground
Building Trust

Learn What Your Customer Needs

To be Understood
To Feel Welcome
To Feel Important
To Feel Comfortable

Why We Lose Customers?

1% Die
3% Move away
4% drift to another business
5% change on a friend's recommendation
9% buy it cheaper somewhere else
10% have a service problem that is not resolved
68% leave because they feel they're not getting good service!

What Customers Expect from Your Business:

Clean, comfortable, attractive surroundings
To be welcomed pleasantly
Well-groomed, professional sales personnel
Immediate, focused attention
Eye contact
To be addressed by name
To be assisted by someone with excellent product knowledge
Confidentiality
To be treated with courtesy and respect

Dealing with a Complaint

LISTEN!!!
Recognize the customer's feelings
Apologize when it's the right thing to do
Clearly explain what you're going to do about the situation
Thank the customer for bringing the problem to your attention
Take action to make things right
Follow up with the client

Customer Service Essentials

Welcome customers to your business
Thank customers for coming to you
Educate customers about your product
Answer questions
Follow up promptly
Thank customers for choosing you
Follow up with the customer, to make sure that your product and service were satisfactory
Use Follow up responses to improve your product or service

These are the basics of sales. Learn the basics well. There will be more posting about sales and will cover more specific topics.

Good Luck in your sales activity

E-Commerce

2008-06-16T13:54:00.000-07:00

The world wide web has made it possible to start up a business with minimal capital and it is a great tool if you use it wisely.

To access the Web, you nee a computer with a modem, a Web browser, and a connection to the Internet. Most telephone and cable companies offer package deals for Internet service, which can be convenient and cost effective. But when you rely on a single company for your phone, cable, and Internet service, you become more vulnerable to technical problems. Also, deals like these may prevent you from taking advantage of better offers.

Internet Connections

The faster your Internet connection, the more you can do with it. Dial-up connections tend to be too slow for most uses, although they're better than nothing. Broadband services like DSL and cable are much faster, although they're also more expensive. Wireless connections can also be pricey. However, may towns are working on setting up free wireless networks in disadvantaged areas.

E-mail and E-mails Clients

An e-mail client is a software application that allows you to send, receive, filter, and organize your email. E-mail clients access your mail from a server, and download it onto your computer. the most commonly used e-mail client is Microsoft Outlook, but there are dozens of others. many of the best clients are free, so you can experiment and find one that works for you. Popular clients include Thunderbird, Eudora, and Pegasus.

Even some sophisticated computer users don't understand how e-mail works, and can't tell the difference between a client program like Outlook, and an ISP's mail server. The main point to emphasize here is that Webmail accounts are a bad choice for businesspeople. They have limited storage and sorting capabilities, and worst of all they can't be accessed offline. Even if you're using a Hotmail account, you should run it through an e-mail client. That way, you'll have a copy of all your mail on your computer, whether you're online or off.

E-mail Security

As a general rule, you should assume that your e-mails are not private. think of them as postcards rather than sealed letters. Most e-mail messages are not encrypted, which means that they can be intercepted and read by third parties. Also, most ISPs back up copies of your messages for a few months, even if you delete them from your mailbox. In addition, there is no law that prevents an employer at your ISP from reading your e-mails!

Managing Business E-mails

E-mails should be answered promptly and professionally. They should also be backed up against loss and filed in such a way that you can find them easily. E-mails are important business records, and they can even form legally binding contracts.

Searching the Web

To find information on the Web, you need a search engine, like Google, Yahoo, Dogpile.

Websites especially ones that sell to the public go to a lot of trouble to make sure that they get a high rating in search engines. Just as your participants want to find what they're looking for with one click, Websites want people to find them with one click.

Online Trends

The most important general trends for microbusiness are these:

Microbusinesses usually target niche markets, and the Internet increases access to niche markets all over the world.

Just as you can sell all over the world, people from all over the world can sell to your hometown. (How does that change the competitive landscape?)

Many consumers and businesses use the Internet to gather information about products, before buying them in a traditional store. that means a marketing site is a good idea even if it has no e-commerce ability.

Customer service and security are increasingly central to successful online selling. Consumers expect as much or more service and security than they'd get at a conventional store.

Online Security

On the Internet, a microbusiness can sell to customers all over the world. You can be located in a small town in Kansas and find that customers living in Mexico and England are interested in your niche product.

for little or no cost, simple online stores can test pricing and product mix strategies without a brick and mortar retail space. Discussion boards and blogs are perfect forums for testing ideas, and for getting support and feedback from other entrepreneurs. And even if decide not to sell online, a promotional Website an be terrific marketing tool, providing pre- or post sale information to consumers.

Planning Your First Website

Building a Website or a Web-based business raises the same questions as building a business offline. Consider:

Short-term and long term business objectives

Attractiveness of target market

Marketing mix

Competition

Customer needs

Your business's strengths and weaknesses

Your budget

The budget question is an important one. There's a wide range of costs for Web development. You could design and launch your own site almost for free. On the other hand, a well-designed promotional site with no e-commerce functionality might cost a few thousand dollars, and could take one to two months to design and build.

Registering Domain Names

If you don't register the name you want today, it may not be available tomorrow! Your domain name can be important to your branding strategy, and should be chosen carefully. Students should get input and feedback from management, staff, friends, customers, and Web professionals. Once a domain name is registered, it's unchangeable and nonrefundable, so spell carefully when registering!!

Researching Sites Online

Spending time online is the most important thing you can do while planning your Website. the only way to know what works is to visit a lot of sites. Which online stores are easy to use, and why? Which aren't, and why not? Which sites are visually appealing? Which sites load the fastest?

Basic E-Commerce Capabilities

Merchandising: People can touch or test your goods online. That makes merchandising very important for Web-based businesses. People want to be able to find what they're looking for easily, see some nice pictures of it from several angles, and read a detailed description of what it is and why it's worth owning.

Making the sale: In this stage, the customer must be able to select items, choose from different shipping options, get a price total that includes shipping and tax, and enter a billing address and shipping address.

Getting paid: If you're selling online, you may be able to set up a merchant account with your bank to accept credit cards. Otherwise, you can choose from a number of alternative e-commerce services. The most well know of these is PayPay. If you're a merchant who uses PayPal, your customers can click on a "Pay" button that brings them to a checkout form. PayPal collects the money, and credits it to your account (minus a fee). You can transfer money in this account to your bank, or access it with PayPal's debit/credit card. If you sell through an e-commerce host, they'll have a payment system in place.

Security

E-commerce requires trust, which is why you must offer a secure a method of accepting credit cards. The standard security method is called secure socket layer (SSL) To implement SSL, you'll need an authentication certificate. This is a sort of digital ID card that confirms your identity. Studies show that sites with SSL certificates enjoy increased e-commerce sales, fewer abandoned shopping carts, and more repeat purchases. Again, e-commerce hosts should have high security standards.

Calculating Taxes

Tax rates vary from state to state. This is a issue to bring up with your accountant or CPA.

Shipping Options:

Should the shopper be socked with a higher shipping cost for spending more money at your online store? Of course not. If anything, the shopper should be rewarded with a discount. Free, discounted, or upgraded shipping are typical rewards for big online spenders. Upgrade shipping is a very good incentive; the cost of upgrading from UPS ground service to 2 day service is not high, but it can make a huge difference in how your customer feels about your business.

Customer Service Online

Online customers expect the same level of customer service they receive offline, if not more. According to study done by BizRate.com, a firm that tracks customer satisfaction with e-commerce, quality of customer service was the top factor in determining whether a customer returned to a particular online merchant.

One of the biggest complaints customers have with e-commerce is that they can't get in touch with online businesses. They complain that phone numbers can be hard to find on Websites, and if called, may not be answered. Also, customer e-mails often get no response for days on end, or receive an automatic response that doesn't answer the customer's question.

Once again, we arrive at the issue of first impressions. Does your Website communicate who you are and how you feel about your customers to everyone who looks at it? Of course it does! Do your e-mail responses have to be just as professional, friendly, and punctual as you and your employees are in person? Absolutely!

To avoid making people mad, and to assure customers that your company is for real, be sure to have a phone number where customers can reach you. Many customers call simply to make sure that the company really exists. These calls present a great opportunity to promote your product.

Online Marketing Strategies

The Internet is very, very crowded. Somehow, you have to get your site noticed so that people can see what you have to offer. This means marketing. Always remember that attracting new customers is about six times more expensive than maintaining a loyal customer base.

There are two primary types of Websites marketing: passive and active.

Passive marketing: means designing your site so that it's picked up by search engines.
Active marketing: means using any and every means of information the world about your Website.

You must combine passive and active marketing to attract the greatest possible number of people to your site.

Online businesses are always coming up with new strategies for online advertising. Most experts agree that the usual ad techniques don't work well on the Web. Unfortunately, there's not much agreement about what does work.

Microbusinesses should focus at first on tried and true techniques of offline marketing. All your packaging, letterhead, and other business materials should have your Website's address printed on them. World of mouth is a powerful tool, too. Be sure to tell your customers and friends when your Website goes up.

Good Luck setting up your E-commerce.

The World Wide Web & how it is changing our world...

2008-05-20T15:17:00.000-07:00

The world wide web (www) has revolutionized the world, in particular the business world. The old business paradigm is now dead and the new business model is changing every minute. Let's go back twenty years, the Internet was in its infancy. If a small company had a great product very few people knew about it. The newspaper industry was strong, advertisers knew how to reach their targets. Now, let's move forward, in 2008, the newspaper industry is in chaos, the industry is losing money because fewer people are reading the newspaper. The newspaper main competitor is the Internet, you don't need to wait until tomorrow to read what is the latest news in Asia or Europe, the Internet brings it now. Advertisers are being challenge by generations X & Y. Advertisers are now reaching into mediums that are new to them, such as: FaceBook, Linkedin, MySpace, YouTube, etc. Industry giants such as Google, Yahoo and Microsoft are bidding to become dominant in online advertising with millions of dollars at risk.

The Internet has made it possible for small companies to create awareness for their products or services. Blendtech a small company unknown to people became the BUZZ when their video was posted in YouTube, millions visited the video and the company became overwhelm with so much traffic (http://www.willitblend.com/) How much did the video cost? $0 and in return the company had its best year after sells skyrocketed.

The Internet has also changed the way talent is found. The Ting Tings, the English electro-pop duo of Katie and Jules De Martino is now famous due to two songs they posted on their MySpace page. Andy Samberg from Saturday Night Live (SNL) was discovered because he posted his "Short" videos online on 101.com

When Andy Samberg along with Jorma Taccone and Akiva Schaffer developed "The Short" in collaboration with SNL and the video was posted in YouTube.com "it was an undeniable online phenomenon that amassed over one million hits on YouTube.com within days of airing on "SNL." The short "burrowed its way into the nation's cultural consciousness" (The New York Times, 12/27/05) and sparked its own legion of Internet imitations" http://www.nbc.com/Saturday_Night_Live/bios/Andy_Samberg.shtml

Many business owners continue to believe that it takes a lot of money to create a web presence, but the truth is that it does not. Your new business can have a web precesence with almost no cost. The only service you will need to pay will be to have access online through one of the many internet providers such as PacBell, Comcast, Earthlink, AOL, etc. then the cheapest way to begin is to create a BLOG, it is free if you use BlogSpot, you can create a free email account from Google, Yahoo, etc and Voila! you are ready to begin writing about your business. However, a BLOG is not a substitute for your website.

Placement and Promotion

2008-05-13T14:46:00.000-07:00

A good promotional strategy lets consumers know what your product is, what it does, why it's better than anyone else's, and how they can buy it.

A great promotional strategy communicates your brand identity and your values. It doesn't just tell consumers why they need your product; it inspires their goodwill, trust, admiration, respect and loyalty.

A common misconception here is that promotion simply means paid advertising. That is just one method, but it is not the only one. Public Relations, networking, and other low cost/ no cost promotional tools.

The Who, What, When and Where of effective advertising.

Who: The Right Audience: With your customer profile in hand, you should know the characteristics of your target market, and can analyse media choices to see which of them are most likely to reach this audience.

What: The Right Message
Regardless of the type of advertising, the message contains the following elements:
Offer: What are you trying to sell?
Benefit: what this product will do for your customer?
Proof: Evidence that the benefit is real (pictures, testimonials, surveys, awards)
Call to Action: Ask the customer to do something, and give the information needed to take that action.

The Right Message
It grabs people's attention and holds their interest.
The headline should get your immediate attention and holds their interest.
The illustration or photo should attract your interest
The text should clearly identify benefits to your customer
The close (logo, last line, etc.) should provide a call to action and all the information needed to make contract and buy.

When: The Right Time
Timing, frequency, and consistency are the rules of thumb for deciding when to advertise.

Timing:is essential, since the average person is hit with over 5,000 advertising impressions each day. You need to maximize the potential for the customer to be paying attention.

Frequency: According to advertising experts, a customer usually must hear or see an advertisement four to nine times before the message sinks in.

Consistency: It takes an average of six months for a new business to get noticed, for people to change their buying behavior, and for competition to react. For this reason, consistency in advertising is essential. All promotional material should have the same look and feel, in order to communicate the business's brand identity.

Where: The Right Place
Ask the question: Where will people who are interested in your products be most likely to look for your ad?
Knowing the customer helps you make these decisions intelligently. That is why market research is so important!! Your industry information can be big help here, telling you whether your prospective customers are more likely to listen to the radio, watch TV, read the newspaper, respond to flayers, and so on.

Types of Advertising: Your Media Choices

Word of Mouth

Print Advertising

Broadcast Advertising (Radio & TV)

Signage

How many signs do you see today?

Signage doesn't just advertise, it also gives directions, and provides other services.

ABC's of Signage:

Attracting new customers: Every year, a certain amount of your customers will move away or change their buying habits. That means you must restock your customers, just like you restock your inventory.

Branding your business: Signs are vital to branding. They trigger emotional responses. They make promises about quality and service. They either beckon or repel customers. Just as with dress, personal hygiene, and etiquette, FIRST IMPRESSIONS COUNT!!!

Creating impulse sales: Studies show that impulse sales make up 68% of total sales. Signage must attract impulse buyers; only then can your service and value turn them into repeat customers.

Public Relations see previous Blog about Public Relations

Networking see previous Blog about networking

Contests

Sponsor events

Be a guest speaker

Trade Shows and Consumer Fairs

Cross Promotions

Pricing Your Product or Service

2008-05-13T13:22:00.000-07:00

You need to familiarize with some basic pricing concepts.

Value: is what your customer believes the product is worth.
Price: is the amount you charge customers for the product.
Cost: is what you spend to produce your product.
Profit: is what's left over after you subtract costs from price.

Pricing: is the process of figuring out how much to charge per sales unit. A bookstore's sales unit would be a single book, while a housecleaner's sales unit could either be an hour of work ($10 an hour) or a specific job (clean the garage for $50.00)
In pricing, the cost is often called the floor. You can't go below it, otherwise you will be given the product away.
Value: is the ceiling. It's the maximum your customers will pay, based on what they think your product is worth. That means your costs should be as low as your brand identity (i.e. quality, and positioning) permits, and your value should be as high as possible. One perfect example is real estate: If a 1,200 sq ft home located in the best school district and in a very desirable area, this house will have a premium, high value and a high demand.
Demand: refers to the amount your product that customers are willing and able to buy at a specific price. A customer who has $10 to spend might be willing to buy two pillows if your price is $5 per pillow, but only one if your price is $7 per pillow. Being able to afford the product is an essential part of demand; just wanting the product doesn't count!

Check out what is happening to the auto industry with high price of petroleum. As the price per gallon of gas increases the demand (driving) decreases. Also, customers will look for alternatives such as smaller cars versus SUVs.

Pricing Objectives:
The pricing objectives depend on a variety of factors, including your production costs, brand identity, competitive environment, and so forth. The most common pricing objectives are:

Maximizing Profits

Maximizing Sales Volume

Return on Investment

Meeting or beating the competition

Quality leadership

The marketing approach to pricing is based on the 4 C's. From the buyer's viewpoint, the four P's might be better described as the 4 C's.

Customer Solution

Customer Cost

Convenience

Communication

Customer: Your target customer's income, lifestyle, and values affect your price.

Customer Cost: To set a price that will earn a profit, you will know your total variable and fixed cost.

Convenience:Place, locations, channels

Communication: Advertising, Personal Selling, Sales promotion, Public Relations.

Pricing Strategies

Cost Plus Pricing: Very common and simple pricing method. It's based on the known factor of cost. It involves totaling your fixed and variable costs, and adding a target return to determine your sale price. The Target return is usually expressed as a percentage of total cost.

Competition Based Pricing: Not a great strategy. The competition could have an entirely different cost structure to guide their pricing. It is better to use competition based pricing as a general guide only; DO NOT assume that you have to price either as low or as high as your competition. My advice is do not compete on price.

Value Based Pricing: The goal is to charge an above average price, while leaving customers with the feeling that they've gotten a good deal. Here are some reasons why consumers may pay more for your product:

Customers like you and trust you

You were recommended by someone they like and trust

You offer convenience or faster service

You offer security or reduced risk

Your products confer social status or distinction

Buying from you aids a cause or supports a philosophy

Your products are unique, artistic, or of higher quality

Retail Pricing: Retail pricing is used when merchandise is purchased from a manufacturer or wholesaler, and then sold again to the end user. Although retailers don't produce the goods they sell, they still have overhead costs. Their price must cover all these costs, and offer an acceptable profit.

To get a retail price you multiply the wholesale price by a certain percentage (called a markup)and add that to the wholesale price. A retailer using a 25% markup might buy a t-shirt at $8, and sell it for $10 ($8 + $2) Many retailers double or triple the wholesale price.

Your markup is the difference between the price you pay for the product, and your final selling price. This can either be a percentage of the cost, or the retail price.

Suggested Retail Pricing: Many wholesalers and manufactures have established what they think are the best prices to charge for their products, which is often referred to as "suggested retail price." This can be a guide for your pricing strategy, but you still need to analyze your costs to be certain that it will allow you to make a profit.

The Marketing Mix

2008-05-12T15:22:00.000-07:00

Once you have decided your business strategy, you will be ready to begin planning the details of the marketing mix. What is the marketing mix? The Marketing Mix is defined as: The set of controllable tactical marketing tools: Products, Price, Place, and Promotion that the firm blends to produce the response it wants in the target market.

Product Price

Variety List Price

Quality Discounts

Design Allowances

Features Payment period

Brand Name Credit Terms

Packaging

Services

Promotion

Advertising Channels

Personal selling Coverage

Sales Promotion Assortments

Public relations Locations

Inventory

Transportation

Logistics

Price

List price

Discounts

Allowances

Payment period

Credit terms

Place

Channels

Coverage

Assortments

Locations

Inventory

Transportation

Logistics

Product: the goods and services combination the company offers to target the market.

Price: The amount of money customers have to pay to obtain the product.

Place: includes company activities that make the product available to target consumers.

Promotion: activities that communicate the merits of the product and persuade target customers to buy it.

Your Product Line:
Inventory control is one of a retailer's biggest challenges, and depth and width have a significant impact on the ability to control inventory.

Positioning

Positioning means developing strategies that will place your product in a particular position relative to competitors.
How have Toyota: Prius and Corolla positioned their respective products in the automobile marketplace. Why? Think about it?

Smart positioning requires understanding the benefits of your products, what those benefits are worth to the customer. You can position your products based on price, quality, availability, uniqueness, etc.

Packaging
It helps to communicate your product's image, it also serves the basic function of protecting products, and providing information about use, ingredients, quantity and so forth.
Packaging can also reduce shipping cost, earn goodwill, and increase your access to overseas markets. Make your packaging decisions carefully!
Products are not the only thing that can be packaged, services can be package as well. Bookkeeping services, Legal services, Shipping services, Banking services, etc.

Branding
Branding is about creating a consistent message for your business, and making sure it comes through whenever and wherever you interact with the public.
It includes benefits, packaging, advertising, and services. You can look at brand identity as a promise. When customers see your name or logo, it promises them certain things. Each time you deliver on that promise, your brand is strengthened. Any time you break the promise, it's weakened. So, Under promise and Over deliver!!

Are You a Doer or a Spectator?

2008-04-21T16:41:00.000-07:00

American Idol is the #1 show for Fox and it has a strong audience. I do not watch it, however, I am quite familiar with it. The other day I was having a cup of coffee reading my newspaper and minding my own business when two older men sat two tables away from me, they spoke so loud I was able to hear their conversation, they were bashing the current American idol contestants, one of the man said "they are terrible, I can do it better!" I refrained from voicing my opinion but I thought well "why don't you?" Obviously, those two men did not have the courage to go on stage to perform, otherwise, their conversation would have a different tone.

When entrepreneur decides to open his/her business many people begin to give their advice, most of the time without asking and most of these are poor advices. You may feel you do not want to hurt their feelings but you will need to decide to whom you should listened to.

As an entrepreneur you should know where to find your answers. You should have a team of advisers: CPA/Accountant, Attorney/Paralegal, Banker, Financial Planner, Insurance Agent. You should be a member of at least a couple of Chamber of Commerce, the more people you are exposed to the more you will be promoting your business and service, plus you will meet other business owners that may share the same challenges that you are facing, you may even learn from their experienced and apply it to your business. On today's paper on the Financial Times a headline stated: "Citi turns to HP for crisis advice" as you can see even big corporation learn from each other. Below is the article.

Citi turns to HP for crisis advice

By Francesco Guerrera and Kevin Allison in San Francisco
Published: April 21 2008 22:04 Last updated: April 21 2008 22:04

Citigroup has turned to Hewlett-Packard, the information technology group, for advice on how to revive its fortunes without breaking up the company – a novel move that underlines Citi’s efforts to defend its controversial business model.

People close to the situation said Citi’s top executives had recent talks with their counterparts at HP to learn how, over the past three years, the IT group managed to overcome a crisis similar to Citi’s.

The decision to tap the expertise of HP, which rebuffed investor pressure to spin off its computer business from the rest of the group, comes as Citi has been urged by some investors and analysts to split its wholesale and retail banking operations.
A big union – the American Federation of State County and Municipal Employees – is expected to renew the call for a break-up of Citi’s universal banking model at Tuesday’s annual shareholder meeting.

Other investors could also urge Vikram Pandit, Citi’s chief executive, to take radical action to reverse a 54 per cent fall in its share price over the past year and restore the company to profitability after two quarters of multi-billion dollar losses.
Citi on Tuesday prepared to sell up to $6bn of hybrid securities to bolster its balance sheet. Traders said the bank was offering the securities, which will pay a fixed interest rate over 10 years, in the market but terms had not yet been set.

Citi’s consultation with HP comes as Mr Pandit restructures the bank’s sprawling information technology operations in an effort to curb expenses, and cut jobs and layers of bureaucracy. The talks between the two companies have focused on IT issues, as well as general strategy, say people close to the situation.

Since replacing Chuck Prince in December, Mr Pandit has sought advice from several current and former executives, including John Reed, former head of Citicorp, one of Citi’s predecessor companies. Mr Reed was an enthusiastic proponent of the idea that efficient IT systems were crucial to the success of banking groups.
Citi and HP declined to comment.

People close to the situation say Citi officials see parallels between their situation and that faced by HP in February 2005 after the acrimonious departure of Carly Fiorina as chief executive. Ms Fiorina’s departure re-ignited debate about whether HP should spin off its personal computer business, whose low margins had been dragging down profits.

Morale was also at rock bottom after a tumultuous six years that had seen the dotcom boom and bust capped by HP’s controversial $19bn merger with Compaq.
However, Mr Fiorina’s successor, Mark Hurd, ruled out a break-up, and focused instead on making better use of HP’s PC business. HP began using its PC group’s scale to save costs. By the end of last year, profitability at HP’s PC group had almost caught up to that of HP’s archrival Dell. HP’s shares have risen nearly 17 per cent over the past year.

Mr Pandit also has rejected the idea of a break-up, arguing in a recent interview with the Financial Times that Citi’s model is a strength, not a weakness.
Like Mr Hurd at the beginning of his tenure, Mr Pandit has launched a cost-cutting programme, hoping to slash Citi’s $60bn cost base by up to 20 per cent.
Mr Pandit also intends to sell non-core businesses.

The Medical Business... Who is making the money?

2008-04-15T16:21:00.000-07:00

During the past weekend I received a medical bill from my previous health care provider... Kaiser Permanente. It showed that I had a balance of over $800.0 due, pay upon receipt.

Monday morning I called Kaiser's customer service to let them know this was a mistake, the Kaiser representative told me my insurance was cancelled by my previous employer, I explained that I had COBRA and that I had made all the payments "well, it does not show that you did" Kaiser representative replied, so I called the COBRA provider Ceridian, I explained the problem and the gentleman explained..."we do not make the payments, we only collect the money and send it to the employer for them to make the payment." Come again? The purpose of my former employer to hire you is so that you manage the collection and payments for employees under COBRA. The representative repeated the same script... I said thank you,but I knew that he was giving me the run around, so I called the head of the HR department from my previous employer, right away we did a conference call with Ceridian, my former employer and myself. The conversation had a different tone, Ceridian acknowledged their mistake and the representative said the mistake should be solve within 7 to 10 days. Now I will check in 10 days to make sure they did what they were supposed to do in January.

This incident made me think... if Ceridian did not make the payment to Kaiser, it means that Ceridian kept the money in their bank account and earned interest on the float, then Kaiser did not receive the payment for the service provided to my family, Kaiser paid the doctor and the technician. Kaiser was out of the money. Then I though about the bill, $820.00 for two echos, why so much? Then I pondered, how can doctors and hospitals stay in business with insurance companies holding their payments for service rendered to patients. On the say day the Wall Street Journal published on their editorial "The Health Insurance Mafia" this piece confirmed what I thought of the current medical business model, why not cut off the middleman and deal direct with the hospital or doctors. Below is the complete article written by Dr. Kellerman, clinical professor of pediatrics and psychology at USC's Keck School of Medicine.

The following was published on the Wall Street Journal on Monday April 14, 2008

The Health Insurance Mafia

By JONATHAN KELLERMANApril 14, 2008; Page A15

Most discussions about the rising cost of health care emphasize the need to get more people insured. The assumption seems to be that insurance – rather than the service delivered by doctor to patient – is the important commodity.

But perhaps the solution to much of what currently plagues us in health care – rising costs and bureaucracy, diminishing levels of service – rests on a radically different approach: fewer people insured.

You don't need to be an economist to understand that any middleman interposed between seller and buyer raises the price of a given service or product. Some intermediaries justify this by providing benefits, such as salesmanship, advertising or transport. Others offer physical facilities, such as warehouses. A third group, organized crime, utilizes fear and intimidation to muscle its way into the provider-consumer chain, raking in hefty profits and bloating cost, without providing any benefit at all.

The health insurance model is closest to the parasitic relationship imposed by the Mafia and the like. Insurance companies provide nothing other than an ambiguous, shifty notion of "protection." But even the Mafia doesn't stick its nose into the process; once the monthly skim is set, Don Whoever stays out of the picture, but for occasional "cost of doing business" increases. When insurance companies insinuate themselves into the system, their first step is figuring out how to increase the skim by harming the people they are allegedly protecting through reduced service.

Insurance is all about betting against negative consequences and the insurance business model is unique in that profits depend upon goods and services not being provided. Using actuarial tables, insurers place their bets. Sometimes even the canniest MIT grads can't help: Property and casualty insurers have collapsed in the wake of natural disasters.

Health insurers have taken steps to avoid that level of surprise: Once they affix themselves to the host – in this case dual hosts, both doctor and patient – they systematically suck the lifeblood out of the supply chain with obstructive strategies. For that reason, the consequences of any insurance-based health-care model, be it privately run, or a government entitlement, are painfully easy to predict. There will be progressively draconian rationing using denial of authorization and steadily rising co-payments on the patient end; massive paperwork and other bureaucratic hurdles, and steadily diminishing fee-recovery on the doctor end.
Some of us are old enough to remember visiting the doctor and paying him/her directly by check or cash. You had a pretty good idea going in what the service was going to cost. And because the doctor had to look you in the eye – and didn't need to share a rising chunk of his profits with an insurer – the cost was likely to be reasonable. The same went for hospitals: no $20 aspirins due to insurance-company delay tactics and other shenanigans. Few physicians became millionaires, but they lived comfortably, took responsibility for their own business model, and enjoyed their work more.

Several years ago, I suffered a sports injury that necessitated an MRI. The "fee" for a 20-minute procedure was over $3,000. My insurance company refused to pay, so I informed the radiologist that I'd be footing the bill myself. Immediately, the "fee" was cut by two thirds. And the doctor was tickled to get it.

A few highly technical and complex procedures that need to amortize the purchase of extremely expensive hardware will be out of reach for any but the wealthiest patient. For that extremely limited category, insurance might work. A small percentage of indigent individuals won't be able to afford even low-cost procedures. For them, government-funded county facilities are the answer, because any decent society takes care of the weakest among us. But a hefty proportion of health-care services – office visits, minor surgeries – would be affordable to most Americans if the slice of the health-care dollar that currently ends up in the coffers of insurance companies was eliminated.

When I was in practice as a psychologist, I discussed fees up front with prospective patients, prior to their initial visit. People appreciated knowing what to expect and my bad debt rate was less than 1%. That allowed me to keep my charges reasonable and, on occasion, to lower them for less fortunate patients. And I loved my job because I was free to concentrate on what I went to school for: helping people, rather than filling out incomprehensible forms designed to discourage me from filing them in the first place.

Physicians and other providers need to liberate themselves from the Faustian bargain they've cut with the Mephistophelian suits who now run their professional lives. Because many doctors are loath to talk about money, they allowed themselves to perpetuate the fantasy that "insurance is paying." It isn't. There is no free lunch and no free physical exam.
If substantial numbers of health-care providers shook off the insurance monkey on their back, en masse, and the supply of providers was substantially increased by opening more medical schools, the result would be a more honest, cost-effective system benefiting everyone. Except the insurance companies.

Dr. Kellerman, clinical professor of pediatrics and psychology at USC's Keck School of Medicine, is the author of numerous crime novels and three books on psychology. His latest novel is "Compulsion" (Ballantine, 2008).

See all of today's editorials and op-eds, plus video commentary, on Opinion Journal.
And add your comments to the Opinion Journal forum.

Know Your Rates... Or It Will Cost You!

2008-04-14T16:37:00.000-07:00

What do I mean by the above subject?

Many times I meet with new business owners that do not understand how rates are calculated. The more experienced and sophisticated business owner will know how much his/her loan will cost. Here is what you need to understand, know and where to find the following information.

Consumer Rates/Business Rates can be found daily in the Money & Investing section of the Wall Street Journal, in the Financial Times it is located in the Companies & Markets section and in any other newspaper it is located in the Business section. Next, look for a box titled "Bonds, Rates & Yields" the title may change from paper to paper and here is the information that you will need:

Prime Rate

What is the Prime Rate? The Prime Interest Rate is the interest rate charged by banks to their most creditworthy customers (usually the most prominent and stable business customers). The rate is almost always the same amongst major banks. Adjustments to the prime lending rate are made by banks at the same time; although, the prime rate does not adjust on any regular basis. The Prime Rate is usually adjusted at the same time and in correlation to the adjustments of the Fed Funds Rate. The rates reported below are based upon the prime rates on the first day of each respective month.

Prime rate is the "Base" that banks use to charge their clients when they request a loan. For example: A banker tells you that your loan will be "Prime + 3" what does it mean? Well, we need find out what is prime. Currently Prime is 5.25%, now, the rate on your loan will be 5.25 + 3 which will be 8.25% how do you know this is a good rate? you will need to compare it with another bank. You will have to compare this rate with other banks in order to find out which is the best rate. There are cases when a lender will give Prime minus 0.25% or Prime minus 1% this is usually given to the best of the best of their clients.

As a business owner this is the most important rate you will need to know and understand so that you are not taken to the cleaners.

You can always contact me if you have any questions: haleman@affinitybank.com

CASE STUDY I: Minimize Cost & Leverage Technology

2008-04-10T15:09:00.000-07:00

A few months ago a prospect of mine called me with an issue he faced. He owns an insurance company, the company has been in business for 40 years, it is a well established and profitable company, his sales force is scattered across the U.S and the world. His dilemma was that his sales people wanted to receive their commission checks sooner, instead of waiting four days for the mail to arrive plus the time it would take them to deposit the check in the bank, they wanted the money yesterday. He had a valid concern, he also wanted to keep the cost down, his current banker recommended wire transfers or a payroll vendor. He thought his options were limited.

His options were not limited.

As a good business owner, he wanted to keep expenses low and here is why: His bank will charge him $25 for each outgoing wire, the receiving bank would charge the sales person $15 or $25 for receiving the wire. If you multiply $25 times 30 sales people that would be $750.00! Mr. X would have to pay that amount each time he would wire the funds! then the sales person receiving the commission wire would pay $30 or $50 dollars each month.

The Payroll company would be able to process his request. The only problem was the cost, although it was cheaper than wiring the funds, it was still a few hundred dollars a months that would come from his bottom line.

I asked him if his bank offered business online banking, he replied "yes, it does." Then I recommended him to sign up for business online banking, the business online banking has an option called ACH TRANSFERS (ACH stands for Automatic Clearing House). This option enables the company to transfer funds from bank to bank at a minimal cost. Depending to which bank the money is send to, the funds will post within 24 to 48 hours. The ACH system allows you to create templates for each sales person and their respective banking information (this template can be saved for future transfers). Once you have created the templates you can send them in a batch. If one of your sales people gave you the wrong information, you will be notified via email of any problems. Now, what is the cost? $1.50 per batch (A batch can be from 1 item to 10,000 items). The monthly cost of the Business Online Banking is $60.00 per month. However, I recommended that his business checking account should be upgraded to a Business Analyzed Checking because then his monthly charges would be offset by his monthly balances, therefore making his business checking, business online banking FREE of monthly fees.

He was excited, he thanked me and we ended the conversation. The next day he came to my office and said... Let's do it!. I asked him what happened to the other banker, he said... "well, you gave me the information and you knew what you were talking about, so let's open the account."

I said THANK YOU!

Trans World Assurance has been in business for over 40 years, taking care of our courageous men and women in the military and their families. The company was founded by a decorated WW II veteran, the company is well run and managed.

If you like more information about the company go to their site.

https://www.transworldassurance.com/twa/twaboutus.pgm?Task=miss

The Importance of Management

2008-04-04T15:09:00.000-07:00

"Management by objectives works if you first think through your objectives. Ninety percent of the time you haven't."

Peter Drucker

In my opinion the best writer on management, his writings and ideas revolutionised the field of management, business in general and in business academia. He introduced the term knowledge worker, the term Outsourcing was created/introduced out of Peter Drucker's desire to make businesses more efficient and to concentrate on their core products or services therefore becoming more profitable.
If you have never read Peter Drucker, I encourage you to do so. You will become more knowledgeable, more efficient and your business will become more profitable. If you visit Wikipedia and search Peter Drucker you will find more information about him and his work along with helpful links. http://en.wikipedia.org/wiki/Peter_Drucker

What are the traits of good Managers? and how do I become one?

Traits of Effective Managers

Build a team and lead it

Organize and plan

Solve problems

Manage money

Provide superior customer

Build strong public relations

Business Communication

In Your Written Communication:

Be clear and to the point

Keep duplicates

Develop a filing system

In Your Verbal Communication:

Be honest. Don't make promises you can not keep.

Don't say anything you would not put in writing.

Under promise Over deliver

In Your Phone Etiquette:

Sound confident and enthusiastic

Answer with a greeting

Keep a message pad and pen/pencil handy

Always end with a "Thank You"

In Your Networking:

You are building a relationship

Provide Feedback to your referral source

Always say "Thank You"

Management Issues

These are some of the most important management issues a manager will face, but it is not limited to list below.

Learn to delegate

Develop your internal and external team.

Look at the BIG picture: Develop management goals and strategies. Create a workable structure. Assign responsibilities.

Communication is Key.

Lead by Example.

Get advice... don't wait!

Have fun and be creative.

Good Luck!!

Public Relations and How it can help your business

2008-04-02T10:14:00.000-07:00

What is Public Relations?

Public Relations is also known as PR, the definition of Public Relations is Building good relations with the company's various publics by obtaining favorable publicity, building up a good "corporate image," and handling or heading off unfavorable rumors, stories and events. Major PR tools include press relations, product publicity, corporate communications, lobbying, and public service.

What is the advantage of using PR? Public Relations is very believable, it can be news stories, features in order to promote products, people, places, ideas, activities, organizations, etc. PR can have a strong impact on public awareness at a much lower cost than advertising. To give you an idea: To place a one full page ad in the Wall Street Journal costs about $100,000. Radio, one spot, once a day for five days minimum cost $2,500. What is the cost of Public Relations? The company does not pay for the space or time in the media. Instead, it pays for a staff or agency to develop and circulate the information and to manage the events.

Imagine this: Let's say your staff or agency developed an interesting story about your product or service and your story is picked up by several media groups, let's say the Wall Street Journal, one of the local radio stations and one TV station. How much did you save?! and how much business will this create for you! Public Relations has more credibility than advertising. However, PR continues to be under utilized by many businesses and corporations.

Do not make the same mistake, learn about Public Relations and how it can help your business grow. There are a few steps you can take to help your business:

1. Take a college class (This assumes you have the time to go to class and do the homework)

2. Read on it and learn it. Visit the local library and read up on PR. Public Relations for Dummies is a good book. It gives you a good foundation. There are many others books on PR as well.

3. You can hire an expert. Once you know what you want but need an expert then search for one. (Do your homework!, meet at least three PR experts before you make a commitment, not all "PR Experts" are the same.)

Five years ago when I worked as a private banker with First Republic Bank I met Patrick Galvin, CEO of Galvin Communications in a network group. It was 7 am, a cold and foggy winter in San Francisco, while everyone was still half awake and sipping their coffee, Patrick stood up to give his presentation, I will never forget it, he was so enthusiastic and full of energy very passionate of what he does that I was taken aback. I asked myself, who is this guy? did he load up on sugar? His presentation was great and as I met Patrick, I learned that he is an energetic, passionate person and he truly believes in the power of public relations.
I have been at a couple of his seminars and put into practice some of the many techniques he taught us and I have to say that it helped increased my sales.

Well, here is an opportunity to come a learn about Public Relations, It will be FREE.
I encourage you to come, there is nothing lose but a lot of gain. Below is the information and GOOD LUCK!!

Free Buzz Marketing Seminar in Berkeley

The typical American is exposed to approximately 5,000 commercial messages a day. For most companies, it's too expensive to buy advertising that offers the necessary frequency and reach to break through commercial clutter. Fortunately, most people choose products and services based on positive buzz rather expensive advertising.

You are invited to attend Patrick Galvin's free "Galvanize Your Business with Buzz" seminar on Thursday, April 10, from 8 am to 10 am at OCSC Sailing. Patrick and his PR firm Galvin Communications (http://www.galvincomm.com) have helped OCSC Sailing land outstanding press (http://www.ocscsailing.com/About/Press.htm) over the past four year including a recent feature in The Wall Street Journal. This will be Patrick’s third seminar at OCSC and his previous presentations received rave reviews.

Patrick’s seminar will show your how to:
Ensure that your best customers keep coming back
Inspire satisfied customers to refer their friends and colleagues
Grow sales through e-newsletters, blogs, viral videos and search engine optimization
Command free media coverage that is far more powerful than advertising
Leverage media exposure for maximum advantage
The free seminar will be held in OCSC's Club Room at One Spinnaker Way in the Berkeley Marina (full directions at http://www.ocscsailing.com/School/Traveling_Here/Directions.htm). To reserve a space, please RSVP to info@galvincomm.com or call 503-249-8800 by Monday, 4/7. If you know people who might be interested in attending, please invite them. To learn more about Patrick and his speaking programs, visit http://www.galvincomm.com/speaking.asp.

Network, Network, Network!

2008-03-31T15:30:00.000-07:00

Networking is very important if you want to stay alive in business.

Big and Small businesses network all the time and everywhere, networking occurs during breakfast, lunch and dinner. It happens during the cocktail hour, the PTA meeting, and on the golf course, it even happens online! professional sites such as Linkedin or ZoomInfo creates a place to meet other professionals 24 Hours a day!

Well, here is an opportunity to meet a lot of business people under one roof:

Speed Networking on Wednesday, May 21st, 2008 at the Franklin Templeton campus in San Mateo Ca.

The registration is only $10.00 (If you were to meet 50 people that night, it would only cost you $0.20 per person! you can beat that price).

You may register online at http://acteva.com/booking.cfm?binid=1&bevaID=156720

If you would like more information please contact Ed Banayat at the San Mateo Chamber of Commerce at 650-401-2440

Good Luck Networking!!! Don't forget your business cards!

Marketing and The Marketing Plan

2008-03-22T23:32:00.000-07:00

Marketing is a very important function of business, but many people and business owners seem to misunderstand what marketing is. The academic definition of marketing is "A social and managerial process whereby individuals and groups obtain what they need and want through creating and exchanging products and value with others. " Let's take this definition and begin to define some basic marketing terms.

Need: A state of felt deprivation.

Want: The form taken by a human need as shaped by culture and individual personality.

Demands: Human wants that are backed by buying power.

Product: Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. It includes physical objects, services, persons, places, organizations, and ideas.

Service: Any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything.

Customer Value: The difference between the values the customer gains from owning and using a product and the costs of obtaining the product.

Customer Satisfaction: The extend to which a product's perceived performance matches a buyer's expectations. If the product's performance falls short of expectations, the buyer is dissatisfied. If performance matches or exceeds expectations, the buyer is satisfied or delighted.

Exchange: The act of obtaining a desired object from someone by offering something in return.

Transaction: A trade between two parties that involves at least two things of value, agreed upon conditions, a time of agreement, and a place of agreement.

Relationship Marketing: The process of creating, maintaining, and enhancing strong, value laden relationships with customers and other stakeholders.

Demography: The study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics.

Psychographic segmentation: Dividing a market into different groups based on social class, lifestyle, or personality characteristics.

So far we can see that Marketing has to do a lot with people and YOU as the business owner need to connect your products or services to these potential clients. There are several potential channels to connect buyers to the products and services. You can use Advertising(radio, TV, Internet), you can create Blogs, you can connect them using Public Relations and/or many other ways, but before you decide to spend money in order to attract these customers you need to understand YOUR MARKET. Who is your client? define your client so that you can better understand what he/she does, how they shop and why they shop.

There are three important components to marketing: Research, Analysis & Strategies and Tactics.

Research: You will need to spend a significant amount of time researching about your business. Study the industry, study your future customer, your competition and the area where you want to do business.

Analysis: After you have completed the research, you need to analyze it, does your research show that there is a market for your product or service? Who will be your customers? How much do you need to invest in your business to begin operations? how long will it take for you to break even and how long will it take to become profitable? How many competitors will be going against you? Analyze your research about the industry, customer, competition and location. Analyze your competitive advantage. At this point you may find that maybe your business will not be viable or you can find that it will be a very good business.

Strategies and Tactics: Determine the best method of getting your product or service to your clients, based on your analysis. Within these section you want to answer three main points: What are your objectives? What is (are) your strategy(ies)? What tactics will you use?

Objectives: these are the actions that will support your business's goals within your market.

Strategies: These are the plans for achieving your objectives. Think of the big picture for your business. Ex: going after a segment of the population within an age group, income group, etc.

Tactics: are the actions dictated by your strategies.

Contents of the Marketing Plan

Three areas that you want to focus are: Product, Market Analysis and T.O.S.(Tactics, Objectives & Strategies)

Product Description

Features and benefits (what makes it different or better?) My advice is to focus on the benefits. People buy based on benefits.

Design and material choices

Life cycle and seasonality

Market Analysis

How big is your target market?

Who are your customers? (Demographics and psychographics)

Who are your competitors? What are their strengths and weaknesses?

What are the political, economic, social and technological trends in your market?

Marketing Objectives, Strategies & Tactics

What are your business's objectives? How will you achieve them?

What is your business niche? (In today's economy the more specialize your business is the more successful you will be).

Sales Forecasting Methods
In business if you do not bring in the sales which turns to revenue and then into profits, your business will not last long. It is for this reason that Sales Forecasting is very important, but when doing the sales forecasting you need to keep it achievable and realistic. If you set unrealistic goals you may get discourage and your business will suffer. The sales forecasts predicts how much of your product you will sell over a specific period of time (per week, per month, quarter, yearly, etc.). It will also show when you will breakeven and when you will become profitable.

There are three Sales Forecasting Methods:

Breakdown Forecasting: Start with the largest population and break it down to estimate sales from target customers.

Buildup Forecasting: Estimate the size of each market segment, and add them to get a total.

Indirect Forecasting: Find possible indicators of sales when specific market data are missing.

Where to find the information?

Information comes from two types of sources: Primary and Secondary Sources. The Primary information comes from primary data such as: surveys, interviewing people: face to face, by phone, via email, regular mail, etc and conducting focus groups, these are a few of the different methods use by other companies to gather information from primary sources, some of these companies that do a great job are: Procter and Gamble http://www.pg.com/ and 3M Corporation http://www.3m.com/ Obtaining primary information is very expensive and time consuming so most mid size companies or small businesses will focus on Secondary information because most of this information is widely available and most of it is FREE.

Secondary Information: This information has been published by other companies, experts, trade associations, etc. The library and the Internet can both provide you with lots of secondary information. Once you find the information, you will need to analyze it and decide on the information.

Here are some sources where you can find Secondary Data

Government (Federal, State, Local)

Small Business Development Centers

Women's Business Centers

U.S. Small Business Administration

Trade and industry associations

Chambers of Commerce

Local newspapers and magazines

Census data

Business Magazines

Libraries (Public, University/College, Private)

Internet

Business Periodicals

Professional Research Companies

Studying the Competition

Analyzing Your Research

Now that you have spent HOURS doing your research and you have the information you were looking for, it is time to analyze it. Before you make a conclusion, check your findings for accuracy and completeness. Be objective when analyzing the information, have someone else review the information with you. Some of the questions you may ask are:

How has the industry developed?

How do small businesses operate within this industry?

what are the current growth patterns in the industry?

What is the industry's size at present? What's projected a year from now? Five years from now?

Are there any niche markets that are hot?

How does international trade affect your industry?

How will current and new government regulations affect your industry?

How will technology affect your industry and the small businesses within it?

Where Do Business Ideas Come From & Is Your Idea Viable?

2008-03-21T15:38:00.000-07:00

Business Idea

Sometimes we wonder how do people come up with a business idea or an invention.
According to the National Federation of Independent Businesses:

43% is from a Prior Job
18% from Hobby or Personal Interest
10% from Chance Event
8% from Someone who Suggested it
6% from Education/Courses
6% from Family Business
5% from Activities of Friends/Relatives
5% Other

What Can Make Your Business Unique?

Features
Your location
Offer things that cannot be found elsewhere
New invention
Use of materials (Green, Recycled, Made in the USA)
Pricing, guarantees
Customer service policies
Unique packaging
Individual artistry
Add-ons or extra that come with a purchase
Your experience
Delivery policies/Time frames

Who Are Your Customers?

Gender
Age or Age range
Income Level
Education level
Residence location
Employment/Job location
Worker type (professional, hourly, etc
Marital Status (married, single, widowed)
With or without children
Renter or home owner
Lifestyles/interests (sports, arts, pets, etc..)
Level of familiarity with your service
Beliefs/Opinions
Specifics to your business

What Do You Need To Know?

Who?
What?
Where?
When?
Why?
How?

Start The Research Process

Preparation, Preparation, Preparation.

Before you begin your business you need to do research and the more you do, the more you will be prepared to begin the business or to decide that perhaps your idea was not going to be viable. Here is what you need to learn about your business:

Your niche
The need for your product
Customer identification
Competition
Location
Pricing
Costs/financing information
Regulations, licensing, certification

Where to Begin?

There is plenty of FREE information available to you. DO NOT rush into paying someone high fees for something that you can get at no cost. Exhaust all your FREE resources before you decide to hire professional help. I recommend interviewing at least three experts and then making a decision.

Accessing Business Resources

Public Library
Trade Associations
Published Reports and Articles
Studying the Competition
Talking with Customers
Suppliers/Vendors
Local Economic Development or Business Resources
Banks
Internet
Small Business Administration

Here is a tip: Check with your knowledgeable banker. You may ask why? Well, if you want to consult an Attorney or a CPA, they will charge you for their time, however, if you check with your banker, the banker will not charge you for the information provided. The banker will guide you to the FREE resources first and then will recommend you to an expert.

Also check with local librarian... they are a great source of information & FREE of charge.

Is Your Business Idea Viable?

Work in your industry on a part-time basis
Get a business mentor and learn from him or her
Volunteer for a small business owner to learn day to day operations
If you have a product, test it at a trade show, community fair, or block party
Call sales reps that supply your industry
Talk with local Realtors, business owners, bankers, elected officials, etc.
Research the competition - start with the phone book
Contact local economic development and/or government agencies

The above information: was Prepared by NxLevel Guide for Micro-Entrepreneurs. I use the above information in my lectures and I teach through A New America Community Corporation

Networking

2008-03-20T16:10:00.000-07:00

Networking is VERY important, if you do it correctly most if not all of your sells will come from referrals. This is better than cold calling, however, it takes work to gain the trust of your referrals, below are a few tips. Remember, networking is BUILDING RELATIONSHIPS.

NETWORKING TIPS

Have a purpose for networking.
Have a confident handshake.
Be aware of your body language
Wear something unusual to spur conversation (unique pin, watch, tie, etc)
Always carry your business cards with you. (you will be surprised how many people don't)
Be able to talk about more than just the weather.
At a networking event, don't try to juggle food and drinks.
Follow through on promises you make
Set up a system to keep in touch with your network
If you're not comfortable networking, learn from a pro.

The above information: was Prepared by NxLevel Guide for Micro-Entrepreneurs. I use the above information in my lectures and I teach through A New America Community Corporation

You want to become a business owner? Read on...

2008-03-20T15:49:00.000-07:00

Traits of Successful Entrepreneurs

Passion
Persistence
Good Health, High Energy
Communication and Listening Skills
Creativity
Self-Confidence
Willingness to Work Hard

Personal Assessment

Why do you want to start a business?
What Special skills, experience, and knowledge do you have?
How's your personal financial health?
Do you have a mentor or advisor? Can you get one?

The Risks of Entrepreneurship

Failure: Can you bear the emotional and financial risk of failure?
Long Hours: 60 to 70 hours per week is normal
Family Strain: Potential strain on relationships because of long hours
No Regular Paycheck: How will you support yourself and your family?
No Health Benefits: No employer provided health coverage
Isolation: You'll be working by yourself much of the time
Debt: you may have to take o additional debt.
Responsibility: Everything may rest on your shoulders
Stress: New emotional, financial, and physical pressures.

The Rewards of Entrepreneurship

Success: You'll be able to support yourself, and hire others!
Independence: You get to be your own boss
Learning: No matter what happens, you'll have valuable new skills and knowledge
Self-Respect: Few things are as rewarding as succeeding through your own talent and hard work.
Recognition: It's always nice to be noticed... and it can lead to new opportunities, too!
Family Benefits: You'll have something special to leave your children.
FUN: You can make money doing something you really enjoy!

Why do Businesses FAIL?

The top two reasons are Poor management and Poor cash flow.

Poor management
Poor cash flow management
Don't listen to customers
No Business plan
Don't set prices appropriately
Don't ask for help.

Why Do Businesses Succeed?

Careful planning
Clear focus and purpose
Offer a unique product
Understand customers' needs
Sell at the right price
Seek and follow expert advice
Get help when necessary
Understand industry and competition
Do regular bookkeeping
Know how to keep existing customers, and get new ones.
Understand cash flow management.

The above information: was Prepared by NxLevel Guide for Micro-Entrepreneurs. I use the above information in my lectures and I teach through A New America Community Corporation

What You should know about Credit

2008-03-20T15:28:00.000-07:00

It's good to establish a credit history
Each time you purchase something on credit, or apply for credit, it's reported to a national credit bureau
National credit bureaus track your credit and payment history
if you apply for credit, a credit report is generated based upon your name and Social Security Number
A "Credit Score" "FICO" is a rating assigned to you based upon your credit and payment history, and is used by creditors or lenders to make decisions about your application.
You can and should obtain a copy of your credit report.
Your personal credit will affect your ability to get credit for a start-up business.

How to protect YOUR credit

Obtain a consumer copy of your credit report (small fee or free)
Clear up any disputes on your credit report. Do it in writing (you can do it yourself for FREE)
Do not carry too many credit cards
Protect your Social Security Number, do not give it out haphazardly.
Don't apply for credit too often; it will count against you.
Don't give your credit card number to telemarketers you're not familiar with
Be aware of hidden costs at check-cashing or rent-to-own establishments.

Ideas for Dealing with Bad Credit

Develop a budget and stick to it.
Obtain a consumer copy of your credit report (Free or a small fee)
If you find an error on your report, contact the credit bureau(s) in writing.
If you are denied credit, find out why
Contact creditors to make arrangements to pay back old debt.
Do not ignore student loans, utility bills or delinquent taxes-- PAY THEM!!!
Do not apply for more credit
Do not incur more debt
Keep only one or two credit cards; destroy others and close the accounts.
Work with a reputable credit counseling or debt management service.
Be wary of quick advertisements to repair credit--there are no easy cures. (These are scams)
Do not automatically file bankruptcy; it can be more damaging in the long run.

CREDIT BUREAU INFORMATION

Trans Union Corporation 1-800-916-8800 http://www.tuc.com/

Experian 1-800-682-7654 http://www.experian.com/

Equifax 1-800-685-1111 http://www.equifax.com/

Also contact your local

CONSUMER CREDIT COUNSELING SERVICE (CCCS)

1,400 OFFICES NATIONWIDE

The above information: was Prepared by NxLevel Guide for Micro-Entrepreneurs. I use the above information in my lectures and I teach through A New America Community Corporation

Business Law Basics

2008-03-12T15:48:00.000-07:00

Disclaimer:
I am not an attorney, this is not legal advice. This information can be found in any Business Law Textbook.

How should I organize my business?

Think about:

Liability
Ownership
Taxes
Filing requirements, fees and other formalities

Types of legal entities

Sole Proprietorship
Partnership: General or Limited
Corporation: C Corporation or S Corporation
Limited Liability Company

Sole Proprietorship

What is it?

One owner
Owner and business are the same
You ARE your business
No separate entity

PROS

Simple, easy. Profits taxed as personal income on income tax returns.
No formal requirements to form or conduct business (easy to establish)
Need a Sales & Use Permit (Seller's permit)
File a Fictitious Business Name Statement with the county if your business has its own name.
Need a business license
http://www.calgold.ca.gov/
www.ciwmb.ca.gov/RMDZ/Guide/Permit.htm

CONS

Unlimited liability: WARNING!
Community (marital) property is also at risk (Cal. Family code SS 910)
Protect yourself with insurance
No tax advantages: business profits taxed as your own income

General Partnership

What is it?

At least two owners
WARNING: unlimited liability. Each partner is responsible for the debts and obligations of the business (partners: protect yourselves with insurance)
Partnership does not pay federal income tax
Each individual partner files returns
Most flexibility in allocating profits and losses (cash paying partner can deduct all the losses)

No formal requirements

Partnership agreement

can create agreement for the most part how you want it, but if you don't default partnership laws will apply.
Determines and outlines responsibilities between the partners.

Limited Partnership

Similar to General Partnership, at least two owners
Must have one general partner and one limited partner. Can have multiple limited partners.

BUT:

General partner has unlimited liability
Limited partner's liability limited to that partner's contribution
Limited partner CANNOT participate in control of partnership without losing shield from liability (Cal. Corp. Code SS 15632)

Filing Requirements:

Must file Certificate of Limited Partnership with the California Secretary of State
Initial $70 filing fee (Cal. Govt. Code SS12188(b): $800 minimum franchise tax, payable to Secretary of State, due at time Limited Partnership files its information return.
Must have a limited partnership agreement.
Name must end with "Limited Partnership" or "L.P."

Registered Limited Liability Partnership (LLP)

Generally available only for architecture, accounting, and legal services businesses (Cal. Corp. Code SS16101(8))
Two or more partners
A partner in a registered limited liability partnership does not have unlimited liability. (Cal. Corp. Code SS16306(c))
Flow through taxation of income
Filing fee: $70, payable to California Secretary of State (Cal. Govt. Code SS12189(a))

Corporation (General)

No partners, it's a separate legal entity.
More formal - state filings, meetings, minutes
Liability limited to the corporation's assets, individual owners generally NOT personally liable.

Ownership and Management

Owned by shareholders

One or more shareholders
No limit on number of shareholders
Managed by board of directors (one or more directors)
Directors generally elected by shareholders
Ordinary operations performed by officers (one person can hold multiple positions)

Must file Articles of Incorporation with the Secretary of State

$100 filing fee to CA Secretary of State for filing articles of incorporation (Cal. Govt. Code SS12186 (c))
First tax year --pay tax rate on taxable income to CA Franchise Tax Board (currently 8.84%)
Next tax year and thereafter -- pay tax rate on taxable income or minimum $800 tax, whichever is more, to CA Franchise Tax Board

Must qualify in other states where it does business

Formalities: separate bank accounts, meeting minutes, etc.

Corporate Taxation C Corporation

Taxed as a separate entity

Tax based upon corporation's net income

Profits distributed to its owners - Two levels of tax:

Corporation taxed on income
Then employees taxed on compensation and shareholders taxed on dividends

S Corporation

What is it?

No Federal income tax -- single tax level
Owners (shareholders) pay taxed individually on the profits when earned ("flow-through" taxation)
Owners (shareholders) can also deduct losses on their personal income tax returns
Still pay state taxes -- currently 1.5% for S corporations.

Requirements:

Generally limited to 100 shareholders
Corporation, partnership or trust cannot own shares
Shareholders cannot be nonresident aliens (for tax purposes)
Cannot have more than once class of stock

Additional filing requirement with the Internal Revenue Service (must file IRS Form 2553) and with the CA Franchise Tax Board

Close Corporation

What is it?

One or more shareholders, no more than 35
Similar to general corporation, but shareholders may have more control if they wish
May be structured more like a partnership
Taxation may be as an S Corporation or a C Corporation
Limited liability, but if shareholders take on more control, they may face greater liability

Limited Liability Company (LLC)

What is it?

No partners, separate legal entity
May not engage in banking, insurance, or trust company business
Owners are called members (may be just one); they may have full or limited management rights
Fewer formalities to follow than a corporation and more flexible management structure(may be managed by one or more members or managers)
No limit on the number or types of members (for example, a corporation, another LLC or a natural person may be a member)
Liability generally limited to the LLC's assets (i.e., the individual owners are not personally liable)
Exceptions: LLC's owners may be held personally liable for certain actions, including:
Personally and directly injuring someone
Personally guaranteeing a loan or debt on which the LLC defaults
Intentionally doing something fraudulent, illegal, or reckless that causes harm to the LLC or someone else
Treating the LLC as an extension of himself, herself or itself, rather than a separate legal entity.

TAX MATTERS

An LLC is typically taxed as a partnership if it has more than one owner; if so, it will not pay federal income tax as a result of flow through tax treatment. If the LLC has only one owner and no election has been made to treat it as a corporation, the owner will be treated as earning the income directly and the LLC will be disregarded for federal income tax purposes

Each individual member files tax returns reporting items of income and loss that "flow through" to each member

Maximum flexibility for allocating profits and losses (i.e. there's no requirement that profits and losses be divided according to the percentage of ownership). For example, the cash paying member can deduct all the losses

Must file Articles of Organization with the Secretary of State

Initial $70 filing fee (Cal. Govt Code 12190(b))
$800 annual tax due to CA Franchise Tax Board
First year tax of $800 payable within first 3 months of organization
Also subject to an annual fee to CA Franchise Tax Board based on LLC's gross income

Formalities: Must have an Operating or LLC Agreement and maintain separate bank accounts; however, no board meetings or minutes are required

Key Factors in Selecting Your Entity

Liability
Taxes
Filing requirements, fees, and formalities

USEFUL WEBSITES

http://www.ss.ca.gov/ (business portal, information on licenses and permits)

http://www.calbusiness.ca.gov/ (portal to resources for starting, growing or financing a business in California)

http://www.smallbiz2.infopeople.org/ (small business resource library)

http://www.microbiz.org/ (CAMEO -- California Association for Microenterprise Opportunity)

Licenses and Permits

Obtain a business license

Federal, State, county or city permits and licenses may be required

Requirements vary by business type and activities
Varies from place to place
Considerations include location of business and state of organization

Small Business Insurance

Property Insurance

Fixtures, equipment, furniture, computers, inventory, etc.
Various levels of coverage (basic, theft, replacement value)

Liability Insurance

Damages due to injuries to others (for example, slip and fall accident)
Automobile liability (business use)
Does NOT protect against regular business debts

Home Based Business

Check with your homeowner's or renter's insurer
Additional coverage may be required
Rented or leased space: Check lease for insurance requirements

Choosing a Name

Reserve name with Secretary of State before you file Articles of Incorporation

Secretary of State will reject a name that is:

Confusingly similar to another corporation, LLC or partnership or
Same as another name already on file

File Fictitious Business Name statement with the county if a Sole Proprietorship

Check statutory requirements for a name

In California, name of corporation must include "corporation," "incorporated," "limited," or an abbreviation of one of these words

Check other states if plan to operate the business outside the state

Avoid trademark infringement

Becoming an Employer

When do you become an employer?

A business becomes an employer when it pays wages in excess of $100 in a calendar quarter to one or more employees

Registration as employer:

Within 15 days of becoming an employer, you must register with the Employment Development Department (EDD)

Report new employee(s)

All employees who are newly hired must be reported to EDD within 20 days of the employee's start of work date

Report independent contractors.

Independent contractor information must be reported within 20 days of paying an independent contractor $600 or more, entering into a contract with an independent contractor for $600 or more, whichever is earlier.

Obtain an Employer Identification Number (EIN)

Federal tax identification number used to identify employers. All employers with at least one employee must obtain an EIN.

Required disclosure to employees

Provide your employees with pamphlets on employee withholdings and Unemployment Insurance (UI), State Disability Insurance (SDI), and Paid Family Leave Insurance (PFL)

Required employee notices.

You must post an employee notice with UI, SDI, and Paid Family Leave claim and benefit information. This notice should be posted in a prominent location where it is easily seen by your employees. The appropriate notice will be sent to you after your register.

Worker's Compensation Insurance

State mandated insurance system which ensures that employees who suffer work related illnesses or injuries receive compensation

Requirement:

All employers with at least one employee must obtain workers' compensation insurance

Employment Issues

Statutory Discrimination

Federal, State, and local laws prohibit discrimination based on a number of characteristics, including race, religion, national origin, ancestry, physical/mental disability, medical condition, marital status, sex, age, sexual orientation
Sex discrimination includes sexual harassment

Avoiding Discrimination

Application for employment

Avoid non job related inquiries that express, directly or indirectly, any limit or discrimination regarding protected characteristics

Employee Handbook

Compile policies, procedures and other important information, including policies to prevent harassment and discrimination, method for complaining of and remedying harassment and discrimination

Take Immediate Remedial Action

Handling termination

Don't fire someone based upon protected characteristics
Retain records relating to performance in personnel file

Disability Laws

Prohibit discrimination against qualified employees with disabilities

Employer must make "reasonable accommodations" to enable disabled employees to perform essential job functions
Employer must engage in "interactive process" with employee to identify a reasonable accommodation

Employment Contracts

Not necessary--default is at will employment
Offer letter for full time employees:
"At will" language important; avoid representations that might be construed as assurances of continued employment

Wage and Hour Laws

In general:

California Minimum Wage 1/08 = $8.00
San Francisco Minimum Wage 1/08 = $9.36

Overtime =

1.5x regular pay for
hours worked in excess of 8 hours up to and including 12 hours
first 8 hours worked on the seventh consecutive day in any week
hours in excess of 40 in one week
2x regular pay for hours in excess of 12 in one day or in excess of 8 on the seventh consecutive day in any week.

Industrial Welfare Commission promulgates wage orders setting minimum wage, hours and overtime standards for many industries

www.dir.ca.gov/lwc/

Immigration issues for the Employer

Employer must file I-9 for all employees
Employer cannot ask job applicant if he/she is a U.S. Citizen or has a green card, but may ask if he/she has legal right to work in the United States
Employer must verify employment authorization by completing Employment Eligibility Verification form I-9 for all employees within 3 days of commencement of employment
Only documents listed on I-9 may be used to verify employment, and employer may not specify which documents on the I-9 the employee should present
If employee's work authorization has expiration date, employer must update I-9 when authorization expires

Significant penalties to employers for:

Improperly completing I-9
Knowingly employing persons without work authorization
Favoring U.S. Citizens over Permanent Residents and other persons with legal right to work in the United States
Many questions regarding I-9 completion are answered at USCIS (U.S. Citizens and Immigration Services) website: http://uscis.gov/graphics/howdoi/eev.htm

Independent Contractors

Not subject to wage and hour laws, workers' compensation, unemployment insurance, or I-9 filing requirement

Independent contractor (IC) vs. employee:

Who controls methods and means of performing the job?
Are hours fixed?
Does the employer manage the individual?
Paid based upon hours or by project?
Bring own equipment or use employer's?

Significant penalties for misclassifying employees as ICs

RESOURCES FOR EMPLOYERS

CA Employment Development Department: http://www.edd.ca.gov/

CA Department of Industrial Relations: http://www.dir.ca.gov/

US Citizenship and Immigration Services: http://www.uscis.gov/

US Equal Employment Opportunity Commission: http://www.eeoc.gov/

Intellectual Property

Trademark: A trademark identifies the SOURCE or ORIGIN of goods and service

A SYMBOL, A WORD, A PHRASE

How do I establish trademark rights?

Use the Mark ("TM")
Use the mark may only provide LOCAL protection

Federal registration provides NATIONWIDE protection
Worldwide protection is possible

How do I register my mark?

Perform a Trademark Search

USPTO Database or Registered Trademarks http://www.uspto.gov/main/trademarks.htm
FREE

Complete the Federal Trademark Application Form

Available on the USPTO Website http://www.uspto.gov/main/trademarks.htm
Fee is $275 - $375

Copyright

Books
Music
Paintigs
Movies
Photographs

Reproduce the work
Distribute the work
Display the work

How do I get a copyright?

Your work is protected as soon as it is fixed in a tangible form.

You write it donw
You paint it
You take the picture

Generally, a copyright lasts for the life of the author plus 70 years

Do I need to register my copyright?

Your work is protected as soon as it is fixed in a tangible form -- so, no
You can give notice your copyright: Copyright symbol, Dates by author/owner
You can register a copyright: http://www.copyright.gov/
Complete an application form
$30.00

Patent

A patent grants a person the right to prevent others from making, using, or selling the patented invention

Two main types of patents:

Utility Patent
Design Patent

Utility Patent

Patent on the invention or discovery of any machine, method, process, or composition that is new and useful
New and useful improvements also patentable
Term 20 years from patent filing date

Design Patent

Patent on the unique appearance (new, original, and ornamental design) of an item (e.g., furniture or jewelry)
Term 14 years from grant of patent

How do I patent my idea?

Write the patent (describe "claims" to establish scope of protection)
File the patent application with the USPTO http://www.uspto.gov/main/patents.htm
Pay the fees

FEES

Utility Patent

Filing Fee + Search Fee + Examination Fee + Issue Fee (Approximately $2,400)

Maintenance Fees:

Due at 3.5 Years = $900
Due at 7.5 Years = $2,300
Due at 11.5 Years = $3,800
50% Reduction in fees for certain independent investors, small businesses, or nonprofits

Design Patent

Filing Fee + Search Fee + Examination Fee + Issue Fee (Approximately $1,230)
No maintenance fees for design patents
50% reduction in fees for certain independent investors, small businesses, or nonprofits

Real Estate Issues

Zoning Laws

Operating business out of one's home
Find out zoning plan from county clerk's office
Look around
Make sure in compliance or seek a variance

Leasing

All Terms are negotiable
Important terms as a tenant:
Hazardous waste representation from the landlord
Ability to assign and sublet the premises

Important terms as a tenant

Rights to expand the area leased
Option to extend the duration of the lease
Negotiate specific needs of business into the lease

Subletting

Make sure landlord has given written consent
Get copy of master lease and sublets agreement

Other Resources

Legal Services for Entrepreneurs (LSE) and the Lawyers' Committee for Civil Rights of the SF Bay 415-543-9444 http://www.iccr.com/

http://www.nolo.com/ (popular small business legal guide, also available in book form

ABA Legal Guide for Small Business (available at most major bookstores)

Do small businesses need a business plan? And how long should it be?

2008-03-11T10:51:00.000-07:00

Yes. Businesses should have a business plan, regardless of their size; the reality is the majority of the businesses don’t have them. Why? Several reasons: procrastination, business owners don’t want to write a long plan and/or plain laziness.

Writing a business plan does not have to be complicated or long. I came across a recent article in The Wall Street Journal by Kelly Spors titled The 100 page Start-Up Plan – Don’t Bother

http://online.wsj.com/public/article/SB120320971126773975.html?mod=sunday_journal_primary_hs

I agree with the article, as a business banker I believe a business plan is like a map or a GPS system, design to guide you and keep you focus on your goals but it should not be over 20 pages long. It should be concise and focus on your objectives and goals.

Here is a quick outline:

Mission Statement

Summary of the Business

Legal Description

Competitive Edge

Management

Marketing: the industry at large, potential customers, benefits of your product or service, geography of your business, distribution, advertising, public relations, pricing: sales and credit policies.

Operations: Accounting, Employees, Compensations, Vendors

Risks

Financial Management Plan: P&L, Balance Sheet, Cash flow projections

A business banker, investment banker or any investor always want to know how soon they will get their money back plus interest. To quote the above article:

“Mr. Kawasaki recommends addressing three key questions: Who is going to make it? How are we going to sell it? How are we going to service it?”

If you like to contact Kelly K Spors the writer of the article you can email her at Kelly.spors@wsj.com

If you need guidance on how to write a business plan check out Small Business for Dummies by Tyson Schell a great reference book.

You can also find great information and most of it FREE by searching on the web. But beware of companies or individuals charging exorbitant prices to write a business plan. It is not worth it.

Are you a business owner looking for a bank?

2008-03-07T13:56:00.000-08:00

Banking is about building relationships and building a trust between clients and bankers.
So here are a few tips when you are looking to establish a new relationship with a bank.

Ask a friend or a colleague where he or she is banking, ask how the service is and ask for the banker’s name. If your friend/colleague keeps talking about the bank, service and banker for more than two minutes then this is a very good start.

Is the bank flexible? Perhaps the bank that you’ll choose does not have many offices (branches) but the bank offers remote deposit, bank by mail, real time online banking, and courier services. These products can be at no cost to you if you have your account as an analysis account. (Educate yourself and understand how Earn Credits work, the rate varies from bank to bank)

Are you a BIG FISH or a little fish? EVERYONE can be a BIG FISH; you just need to choose the right size bank for you. If you have a business with balances over $1MM in a checking account you will be a big fish in any bank. However, if your business is small and you are not able to keep such high balances then a smaller institution will fit you better. A smaller institution will get to know you and your business, they will give you personalized service that may not be found at bigger institutions.

Personalized service vs. Transactional service
Choose a bank the values personalized service, it will be better for you in the long run. The more accounts you have with the bank, the more your banker will know you, and it will be very favorable when you request a loan.

Interview your banker. You want to choose a banker that is an expert in his/her niche and very resourceful because he/she will be the advocate for your business. You want a banker that does not “beat around the bush” you want your banker to be fast and direct, after all you are in business to make money not to waste time.

For great personalized service check out:

Affinity Bank http://www.affinitybank.com/

First Republic Bank http://www.firstrepublic.com/